Updated CrazyIvan Results

I just returned from Alicante which I found to be one of the more insignificant towns I have visited here in Spain – suffice to say that I probably won’t be back. Due to another rain storm I found some time to update the CrazyIvan stats which are copied below:

Since the last update we had a little swing back down which is very interesting as Scott recommended that I would turn it off for a week after we pushed near the 50R point (i.e. the second highest peak on this chart). I however declined and would do so again (even in hindsight) as I’m going hardcore Ivan with this system, which means letting it run at all times assuming that our volatility filters will keep us out of the worst. Be this as it may, this may lead to an additional post-streak filter sometime in the future (meaning a year or more from now when it’s very conclusive). Anyway, happy to say that we are closing the month near new highs – you cannot argue with that.

 

And here’s the updated 2014 graph – again all trades are being reported in real time after they are closed out – I update the charts about once a week. If you are interested in giving CrazyIvan a shot then I suggest you work yourself through the intro/tutorial as well as the order flow page. If you still have questions after all that then feel free to shoot me an email to admin@.

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,

Updated CrazyIvan Results

It’s been a wild week for me – not just in the markets but also in real life as the Las Fallas celebrations here in Valencia ended just two days ago and I’m still catching up on sleep. It also doesn’t help that you yanks already switched to daylight saving time and thus everything is getting pulled forward an hour for me. Sounds like a minor inconvenience but when you have a routine going changing it during a noisy week doesn’t help matters. Oh yeah – and on top of all we have houseguests who want to be entertained. So quite frankly I’m very much looking forward to kicking my feet up and doing abso-diddly-nothing this weekend.

CrazyIvan has been kicking butt and taking numbers this month and I thought I’d share the updated stats. We started the month with around 28R in the plus for 2014 and it managed to work its way up all the way to 45R thus far.

Here are the updated 2014 stats – it’s looking pretty good and we are actually way ahead of expectations. This is based on trading six symbols (four FX and two futures symbols) on the 480 which have produced a total of 45R. Assuming compounding and the recommended 1% position sizes this means that our subs should have added near 50% to their trading accounts – and we are only 1/4 into the year. CrazyIvan very much likes volatility and given the tape of the past few weeks I have an inkling we are going to see quite a bit more of that.

If you are interested in giving CrazyIvan a shot then I suggest you work yourself through the intro/tutorial as well as the order flow page. The live results are available here – meaning the spreadsheet (top of that page) is being updated each single completed trade – I update the charts about once a week. If you still have questions after all that then feel free to shoot me an email to admin@.

Quick update on my TF campaign – as you may recall I did mention that the bulls weren’t out of the woods yet this morning and apparently my suspicions were right on the money. That’s quite a reversal and it increases the odds for yet another leg to the downside. Obviously we have equity/ETF/ETN options plus cash settled currency options expiring today, which may account for some monkey business.

The Zero shows us a total flatline in the beginning of the session and that alone gave me the willies knowing that the tape can change direction at the drop of a pin when that happens. We’re seeing a bit more of a signal now (nice Mole reversal signal as well) but wouldn’t want to guess where we wind up today.

So my ‘cunning plan’ (any Black Adder fans here?) will be to wait for the close and then adjust my initial stop based on the close. IF we produce some sort of shooting star (I know I said hammer on the chart and apparently it fell on my foot) then I will propagate my stop up to today’s low. That would also be my short trigger starting Sunday night – unless of course we gap in which case I wouldn’t want to chase it.

Before I go I have the sad duty to wish our resident Gold Gerb all the best and at least a temporary goodbye as he has decided to hibernate for a while. Seems like he has finally managed to bankrupt his employer as 40% of his colleagues have been laid off and the silly gerb now winds up making up the slack. Well, at least you still got a job buddy – use the remaining time to polish up your resume! After over four years of daily participation it will be tough to see him gone and we can only hope he’ll fall on his grubby little feet. Farewell Gold Gerb! (Mole wipes a crocodile tear).

Well, that’s as good as any reason for me to crack open a cold one and call it a day. I’ll be back come Monday morning bright eyed and bushy tailed. Wishing you all you Slopers a relaxing early spring weekend.

 

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,

System Quality Number and Stop Logic

Mugabe posted a few follow up questions regarding the flood of information Scott posted here last week. Given that the tape is gyrating sideways and everyone is still in the process of digesting what was presented I propose that we facilitate the comment section to discuss follow up question and provide clarifications.

So let’s start with Mugabe’s comment – I actually responded to him in much detail and then fat fingered a page reload. So I’ll just have to do it all over again:

  1. Strategies are tied to market conditions. Nothing works all the time. How true is this? And do I really care, as I’m not looking for superformance? CAGR of 20% with shallow drawdowns is good enough for me. Scott is obviously looking for something much higher.
  2. The whole question of stops, specifically that they are usually too wide once a trade really gets moving. The idea of multiple stops in a race with each other is interesting, too.

I have been coding strategies for years as you guys know and let me assure you that it’s absolutely essential to start with determining the market conditions that drive your assumptions. It’s rather obvious really – nobody develops dip buying strategies in the brutal sell off periods produced by secular bear markets. We all respond by what we experience and thus develop ideas around what is happening right now or in recent history. Which often also leads to the demise of many great systems – they work fine as long as markets conditions remain the same but quickly fall apart when the character of the market changes. I often talk about market weather and it’s key that you find ways to identify market characteristics that work well for you or your systems.

Let’s simply say for example that your belief is that buying every dip at the SMA(100) provides a good edge. If you trade this on a daily or an hourly chart you will quickly discover periods in which this will work very well and times in which it will fall apart and your edge goes down the drain. You may disagree and perhaps you are only interested in systems that trade all the time. Ivan for instance completely opposes market weather optimization – he is happy with taking every single entry. But he also has developed the trading maturity and years of experience that tell him that his edge will hold up over time. Let me assure you that he is probably one out of a million people out there – not only is Ivan extremely intelligent (my guess would be an IQ of 180+) but he also has developed a very resilient (almost robotic) mental fortitude. As much as you may like to believe otherwise – chances are that this is NOT YOU (sorry – but it’s not me either). So at minimum being active in favorable market conditions will make things a lot easier for you psychologically. It’s one thing to define and prove an edge – it’s another being able to actually stick with a system that follows it.

Technically speaking it will also lead to higher SQN scores. If you remember our System Quality Number formula:

SQN = root(n) * expectancy / stdev(R)

Given our example yielding an expectancy of 0.8 – you have a system that wins 30% of the time. When it wins it nets you 5R while losing trades lose 1R:

(0.3 * 5) – (0.7 * 1) = 1.5 – 0.7 = 0.8

That’s all fine and dandy but recall that expectancy does not account for opportunity and standard deviation (which addresses MFE and MAE). Perhaps this system only trades 25 times per year:

SQN = root(25) * 0.8 / 2.5 = 5 * 0.8 / 2.5 = 1.6 (which is tradeable)

Now by selecting certain market conditions you may be able to change your rule sets to be more opportunistic, thus allowing you 100 entries per year.

SQN = root(100) * 0.8 / 2.5 = 10 * 0.8 / 2.5 = 3.2 (which is excellent)

You also may be able to optimize your stop logic by starting out with a wide ISL and then narrow down as things go in your favor. This may be much more optimal than simply picking a static stop and losing a big good chunk of the maximum favorable excursion that certain market conditions offer you. I cannot over emphasize how important this is. If you know which market conditions work best for you then you will have a much better lock on your MFE and MAE (maximum adverse excursion). Let’s assume you only have 50 trades per year but you can narrow standard deviation down to 2.0:

SQN = root(70) * 0.8 / 2.0 = 8.3 * 0.8 / 2.0 = 3.32 (which is also excellent)

Had we not clearly defined our favorable market conditions and also trades 70 times but in all market conditions our SQN score would suffer quite a bit:

SQN = root(70) * 0.8 / 2.5 = 8.3 * 0.8 / 2.5 = 2.66

Now an SQN score of 2.66 is well worth pursuing but it most likely will have larger draw down periods and will not be as ‘fun’ to trade. There is something very rewarding about taking entries under very specialized conditions and see things take off when things shift into focus.

I strongly suggest that you fully absorb this rather trivial formula and that you fully internalize it. SQN as well as expectunity are very important aspects of trading which will open up an entire new world to you. Suddenly many of those formerly abstract moving pieces start making sense and the dynamics of system performance are actually starting to work in your favor. You will instantly realize how MAE and MFE affect your respective systems and how you may be able to optimize for it. If your expectancy drops then you will also know why. And if you don’t have enough opportunity you may be able to compensate by trading other markets instead of trading the same market more often.

Of course I cannot complete this post without also mentioning an important caveat that I have learned the hard way.

Premature optimization is the root of all evil.

It’s one thing to capture statistics and define market conditions – it’s another to immediately jump to conclusions and add one rule and exception after the other. Make sure that whatever you discover works as simply and as often as possible. More rules are rarely better than fewer rules. In other words – the answer does not lie in complexity, rather it often hides out in the open. As Scott already mentioned – the problem with especially intelligent traders (and I hope that speaks to you) is that we have a tendency to believe in complex solutions.

My IQ tested out somewhere in the upper middle at 149 – and thinking that I was a lot smarter than I really am I often fell into the trap of developing complex rules which in the end turned out to be nothing but form fitting. Start out with the bare essentials and then work yourself up from there. Instead of 10,000 lines of code start out with maybe 50 or 100 and test your basic assumption. Then grow from there, slowly adding one component after the next, thus making sure that all the pieces work well together. You still may wind up with something complicated years later but each small unit will have proven is merit.

Also, don’t be afraid of throwing pieces away if they have limited value – both code or rules. As human beings we quickly fall in the trap of the sunk cost effect – another of our cognitive biases. If you start out with a huge code base or with 100 rules you will not be able to determine where your problems are if things fall apart. However, if you start out small and add new rules piece by piece you have a much better chance of finding out what is suddenly breaking things for you.

In the coming days let’s go over various aspects of system development that speak to you and that have evoked more questions. Feel free to ask away and I’ll do my best to cover it to the best of my abilities (or ask Scott for backup if I have to). Also – don’t be shy to post charts here. Just because entries are only 20% of trading it doesn’t mean they are of no importance. But perhaps we can start shifting things toward hunting for edges and applying them to our favorite charts. So in the future I would love to see folks post a chart and say – I’ll trade this via CI rules, or via my own X or Y system – here are the basic specs. If something promises a consistent edge I would be more than happy to code the rules in NinjaTrade and make it available to you guys.

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,





    Zero Indicator
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