Equity Curve Trading With Crazy Ivan

A few weeks ago Scott sent me a pretty fascinating article on equity curve trading which after perusal triggered a major brain quake followed by a flurry of activity over the past few weeks. The whole affair started in response to Ivan Krastins bitching at Scott (and thus implicitly at me) for not considering certain EC techniques that he apparently teaches to his own students. Most of them practice things like ‘stop trading after x drawdown in a month’ or ‘increase position size after x losers’ etc. A bit all too vague for my taste but I was interested enough to dig a bit deeper on this. Which of course meant letting Scott do all the statistical heavy lifting – he’s good at that which is why I keep him around. Turns out equity curve trading (ECT) works best on one-size-fits-all and marginal systems with large dependency (a term explained in the article), so looking at our recent equity curve our suspicion was that it may just be tailor made for CrazyIvan.

For the record, Scott and I have always steered clear of any manual intervention – meaning switching systems off and on – thinking it was a subjective way to curve fit a marginal edge. But after being schooled on dependency and how it can affect high dependency systems we had to concede it to be totally valid concept. Of course now you may just want to know how dependency and thus equity curve trading may affect Crazy Ivan – would it actually benefit? Well, I’m glad you asked as Scott ran the stats about two weeks ago. And here they are:

The is the unfiltered version which ran through 379 trades this year and is currently still hovering around 50R. That’s right on track and we’re optimistic it’ll keep up the good work.

Now this is the equity curve filtered version which only would have taken 141 trades this year by the time we ran the numbers. Results in R – 115R!! Boy oh – boy! How did we do that?

Now to be clear, this is the exact same system – same settings, same time frame, same instruments. The only difference is that we slapped on an SMA(12) on the raw equity curve (which is basically the first chart). Any trades below the SMA were skipped and when the raw equity curve slipped back above the SMA we would continue taking trades.

Now frankly there is really no magic to this – and it’s a ridiculously simple technique. The reason why this works so well on CrazyIvan is that it obviously has high dependency – i.e. you get periods of consecutive profit taking followed by stretches of draw downs. Over time it comes out on top, assuming of course you are able to sit through the rough periods. Of course we had considered various approaches to avoiding those drawdown periods – the one we actually implemented was a volatility filter based on Ken Long’s VolStat and StretchStat indicators. In theory the vol-filter was supposed to avoid those nasty sideways periods which we knew were tough to sit through. But when we actually ran it this way we actually saw a decrease in expectancy and in the end we just decided to let it run pure (since early January0. Until now that is.

As you can imagine, once I collected my jaw off the floor I was getting pretty antsy about implementing an EC filter into CrazyIvan. Scott ran through the numbers a few times and it seemed that anything from an SMA(10) to an SMA(15) was working just fine, so we settled on the 12. There were however unforeseen challenges which had to do with the fact that we run CrazyIvan on a 480 minute chart, that’s eight hours. So it’s very much possible that the SMA is being breached but it’s not ‘on the books’ yet until a day or two later when some of the open campaigns actually settle. Of course the Mole wouldn’t let this one sit and I came up with a pretty creative solution to the problem (which one I won’t tell you of course – hehe).

I’m still testing it on my end but I expect it to be deployed into production either today or tomorrow, so all CrazyIvan subs can rejoice! The only difference you will see going forward is an additional instruction in your alerts. Here is an example:

*****************************************************************
CURRENT MKT POSITION: Flat

ACTIVE ENTRIES:

LONG SIGNALS: RTV-L
IF BUY GBPUSD STOP @1.67955.
THEN SELL GBPUSD STOP @1.67825.

RISK: 13 pips.
RISK RATIO: 1%.

EXPIRES:
New York: 4/17/2014 11:00:00 PM Eastern Daylight Time
London: 4/18/2014 4:00:00 AM GMT Daylight Time
Tokyo: 4/18/2014 12:00:00 PM Tokyo Standard Time
*****************************************************************

Right below the risk field you will now find a ‘risk ratio’ field which tells you how much of your equity we recommend risking. Now until now that has implicitly been 1% (more or less being at your discretion) but we now recommend a risk ratio based on our equity curve filter. All the heavy lifting is done behind the scenes and you don’t have to worry about making any changes on the trading front. The only difference is that you will either trade 1% as usual or reduce it down to 0.1% (or nothing). We decided to use a fractional position sizing approach as it’s better if you adjust the SQN formula accordingly (a topic for another day). But you of course have a choice and so during EC down periods you may get alerts that say this:

*****************************************************************
CURRENT MKT POSITION: Flat

ACTIVE ENTRIES:

LONG SIGNALS: RTV-L

IF BUY EURUSD STOP @1.38165.
THEN SELL EURUSD STOP @1.3812.

SHORT SIGNALS: FH-S

IF SELL SHORT EURUSD STOP @ 1.3812.
THEN BUY TO COVER EURUSD STOP @1.38165.

RISK: 4.5 pips.
RISK RATIO: 0.1% or skip this campaign.

EXPIRES:
New York: 4/17/2014 11:30:00 PM Eastern Daylight Time
London: 4/18/2014 4:30:00 AM GMT Daylight Time
Tokyo: 4/18/2014 12:30:00 PM Tokyo Standard Time
*****************************************************************

So this is pretty easy – if you want to trade fractional position sizing then take only 1/10 of a percent or skip the campaign altogether (for a fixed on/off EC approach). The math is simple as you can just change that field in our handy futures (or forex) risk calculators. Here’s how you would do it:

You can click on the image to get to the actual calculator. So by simply by changing your risk ratio to 0.1% you are now following the system by the book. Of course if you think that’s all humbug and that you prefer to trade as always then simply ignore the risk ratio recommendation and Bob’s your uncle.

Scott and I are pretty jazzed about all this and we are very curious how the new EC Filter will affect the system moving forward. We will continue to post equity curves based on the filtered and unfiltered version of course – all my server side logging accounts for both. I also think that this will make a huge impact on you subs as draw down periods promise to be rather shallow compared with what we usually had to deal with. As of now the average draw down was 10R and if the system runs long enough you may have experienced a worst case scenario of 20R (my motto is to always expect the worst). Given the EC filter however this cuts draw downs to 5R or less and the worst case scenario to 10R and even that would require six or more consecutive losers with very bad fills, meaning they would all overshoot our 1R stop. Not impossible but rare.

The article I referenced mentions near the end that not all trading systems will be candidates for equity curve trading techniques (i.e. Heisenberg is NOT), but if you have a system that is, the results may be well worth the effort. Well, after running the stats Scott and I both agree that CrazyIvan is a superb system for EC trading and moving forward I hope we’ll all reap the benefits.

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@.

Cheers,

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,





    Zero Indicator
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