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Surprise!
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Surprise!

by The MoleMay 1, 2009

evil.rat/NQ Update

I was pretty frustrated last night as evil.rat/NQ had been through several whipsaws since its official introduction about 10 days ago. Just my luck – after two years of almost continuous upside I have to introduce this thing during a drawdown. But if you know anything about me it’s that I don’t give up easily.

So, I started testing various charting intervals realizing that a 30 minute candle strategy might be hazardous in the current tape – especially on the more low volume NQ. My initial goal was to replicate the same profit graph seen on the 30 min chart with a 15 min chart – and it turned out that this was actually not that hard which really surprised me. However, I kept on on running my optimizer for a few hours – and to make a long story short – here are the results:

4/15/08 – 4/30/09 profit graph – now over 160% in one year – previously 110%. Also note that the current drawdown is a lot more subtle.

Here’s the weekly profit graph – yes, we are still down for this week but a lot less as there wasn’t as much whipsaw – which was the point of the exercise. The strategy is now more responsive.

Now the statistics chart is actually the most important one and I’m posting the previous version right below so you can compare the two:

This is the old one – still featured on the evil.rat page.

The key observation here is not just a considerable increase in profits but two statistics which many of you rats might not even look at:

Max Draw Down: Previously -5.78%. Now – 4.04%.
Total # of Trades: Previously 203. Now 223.
# of Trades/Day: Previously 0.55. Now 0.6

So, we have about 10% more trades, which I think is very tolerable as the chart interval has shifted to half the amount (i.e. 15min vs. 30min previously). However, the max drawdown is actually lower! That is usually not the case when you start decreasing the chart interval – I have tried on many systems. The sweet spot on most strategies I have tested is between 30min and 90min – if you are below 15min you do get higher profits but the drawdowns are usually well above the 10 percentile.

Now, I know what you are thinking:

Q: But Mole – are you going to start fiddling with the system every time we have a drawdown?

A: No – I was actually trying to simply shorten the chart interval but retain the same profit curve to avoid getting caught in whippy tape. I would have not made a change had there been any negative impact on my key parameters, which are profit, drawdown %, and # of trades.

Q: Are you going to do the same for the ES?

A: Well, I have tried but thus far I have not been able to replicate similar results on the S&P E-Mini contract version. I will keep trying but, sticking with my pledge, I need to make sure that a 15 min version of evil.rat/ES neither vastly increases the number of trades nor that it impacts the performance of the existing system. It also seems that evil.rat/ES is a bit more resilient to the pump and dump schemes we’ve experienced lately.

Q: Have you tried a 5min version of evil.rat?

A: Yes, I have and yes it does produce higher profits. But there are at least double the amount of trades and the drawdown suffers considerably (I think it starts in the -8 to -9 percentile). So, that is not an option in my mind – especially not in this tape. I am frankly really surprised that evil.rat/NQ works so well on the 15min chart and it is probably specific only to this particular contract.

Epilogue

So, in a way I should actually be thankful for the bad tape of the last week as I otherwise might not have tested this more exhaustively. My goal was always to employ a shorter term chart interval but my I will continue my research over the weekend (once I’m out of the hospital) but rest assured that I will only change over evil.rat/ES if I find a worthy replacement.

For the record – before you guys all get super critical on me: Remember when I was fiddling with the Zero a few months ago and you guys were moaning and groaning about it? Well, look how far we got it though and it’s vastly better than it was just a few months ago. The subscriber base is growing every month and I think most of you guys are very happy with it. If I see something I cannot pass up I will present my new findings to you – as I have right here.

Right now you guys are actually trading the new version of evil.rat/NQ and so far it’s doing fine it seems. If you have any further questions please post them here.


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://www.aggressivelyuninformed.com nepharis

    Thanks for the update, and great news on cutting back the drawdown for evil.NQ! Today it is doing quite well, despite me screwing the pooch on the second trade (had to leave for an hour and had the dumb idea of moving the stop up — back in after getting booted out, but lost a few points). Still net positive, though.

    Any news on resident.evil? Can't wait to give Mr. Evil Conservative a try, if you decide to let it out of the bag. =D

    Cheers

  • mrclam

    Mole,
    Did you mention that the new rat trading programs were running on 15 minute intervals as well? I just noticed yesterday that evil.rat is running on a 30 minute interval, so had that same thought about the shortened time intervals. I get the ES version doesn't benefit from the change too much, but glad to see the NQ version does!

  • katzo7

    Could very well be the extent of that move.

  • annamall

    That's a pretty picture (graph) Mole! πŸ™‚ Congratulations.

  • Randy Harris

    I for one really appreciate this work Mole – thanks!

  • salvadorveiga

    I had actually asked that before… I think the new rats are 15 min based if I remember correctly and the current rats are either 60 min or 30 min (welll NQ now is 15 min according to mole latest post…).

    It'd be great if Mole indeed would get the same results on ES. The conservative rat looks like it escapes whipsaw's…

    I remember Mole saying “… it's more picky choosing trades…” hence also the lower trades, that were around 120 and an amazing Sharpe Ratio and low drawdown… the profit factor was also very good.

  • molecool

    It's running right now, Randy – if you took the 2nd trade today you're nicely ITM.

  • Autopsias

    “For the record – before you guys all get super critical on me”

    Critical?? Bloody hell, that's really good news, and it just shows the lengths that you go to have an optimal system!

    You can only be praised for that!

    Honestly I don't know where you get the hours to do so much, don't you sleep? πŸ™‚

  • BalaB

    I did notice a quicker response signal on the Evil.NQs this morning….
    I was wondering why the cover and go long signal was so abrupt. Cool.

  • annamall

    Excuse my French…this tape sucks!

  • molecool

    You are confusing things a bit (as usual):

    There are no 'new rats' – except for the one shown above. The other system is called resident.evil – it runs on the ES and on a 15min chart. Completely different indicator that drives this strategy however. What I'm currently doing is trying to find a way to shorten the time interval on the ES but retain or even improve the same profit curve and pertinent statistics.

  • Squidman

    Yeah, stupid me thought it was gonna get whipped again. Great news Mole!

  • BalaB

    Laugh Snicker Snort.
    It is lame indeed.
    I just did something a bit risky with the ES but don't feel like touting it. This time it worked out for me but I think its pretty safe to say, I'll never do it again (unless under very unusual circumstances)

  • isaiah64v4

    Your French is flawless… I take it you're bilingual ?

  • Pingback: Walking Down Again | the evil speculator - one nefarious trade at a time()

  • Douala

    Remember today is the first day of the month so normally it will be up due to automatic reinvestment plans, but since they aren't blowing away the tape today this could be a sign a near-term top has been reached. We could sell of at the end of day. If not then Monday could be a real hoot! Remember my earlier post of the small change in the McClellan Oscillator yesterday which Mchugh suggested we could see a large price move either Friday or Monday.

  • salvadorveiga

    i know… read better.

    the “new rats” are the resident ones that I said. I know the other are different indicators… the name “rat” became so incustrated that i tend to call the new ones rat as well(rat extreme and rat conservative).

  • Paleface

    Luckily I have found the channels on 5 min in time.
    http://screencast.com/t/E7Nc0Xlg

  • molecool

    Okay, now you're confusing me. Jeeezz….

  • annamall

    oh come do tell! πŸ™‚

  • annamall

    trilingual I can say sucks in 3 languages πŸ™‚

  • newbear

    Large price move down I hope. But if Monday is a big down day have a feeling that going long at the EOD may be a good idea.

  • http://jadedapprentice.com JadedApprentice

    Strange tape for sure today, but it's been kind to me – big pops for my UNG, MS, DRYS, PALM, ATHN, STX, EWZ, and S holdings – took partial profits on most of them today or earlier this week and they're still running. Added to some long positions that pulled back as the zero turned and they're doing nicely. Bought some SEF and DUG to rebalance my hedges (which are all bleeding profusely) but am still up 1% overall today. Zero lite's been giving excellent signals as well.

  • salvadorveiga

    lol nevermind… just know that i knew what you were talking about. Gotta remind myself the new systems have a different name other than just extreme and conservative…

  • GDII

    that it? does not sound like french. πŸ˜€

  • BalaB

    'meh…I was playing with Level II and Active Trader on a 1min chart. I got wind of a possible updraft and went in real heavy, grabbing 873-875.75

    I can tell from my current pulse level, that's NOT a good idea to do again.

  • lester

    I do not know what to make of this as I think we may (and I dont know) drop. Money coming in may push it tho.

  • asetrader

    Anyone notice JPM off 10% from yesterday high? Anyone think JPM is what is holding up the release of the stress test? Surely JPM couldn't need more capital?

  • annamall

    I just turned my 5min on. its @ the top of the BB's. (ES)

  • annamall

    πŸ™‚

  • Blind_Squirrel

    Fed expanding TALF to CMBS

  • Implosion

    Mole,

    If there were 5 trades on a particular day with the old /NQ system, then would new /NQ system still have had at least 5 trades on that particular day? In other words, I take it that the difference between the old and new sytems, is that the new system will exit more quickly when it has a small profit if it detects that the market is switching directions. There will still be a lot of trades on a whipsaw day with the new system, but the new system is more likely to be profitable, is that correct?

  • annamall

    Speaking of French now France has the swine flu

  • Paleface

    1600 tick spy at the bottom…

  • isaiah64v4

    Interesting article by Mr Bear himself Doug Kass. Note his charts. He is calling for a sharp drop this fall also!

    “My best guess (illustrated below) is that a similar pattern for the markets will develop after an explosive rally to 1,050 in the S&P 500 by late summer 2009 — namely, first a sharp drop and then a flat period extending for four or five years. (One caveat: I fully recognize that the further one goes out with a market prediction the less likely will be the accuracy of that forecast.)”

    http://www.thestreet.com/story/10495027/1/kass-

  • annamall

    nice!

  • lester

    I have been looking at BBs violations as indicator to trade. SPY traded outside the 15 min BBs about 30 mins and ago I think this means to go short. Anybody else look at BB violations?? I find the 15 min gives most reliable signal…

  • Squidman

    Your wife needs to get home and you back on your leash. Maybe handcuffs too.

  • annamall

    My stochs giving a sell signal. MACD just crossed over.

  • BalaB

    Clearly.
    I just learned a valuable lesson: My emotional make-up is not geared for trading Level II.
    Perhaps I should reserve such activities for strictly mock trading situations.

  • annamall

    From your mouth to trading God's ears Doula! πŸ˜‰

  • annamall

    Let's all print some $$$$$$$$$$$$$$$$$$$4

  • Autopsias

    Hey Lester you're one of my favourite contributors, you're humour always makes me laugh.

    As I'm the least qualified to advise you on TA, I'll give you an advise which I think would have helped you a lot today and in other days. Please subscribe to Zero! It has helped me enormously today and in other days.

  • Paleface

    5 min CCI too

  • Douala

    πŸ˜‰ Hopefully downwards!

  • annamall

    I mentioned on the 5 minute the stochs gave me a sell signal and the MACD crossed down.
    I looked @ your BAC puts OMG Lester, even if your'e in the right direction, the puts will take a IV crush when the news come out on Stress tests.

  • BalaB

    I watch them all the time in the Futures market but have not tested them (yet) on the SPYs.
    fwiw, i usually exit the position once a candle closes outside the BBs or if it grossly violated the BBs, I exit right away as a snap back is almost assured.

  • Paleface

    I see legions of robots/terminators in the last 10 min. Maybe I've finished for today.

  • lester

    Hey thanks. I would rather be known for good trades but I will have to settle for humour….

  • molecool

    No, the dynamics change – you cannot compare them this way. Entries and exits shift around sightly.

  • annamall

    You know sometimes I wonder if he is just pulling all our legs (at the same time) and he's really banking some serious $. LOL

  • standard_and_poor

    880.48 should be today's high if you feel lucky! I do.
    We'll see.

  • lester

    I wish. I have done so badly it is ridiculous. If I ever have the time I will create a chart that shows all my screw-ups. I will say I have gone from $60K on March 9 to $6 K now because I keep trying to short a bull market. I am almost to the point of saying to hell with it and only trading long…

  • lester

    So you feel there will be a sell off…

  • Squidman

    Please, don't remind me.

  • Squidman

    I'd say if you get the same rush from banking coin it's not bad. If you haven't been here, this is fun: http://www.inspectd.com/

  • annamall

    You're the funny sad clown πŸ™‚ I hate to hear you lost so much, that hurt!

  • annamall

    good article thanks isaiah

  • BearsRus

    That looks good Mole,
    And by the looks of it, it's doing a hell of a job today!

  • BigHouse(Aka Mr Vix)

    Long XLF at 10.70 ..Covered COH at 24.90 earlier.FFFFFuuuuuuuu Coach lol.that stock is going to go up just like DIN ..No pull back

  • fuzzygreysocks
  • fuzzygreysocks

    More debt = lower $USD = higher commodities = higher market.
    EOD drop coming.
    Buy long/calls @ SPX circa 870.

  • Squidman

    Sorry mate. Female buying power, not logical, very powerful.

  • rhae

    SPY 10m , I see no suprises today on this chart… as price meanders around from sign post to sign post…

    http://screencast.com/t/oaq9gDS3x

  • annamall

    I bought AAPL ATM puts when it was up 2.00, the (theives, thugs) MM”s took me out on my long calls.
    I am happy to see my QCOM BWB 41/42.50/44 is @ 42.38 so that's working out very well (so far)
    Let's hope we finally see some long overdue selling.

  • BigHouse(Aka Mr Vix)

    I dont wan tto end up like those who bought FAZ at 60 only to see it go to 8

  • annamall

    touch'e!

  • salvadorveiga

    ouch that sure hurts… sorry for the loss

  • LostIllini

    Unless they bought a crap ass bank like Wachovia….. Oh yeah they did.

  • thunda72

    Nice chart…. def. looks like it's on the way down….

  • BalaB

    POT would have made a fantastic play.

  • katzo7

    Now, IMO, we will see the real tape now. Europe was closed today, hence there is light vol., right? That spike was a bull trap. On Monday we see the real action.

  • annamall

    I hate to be a kiss ass, but I tend to agree with you! ;-D

  • lester

    Well it was my own stupidity….trading Calls on FAZ three days before
    March OPEX.

  • BalaB
  • molecool

    NEW POST!

  • annamall

    πŸ™‚ probably a good move Squiddy.

  • salvadorveiga

    well i did that too dont worry πŸ˜›

    although what i lost were a bunch of the profits from febr/march…

  • standard_and_poor

    I have a stop at 889 SPX on positions. Always keep a stop.

  • NinjaPenguin

    Hey GDII, did you try that OEX strategy you mentioned sometime last week?

  • fuzzygreysocks

    Yeah, BAY-BEE!
    Hoosier Daddy?!!
    http://tinyurl.com/db2nca

  • GoingForBroke

    TEST

  • katzo7
  • GDII

    hi penguin, the answer to yr question is yes and no.
    from the morning tape, oex was strong that day. so i set an order to long 405p at 0.05. it was not filled for the entire day.
    for the past almost 1 year i have been fooling around with oex, this happened 2-3 times only.
    now look back, i can change my order to 0.10 and still have chance to make decent profit. even 400p would generate good profit during the late afternoon drop. but i will not do it.
    this is a very high risk game, but it is an easy homemadable recipe. sigh

    maybe some mm are here and they r trying to take my small profit from my noodle soup away. πŸ™

  • NinjaPenguin

    Thanks for your answer. I read your original post and thought it was a clever strategy, so I was just wondering how it had gone. Hope you have better luck this week!

    -NP

  • http://readingtowin.blogspot.com/ Boris

    hi penguin, the answer to yr question is yes and no.
    from the morning tape, oex was strong that day. so i set an order to long 405p at 0.05. it was not filled for the entire day.
    for the past almost 1 year i have been fooling around with oex, this happened 2-3 times only.
    now look back, i can change my order to 0.10 and still have chance to make decent profit. even 400p would generate good profit during the late afternoon drop. but i will not do it.
    this is a very high risk game, but it is an easy homemadable recipe. sigh

    maybe some mm are here and they r trying to take my small profit from my noodle soup away. πŸ™

  • NinjaPenguin

    Thanks for your answer. I read your original post and thought it was a clever strategy, so I was just wondering how it had gone. Hope you have better luck this week!

    -NP