#021: MY STUDENT'S STRATEGIES (CASE STUDY #6)
Download FREE resources to boost your trading
SOTR images-05-Emini min.png
SOTR images-06-STU min.png
SOTR images-08-TMI.png
SOTR images-07-SFB min.png
SOTR images-02 v4.png
SOTR images-09-v3.png
SOTR images-03-MSA min.png
SOTR images-01-v3.png
SOTR images-10-Checklist.png
SOTR images-04-Adaptrade builder min.png
Automated trading strategies that work!

© 2015-2018 SystemsOnTheRoad.com. All Rights Reserved  | Contact | About Me | Privacy Policy

  • LinkedIn Social Icon
  • Twitter Social Icon
  • Instagram Social Icon

DISCLAIMER:  Futures trading systems and commodity trading bear a high degree of risk. People can and do lose money.
Hypothetical results have many inherent limitations. Past performance does not guarantee future results. 

 

ACTUAL RESULTS SHOULD BE VIEWED WITH CAUTION, BECAUSE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

OUR NEW PLACE

I'm a paragraph. Click here to add your own text and edit me. Let your users get to know you.

#021: MY STUDENT'S STRATEGIES (CASE STUDY #6)

Another strategy that was created by one of my students is E-mini S&P MidCap 400 (EMD) strategy. This system is a little different from the previous ones as it uses light asymmetry for opening long and short positions. The logic is the same, yet one of the parameters is different for each direction. This approach is also acceptable (if the strategy passes the robustness tests!), I use it for some of my strategies, too. All you have to do in the code is to create one parameter for short and one parameter for long and optimize the strategy to get the best possible (but still robust) results.

 

Let's take a look at the system more in detail:

 

  • Market:                                           E-mini S&P MidCap 400 (EMD)

  • Main time frame (data1):            15-minute

  • Secondary time frame (data2):   Daily

  • Time template:                              Regular session

  • Exit:                                                 stop-loss or at 15:00 exchange time                                                               (avg. winning trade +651 USD)

  • Stop-loss:                                       3,500 USD - only protective, never hit.                                                         (avg. losing trade -597 USD)

 

In the the last 11 years the strategy went through its ups and downs, but it managed to earn over 100,000 USD during this period, which gives the average profit over 9,000 USD. The longest drawdown period, on the Out-Of-Sample based equity curve, is approximately between trades #200 and #290 (see the chart below). That can be quite a long period for some of the traders, but once the system passes all robustness tests, you need to believe in it. This is one of the reasons why you should have a portfolio of low correlated systems. As you already know from previous Success Stories, similar moments are not unusual, but thanks to other systems in your portfolio, the equity of the portfolio can be rising even in a moment like this one. And it really pays off not to switch this system off in the bad times - looking at the next 100 trades you can see almost constantly rising equity curve and the system got from 40,000 USD to over 70,000 USD! The drawdowns have always been part of the trading.

 

Now let's take a look at the equity and the overall performance of the system more in detail:

 

 

 

 

From these numbers I would like to point out the 1.72 profit factor (notice also 2.01 PF for all short trades), over 60% of profitable trades and average trade value over 165 USD. The drawdown 6,140 USD can be a little too much for some of the traders, especially when it takes almost 100 trades to recover from the drawdown, but as I have mentioned before, it really pays off. Just believe in your systems and let them show you what they are capable of. Sometimes they will give you really nice surprise.

 

As you already know, part of my robustness testing is also strategy verification with the same parameters in other markets as an extended version of Out-Of-Sample testing. Well, this one works also in ES and YM markets. The system is not tradeable under current conditions, but all I want to see here is that it works pretty much and that it still creates new equity high. And if you put some additional effort into the optimization, there is a high probability that you would get a nice, profitable and robust system for ES. This is how it looks like with the current setup in EMD market:

 

 

For YM market, the equity is slightly worse than for ES, but you can see that the system still makes new equity high. Again, it is just to verify that with the current setup it roughly works in other markets:

 

The important lesson we have learned today is that even though the system is in the drawdown, and it takes some time to recover from it, we should be patient and shouldn't make any rash decisions. Of course, when the drawdown gets too big, you should turn the system off, but as long as the drawdown is still acceptable and within the expectations that are based on Monte Carlo Analysis, you should fully believe your system and avoid switching one for another.

 

You can click here to learn more about the workflow I teach and start creating your own similar systems today.

 

Happy trading!

 

Tomas

 

 

Click here to read more success stories.

 

 

 

Please reload

Author: Tom Nesnidal (more about me
Join 15 000+
LinkedIn Followers
Join 5 000+
Twitter Followers
Get Social With Tom
  • Black LinkedIn Icon
  • Black Twitter Icon
  • Black Instagram Icon
  • Black RSS Icon
What others are saying

"Tomas is one of the most creative traders I know. He is able to generate unique trading ideas and elegant solutions to system development challenges."

Andrew Swanscott, BetterSystemTrader.com

"Tomas has been a professional trader for more than a decade and I have had the privilege of monitoring his accounts in action since 2006. His systems are performing as some of the best I have ever monitored and executed. I have been in the trading industry since 2002 and worked with many developers from all over the world. Tomas is definitely the one to consider."

Martin Lembak,

Systems Trading Expert,

MFRM, CAIA 

"Tomas is a professional trader, who for the last 10 years has specialized in developing trading systems. We have been tracking his trading systems for about 5 years and they generally show very robust, stable and above average performance. Striker is pleased to work with someone like him - a real professional with enthusiasm and deep knowledge of trading."

William Galwas, President Of Striker Securities, Inc 

"Personal consultation with Tom helped me to re-evaluate the complexity of my robustness testing and optimization processes. Plus, it has helped me with a specific plan on how to take things forward. It has given me some great ideas on how to avoid overfitting and make my testing more robust and provided tips on low hanging fruit in terms of the best markets to trade for intraday/short-term breakouts."

Craig Peters,

semi-advanced trader,

United Kingdom 

"Tom's approach to Automated Trading Strategies design, tests of robustness and portfolio diversification is really unique. He has been a professional trader for many years and the depth of his understanding of Breakout strategies and Market Internals is hard to find elsewhere."

Antonin Fisher,

Hedge Fund Manager,

Czech Republic 

"Tom´s systems and trading approach do really work and can bring good, stable and reasonable returns. I can highly recommend him as a teacher."

David Hruby,

Trader, Czech Republic 

"Tomas is truly an inspiring mentor and great trader with a positive life attitude. He has got very deep understanding of markets, breakout strategies, robustness testing procedures, and Market Internals."

Jan Lesanovsky,

Client, United Kingdom 

"As an experienced trader, I used Tomas´s consultation to get more clarity on best-practise robustness testing procedures, risk management, and portfolio management. He was quickly able to help me refine my current trading and system development approaches, and pointed me to really practical measures that I could implement immediately. I found Tomas to be not only extremely knowledgeable but very helpful and a great teacher. This has given me more confidence in developing robust strategies that work, and I would recommend his mentoring as extremely valuable for any systems trader."

Trevor West,

advanced trader, Australia 

The author of this trading blog has been featured on: