MY STUDENT'S STRATEGIES #22
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.

#060: MY STUDENT'S STRATEGIES (CASE STUDY #22)

As you already know, the part of the robustness testing process is a verification of how well the system performs on other markets. Sometimes it can happen that the strategy outperforms the original one, the one it was created for, when it’s tested in a related market. In this situation you can still take the system and complete the development on the other market (as long as it passes all robustness testing).

 

This is exactly the case of today’s strategy - the system was originally developed for 10-year T-Note market (TY), but during the testing phase, it showed a better performance on 30-year T-Note (US).

 

Strategies on these markets usually require a bigger account - and this isn’t an exemption. The stop loss is set to $1,700 and the maximum intraday drawdown (not close to close) is $15,531. Which is quite a lot compared to other systems, but this system is making about $18,000 per year (to be exact, it is $172,437 in 9.5 years).

 

Let’s take a look at more numbers:

 

  • Market:                                              30-year T-Note (US)

  • Main time frame (data1):               15-minute

  • Secondary time frame (data2):     400-minute

  • Time template:                                 7.20-14.00

  • Profit factor:                                      1.37

  • Win %:                                                54.1%

  • Avg.trade:                                           102.82 USD

  • Exit:                                                     stop-loss or at 14:00 exchange                                                                      time (avg. winning trade                                                                                +705.45 USD)

  • Stop-loss:                                           1,700 USD - only protective,                                                                            barely hit(avg. losing trade                                                                            -607.02 USD)

 

The 400-minute timeframe can look exotic, but it is basically daily data for this time template - as it is 6 hours and 40 minutes.

 

A characteristic that is also worth mentioning is the number of trades - the system has done 1,677 trades (both long & short) in less than 10 years. The number of trades is increased through a special trick - to increase the number of contracts depending on the market situation of the previous day - depending if the market went up or down, the system trades 1 or 2 contracts. Even this simple trick can make the equity smoother.

 

How smooth is the final equity? Let’s take a look now:

 

 

Besides 2-3 weak spots, the equity curve is mostly rising. At about trade number 1100 we can see the biggest drawdown. The system was mostly losing money for over 100 trades. For most traders, this could be unbearable and they would switch the system off. And that would be a mistake - as you can see, the system recovered from the loss pretty quickly and started making new equity highs.

 

How does this curve look in numbers?

 

 

In the beginning, I mentioned that this system was created for 10-year T-Note market (TY), how does it perform there?

 

 

The performance isn’t that bad, either. The net profit is about $65,000 and the drawdown will be probably at about a $7,000-$8,000 level, making the net profit-to-drawdown ratio slightly worse than in the case of the US market.

 

Let’s leave interest rates markets for a while and try completely different ones - the stock indexes? The first one is E-mini Dow Jones (YM):

 

 

The equity isn’t perfect, especially when you take a look at the $10,000 loss in the beginning, but it still was able to recover from it and make a nice $60,000 profit - so important is the rising tendency.

 

How about S&P 500 (ES)?

 

 

Despite the fact that it is a different market, we can see a similar equity curve - a quick loss in the beginning, slow, steady rise, every once in awhile a new equity high, and then a nice profit in the last 100 trades.

 

You don’t want to trade equity like this one, but don’t forget those are parameters that were created for a completely different market and, with a little bit of work, you can turn this equity into a tradeable one.

 

For those of you who are still thinking how to code the condition I described in the beginning of the article (change number of contracts depending on the market situation of the previous day) and how to add it your own strategies, here is the EasyLanguage code:

 

if CloseD(1) < OpenD(1) then ContractsLong = 2 else ContractsLong = 1;

if CloseD(1) > OpenD(1) then ContractsShort = 2 else ContractsShort = 1;

 

As you can see, it’s nothing complicated. Just 2 lines of extra code that can improve the performance of your trading strategies. And don’t be afraid to experiment with this condition and come up with your own versions on when to change the number of contracts.

 

But don’t forget that you also need to use the same variables ContractsLong and ContractsShort for your buy/sell orders.

 

Click here to learn more about the workflow I teach and start creating similar systems by yourself 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: