Category Archives for "General"
You should have a plan for when you screw things up because I can guarantee it will happen. This is the screw up I did last night and how I handled it this morning. Enjoy this unplanned post.
Each night for 250 days of the year, I do the following for my trading.
Step 1: In the early evening, log into InteractiveBrokers, get the executions for the day, update my current positions and P&L spreadsheet. This is all done with a push of a couple of buttons. Last, push button in Excel that starts code that waits for data to be updated for the day and then runs my scans in AmiBroker and imports results into Excel. Time to do 2 minutes
This post is the continuation of the steps for creating a mean reversion strategy from the first part of The ABCs of creating a mean reversion strategy – Part 1. You can also listen to part 2 of my interview on Better System Trader here.
A quick recap of the topics covered in part 1. I covered trading universe, indicators to measure daily mean reversion, combining multiple mean reversion indicators, and last bar mean reversion.
I was recently interviewed on Better System Trader, click here for part one of the interview, about the steps for creating a stock mean reversion strategy. I will be covering and expanding on the topics from the interview. These steps, for the most part, would apply to any strategy one is creating. The focus will be a long stock mean reversion strategy using daily bars.
Like all traders, I am always on the lookout for any new indicators better than the ones I am using. I have been using and promoting RSI2 since 2004 for mean reversion trading. I created the ConnorsRSI in 2012. Am I married to these indicators? No. If I find something ‘better’ I will drop them. I came across this article Battle of the oscillators, I had to try it out.
One thing to understand, is that each situation is different. An indicator that works great on ETFs may work not as well on futures. Also, each person has a different metric on what is ‘better.’
I am frequently asked if I do out-of-sample testing. The short answer is not always and when I do, it is not how most people do the test. There are lots of considerations and pitfalls to avoid when doing out-of-sample testing. Out-of-sample testing is not the panacea it is made out to be. There are lots of grey areas which I will discuss below.
While doing the research for the next article based on Simple ConnorsRSI Strategy on S&P500 Stocks, I discovered that I had not tested what I wanted. Unfortunately errors are made while doing research and my goal is to catch them before publishing them. I did not in this case. Fortunately the results did not significantly change. The top CAR went from 27.32 to 26.63. As usual the error made the numbers comes down. Why is it that it never happens that they go up? See the post for the corrected numbers. I have also uploaded a new corrected spreadsheet.
Good Quant Trading,
I will be in Texas next week giving presentations. Click the links below for more details. I hope to see some readers there.
For more information see https://www.mta.org/event-registration/austin-chapter-meeting-featuring-cesar-alvarez/
For more information see http://www.afta-dfw.org/schedule.htm meeting #2.
To those on my new blog notification list, I sent out the opportunity to join me in a one hour webinar where people could ask me anything about trading. I had a ton of fun answering lots of great questions. See the bottom of the post for links to download the mp3 files of the webinars.
Some questions, I answered are:
A reader sent me a link to presentation, Robert Frey – 180 years of Market Drawdowns, about drawdowns and the time that a strategy is underwater. I highly suggest you watch it. I wanted to perform my own analysis on how often a buy and hold strategy on the S&P500 index is making new equity highs. Then, I wanted to compare the results to a new strategy I am working on for my trading. From previous experience, this number is a lot lower than people expect.
I am back from the Australian Technical Analysis Association meeting in the Gold Coast, Australia. I had a great time meeting readers of the blog and other traders. Lots of good presentations. My favorites include those by Alan Clement and Andrew Gibbs, which provided me with new research ideas. These include trend following and using fundamental data. Rande Howell talked about our emotions, which as quant traders we believe we can ignore but we cannot.