Category Archives for "Trend Following"

External Strategy Rule Evaluation. Too many rules?

A common question I get is where do I find all my research ideas. My main source is Quantocracy. He does a great job of curating posts because the work is manually done. Then there the Better System Trader and Trend Following Radio podcasts. Usually from these sources I get a nugget of an idea to research or a simple strategy. Sometimes the post/podcast will recommend a book.

From one of these sources came the recommendation of the book “Trade Like A Stock Market Wizard” by Mark Minervini. Fortunately for me, my local library carried it. The strategy he covers in the book is a mixed of fundamentals, chart reading and technical analysis. Not something I would normally care about. I really enjoyed the chapters on risk management. In one chapter, he has very specific technical rules that all stocks must follow. On seeing this, I wondered could these rules be a basis for a trend following stock strategy? My second thought was, there are lots of rules there. Are all the rules necessary? The latter question is what I will focus on this post.

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September 20, 2017

ETF Sector Trading: The effect of daily, weekly and monthly timeframes

I recently gave a presentation on Sector trading using the 200-day moving average at the Northwest Traders and Technical Analysts. Some questions asked were:

  • What if we only trade this monthly?
  • What if we used weekly bars to trade only weekly?
  • Wat if we used weekly bars to trade monthly?

The reason for these questions was to reduce the frequency of having to check signals and the total number of trades. My first response was that the results would probably be a little lower and the trade count also would be lower. But that was just a guess. I have been doing this long enough to know that I wrong 40% of the time. Curiosity got the better of me and I tested it out.

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Using Stops: The Good, The Bad and The Ugly

I recently gave a presentation on Better System Trader about using stops on a breakout strategy. The research produced results I was not expecting and may be surprising to you. The stops tested are

  • No stops
  • Maximum Loss using ATR (Intraday and End of Day)
  • Maximum Loss using percentage (Intraday)
  • Trailing ATR (Intraday and End of Day)
  • Profit target using ATR (Intraday and End of Day)

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November 19, 2014

Heikin-Ashi Charts

A reader recently introduced me to Heikin-Ashi charts. Popular with forex traders for showing trends which at first look of chart sure seems that way. Look at these two daily charts. The top one is a standard Candlestick chart while the bottom is Heikin-Ashi chart.

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The trend of unbroken green sure seems more obvious and stronger in the Heikin-Ashi chart. Will testing confirm this?

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September 22, 2014

DTAYS Weekly Breakout Strategy With Time Stops

I recently read on Don’t Talk About your Stocks about an idea that stocks that were losers after (4, 6, 8) weeks should be sold to make way for other stocks that may do better. Will this idea improve the results from the original DTAYS Weekly Breakout Strategy? This reminded me of research I did while working for Larry Connors. On a mean reversion strategy we were researching, we noticed that after 10 days, 95% of the positions end up being losers. Then came the ‘obvious’ rule to add. Exit a position if it had not bounced after 10 days. We both thought this would greatly improve the results. It did the opposite and hurt them. Why? Because it was better to wait for the bounce even if the trade was a loser.

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