Trading System - 1
The recent slowdown in blog posts is due to time spent developing a trading system. So far, it’s fairly basic in functionality:
* Screens historical data for ~25 of the Nifty-50 stocks (Jan 2003 - todate)
* Tests trend-following (e.g. range contraction followed by range expansion) as well as swing trading (e.g. moving average cross-over) strategies, both long & short
* Implements position sizing, assumes compounding
* Uses trailing stop-losses, computed as function of each stock’s volatility (as measured by ATR)
* Accounts for bid-ask spreads & commissions
* Computes win/loss ratio, worst drawdown, avg win/loss percentages, average holding period, expectancy, etc.
I’ll post a sample trading plan soon that captures some of the details. Altough the system is in very preliminary stages, I’ve been able to back-test some trading strategies already.
As for the results, nothing ground-breaking yet. Given the market’s runup since 2003, it’s a no-brainer that a trend following (long, of course) system should have performed well. A swing trading system on the other hand can go either way.
The onus is in avoiding statistical biases while interpreting results - more on this to follow.
Related Posts:
July 10th, 2006 at 9:33 am
Thanks for posting your comprehensive trading strategy Kaushik. It will be very interesting to follow as I am interested in technical trading but take a more fundamental approach with my investments.
How about computing the stop-losses based on the stock’s volatility AND the volatility of the market as a whole?
July 26th, 2006 at 4:05 am
What are you using to test your systems?
How do you like it?
How did you like Mike Covel’s book?
July 26th, 2006 at 9:21 am
I assume you mean “back test” my system - I’m using historical data for half of the Nifty-50 stocks, going back to 1994.
Mike Covel’s book - I have not read it, although I do follow his blog.
July 29th, 2006 at 8:26 pm
Hi Kaushik
Some silly ( ? ) questions since I am not well versed with the jargon
What exactly do you mean by long entry and short entry ?
Also what is the THRESHOLD that you have in your trading plan
July 31st, 2006 at 6:21 pm
Hari,
Long entry = buy the stock, Short entry = “short sell” the stock.
THRESHOLD could be in the 1-2 range, to look for stocks whose volatility has collapsed.
August 2nd, 2006 at 10:18 am
Dont miss this: http://www.businessstandard.com/common/storypage.php?autono=99963&leftnm=5&subLeft=0&chkFlg=
I am a big fan of this guy.
August 4th, 2006 at 4:06 pm
Hi
you are doing a great job. Just line Barry Ritholtz of India. I wanted to call you but did not get through your number. I wanted some Data of stock market. Can i have your new number. I am a curreny analyst.
Also one curious thing, every one and his mom is expecting that Dollar WILL fall and that too most with asian currencies.. But they dont seem to be following the market, See Euro-Yen, GBP-Yen or CHF-YEN.. all near their 10 year highs.. meaning that the asians are depreciating against the European currencies and are flat against the dollar. Do you track currencies anyway?
Give your number..I will call you
August 29th, 2006 at 4:34 pm
i want to collect data on bid ask spread rate for the last 30 days..what should i do??