Posts tagged ‘System Results’
The system closed the month of March with a modest gain (+2.5%). With the exception of a few days, most of the market’s movement continues to be in the gaps, with relatively narrow intraday ranges. Again and again the market gaps up/down and then just lays there. Everyone seems to be guarding their chips and waiting for the other guy to make the first move.
So why all the caution? My personal view is that the ever-looming Euro debt crisis has instilled quite a bit of fear into the markets and the retail investor (after loosing all of his home equity and most of his 401K) has run screaming, fleeing equities for the foreseeable future. Thus, what we seem to have now is a listless market comprised largely of HFT bots trading money back and forth. A zero sum game and a difficult environment for the retail day trader, to be sure.
Survivorship Bias (SB) is a plague to most trading system developers. Pick any basket of stocks to trade and you’ve just introduced it into your results, especially if that basket is a collection of index components (like the S&P500, Nasdaq 100, etc).
So what exactly is this bane of all algo traders? Here’s the textbook definition:
December yielded some nice gains for System A, but it was a bit of a strange month. Most of the movement (if any) occurred in the gaps, and thus the intraday range/volatility was almost non-existent, leaving the system on the sidelines much of the time. But fortunately there were a few decent positive days, with one nice outlier of nearly +9% that allowed the system to finish the month with an 11% gain.
I’ve been trading an intraday system live (with real $$) for just over two years now. Its based on mean reversion principles with a few extra wrinkles of my own design.
Here’s my live actual net returns as of yesterday (click to zoom):
Here’s some screen views from my algo trading system development application (click on image for a closer view).
Note that the charts were generated from a trading simulation of simple a diagnostic system that generates random trades (this obviously isn’t the system I trade live).
Stock Bar Chart View (with marked trades)