|
Trader's Tip
80-90% of everything created is NOT worth trading.
- Ryan Jones |
|
Quotes & Charts
Quote Search:
Market Specific Links:
Indices/Minis
Grains
Currencies/Forex
Financials
Food/Fiber/Softs
Metals
Energy
Meats
|
Special Message from Our Author
Today's Featured Article
In January 1995, I started a newsletter called the KamiKaze Trading Newsletter. This was focused on discovering profitable trading systems based on technical analysis, and how to properly apply the systems to your own trading. As many of you know, I am pretty stoked about a new software program (
Quantum Charts) I am having developed that will uncover and create profitable trading systems without any programming, and in a fraction of the time it takes to create systems in other programs. Quantum Charts is not due to be released for another couple of months, but I decided to break out a few old kamikaze Trading Newsletters and do a comparison on putting together some old trading systems, first with a well known system development software package, and then with Quantum Charts.
Most of the systems are simple, as they should be. As a rule, the more complex a system is, the more risk there is of the system being data fit, and for all intents and purposes, worthless. You need to review my last few articles on "Truth" ("Truth",
"Truth, Part II", and "Truth, Part III"
) for further information on this. But bottom line, if a system is "data fit", then profitable results cannot be trusted for future trading. In other words, despite the numbers, they may not reflect the truth about the potential profitability of a system. Regardless, my KamiKaze Trading Newsletter was monthly, providing a few trading systems in each report. Why monthly? Because it took more than a few days to analyze and create a few potentially profitable systems back then (and still now with the software programs out there)...it took a long time.
Take for example the first one I am going to discuss today. In my May 1995 KamiKaze, I revealed a simple strategy for selling the S&P 500 Index on the Tuesday after option expiration. The system simply sold on the open and exited on the close. It did not take a tremendously long time to program this system (although it did take a while to figure out how to make sure it was the Tuesday after Option expiration), what took a really long time originally was to program all of the other systems before I found one that might be worth trading. This is why I created Quantum Charts...to do my research, uncover profitable trading opportunities and create automated trading systems...all in a
fraction of the time with absolutely no programming.
Before I get to the results, then and now, along with other problems that I have incurred, let me briefly go through what I have to do with other system development programs to finally get access to the results for this simple strategy, and then how it is done with Quantum Charts.
First, with other system development programs, I have to figure out how to write the program to make sure that trades are only taken on Tuesday. Not hard. Then I have to make sure that the only Tuesday being traded (for back testing) is in fact the one after Option expiration. Option expiration is the 3rd Friday of the month. The 3rd Friday of the month can come on calendar days of the month between 15 and 21. This means that the following Tuesday can be calendar days between 19 and 26. It isn't as easy as simply saying the 3rd Tuesday of the month as sometimes the 3rd Tuesday comes before the 3rd Friday. A little less than half of the 3rd Tuesdays occur before the 3rd Friday. Long
story short, there is some checking and calculating that must go into making sure the trade is occurring on the right day. For such a simple strategy, it should not take as long as it does. Now, once you figure out the exact way to calculate the right day, you have to then program the information, including how you want to enter and exit the market. Again, not too terribly difficult, but if you are not a programmer, it is not as easy as you might think.
Total time with other System Development Programs = approximately 12 minutes after a mistake was made and fixed.
|
|
Compare this with creating the same simple strategy with Quantum Charts. If you want to see what happens on the Tuesday after option expiration, you don't have to calculate anything. All you do is open a daily chart, click on any Tuesday after option expiration and then click on "get conditions". Quantum Charts then analyzes the chart and immediately provides an exhaustive list of true conditions that exist for that bar. For the purposes of this article and our comparison, all we need to do is click on one of those conditions; "Tuesday after Option Expiration". You then drag and drop that condition into the System Module, drag and drop the entry
and exit triggers (buying on the open and exiting on the close) and WHAM, you are done.
Total time with Quantum Charts = 22 seconds.
And, just for your information, I have included the results listed in my Newsletter back in May 0f 1995 (testing period from Jan 1988 through Jan 1995 - Selling on the open and exiting on the close on the Tuesday after option expiration)
Here are the results provided back in May of 1995 (from Jan 1988 - Jan 1995):
Total Trades: 71
Winners: 47
Losers: 24
Winning %: 66%
Net Profit: $21,535
Average Trade: $303
Large Drawdown: $4420
Here are the results since May of 1995:
Total Trades: 166
Winners: 80
Losers: 86
Winning %: 48%
Net Profit: $40,990
Average Trade: $247
Large Drawdown: $27,230
Another strategy that was provided in February 1996 was a slightly more complex system that sold the S&P on Friday during certain setups that occurred during the week. They were as follows:
- Open Friday has to be greater than the open Thursday.
- Close Wednesday had to be less than the close Monday.
If these two conditions were true, then the strategy would sell on Friday at Thursday's close on a stop.
After 8 minutes, I had what I thought was the right strategy programmed into one of the better-known system development programs on the market today. The results were as follows from 1999 - current:
Total Trades: 90
Winners: 51
Losers: 39
Winning %: 56.7%
Net Profit: $50,550
Average Trade: $562
Large Drawdown: $27,610
These stats were simply exiting on the close for simplicity purposes. However, after I double-checked to make sure the trades reflected the system I was trying to program; I realized that it took 80 of the trades on Monday and not Friday, while the remaining 10 were taken on Tuesdays. This screw up strategy, by the way, made up 36% of the total net profits from the above stats).
|
|
It took me another 2 minutes to figure out what I had programmed wrong and then correct it. The results after the correction were as follows:
Total Trades: 52
Winners: 33
Losers: 19
Winning %: 63.5%
Net Profit: $25,355
Average Trade: $488
Large Drawdown: $15,235
Total time to recreate the system was 9 minutes through a popular system development program.
The process with Quantum Charts is quite simple. You open a chart, click on any Friday and click on "get conditions". You then drop and drag the two conditions that meet the above requirements into the system module, drop and drag the entry and exit triggers and WHAM, you are done. Total time was 35 seconds, and the extra time was simply because I changed the variables in one of the conditions. One of the conditions stated close.1 is less than close.2, which simply means that the close Thursday was less than the close of Wednesday. I changed the variables (all variables are changeable) 1 and 2 to 2 and 4.
There are two other simple ways to achieve the same process, both only taking a few seconds. This one seemed the quickest to me but I really don't think it would matter. Nonetheless, 35 seconds to create a simple trading system.
As the weeks go by, I will demonstrate other systems being created by Quantum Charts (complete with rules and results) and compare them to what is required to achieve the same end result with other system development programs. The two examples I gave today are great examples, but there is more context to them than just the difference in time it took to create the systems. You see, I have years and years of experience creating simple systems through popular system development programs. However, I am NOT a programmer and have never taken the time to become an expert at writing the code for these systems. I was able to complete the creation of these systems in other system development
programs fairly quickly because of my familiarity with the programs. A beginner with no experience with the other programs might take hours to figure these out, if not days. A beginner using Quantum Charts could probably create these systems without even reading the manual; it is that simple and intuitive.
But there is another aspect that needs to be addressed before bringing this article to a close. I went into this article knowing exactly what I wanted to program. However, when I originally created these systems, it was by trial and error, testing different things out with hit and miss results. When a trader starts to look for a strategy, upwards of 80% - 90% of everything created is NOT worth trading. The above systems may or may not be worth trading based on additional analysis (see my recent "Truth" articles:
"Truth", "Truth, Part II", and
"Truth, Part III"). Accordingly, if I develop 10 systems and deem only 1 worth risking, it is not a matter of 12 minutes compared to 22 seconds; it is 2 hours compared to less than 4 minutes.
Finally, with all other system development programs, you have to come up with the ideas to test out. With Quantum Charts, all you have to do is click on a price bar and immediately an exhaustive list of ideas is presented to you...you simply click and go. I can talk about this until I am blue in the face, and it sounds great, and is great, but wait until you see it in action. If you would like to be kept informed on demonstration videos displaying the power of Quantum Charts that are scheduled to be released soon (you won't be disappointed), simply click on the link below.
http://www.QuantumCharts.com
My next article will deal with more complex systems; you won't believe how quickly they can be created through Quantum Charts.
|
|
About the Author
| Ryan Jones
is considered one of the trading industries "most complete traders". Starting his trading career at the early age of 16, he had traded nearly every major market and strategy by the age of 21. At the age of 26, Ryan signed a book deal with John Wiley making him one of the youngest authors ever in the field of futures trading. His book, The Trading Game, Playing by the Numbers to Make Millions is still considered to be the authority on the subject of trading and money management by many leading traders. Ryan's advanced experience and knowledge across many trading fields such as Technical Analysis, Option Trading, Money Management and the S&P have lead to several
trading feats, including turning a $15,000 account into over $107,000 in less than 90-days short-term trading the S&P (real money). |
|
Special Message from Our Author
|
