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Chuck,
May I ask you some technical questions:
1.how do you apply Stochastics on MF, since it is HLC function
2.how did you do it back in 60s without any computerised facility ?
Was it paper calculation ? [!!]
3.I read some stories about Lane´s %K and %D names. Do you remember
anything about this great T/A step ?
4. As for the Stochastic, CCI and RSI, the most interesting use is
through their composites, not the indicators alone. If you have some
time, you will find the relatively new ideas in the AFL Library.
Dimitris Tsokakis
--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:
> Fred,
>
> I really hate to sound coy about my systems, as I know the various
ways that
> such a response can be interpreted. However, I am trading several
hedge
> funds using my systems and it would be a disservice to my clients
to divulge
> my exact methods. Having said that, I will try to answer your
questions.
>
> Let me start by telling you what I don't use. I'm not looking for
a debate
> here, but I've tried all of these things and I cannot get value
from them.
> Indicators such as Stochastics, DMI, ADX, RSI, CCI, etc. have
proven to be
> useless to me, over 40 years of trading. I know many of the
members in
> this group use some or all of those things and many people use them
> successfully. I have not been able to do so. I've spent a month
trading
> with George Lane (inventor of stochastics), for instance, and I've
written
> hundreds of systems that use stochastics in various forms to no
avail. I've
> spent time with Don Lambert (creator of CCI) and couldn't find
value in that
> indicator either. I have every book and article written about
DMI, ADX,
> RSI and have a disk folder full of discarded systems using those
indicators.
>
> I have to tell you (if you already aren't aware) that I approach
system
> development quite differently from most people. Of course, that
could very
> well mean that I'm doing it "wrong". I endeavour to create system
(s) that
> work across all stocks at all times. Many system developers create
a
> system, using stochastics for instance, and then apply that system
to stocks
> that have worked well with that system in the past. If that
approach works
> for others, fine. I'm of the opinion that a stock that has worked
well
> with stochastics for the last 27 years could stop doing so
tomorrow. I
> have stochastic systems, for instance, that work extremely well if
I decide
> which stocks to feed them. So, it's not that I am unable to
develop
> systems that use these indicators. As you are aware, such systems
are easy
> to write and test. I feel that is equally easy to fool yourself
into
> believing that they will work in the future.
>
> As to what I do use... this is a bit more difficult for me to
discuss. I
> can tell you that my systems are aware of where the current price
is in
> relationship to some moving average. My systems look at
(something similar
> to) the Sharpe ratio of returns over the recent past and the slope
of a
> linear regression line and/or momentum. Other functions you will
find
> being heavily used in my systems include things like standard
deviation and
> standard error (both based on the close). Another hint for you
would be
> best stated in a question: "Who says that standard deviation can
only be
> useful in powers of two?". Many of my systems that use standard
> deviation, in some form, use powers of three, four and even seven
when
> calculating standard deviation. I guess a mathematician would say
that
> using a power other then two makes it non standard. That's
exactly why I
> call the function "NonStandardDeviation".
>
> Relative strength (not RSI) is also a powerful tool that I use
extensively.
> I've done over 15 years of research using relative strength in
conjunction
> with two very large ($300 billion) hedge funds in the States. One
of the
> hedge funds I manage uses only a relative strength approach while
always
> being beta neutral. I use a method similar to that used by IBD,
but IBD
> hasn't changed their methodology (IMO) for too many years. It's
basically
> a multi-period relative strength, weighting each lookback period
> differently. I can give you another clue here that took many
years for me
> to discover. However you weight the various lookback periods,
performance
> can be increased by treating the most recent period negatively.
The idea
> being that a recent, strong, positive relative strength can very
well mean a
> pull-back is in order.
>
> That's all I can tell you, at least in this group forum. I am
very happy
> to share concepts and I may, in the process, tell you enough about
what I'm
> doing for you to replicate it. I'm sorry that I cannot simply
give you
> AFL code and I'm sorry if that sounds like I am building up my
systems to be
> the grail. They are not the grail, but they do produce proven,
> consistent, non-spectacular, returns.
>
> Cheers
> -----Original Message-----
> From: Fred [mailto:fctonetti@x...]
> Sent: Sunday, April 13, 2003 5:08 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: Real-world trading (specifics)
>
>
> Chuck,
>
> You have filled things out somewhat, but I guess what I was asking
> more specifically was:
>
> 1. What other kinds of qualifiers do you use to decide how to
limit
> the universe of stocks that you'll even consider some signal for
> today ?
>
> and ...
>
> 2. Does the system you use employ some sort of pattern matching
> (Raschke's "grail" i.e ADX +/- DMI etc. plus a pullback etc.
would be
> an example of this sort of thing) or is it something that is more
> trend of momentum oriented (MACD, Stochastic, Linear Regression
would
> be examples of this sort of thing)
>
> TIA, Fred
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
> <chuck_rademacher@x> wrote:
> > Re: Real-world tradingThanks, Fred Tonetti, for the comments. I
> will
> > endeavour to answer your questions without "giving away the
farm".
> >
> > First, I have to tell you that I think my approach is different
> from MOST of
> > the people in this group. Of course, that could mean that most
of
> the
> > others have it right!
> >
> > I would NEVER optimize for a different set of parameters for
each
> stock.
> > I'm of the opinion that MSFT can start looking like IBM
tomorrow.
> AOL can
> > take on the look and feel of INTC next week. So, I want to
have
> one set of
> > parameters that works on ALL stocks over at least six years of
data
> > (preferably ten to twelve). I end up with a set of parameters
> that works
> > over 13,000+ stocks (active and extinct) times however many days
> those
> > stocks have traded. The number of trades can be between 15,000
> and 50,000
> > and gives me some feeling that the system(s) will be robust in
the
> future.
> >
> > The next area I seem to treat differently than most as well. I
> trade fixed
> > size positions all the time. My backtesting and realtime
trading
> is always
> > based on fixed position size. If I have cash, I will take as
many
> trades
> > as I can take. If I don't have enough cash to take every
trade, I
> will sort
> > the orders by "something". If I'm not getting enough signals
to
> use all my
> > cash, I will gradually increase the bet size. AB lends itself
to
> this
> > approach, although I would like to see it more automated. I'll
> give an
> > example:
> >
> > Let's say I'm sitting on $100,000 cash, or will be after I close
> out some
> > positions tomorrow. If I'm trading $10,000 per transaction,
> obviously I
> > have enough cash to take ten new positions. My system may
> generate 100
> > orders for tomorrow. I will add a column to my exploration so
> that I can
> > sort by it (or at least look at it). For simplicity, let's say
> that I know
> > that my system works better on low price stocks; the lower the
> better.
> > That's almost too easy, but I could sort my buy orders by
closing
> price and
> > take the first ten. Obviously, I would have had to backtest
this
> premise
> > before trading in realtime.
> >
> > I sort by whatever I have found (via backtesting) gives me the
best
> results.
> > Since I have other information in my data (fundamentals, etc.),
I
> can sort
> > by just about anything you can imagine.
> >
> > You quoted me as saying that I use volume * price as one of my
> filters. I
> > use something between a ten-day and fifty-day average volume
times
> the
> > (actual) closing price to give me the turnover. If I'm trading
> $10,000, I
> > want the turnover to be at least $200,000. That's not a
science,
> just a
> > judgemental ratio of my order size to the average turnover in
order
> to get
> > an easy fill (in and out).
> >
> > I hope I have answered your questions. If not, hit me again.
> > -----Original Message-----
> > From: Fred Tonetti [mailto:ftonetti@x...]
> > Sent: Sunday, April 13, 2003 4:22 PM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] Re: Real-world trading
> >
> >
> > Chuck,
> >
> > I can tell from messages that you've posted in the past that
you
> are
> > thorough in your testing ...
> >
> > Without giving away the farm as it were I am interested in the
> kinds of
> > systems you develop and trade, do they in general look for
certain
> kinds of
> > conditions like for example a Raschke "grail" set up or do they
> more belong
> > to the timing of things with in the larger trend or ?
> >
> > I think you are far beyond most here or at least me in terms
of
> how you go
> > about selecting stocks to trade beyond whether or not they match
> some
> > pattern in a generalized way. I've heard you speak of volume >
X
> etc., but
> > I think most here or at least I would benefit from any and all
> information
> > you'd be willing to share about how you pare down 10,000
tradable
> issues
> > into something more manageable on a real time basis.
> >
> > Regards, Fred
> >
> >
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