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Yes,
Phsst... backadjusted means split-adjusted (both ways). I do all
price filtering based on "actual" prices. Have a look at AOL in 1992
(actual vs. backadjusted).
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<FONT face="Times New Roman"
size=2>-----Original Message-----From: phsst
[mailto:phsst@xxxxxxxxx]Sent: Wednesday, April 23, 2003 1:40
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re:
Real world trading - brainstorming>It would also
help if you believed in the need to use actual prices>instead of
backadjusted prices and that you have access to such>information.
Does 'backadjusted prices' mean split-adjusted price
data?Phsst--- In amibroker@xxxxxxxxxxxxxxx, "Chuck
Rademacher"<chuck_rademacher@x> wrote:> I have come up with
some fairly profitable ways of using one of AB'svery> powerful
features (AddToComposite). Perhaps my approach is alreadyold
hat> to many of you, in which case it's easy to hit the delete
button. I'm> hoping, however, to stir up some dialogue
regarding the concept in hopes> that we can help each other through
brainstorming the idea(s) evenfurther.> > In order to best
utilise what I am proposing, you would ideally have a> system that
generates lots of trades (1,000 plus) and you wouldalready be a>
believer in backtesting over several years of data. It would
alsohelp if> you believed in the need to use actual prices instead
ofbackadjusted prices> and that you have access to such
information. You can stillbenefit from> this
approach without these conditions being true, but not as much.>
> The first idea that I'm going to describe assumes that stocks
indifferent> price brackets do better than other stocks and that
the bracket ofthe best> performers changes over time. I
have proven, at least to myself,that this> assumption is
valid. I'm sure all of you have heard
commentatorssaying> that the mid-cap stocks have been outperforming
the large-caprecently or> the micro-cap stocks have been the best
performers over the last 30days,> etc.> > Let's
assume that you have a fairly profitable system that generates too>
many trades in proportion to the amount of cash you have available.
One> way of reducing the number of trades would be to only take
tradesfor stocks> in the price range that has been performing the
best in recenttimes. I> made several composite
files that contain the average returns forvarious> price
brackets. For instance, I made a composite file containing
the> returns for stocks in the $1 to $5 price range, $6 to $10
pricerange, etc.> I used a simple formula (close/ref(close,-20))
for determining thereturns> and wrote the composite with a count
for how many stocks met thecriteria> each day as well as the total
returns for all of the stocks meeting the> criteria each day.>
> When I run a scan or optimization using my trading system, I
canread these> composite files (using the Foreign function) and
calculate averagereturns> for each price bracket. Each
day, I can determine which pricebrackets> are performing the
best (or worst for shorting) and filter my tradesto only> trade the
best one or two price brackets. Of course, you can
usevarious> smoothing techniques to filter out some of the
noise.> > By placing this price bracket ranking in one of my
Explorationcolumns, I> can place my orders for the day by working
my way down the buy (orshort)> signals in sequence until I run out
of cash.> > I have backtested this technique and it adds enough
additionalprofit to the> bottom line to make it
worthwhile. Sectors and/or industries workwell if>
substituted for price brackets.> > Here's another idea, very
much related to the one above. Let's saythat> you like
to use moving average systems. Or you would like to usethem,
but> have trouble making them dynamic enough to adjust to various
market> conditions and cycles. For sake of
simplicity, we'll just look at a> simple two-period crossover
system. Let's say that the short timeframe> might range
from three to eight days and the long timeframe might gofrom>
eleven to 20 days. What I did in this case was make the
following> composite files:> >
~Composite311 (will contain returns based on using a 3/11
crossover)> ~Composite312 (will contain returns based
on using a 3/12 crossover)> etc.> > > I then run
my system over historical data, creating a composite foreach of>
the possible timeframes (3/11, 3/12, 3/13, etc.). Tedious
forsure. If> you are determined to use a moving average
crossover system,however, this> is worth the effort.>
> Each composite file would contain the equity curve information
resulting> from using the applicable crossover periods.>
> The actual trading system would determine (each day) which of
thevarious> timeframe possibilities has been performing over the
last 20, 30,etc. days> and would use the relevant timeframes for
trading going forward.> > There is a problem with what to do
with trades that were enteredusing one> pair of timeframes when you
switch to using another. But you haveto deal> with this
problem anyway if you are going to use any sort of dynamically>
adjusted moving average or similar system.> > Another idea that
I am playing with has two composite files. Onecontaining> the
results derived from trading the same system on stocks paying high>
yields and the other for stocks with low debt/equity ratios. Through
time,> I can see definite times when one of these groups has better
returnsthan> the other. Emphasis of investors and
traders seems to switch fromyield to> debt and back again over
time.> > Just a couple of ideas. The first one
(price brackets) seem tohave the> best reward for the amount of
time invested. Substituting sectors for> price brackets
produced some interesting results. It frequentlypays
to> buy the worst performing sectors as long as the peformance
isworking its> way back to the top. Of course, you could
substitute actual marketcap for> price brackets too.>
> Have a think... you'll surely come up with some ways to use
and/orimprove> on what I've done.Send
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