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Herbert (Pete) Holt asked:
> > I've been working on a daily S&P reversal system. The system needs
> > filters to screen out incorrect signals. I've used ADX to eliminate
> > signals in strongly trending markets with some success. I need a
filter
> > for moderately trending markets where I now get successive trades that
are
> > stopped out. For example, a day when the market trends upward all day
> > > by about 30 points, but has no sudden spikes. Any suggestions as to
> > what I might use as a filter would be very appreciated.
to which Hans Esser replied:
> If you use INTRADAY data why not just LIMIT the numbers of trades per day
- or LIMIT the numbers of losers per day.
I trade a simple intraday breakout system, which can go long or short, and
one day about 3 months ago the market banged up and down hitting the entry
point and stop three times in less than an hour. Luckily I wasn't trading
that day, but I wondered if it would be beneficial to hold off re-entering
for a given amount of time after a losing trade.
I soon found that the best solution was not to re-enter at all in the same
direction during the same day, ie only one trade each way per day.
Backtesting on the previous 7 years' data showed that this modification
would have produced a very significant improvement in the bottom line, and
also reduced drawdowns considerably.
It still amazes me that I hadn't thought to try this earlier, and until
Hans mentioned it, I don't recall seeing it suggested anywhere else. And
yes, I was going to share the above with you, but just hadn't got round to
it.
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