It’s time for an upgrade! I’ve alluded a few times in this blog, and the SnapTrader blog, that I am working on improving the MultiStage Trading System. That’s an ongoing effort and will likely continue. The latest revision (version 9) is a substantial upgrade. It incorporates some new criteria for the development of signals, as well as a slight change to the exit rules.
Before I go into the changes, let me first share some of the results. There are a few reasons why I like this version better. First and foremost is risk management. Version 9 incorporates a simple dynamic stop that protects us from the extreme downside. I haven’t been shy about my concern with stops. For the most part stops have always hurt us, both in returns risk management… until now.
The results show the benefit of the new system by trimming drawdowns, and improving risk/reward measures immensely. For example, for the 2012 trading year compare the numbers below:
It’s pretty clear that we’ve improved the risk management, but what about performance. I’ve added another row to the table with the total return for this year, through 11/26.
Now, please don’t get silly and expect you can duplicate these returns. There are many reasons why it’s virtually impossible to match them exactly, but I’m sure it’s easy to see why I much prefer this latest version to the trading system. There is very little difference in return, yet measurable risk improvements.
The signals for this new version will go live on 12/1/2012.
If the stock’s closing price is below the 200 day simple moving average, enter an order to exit on the open for the next day.
That’s it. It’s simple, but it does require you to assess this each day. I find that the easiest way is to just click through my positions with the 200-day MA line on the chart. If you have been following the system you will know that there are rarely more than a few positions, so this isn’t really a big time sink. And again, it’s not required, but without it the improved results don’t test out.
Good Trading…
Before I go into the changes, let me first share some of the results. There are a few reasons why I like this version better. First and foremost is risk management. Version 9 incorporates a simple dynamic stop that protects us from the extreme downside. I haven’t been shy about my concern with stops. For the most part stops have always hurt us, both in returns risk management… until now.
The results show the benefit of the new system by trimming drawdowns, and improving risk/reward measures immensely. For example, for the 2012 trading year compare the numbers below:
Version 8
|
Version 9
| |
| Max Drawdown (trade) |
35.14%
|
28.21%
|
| Sharpe Ratio |
2.19
|
2.62
|
| Ulcer Perf. Index |
27.67
|
32.97
|
Version 8
|
Version 9
| |
| Max Drawdown (trade) |
35.14%
|
28.21%
|
| Sharpe Ratio |
2.19
|
2.62
|
| Ulcer Perf. Index |
27.67
|
32.97
|
| Net Profit% |
59.51%
|
58.74%
|
The signals for this new version will go live on 12/1/2012.
New Exit
All of these improvements come with a price. It’s not required, but without using this new exit back-tested results are much closer to the version 8 results. It’s a simple exit, but does require a daily look. Here is the rule:If the stock’s closing price is below the 200 day simple moving average, enter an order to exit on the open for the next day.
That’s it. It’s simple, but it does require you to assess this each day. I find that the easiest way is to just click through my positions with the 200-day MA line on the chart. If you have been following the system you will know that there are rarely more than a few positions, so this isn’t really a big time sink. And again, it’s not required, but without it the improved results don’t test out.
Good Trading…
No comments:
Post a Comment