Thursday, August 29, 2013

TSI-Vector Strategy Applied to 13 Ticker Symbols

In the left panel of the homepage you will now find links to 13 ticker symbols that have received my best 'TradeStation Walk-Forward Optimization' effort. Clicking on one of the links will take you to an overview of how relatively successful my TSI-Vector Strategy was with that particular security on a daily trading basis, and includes links to all of the other ticker symbols studied. 

My expectation is that by this weekend I will have completed the next phase of my work, which is to prepare for the public communication of the real-time trading signals generated for each ticker symbol and to provide a mechanism for their recording.

An unusual feature of the strategy is that all trades - both entry and exit - are conducted at the opening bell of the NYSE at 9:30 am EST with a simple market order. Another feature is that the computer will give me the signals on the preceding day at 4:01 pm EST - and from there I will be able to post the details soon thereafter. These features, should the strategy prove worthwhile, will be really convenient and easy for everyone's use.

Once I got a ways into my work with the TradeStation WFO (Walk-Forward Optimizer) I discovered that the reliability of its output is contingent on the strategy delivering a minimum of 400 trades for analysis. This was extremely disheartening to me, as nothing I was testing would deliver that many trades. My concluding run of the S&P 500 ETF (SPY) covered the daily price movement of 20 years, yet amounted to only 235 trades. The gold ETF (GLD) only goes back 9 years and my long only strategy generated just 41 trades.

So what I am trying to say is that these strategies may not work. It is entirely possible that their sample size (ie number of trades) is insufficient for reliability. But to be fair, it is possible that they will work, just the same. At this point we really don't know.

I'll post the trades daily, update a spreadsheet that records the signals, prices, etc., then we'll just watch and see what happens. It'll be another adventure - and hopefully an adventure with a beautiful rainbow or pot of gold at the end. 

By the way, if you find a link or picture or whatever that does not seem to be working properly, please let me know. No doubt I have juggled so many balls for 16 hours a day to produce this that I have overlooked something. I will appreciate your input. Thanks.



  1. Hi John

    Looking forward to seeing this in action!

    Many thanks

  2. John, what an achievement!


  3. Hi John, thank you for sharing your hard work. Just wondering how exactly one interprets the Return on Initial Capital and Return on Account fields? I looked at the link below as it appears RonIC is quite low as is the Annual Rate of Return yet the RonA is high? It'd be interesting to see the % equity return graph vs $ equity graph. Thanks again, Ross

  4. Thanks Greg and Joe. I look forward to seeing how this is going to work and have my fingers crossed. Putting a strategy into the contraption and watching all 25 little squares turn red was quite a shocker. Eventually I could get a few to turn green. A few. I referred to someone who has a lot of experience with this and when he told me his strategies would get green on all 25 squares I was dumbfounded. Like that was absolutely impossible, I was sure. So I kept working to understand - as best I could - how a good strategy would perform in order to pass the green squares. I learned a lot.

    The short of it is that the equity curve, rising from the bottom left corner to the upper right corner, ideally, needs to be as straight a line as possible. If it draws as such it means that as the sequence of trades progresses throughout the time period, say 10 or 20 years, is consistently profitable. Large dips in the line are time periods where the system is not profitable (ie incurring a series of losing trades and often large losing trades). One spell of this behavior and the system is rated FAIL - the red square. Or perhaps the overall Net Profit is good but the profit was made during a specific period of time - while the rest of the 10 or 20 year period was mostly flat. This too will FAIL. So to succeed, the strategy must consistently and persistently be profitable trade after trade throughout the entire period - or else it will not PASS. It's quite the challenge to figure out how to structure a strategy to do this and for me it was very very difficult. But I am improving.

  5. Ross - thanks for your question. I don't know much about this subject, except from what I read at the link you provided.

    The Rate on Initial Capital = (Net Profit / Initial Capital).

    If my case, if one trades with 100 shares and the very first trade was for the stock at $20 per share, the initial capital $2,000. That is, I had to have $2,000 to start the game or I would not have enough money to play.

    If at the end of the strategy time frame, say 10 years, the Net Profit read $4,000, I gather the ROIC would be a 2. A reading of 2 would say starting out with $2,000 allowed me to double my money. 3 would triple my starting investment....and so on.

    If the exercise is converted to reflect an *annual* rate, then if I doubled my initial investment in 10 years, certainly I did not double the $2,000 each of 10 years. Then the question/answer is how much did the strategy gain each year so that after 10 years the initial investment would double.

    Please, help me do a better job of explaining my understanding if I did not entirely succeed this first time around, OK?

  6. John - thanks for replying. Your explanation is also my understanding of that link. GLD for example, has an Initial Capital/Account Size Required=$515(100 shares x ???), NP=$10,293, RoIC=10.29%, ARR=1.23%, and a RoA=1998.64%. How did we get an IC of $515, how did we get that RoIC with $515->$10,293 at that ARR and why is RoA so vastly different to the RoIC? Is there a set stop loss percentage that I'm missing also? Apologies for all the questions. I guess one of things I was getting at was maybe you could leverage your IC more along with a stop loss, which you seem to have covered with the ES article.

  7. Thanks very much for this, I'm looking forward to reading more in September.