One of the best ways, I feel, to learn a new system is to explore it in depth. In order to learn something new, it’s often advisable to see a practical example of that which you’re trying to learn in action. In this post, I’d like to discuss how we can use TraderStudio to test a strategy that significantly outperforms buy-and-hold. This system is so profitable, in fact, that it outperforms buy-and-hold by a factor of 100x. Intrigued? Read on.
This strategy ships free of charge with TradersStudio and is called TSStockTraderLong2006. We will test it against the NASDAQ100 as evidence that it has consistent profitability.
The code for this strategy is simple:
The system is a breakout system that looks at yesterday’s price activity and operates under the assumption that today’s price bar will be similar. The 50-bar moving average of the NASDAQ Index (NAS) is the Predictive Market. The Market Noise is calculated by taking the minimum value of yesterday’s High minus Open or yesterday’s Open minus Low.
Reading through the code is the best way to determine the rules of the system.
The Buy rules are:
If the NASDAQ index is above its 50-day moving average,
Then, if the Close is less than the close of 6 days ago (Lookback) and the Range is less than the 3-day average of the Range and the Close is less than the Open,
Buy on a Day Stop at the Close plus 1.1 (BullMult) times the Noise.
If the NASDAQ index is below its 50-day moving average
Then, if the Close is less than the Close of 6 days ago (Lookback) and the Range is
less than the 3-day average of the Range and the Close is less than the Open,
Buy on a Day Stop at the Close plus 1.3 (BearMult) times the Noise.
This process filters the trend of the market. The NASDAQ Index is either above or below its 50-day moving average. This provides information on the trend direction. The ‘BullMult’ and ‘BearMult’ multipliers provide different levels to enter on the Buy side based upon the prevailing trend of the market.
This system enters only Long positions. It does not enter the market Short. Still, we will see that this system held up well during the recent Bear market.
The Exit rule reads much the same. Here are the BuyExit rules:
If the NASDAQ index is below a 50-day moving average,
Then, if the Close is greater than the Close of 6 days ago (Lookback) and the Range is less than the 3-day average of the Range and the Close is greater than the Open,
Exitlong on a Day Stop at the Close minus 1.3 (BearMult) times the Noise.
Finally, there is a disaster stop, which is set at 25% of the actual stock price below the entry price to limit losses to a reasonable amount. This shows one advantage of TradersStudio since this type of stop could not be accurately executed using split-adjusted data because of rounding errors. If split-adjusted Microsoft® stock sells for .1001 per share, reported to the nearest 1/10,000th decimal place (.0001) and there is a 25% stop, the stop would be reported as .0250. This small rounding error would translate into fifty cents or more in real life trading.
So now that we have the code for our system, how do we test it on TradersStudio? The process is actually quite simple. We first must create the TradersStudio stock session, and then we must view our reports. To learn this process, simply read on. nike air max thea damen nike air max thea damen