SH's 315 Strategy - how to use if effectively

[tmnkin]

F&O Crossover as on 02-Jul-2010

Entry date Scrip Action Reason Entry Price Stop Loss
02-Jul-2010 INFOSYSTCH SELL 315 -Cross 2736.55 2804.96

 

[shajans]

JP Associates / Cash - 315 cross "sell" signal generated. Please confirm.

 

[SwingKing]

From my personal view, 315 is a deadly weapon in a trader's arsenal.:clap:

I think everyone using this system as well as Anant's system need to fully understand what these systems are about. These systems will do very well in trending markets (2003 - 2009) but will struggle a lot in non-trending markets. I have backtested these systems and they are profitable but the draw dawns in both are not sustainable for the average trader. I don't intend to undermine the work of SH or Anant. Both have indeed done a commendable job. But for the average trader, the complete understanding and testing of system is necessary. In my opinion, less than 2% of traders actually know what they are doing. Also, most of the traders don't know how to properly test a system.

If users are following this system, then they need to understand the nuances associated with it. I would like to see results of this system on a market like FTSE 100 or other developed countries Index. This system in my opinion should not do well there. Most good systems should infact work on different types of market. Hence, if this system does not work on some markets, then we can find the reason for it and improve it further. This should be our ultimate goal. That is, improve a system by testing it across various asset classes and fine tuning it accordingly. Users should pay more emphasis on this and this is how work of SH can be enhanced further. I am sure this is what SH wants.

Tc

 

[raj_usb]

Hi Raunak,

I understand there are some deficiencies in 315 but still it is good system. One can't expect a system to be 100% efficient. If it is 100% efficient then no need to do anything in life just track it and earn tons of money. If you go by back testing and other parameters then you can't find a single system in the world which is 100% profitable. If you know any such system then pls let us know.

Pls dont discourage anyone with your results of backtesting. If you have any suggestion pls share in this forum. I will be happy to listen you.

-Raj

 

[SwingKing]

Hi Raunak,

I understand there are some deficiencies in 315 but still it is good system. One can't expect a system to be 100% efficient. If it is 100% efficient then no need to do anything in life just track it and earn tons of money. If you go by back testing and other parameters then you can't find a single system in the world which is 100% profitable. If you know any such system then pls let us know.

Pls dont discourage anyone with your results of backtesting. If you have any suggestion pls share in this forum. I will be happy to listen you.

-Raj

Dear Raj,

Read my comments carefully. Understand what I have written. Its all positive. Improving a system is a positive statement and discussing what draw downs mean is not discouraging anyone. But by discussing such things, we can alert everyone to improve and profit more. Whats wrong in that? After all, any system you use, the Worst draw down is yet to come.

Hope you take it positively.

Tc

 

[columbus]

I agree with Ranauk. Refinement comes through discussions and makes the
system ROBUST.When I go back to my old posts,they appears immature ,
because we see them with present knowledge. At that time they were not
at all IMMATURE.(Previously)

 

[SwingKing]

I agree with Ranauk. Refinement comes through discussions and makes the
system ROBUST.When I go back to my old posts,they appears immature ,
because we see them with present knowledge. At that time they were not
at all IMMATURE.(Previously)

Thanks for taking the post constructively Columbus. Am sure SH will do the same. There is absolutely no intention to question anything. But intention is certainly there to improve upon what is working.

When I backtested this system, I did post good reviews about it. Similarly, when I am now thinking about applying this system to various markets, I am finding that there could be a lot of scope for further improvements. For eg, the parameters on which I tested this system on Nifty, I used the same to test it on Dow jones, Dax and FTSE. The results were not encouraging. FTSE and DAX were marginally profitable whereas Dow was giving negative returns. The draw downs were absolutely unsustainable. This made me think, that we can emulate the developed markets and modify this strategy accordingly, then when our markets stop trending, we would be in a much better position to execute our trades.

There is always a difference between a good system and a profitable system. A good system might not be profitable, but will certainly work across various assets. A profitable system on the other hand is not necessarily a good system. Anyway I have written a lot about this and I think it is upto the users to look into it. If users want to criticize me, I am willing to accept that. But my intentions were only to enlighten users on system testing and tweaking. I hope users don't expect SH to do all the work for them. If users use the system, they need to think upon making it better. Blindly following it won't help.

Tc

 

[columbus]

Thanks for taking the post constructively Columbus. Am sure SH will do the same. There is absolutely no intention to question anything. But intention is certainly there to improve upon what is working.

When I backtested this system, I did post good reviews about it. Similarly, when I am now thinking about applying this system to various markets, I am finding that there could be a lot of scope for further improvements. For eg, the parameters on which I tested this system on Nifty, I used the same to test it on Dow jones, Dax and FTSE. The results were not encouraging. FTSE and DAX were marginally profitable whereas Dow was giving negative returns. The draw downs were absolutely unsustainable. This made me think, that we can emulate the developed markets and modify this strategy accordingly, then when our markets stop trending, we would be in a much better position to execute our trades.

There is always a difference between a good system and a profitable system. A good system might not be profitable, but will certainly work across various assets. A profitable system on the other hand is not necessarily a good system. Anyway I have written a lot about this and I think it is upto the users to look into it. If users want to criticize me, I am willing to accept that. But my intentions were only to enlighten users on system testing and tweaking. I hope users don't expect SH to do all the work for them. If users use the system, they need to think upon making it better. Blindly following it won't help.

Tc

Well,Raunak,this is same not only in the case of Software but any product.
That is why we have Feedback forms.In case of Software ,there is a urgency.
That is why we have Windows.3 and windows.6,there is a lot of changes
between these two.

 

[Tradewithhunter]

I think everyone using this system as well as Anant's system need to fully understand what these systems are about. These systems will do very well in trending markets (2003 - 2009) but will struggle a lot in non-trending markets. I have backtested these systems and they are profitable but the draw dawns in both are not sustainable for the average trader. I don't intend to undermine the work of SH or Anant. Both have indeed done a commendable job. But for the average trader, the complete understanding and testing of system is necessary. In my opinion, less than 2% of traders actually know what they are doing. Also, most of the traders don't know how to properly test a system.

If users are following this system, then they need to understand the nuances associated with it. I would like to see results of this system on a market like FTSE 100 or other developed countries Index. This system in my opinion should not do well there. Most good systems should infact work on different types of market. Hence, if this system does not work on some markets, then we can find the reason for it and improve it further. This should be our ultimate goal. That is, improve a system by testing it across various asset classes and fine tuning it accordingly. Users should pay more emphasis on this and this is how work of SH can be enhanced further. I am sure this is what SH wants.

Tc

Hi Raunak - you are absolutely correct, however what you have highlighted above should be obvious to any trader worth his salt. I am guessing your post is for newbie traders who might mistake 315 as a universally applicable system, and I appreciate your reminder to them.

1. 315 is an EMA based trend following system, hence will fail miserably in a non trending markets. However as you have rightly said, Indian markets have not stopped trending in the last 7 years ... and until the charts suggest the markets have gone rangebound, there is no reason to stop following 315.

2. I agree with Raj's comments, there is no single system in the world which would have been 90% profitable (leave aside 100%) over the last 25 years data - across all markets. If there is one, I would be all ears and eyes to understand how it works, if someone can share with backtested data of last 25 years.

Each market is different and hence a trader needs to have different strategies to trade different asset classes/geographies. I have not mentioned anywhere on this thread that 315 would work effectively on all asset classes and all markets. In fact if you read some posts where some traders had asked me if 315 can be followed for commodities... i had suggested 534 instead of 315.

By the way, backtest DOW and FTSE with 534 (instead of 315) and let me know what you find..I am sure you will not be disappointed !

I hope you understand why 315 doesn't work on markets like Dow Jones and FTSE ...and why it would work on markets like India, China etc. If not, please let me know and I will explain for your benefit.

For Indian equity markets, till the time they are trending, no problems in following 315 blindly on daily/weekly timframes.

Cheers
SH

 

[SwingKing]

I hope you understand why 315 doesn't work on markets like Dow Jones and FTSE ...and why it would work on markets like India, China etc. If not, please let me know and I will explain for your benefit.

Cheers
SH

SH,

I respect your views and I understand very well why this system won't work in Dow and FTSE markets. Hence, explanation is not required. The purpose of my comments were something else. Anyway, keep up the good work.

Tc