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T3 Use Questions
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Paddy_VA

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Subject : T3 Use Questions
Posted : 5/30/2010 11:12 PM
Post #20617

I have some questions about T3 that I'd like to gain clarification about, pending deciding whether to keep or return it. Some time ago, Barry suggested that I start a new thread, particularly since the long running (and very useful) one has become so extensive -- see http://www.omnitrader.com/omnitrader/support/OT2004/forum/thread-view.asp?threadid=4828&start=1 . I think some of the issues are touched on in that thread, but not with sufficient discussion and clarity for my decision, so I hope to pull some out, and also add some new ones.

The most important question is whether T3 makes enough money in real trades to really pay for itself in reasonable time; I think the jury is still out on that -- see the above link -- and probably that is a good link to continue the reporting of detailed trades there.

But some of the features of T3 in practice seem to have turned out to be not as easy as indicated in the brochure. Chief among these is how MOO orders are entered with IB and MB brokers, when they can be entered, when they will be rejected, when trade plans will execute, when a trade plan may be cancelled by running OT during the day, whether OT needs to be running during the day, what happens when OT is changed to another profile, whether the trade plan will still execute, etc.

The impression was that it was easy -- just run T3 at the EOD, choose trades , make sure the right T3 trade plan was chosen (1 of 3, depending on which of three signals fires), confirm the trade, shut OT down, wait until the next evening and run it again. In practice, there are qualifications and questions that have been raised, and I'm not clear about all the answers.

I'm just kicking this thread off tonight -- I need to go through that long thread linked above, and pull out some of the specifics that I've referred to, and then document some of the other things that I had some time ago sent in a PM to Barry, where he urged me to post them in a new thread.

At least, this provides a start for any others who have similar questions about T3.

FTR, I have made a few trades from T3 signals, with a small profit, but they weren't closed out by trade plans, although I entered them from the Integrated Broker on MB. I've also made paper trades in OT and also in TOS on many more of the signals, but not consistently, but they were running positive, when I had to turn my attention to other OT and VT troubles, particularly recurring BSODs on two different PCs.

Pat


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golfeur

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Subject : RE: T3 Use Questions
Posted : 5/31/2010 11:28 AM
Post #20619 - In reply to #20617

Hi Pat

Let me describe my experience with T3.
I apply T3 on a large set of symbols (3000) whereby I have added a few filters.
I submit my trades manually with IB; enter them as MOO order and then enter a 3 ATR stop (which is different from the T3 tradeplans, as they enter an MOO order if the previous day the 3 ATR loss has been hit).
I do a visual inspection of the trades, looking at 3 to 5 red bars as described by Tom Helget.
I did meticulously every day paper trading since march 19, using the OT standard tradeplans, entering the results in Excel.
Based on a $50.000 equity with full margin and 10% allocation, the results are today as follows: NT=335, PPT=0.72%, HR=68%, return on equity around 25% and drawdown= 17.18%.
So the paper trades show quite a bumpy ride over such a short period.

I started real trading with IB early april, first on a limited nbr of trades of $1.000. I realized rapidly that the IB odd-lot limitation on NYSE eliminated many possible trades, so I moved to $3.000 trades (I think $5.000 is the ideal amount). Quite rapidly I decided (luckily) to only enter trades when the european exchanges and the S&P future were positive, so I avoided most of the losses. In total I did 71 trades with a small net positive result. However most of the losses were occurred by 7 trades who hit the stop loss.

So my conclusion is that T3 is an excellent strategy but huge losses can occur in turbulent times such as the ones we experienced lately.

As soon as the turbulence is over, I'll start again actively trading T3.

Rudy
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EYEGUY

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Subject : RE: T3 Use Questions
Posted : 5/31/2010 1:10 PM
Post #20622 - In reply to #20619

Rudy:

I concur with your comments. I think to be successful with T3 we have to be in a market with a positive up bias and a lot less volitilty that is currently present. I also place my orders manually on IB or Fidelity or FOLIOfn. I usually fly (maybe unwisely) without stops.

Tom Helget
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Duxx

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Subject : RE: T3 Use Questions
Posted : 5/31/2010 6:51 PM
Post #20624 - In reply to #20622

Tom

I thought that one of the beauty of the T3 was the ability to be out of the market on tough times, like 2008. I remember that even the flyier mentioned that the drawdowns where pretty small even in difficult conditions where the market was clearly down

Do you foresee anything sistematically wrong for the T3 on downmarkets or maybe is that the use of the T3 has been extended to non SP100 stocks which may not work as expected?

Thanks
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Bruce Hands

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Subject : RE: T3 Use Questions
Posted : 5/31/2010 8:04 PM
Post #20625 - In reply to #20624

Hi Duxx,

I haven’t checked this yet but it might well affect the results of T3.

During a powerful up trend prices tend to get well above their respective moving averages before the rubber band effect takes place pulling all of those lofty price actions back to earth.

Is it possible that prices get well above the stratosphere of the 200 day MA and during the pull back to earth’s gravity T3 keeps offering new trading positions thereby getting slaughtered in the retreat to the 200 day MA?

Just a thought….

Bruce H

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golfeur

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Subject : RE: T3 Use Questions
Posted : 6/1/2010 5:44 AM
Post #20627 - In reply to #20617

Hi Duxx

I ran a simulation of T3 on the S&P100 since March 19. Enclosed you find the portsim.
You clearly see the huge fluctuation in May although the drawdown remains reasonable.



I have the impression that Bruce's explanation is entirely correct. I assume that T3 will stop generating trades after a lengthy down period.

The larger list of symbols obviously causes a larger drawdown, although the superior return, in my mind, by far compensates for the increase in drawdown.

Rudy

[Edited by golfeur on 6/1/2010 5:55 AM]

Attached file : OMNITRADER_T3.jpg (201KB - 465 downloads)

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EYEGUY

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Subject : RE: T3 Use Questions
Posted : 6/1/2010 8:22 AM
Post #20628 - In reply to #20624

Duxx:

I concur with Bruce's evaluation.

Tom Helget
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EYEGUY

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Subject : RE: T3 Use Questions
Posted : 6/1/2010 4:23 PM
Post #20640 - In reply to #20628

All:

The market avoidance factor of T3 may finally be kicking in. I had only one Enter Long signal tonight in my rather large list: LQD.

Tom Helget
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Duxx

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Subject : RE: T3 Use Questions
Posted : 6/1/2010 10:09 PM
Post #20647 - In reply to #20646

Thanks Guys for the responses.

One of the hardest things I have found is to cut drawdown without affecting performance on the systems.

One option is really to have a better way to select trades - one way is what Tom kindly share in other emails or maybe we just need to develop a numerical indicator that tells us which trades have the biggest probabilities - for example using industry group rotation (just one idea that I have not tested)


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golfeur

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 8:48 AM
Post #20649 - In reply to #20617

Hi

Since thursday evening, I didn't get any signal om my 3000 symbol list either.

I have been trying since a few days to identify a succesful strategy that generates only short signals and is complimentary to T3.
As I own most plug-ins I ran each of them on various symbol lists.
The result is quite interesting.

I found that the Wavetrader short-term strategy generates excellent short positions during the times that T3 generates poor or no signals.

I'm enclosing the results on my 3000 symbols list (without any filters).
I ran the BT between jan 99 and dec 2009 and FT in 2010.

The performance statistics speak already for themselves.



I then ran two portsims in order to see when those signals were generated.

The fist portsim covers both BT and FT. It shows that most trades were generated in the 2nd half of 2008 and early 2009.



The second portsim is even more astonishing. Nearly all trades were generated in May 2010.



Now remains the question when to use T3 and when WT-short-term...

Rudy



[Edited by golfeur on 6/2/2010 8:53 AM]

Attached file : OMNITRADER_WTshter_perf_stat.jpg (54KB - 381 downloads)
Attached file : OMNITRADER_WTshter_BT_FT.jpg (216KB - 402 downloads)
Attached file : OMNITRADER_WTshter_FT.jpg (194KB - 390 downloads)

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EYEGUY

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 9:54 AM
Post #20652 - In reply to #20649

Rudy:

You really gave yourself the answer. When you have such a large list and no signals are being generated it is a sign that things are changing. So, switch to WaveTrader. If you are getting a lot of short signals go with the flow. I had hoped that NSP-35 (only available to Nirvana Club Members) would fill the gap, but it has not. I am glad to see WaveTrader doing the trick.

Tom Helget
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EYEGUY

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 11:03 AM
Post #20659 - In reply to #20652

Rudy and all:

Another technique you might want to explore with T3 would be to adjust the Long Moving Average Filter in T3:





Before you do this be sure to make a new strategy so as not to foul up the original.

For example, using a 100 period SMA on the DJIA as the filter instead of 200 would have kept you out of most of the mess in May:





Once again, if you were getting only a few signals in T3 you might suspect something was afoot and start basing your trades on WaveTrader instead.

Hope that helps!

Tom Helget

[Edited by EYEGUY on 6/2/2010 11:05 AM]

Attached file : ALTER MOVING AVERAGE FILTER.png (11KB - 369 downloads)
Attached file : CONSIDER CHANGING THE MOVING AVERAGE USED IN T3.png (41KB - 356 downloads)

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kmcintyre

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 11:30 AM
Post #20662 - In reply to #20617

Thanks for the tip on using WT for down markets when T3 is quiescent.

Trading T3 with NAS-100 for the past couple months, the big hit came on the "flash crash", when all but one of my positions were stopped out. Since then I only had one buy signal (which led to another loss). In fairness, I don't think many (ANY) system could have seen the flash crash coming. Maybe the losses could have been reduced with tighter stops, but sans 1000 point free falls, the stop has not been problematic.

I'm not giving up on T3. But I do wish it traded both directions.

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golfeur

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 12:15 PM
Post #20664 - In reply to #20617

I just finished running WT-short-term on my 3000 symbols list, whereby I added my usual filter (close price >5, volume>500.000 and volatility<10%).
The strategy generated 38 new short signals.
An analysis which would be very worthwhile (but time-consuming) would be to plot the number of new signals over time for both T3 and WT-short-term-short-signals, combined with the ppt per entry day.
I guess that at some point in time you should see the increase/decrease in nbr of signals, providing a good indication for switching strategy.

If I find some time the coming days, I'll do the analysis and publish the results.

rudy
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Jim Dean

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 2:47 PM
Post #20669 - In reply to #20664

If you want faster "recovery" from a crash, then you could change the Filter from SMA-basis to DEMA or TEMA-basis. Those MA's react much faster to big changes than an SMA.
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Subject : RE: T3 Use Questions
Posted : 6/2/2010 5:10 PM
Post #20672 - In reply to #20669

Jim:

And, I might want to add from my recent nightmare coding experience to note not to use the OmniLanguage TMA function nor the TRIX function in doing this, but rather this coding for the triple exponential moving average:

(3*EMA(Data,Periods)-3*EMA(EMA(Data,Periods),Periods))+EMA(EMA(EMA(Data,Periods),Periods),Periods)

Tom Helget
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Paddy_VA

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 6:31 PM
Post #20675 - In reply to #20672

Tom and Jim, I'm wondering if a 50 SMA would be better than 100 for the shorter term response (since 50 is probably a more major indicator than 100), or if the TEMA is as good or better in your opinion.

Pat
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Subject : RE: T3 Use Questions
Posted : 6/2/2010 8:16 PM
Post #20676 - In reply to #20675

Pat:

Remember T3 was designed with the 200 period SMA built in. I think even the 100 period SMA might be a bit "short". You might want to play around with it a bit and perform some portfolio simulations to see what drawdown you might be willing to accept.

Tom Helget

[Edited by EYEGUY on 6/2/2010 8:17 PM]

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Jim Dean

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 9:18 PM
Post #20677 - In reply to #20676

If you want the reactivity of the tema but the general threshold during "non crazy" times of the 200 sma, I suggest that you build a custom tema indicator with Periods as input, then plot it and the 200 sma on the same chart, and go back befor the crash, and play with the tema input to find a close equiv to the general 200 sma level. You might need a much higher number. When you encounter sharp spikes, the tema will react much faster.

I suggest you do your fiddling on a big index like spx or dji.

Tom is right - T3 is Presumably "calibrated" in some unknown degree to the 200sma - but ya never know, this might improve it. Or make it worse. Worth taking a look at.

A conservative approach would call for the price to be above BOTH averages.
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Jim Dean

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Subject : RE: T3 Use Questions
Posted : 6/2/2010 9:23 PM
Post #20678 - In reply to #20677

If the TEMA is TOO reactive, try the DEMA.
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