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jpb

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Posts: 168

Joined: 5/11/2005
Location: Brown Deer, WI

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Subject : No Trade Market State
Posted : 8/10/2018 11:42 AM
Post #45150

In the 8/9/2018 ATM Master Course session, Jeff Drake had included a seemingly innocuous market state he called No Trade. The idea being that maybe there is a state in the market that is so unpredictable that you may want to move to the sidelines and wait it out.

Jeff created it using a formula of ATR(20) > ATR(60)[20]*1.5

He placed this market state at the top of the list so it is the first to be evaluated. This of course means that we aren't running with concurrent market state enabled. But if the market state is triggered, you want to stop all trading.

I was intrigued by this market state so decided to run a quick test during the seminar. My results showed an improvement of 34% against a test ATM method. I then wondered what it would do against the ATM Macro & Micro method.

To test this, I used the stock ATM Macro & Micro method. I created the new No Trade market state and used Jeff's original formula. I also activated "Close all Trades when entering this market state". I placed this new market state at the bottom of the list so my first test run would never hit it.

My second run, moved the market state to the top of the list so it was always evaluated.

My third run used an altered formula for the market state that I arrived at running various optimizations against the basic formula. For this I used:

ATR(22)>ATR(75)[20]*0.8

The results are attached. These are likely to be different from what you run since I start my account at $10,000 instead of $100,000. I also include my brokerage commissions. But the relevant point here is not my specific ending balances, but rather the degree of improvement the inclusion of a No Trade market state.

The conclusion I reached was that stepping aside during certain market states and closing all positions can have a dramatic impact to your overall results.

I see some interesting statistics:
- ROI improved
- Max DD decreased
- Calmar improved
- Trade quantity actually increased (substantially with the optimized formula)
- While max # consecutive wins improved, max # consecutive losses got worse
- Average Invested decreased
- Profit Standard Deviation tightened.

I haven't yet looked at exactly when the No Trade market state was declared, how long it lasted, or examined the trades. But I thought this was an interesting set of results to share.

Feedback welcome,
Jeff B

Deleting message 45150 : No Trade Market State


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