Excel Based Quantitative System
Hi everyone, I'd like to start discussing a trading system I've been developing. I want this to be a place where ideas flow freely and friendly discussion takes place. In the interest of complete transparency, I would like to inform you all in advance that my work is based on the work of the very infamous JetTrader/7thSignalTrader/SignalBender…etc. I'm not him. I saw his work in 2005 and quickly realized that this guy was terrible at his work (he proved it in March, and many of you know the story), but I was attracted to his work and saw the potential. I tried to get as much information as possible about the basic indicators he used and his approach to trading system development. Since then I have developed my own indicators and filters.
Over the past 15 years I have worked continuously to create what I hope will eventually be a great, consistent and profitable trading system. As it stands, it could remain horribly accurate for days or weeks, then drop and go on a losing streak.
I make no claims about the accuracy or earning power of this system. I can say that I see the potential of this high precision system. Since it is completely quantitative, there are infinite calculations that can be added that I would probably not consider modeling market activity further.
This is a strictly quantitative system and is done in Excel. There will be no charts or EAs.
Let’s take a deeper look at the core content and basic indicators of the system. I won't take the time to rename everything, so I will use the language of the original creators of these indicators. Also, if any of you are somewhat familiar with his work, this will be easier to understand.
The basis of the system relies on a numerical input called "Delta," which is the difference between price points.
The most important of these deltas is TCD, which is a calculation of price points between the current day and the previous day. These calculations are then fed into an exponentially weighted moving average. The current performance of these indicators is then weighed against the EWMA to understand what is likely to happen. For example, assume the EWMA of the "Delta" value of the highest price minus the previous day's lowest price is 100 points. When the trading session opens (which can be any opening session), the current high minus yesterday's low is currently calculated to be 25 pips. In this example, the TCD "fill" is 25%. As a general rule, fill percentage "wants" to be 100%, which means it behaves according to EWMA. So, in this case, in simple terms, the long TCD has a "trend" to complete 100% filling, and therefore we may expect the price to rise.
However, there is also a short side TCD, which has its own agenda. The short TCD is the reciprocal of the long: current low – the absolute value of the previous day’s high (or can be stated as yesterday’s high – today’s low)
In a perfect range market, these numbers would be close to 100% day after day, but that rarely happens. There may be consecutive days where the bulls hit above 130%, while the bottom is lower, say around 65%. This indicates that prices are on a sharp upward trend and must correct. To make matters even more confusing, EWMA will now begin to adjust these high numbers so that large spillovers will become smaller and smaller over time. It is for this reason and others that there are many auxiliary indicators and filters that operate with these basic TCDs.
This is the basic framework of the system. I'll go into more detail in a future post if you're interested. I'll try to post some images later to help describe what I'm talking about.
SB
Over the past 15 years I have worked continuously to create what I hope will eventually be a great, consistent and profitable trading system. As it stands, it could remain horribly accurate for days or weeks, then drop and go on a losing streak.
I make no claims about the accuracy or earning power of this system. I can say that I see the potential of this high precision system. Since it is completely quantitative, there are infinite calculations that can be added that I would probably not consider modeling market activity further.
This is a strictly quantitative system and is done in Excel. There will be no charts or EAs.
Let’s take a deeper look at the core content and basic indicators of the system. I won't take the time to rename everything, so I will use the language of the original creators of these indicators. Also, if any of you are somewhat familiar with his work, this will be easier to understand.
The basis of the system relies on a numerical input called "Delta," which is the difference between price points.
The most important of these deltas is TCD, which is a calculation of price points between the current day and the previous day. These calculations are then fed into an exponentially weighted moving average. The current performance of these indicators is then weighed against the EWMA to understand what is likely to happen. For example, assume the EWMA of the "Delta" value of the highest price minus the previous day's lowest price is 100 points. When the trading session opens (which can be any opening session), the current high minus yesterday's low is currently calculated to be 25 pips. In this example, the TCD "fill" is 25%. As a general rule, fill percentage "wants" to be 100%, which means it behaves according to EWMA. So, in this case, in simple terms, the long TCD has a "trend" to complete 100% filling, and therefore we may expect the price to rise.
However, there is also a short side TCD, which has its own agenda. The short TCD is the reciprocal of the long: current low – the absolute value of the previous day’s high (or can be stated as yesterday’s high – today’s low)
In a perfect range market, these numbers would be close to 100% day after day, but that rarely happens. There may be consecutive days where the bulls hit above 130%, while the bottom is lower, say around 65%. This indicates that prices are on a sharp upward trend and must correct. To make matters even more confusing, EWMA will now begin to adjust these high numbers so that large spillovers will become smaller and smaller over time. It is for this reason and others that there are many auxiliary indicators and filters that operate with these basic TCDs.
This is the basic framework of the system. I'll go into more detail in a future post if you're interested. I'll try to post some images later to help describe what I'm talking about.
SB
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