November 10, 2011

Over the last few days, at my preferred forum, there has been much debate on the value of old and proven trading strategies. After having presented my own version of what a random entry system could look like, it almost appeared as if it was not enough.

So, for comparison purposes, using the same simulator and the same data set over the same trading period, I opted to test a published random entry system.

The one chosen can be found in Dr. Van K. Tharp's book "Trade your Way to Financial Freedom" p. 200-201. This might be considered unfair by some since the whole testing period would be the future of this script. A totally out of sample, out of optimizing period. And yet for others, maybe, the perfect testing ground.

I took the first script that sounded reasonable for a test. I intended to run only one and only once; I did not have that much time to waste. Whatever the results, that is what would be presented.

The original script was available free on the old Wealth-Lab 4 website. That website was shut down and replaced with a new one.

The summary results of that script are:

Random Entries. Script from Van Tharp's book

Random Entry Tharp Book

(click to enlarge)

This should please the statistically minded. The sampling size is sufficient to show significance. The same goes for the trading interval as it is sufficiently long to experience all sorts of market perturbations. And since you are playing on the outcome of a coin, the expected value should be zero added to the drift.

This corroborates Andrei's paper, as it should. There is no gain at flipping a coin; all you can catch is the drift. 

(click to enlarge) 

AAU AKAM ARUN ASYS
ATML BIDU CAM CAT
COOL ETN FFIV FIRE
GMCR HK HNL IDCC
IGTE LTXC LULU MELI
MENT MFL MGH MSN
NDSN PFCB PNRA PTI
QCOR QLTY REDF RVBD
SCSS SF SFLY SHS
SPRD SVVS TLEO TPX
UA UTEK VSEA  

( click to enlarge)


Modified ... November 10, 2011,    © Guy R. Fleury. All rights reserved.