Selectivity vs turnover

[spreadbetting]

I would recommend focusing on one problem until you solve it then branch that to new variations.

I think that's that's a very good point especially for people starting out. Usually they're trying far too many things at once and listening to well meaning but useless advice on the whole. So many times people ditch working strategies just because they're hidden amongst the poor trades they're also doing but they don't have the patience to separate what they're doing that works from what doesn't.

I'm sure we've all been there at the start with far too many ideas bussing around but you really do need to take things a step at a time to find what's working and just as importantly why you think it's working. Once you start to figure out how and why markets move it's much easier to find other things that'll work for you also.

[ShaunWhite]

I then started cutting out errors, basically where my biggest losses were, and that led me to a selective approach for that strategy.

This approach only works when the initial 'random' strategy is profitable on a non random set of data.

If you filter the results by all possible combinations of volumes, market profile (prices), time ranges, number of runners, distances, types etc etc, and no subset is significantly better than any other, where do you go from there? And where next when the best or worst performers don't have anything in common?

I'm certainly not doubting your approach, it's clearly extremely effective and without it I'll struggle, but it gives the impression that almost any strategy fits a certain set of markets that can be singled out in a logical way with the data we have at our disposal.

I'm so convinced that my approach is a logical conclusion to real world events that I don't want to share it openly. But unless I can find someone who'll take a look at it and give me some guidance, I'm snookered.

[ruthlessimon]

If you filter the results by all possible combinations of volume..... and no subset is significantly better than any other, where do you go from there? And where next when the best or worst performers don't have anything in common?

I'm certainly not doubting your approach, it's clearly extremely effective and without it I'll struggle, but it gives the impression that almost any strategy fits a certain set of markets that can be singled out in a logical way with the data we have at our disposal.

That's a really good post & exactly why I'm delving into "Target shuffling" etc.

Let's assume hypothetically, that I was working on a pre-of trend based lay strategy.

1. The losers median entry time was 215, & the median total market volume on entry was £126k
2. The winners median entry time was 199, & the median total market volume on entry was £154k

Is that then enough for a trader to say, "when the volume is higher, that predicts trend-based strategies will perform better?" - "I'm only going to trade this strategy when volume is at least £150k?"

A trader could keep on adding & adding variables (does race type influence this, does day of the week influence this), & eventually, something (by sheer luck) will look amazing - but still provides little real predictive value - & that's my issue

[ruthlessimon]

I think the answer is quite simple really.

When I first started trading I went for the one fits all approached and just tried a generic strategy across all markets. I then started cutting out errors, basically where my biggest losses were, and that led me to a selective approach for that strategy.

You didn't look at the "niggly losses"?

Here was a basic strategy I employed through May - I thought it was interesting that summing the "minor losses" came to -44 ticks nearly double the worst loser. Therefore cutting out trading the "50/50 markets" could boost that strategy just as much as the huge losers - possibly more. Or rather than improve the strategy, just reverse it?

[Greco]

Euler has spoken of the Pareto principle before and it is something that is illustrated by your point Simon. I use a price range filter for my trading. Yes I have profitable trades outside that range but I also have a lot of small losers as well. Therefore I have simply removed them and concentrate harder on the ones that make me the most money.

[FrogThimble]

I would recommend focusing on one problem until you solve it then branch that to new variations.

I wish I'd realised that 7 months ago when I started.

[ShaunWhite]

I would recommend focusing on one problem until you solve it then branch that to new variations.

I wish I'd realised that 7 months ago when I started.

Unless it's unsolvable, in which case you never move onto a second problem.

[FrogThimble]

Unless it's unsolvable, in which case you never move onto a second problem.

Absolutely! That's certainly a factor that held me back for a long time. Sometimes it's important to realise that a problem has no solution and just move on. Or totally change direction. I've made more money here in the last 6 days than in the entire previous 6 months - all because I finally stopped fooling myself about which problems I could solve.

[ShaunWhite]

Sometimes it's important to realise that a problem has no solution and just move on.

That's another tricky part. Especially if you're the sort of person who won't be beaten just because something's difficult, and when you're told that almost every strategy can be refined by discarding the negatives and improving the positives.

[Euler]

Every market has an element of entropy, but you can 'solve' that as well.

[Euler]

The method above is how I have solved every problem in the market. I then joined up the dots on each to come up with a general description of what was going on which led me to explore and refine specific points on each strategy.

[ruthlessimon]

The method above is how I have solved every problem in the market. I then joined up the dots on each to come up with a general description of what was going on which led me to explore and refine specific points on each strategy.

Would this be along the right lines :

1. Take a basic strategy
2. Look at all the losers & compare it to a variable (i.e. entry time) - calc the correlation
3. Look at all the winners & also compare it to the variable above - calc the correlation

If the correlation differs between steps 2 & 3, the said variable has had an impact on the strategy.

I'm tempted to have a crack at that, but again I do fear the "look-elsewhere effect" when performing step 2 - is it a valid concern?

[ShaunWhite]

I think the key phrase was 'come up with a general description of what's going on' beyond it being a restatement of the parameters.

It must surely be the case that variables can't just showing a correlation to outcomes, they also must have relevance in the general description. Without that 2nd confirmation, they're just a coincidence that might not persist or might even become detrimental. For instance, distance should have no bearing on a strategy that's related to reversion or momentum. If it does then it's inclusion will be a problem in the future when it randomises. The very parameter which pulled out the winning selections is the one that guarantees failure unless it's relevant.

Eliminate the irrelevant, but knowing what's irrelevant might only become obvious once the general description is known?

[ruthlessimon]

For instance, distance should have no bearing on a strategy that's related to reversion or momentum.

Exactly

In fact, I'm tempted to build a spreadsheet around distance & using it to trade pre-race - just as a case study for randomness, & the dangers of curve fitting.

There will be an optimal distance than "predicts" steams/drifts over x time period

& again - this is why psychology is misleading. Mark Douglas won't be able to help if the strategy is curve fit to a random variable

[FrogThimble]

That's another tricky part. Especially if you're the sort of person who won't be beaten just because something's difficult, and when you're told that almost every strategy can be refined by discarding the negatives and improving the positives.

Yes, I'm very stubborn... But even I know that if I beat my head against the wrong brick wall for long enough then my skull will cave in before the wall ever crumbles.