Optimisation seems to take a long time - can this be made faster?
Optimisation is a very complex business where the pc has to run thousands and thousands of calculations to check numerous back test results with a great many combinations of different settings. Only a few years ago this would have taken many hours if not days to complete. If you have a pc that is a few years old it can take about 10 minutes but I have recently had a fast dual core pc built for me and can carry out an optimisation in 44 seconds so it is really down to how powerful your pc is. I suggest you set it off and go and make a coffee or optimise over night if you have a slower pc.
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What is a Last Significant Day (LSD)?
A new significant day is a day where either a new high or a new low has been made since the previous significant day. The LSD is the most recent significant day. There is a full explanation of the Short Swing Trading strategy, including the LSD concept, in the book (see help text).
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I seem to get some stop & reverse trades, is this correct?
First to clarify: A stop & reverse trade is when you are already in an open trade and you get a trade trigger in the opposite direction causing you to close one trade at the same time/price as you open the one in the opposite direction.
Yes, sometimes when the price is close to the MA you will see a prospective trade in the opposite direction to the open trade. The prospective trade is generally reflecting the fact that the price may cross the MA. For example, you may have gone long on a new position yesterday and today you see a prospective short trade appear for the same symbol leading to a potential stop & reverse trade. In other words what you would need to do if the prospective trade price is hit is close the long trade at the specified stop level in Open Trades and open the short trade at the specified level in Prospective Trades. A new stop loss should be placed as shown in Prospective Trades. Of course not all these S&R trades actually trigger and the original trade will often continue to run.
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I occasionally get an entry of 'NaN' instead of a price, what does n this mean?
NaN stands for 'Not a Number' and it means that the data from Yahoo or Google has an error which means that SwingTrader is unable to calculate the price. Usually this is corrected by Yahoo/Google within a day or two and it will then allow SwingTrader to correctly calculate a price.
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I get quite a number of small wins and small losses but every now and then I get a really good winner, is this normal?
It is not unusual and is typical of many trading strategies. SwingTrader can give a number of small losses together with a number of small gains under certain market conditions and then when a strong trend is formed you can see substantial gains. In a back test on certain stocks this will be reflected by a lowish %wins (say 40-50%) but a good win/loss ratio (say 3:1 or better). This, over time can produce very profitable trading but you need to accept the 50-60% losing trades as part of the trading pattern.
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Why does the DOW (^DJI) back test poorly yet seem to trade quite well with SST "manually"?
This is probably down to the fact that Yahoo Finance use "theoretical" high's & low's in historical data rather than "Actual" data. Their website expands on this http://help.yahoo.com/l/us/yahoo/finance/quotes/quote-48.html but it affects optimisation and back testing - nothing we can do at present - see Data Source in help text.
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Do you intend to provide other sources of data that cover markets such as Forex and Commodities?
Yahoo & Google Finance data is pretty good and we are happy with it right now. They do not provide the historic data we need for Forex or commodities. We may consider alternative subscription data to give options on which data you use. If we find suitable alternatives that include other markets we will look at including them. If you know of a good data source we could check out please let me know.
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I can see data for certain symbols such as Futures and Forex in Yahoo/ Google Finance but when I try to add them to a watch list the symbol is rejected by SwingTrader - why?
This is because for certain symbols Yahoo/ Google Finance provide the current day's data but do not provide any historic data and SwingTrader needs the historic data (minimum of 200 days) to be able to optimise, back test and provide trading signals.
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I am getting prospective trades showing to potentially go long and to go short on the same day for the same symbol, is this correct?
Yes it is but it shouldn't happen too often. It means the price is close to the MA so there is a possibility of a trade in one direction and if the price crosses the MA then there can also be a possible trade in the opposite direction.
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I have read your book 'Short Swing Trading' and understand the basic SST strategy which always employs an 8 DMI and a 50 MA, why are these not always used in SST SwingTrader?
It is true that the SST SwingTrader software is programmed with the same basic strategy as detailed in the book. However, the software achieves a level of sophistication that would be impossible to achieve manually. I will try to explain. In the book I give a set of rules that include the use of an 8 DMI and a 50 MA. I won’t go into the detail of those rules because if you have the book you will know them but the point is that I give one set of rules to use on all stocks which display the right “personality” (again, you will know what I mean by that). This set of rules are easy to learn and to follow when trading manually and they are an excellent compromise used across a variety of stocks. Every strategy with one set of rules is a compromise. Why do I say this? Because as I say in the book, every stock or index has a “personality” of its own and therefore why should every stock you trade use the same settings of 8 DMI and 50 MA? It may well be that one stock trades more profitably with settings of 6 DMI and a 30 MA while another is more profitable with settings of 10 DMI and a 60 MA even if the rest of the rules used are the same. Now if you were trading manually how could you possibly know this? You would have to do many hundreds of hours manually back testing each stock you wish to trade in order to find the very best combination of settings. That is called optimisation – finding the very best settings for each stock or index you trade in order to both maximise profitability AND widen the stock “personality” range that can be traded. You can click on the “Light Bulb” icon in the Control Panel and see the individual settings used for each symbol in your watch list (after optimisation has been carried out). (Also see Help).
Within the SST Strategy programmed into SST SwingTrader there are a number of variable settings (within certain parameters). Optimisation using the software takes minutes and in that time the software automatically back tests the stock with thousands of combinations of these variable settings such as the DMI period and the MA to be used. This process can improve profit made from a stock by between 30 and 80%. This is really using the power of computers to achieve a degree of sophistication that is impossible to achieve manually.
In addition to this you will know from the book that I think one of the most important aspects of trading is selecting stocks or Indices that have a suitable “personality” that matches the trading strategy used. Finding stocks that have the correct personality for the SST Strategy is time consuming and open to error when doing this manually. SST SwingTrader checks a stock or Index totally accurately and does it in seconds – again this is impossible to do manually.
So by using SST SwingTrader you are taking the same basic SST Strategy with the same basic set of rules but taking your trading to a completely different level that is impossible to achieve manually.
In the book you say that the DI lines must cross before entering the trade. I have checked SwingTrader against a different charting package and at times you enter before the DI lines cross, is this correct?
Yes it is. When trading SST manually I discovered that SOME symbols could be traded with the DI lines very close but not yet crossing so this was programmed as a variable called "DMI Trigger Gap" into SST SwingTrader. Optimisation will automatically check this out.
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Why have I seen a Prospective trade a long way from the current price?
If a prospective trade is showing a long way from the current price it will be down to one of two things:
a) The prospective trade is at the point where the price would cross the MA which can be a distance away but not out of reach of a big move.
b) There is a big difference between the high & low on the Last Significant Day.
You will also notice the stop is a long way from the open price when this happens representing a high risk in points if whipsawed. Often it is best to stand aside from these trades - it is always your decision whether to use a prospective trade or not.
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Why can't I add an indicator to the charts, like a DMI?
I bought a charting facility to bolt into SwingTrader because developing one would have been prohibitively expensive and it is mentioned in help that the DMI which is a part of the charting package is not a good one because it uses calculations which do not conform to the standard required for the SST strategy. We therefore had to build our own DMI calculations which we believe are accurate and reliable. What we haven’t done is display our own DMI on the screen and link it to the optimised DMI setting, we may do this in the future but it represents quite a development investment. In the mean time we have switched off the ability to use indicators because the DMI which is part of the basic charting package was causing much confusion. SwingTrader will automatically display the correct MA if one is used and no other indicator is part of the SST strategy. The charting facility was never designed to be fully functional but simply to show the chart, entry and exit points of previous trades and prospective trades. There are plenty of good and free fully functional charting packages available if you wish to use one alongside SwingTrader. . Go to charting software page.
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