June 3, 2011

The worst type of tests for any trading strategy is to be confronted with a different dataset. What was used to “train” the script to perform on a particular group of stocks may not work as well on another group? Usually, this is where a script breaks down, its performance greatly reduced due to curve-fitting and over-optimization on the first tested group of stocks.

In this perspective, I ran the same modified Livermore Market Key script as in the previous test (Model 0.05 Level 1).

The outcome: 

Livermore Challenge 2nd Act

(click to enlarge)

As can easily be seen, the performance level has been maintained with the same general characteristics as in the previous test. You even end up with a higher return.

The Alpha Power methodology plays mathematical functions; not necessarily market indicators. The formulas are in my papers. You pre-set your trading behavior based on these mathematical functions and then wait for the market to hit all the triggers generating the trades. If the market does not move in a way to trigger the buy, sell or stop-loss orders, you simply wait for it to come to your terms of engagement.

The method has for primary objective to accumulate shares for the long term. It will buy shares while in an uptrend ready to hold indefinitely, if needed, or until one of the other two possible events occur: a short-term profit is generated in which case the shares are sold, or a stop loss is hit.

The method is a trend-following system; it buys on the way up while accumulating shares for the long run. It does need some form of trend definition. It appears, after some modifications, that the Livermore Market Key script may have, in this sense, a usable trend definition after all.

(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)  

Created on ... June 3, 2011, © Guy R. Fleury. All rights reserved.