Saturday, March 17, 2007

Re-Testing Filters

Fiddling around this morning and so I decided to run some updated tests on my favorite filters and show you the results - or - what a difference a month can make. Actually I'm glad that we got this dip to work with because it helps assess the various filters in bad times as well as good.

You can see that I've retested against two separate 80 day periods - one overlapping the other. I began with the basic filter – the basic filter is the filter that contains all of the common elements of every filter I develop such as price range, volume minimums, and any EMA or other overlays I might want to see on my charts. It is as vanilla as they get and even this filter produces a profit in good times when the selection is based on the highest volume of the output day. But if your win percentage can’t beat the basic filter then you probably don’t have a very good filter.

I followed that with the ATR and RSI filter. Note that the Win percentage stayed close, as did the Reward/Risk ratio and the ROI.

The BOB filter also maintained a consistent win percentage but, as expected, it outputs a much better ROI when times are favorable – but 87% is nothing to sneeze at when times are not so good.

Break Out is the best of the bunch. Interesting item about this filter is that it isn’t as prolific as the others – only about 1 selection every other day but that maintained through both periods. In period 1 there were 44 selections and in period 2 there were 42. Of course, breakouts are the very best method regardless of time period.

You don’t need any special skills to be able to find breakouts or even any special software – you just need to be observant. In my next post I’ll show you how to visualize breakouts without a lot of special equipment, software, or even knowledge.


Darius said...

I went back looking for the Breakout filter; I must have lost my Google mojo, however.

The combination of your blog and StockFetcher have totally changed the way I think about stocks -- thanks!

Marlyn Trades said...

Here is the core

show stocks where close is between 15 and 35
and average volume(90) > 500000
and the close is above the upper ascending triangle(40)
and the close 1 day ago is below the upper ascending triangle(40) 1 day ago

And thank you for the complement.

Bullish Jim said...

Hey Marlyn- I've been running your breakout filter on stockfetcher and the returns are fantastic. Sometimes I can't believe you give away this stuff for free.

I've changed the price parameters a dozen different ways and, as I'm sure you know, I can't improve upon the ROI of stocks between 15 and 35 and the ROI gets worse and worse as I expanded to 40, 45 etc on the high end. Any theories as to why it doesn't work as well with higher priced stocks? I was thinking that I'd love to get more results and that stock price shouldn't make any difference. Obviously that isnt the case.

Marlyn Trades said...

I think that it has something to do with the way they are selected for simulated trading based on high volume. I have noticed that the lower the price the more sensitive the stock is to volume increases over a period of time. At the higher prices a volume spike is generally a one day story and the stock makes its move but stops moving after that. I think the lower priced (15 - 35 dollar stocks) are in the sweet spot as far as funds and day traders are concerned. They are graduated from being cheap stocks and haven't made the big cap yet.


Third great post.