TPS (Time, Price, Scale-in) Revisited

Trading Systems
146

Yeh. People see Cape Town on TV and reckon to themselves “hey that’ll do me”.

Well. It is what it is. For now.

Sheer irony is that my intention was to return to this once I’d gotten paid anyway. On the money we’re (we were) talking about: even 5% per month would have me on easy street for the rest of my days. Well maybe not easy street. But for sure I’d have my Mercedes convertible back and I’d not be walking to the shops or paying Uber a flipping fortune to get anywhere. Talk about a false economy. Sheer irony is that it costs me less to order food from Uber Eats than it does to take an Uber to the shops and back. My dog happy though i.e. she loves KFC!!! LOL!!!

148

Ten years. This probably the most interesting and welcome post I’ll ever receive (no offense to anyone else).

Me: for five years (this particular system) with really no worries. But part time i.e. maybe eight months out of a year. But it’s never let me down (which is not to say I’ve not let myself down of course).

As for trading: I closed out all of my positions this morning at break even so I’m not in any trades. This really was done to preserve the little bit of capital that I have. I’ve no doubt that those same positions would have eventually turned to profit. But I wasn’t prepared to write off more than my 15% gains that I’d made in the last three weeks. I suppose my closing the positions was more fear based than a sound trading decision especially given my faith in and track record with this system. That and of course that I needed to withdraw some capital to supplement what I have in the bank to pay rent next week which actually I forgotten about until I’d closed the positions truth be told.

Since I’ve been calculating my position sizes (method to follow but if you have your own then please do share as this has been but one issue I’ve had all these years i.e. difficult without stops) at no point have I or do I come close to margin calls. That and the fact that I fall under the ESMA leverage restrictions which most certainly curb any desire one may have to over trade the account (and which suits me totally).

As far as instruments go: I will take positions on as many instruments that give signals. Such instruments being limited (mostly all of the time anywyay) to the major Indices and Oil. And almost always Futures i.e. not necessarily ETFs. Has worked well for me anyway.

Going back to real estate isn’t really an option. It’s something that I just ended up doing and that paid off. But it was due only to an exclusive arrangement with a certain property fund between my so-called partner and them and such agreement has lapsed anyway. Point is this is the last deal. I’ve not been in that business long enough to build up a client list or contacts or support network that’s sustainable. And yeh: the end goal is and was to do this for a living anyway now that I’m confident (after fourteen years I might add) that I can do it. Maybe even start a small investment company was the plan. But obviously and as things stand now: those plans seem really far removed from reality.

I appreciate your thoughts and your input. I really do. Thank you.

149

By the way:

My apologies. I didn’t mean to lecture YOU on the finer points of Connors’ work. Obviously I had no idea at the time that you were also a Connors convert (for want of a better word anyway).

1 Like
151

You summarize it well.

I’m definitely going to spend some time this weekend detailing in a CONCISE fashion (I do tend to ramble) what I’ve started doing with regard to position sizing and even possible use of a hard fixed stop (monetary value). Up until now I’ve pretty much also just based position sizing on a fixed amount of lots very much on a guesstimate type basis. But there have indeed been times over the last five years where I’ve sat with very wild swings in floating P/L and this has always concerned me even although it’s never caught me in the tail (but there would have been that first time I’m sure). Since implementing some type of proper position sizing I’m not seeing that anymore. Also come nowhere near to margin calls. Frankly I could have held onto my positions today probably ad infinitum. But, well, now that all know the circumstances I guess it’s pretty clear as to why I closed out. But I will most definitely be getting back in tonight just before the close. Unfortunately I’ll not be able to trade the big payers after having withdrawn some funds (Hang Seng, Nikkei, MIB40, Ibex) as the margin requirements will be too high. Oh and that’s something else which I’ve actually now worked out nicely but as yet have not implemented (and maybe now is a good time to start). Instead of trading anything and everything: better to trade maybe the top four, five, or six instruments that are volatile. Calculation is really simple i.e. just trade those by ranking them by the highest ATR values at the time is all. I’ve done a lot of work on this but actually didn’t bother to upload or detail because for the most part I reckon I’ve been typing to myself here. But maybe you can have a look and tell me what you think of my conclusions on all of the above (and of course feel free to add your own theories and ideas).

But hey: I’ll tell you I’m real happy that you stopped by!!! LOL!!! Thanks again.

Regards,

Dale.

152

And this is the one very good reason why this does not work on FOREX pairs (I am very anti FOREX trading and pretty vocal about it which I know doesn’t endear me to some, if not most, on these forums which is understandable I guess).

154

Hey Andy.

Take a look at the link below and see what you think. I’ve started implementing “Method 4 Percent Volatility” which is about a half way down the page. And it’s made a big difference. For one thing and in just this last month’s trades: in some instances my trade sizes would have been too small while too big on others. This seems to nicely normalize them all out. Only thing you have to be careful of is your tick sizes and tick values i.e. the $ value of the ATR increments. But this I’ll post nicely about over the weekend.

Risk-Based Position Sizing

And take a look around that site (if you’ve not already seen it that is). The guy is obviously from the same school as we are i.e. has spent a lot of time testing Connors’ stuff over many years. And the results are fantastic. And given that this is done with TradeStation I have a lot of faith in what’s being shown. That and the fact that they’re not selling anything of course.

Here:

Connors 2-Period RSI Update for 2016

Connors 2-Period RSI Update For 2013

This Simple Indicator Makes Money Again and Again

I realize that the testing is done on a variation of the theme that I’m trading of course.

155

Oh and by the way:

Not too far removed from what you’re suggesting but I was assessing a Larry WIlliams position sizing method but trying to apply it here. Mixed thoughts.

Larry Williams demonstrates mathematically that without the correct position sizing one can indeed have a trading system that is 80% accurate but that can still lose money. I’ve posted links somewhere above to this. Very interesting. And he has an interesting method to calculate position sizes and risk which is ideally suited to a system that does not use stops. In short the logic is to calculate the largest single loss on a trade that the system has ever incurred and base future position sizing on that by a formula that he has worked out. I’m undecided on this. For one thing: if I had to use his idea I would not be trading right now given a lack of capital. I’m also not entirely sure that it has relevance here with these systems i.e. your future trades would be so small (unless with HUGE capital) that it may not be worth it. But as I say: it could very well be the way to go once (or rather if) I manage to pull through all of this.

Here you go:

Excerpt - Larry Williams - Long-Term Secrets to Short-Term Trading

156

Well.

Almost time for me to jump on the horse again I guess!!! Oops. Never mind. Still an hour to go.

Loads of stuff above. Hope it’s of interest. Thoughts, input, and discussion very welcome.

157

You know something:

Another anticlimactic post from me.

I’m not taking any trades and sitting here like an idiot.

It just dawned on me that I’m looking to get back long into these markets but everything is trading and will close below the 200-day SMA. And I will tell you that this is not easy for me i.e. to not pull the trigger with the logic that these things have fallen so far and so fast that they MUST rebound SURELY. That very same logic is what got me in trouble last year on Gold. And unfortunately I have a long bias which makes it very difficult for me to short. But let’s face it: the key is in the words above as in “MUST” and “SURELY”. Well how about this scenario: there is a L-O-N-G way down to the December 2018 lows. And who is to say that cannot happen??? It most surely can. And another thing that I didn’t even SEE in front of my eyes this week. The Dow and both Oils BOTH had traded and closed below the 200-day SMA this week. Those trades should have been closed and losses realized on those days. Not holding the trades open. Same as the Hang Seng and a few others this past week. I have to watch for this going forward. That loss on the Hang Seng should have been called a lot sooner. Didn’t even occur to me at the time.

Oh well. That’s it. All closed (the markets I mean). Got cleaning and other nonsense to do this weekend. Pity about the outcome this month. Would have been nice to start out with a bang. Then again it could very well have been a bang. Just not the kind of bang I wanted to hear. So all good I suppose.

158

I’m waiting for a pullback next week to go short indices. Anticipating the start of a real downtrend that will last for a year or two. Just my opinion.

159

Hi. A good post. Just asking, i know you from somewhere #BTMM. With a good strategy, we don’t give out our real successful systems. Do you really still use this one?

160

Hi.

Just asking: what is #BTMM??? PM me if don’t want to reply to that publicly of course. A lot of people know me though. More so in this business than any other realm of my life that’s for sure. Maybe a message in that statement right there for me let’s face it, Put another way: I’ve been at it since 2005 which is quite a while let’s face it.

Not sure why you would be wondering if I really trade this system and if I have another good system that I keep secret. I assure you that’s not the case. Matter of fact and to go a step further this is THE ONLY system that I have ever traded that is consistently profitable and has been for the last five years or so. If you know me from these parts you’ll know that I spent years and years testing other systems that never amounted to anything and cost me and others a lot of money back in those days. Curious to know why you have doubts though. Why would I spend day in and day out detailing my every trading move on this thread if I wasn’t trading it or if I was trading some other system on the side??? I’m not trying sell this system to anybody nor am I trying to sell anything else for that matter. I post because I can and because I unfortunately have too much time on my hands and which can drive a person insane especially when you are totally on your own. And I hope that when some have lost and don’t seem to be able to come right in trading that they will see what I’m doing and be able to make at least some money albeit not on the grand scale that they may have been hoping for in FOREX. And I guess this thread is detailing what it is like in the real world of trading i.e what it’s like to have to do it for a living for whatever reasons and the pressures associated with that. And I suppose and if you’ve read my posts you’ll know I have just very recently ended up In an extremely precarious financial position so yes I guess I am hoping that somebody will see what I am doing, verify what I am doing, and maybe give me a shot at trading some decent capital and make them some money and try and get myself out of this. But at the time of my starting this thread that was not the intention nor was it something that I ever wanted to do again (which I did note at the beginning if memory serves me correctly). But things change. And on a dime too evidently. Anyway. I digress. The notion that a trader may have a secret system that they don’t wish to share with others for fear that it will no longer be effective is far off of the mark. If I or any other retail trader had the kind of capital where trading this or any other system would result in actually moving a market to such an extent that it had to be kept secret well, then, speaking for myself of course I’d be living in the lap of very serious luxury and I doubt I’d have the need to make more money so probably wouldn’t be an active trader anymore let’s face it. Put another way: I do this to make money and to try to pay my bills right now. And I see this business as nothing more than a means to an end and a way to make a living in the absence of any other options. The love affair that I had with this business all those years ago is long gone. It’s simply a business to me now. Not something that consumes my entire life and being nor is it challenge or me trying to prove a point. But it is the only thing I can do and that I can honestly say that I have put in the hours necessary that should enable me to make a success of it this time around. All other things like capital being equal of course.

Anyway. Pretty sure that’s more than you needed to or wanted to know!!! LOL!!!

But yeh. Would be nice to hear from you.

161

Well i like how you have put it, it’s now very clear to me. I have been reading your past Post’s. Tried some of you systems but had no/or very small success. Still will want to try this on one of my account. Hope this one will work. Though i have one that am using. Maybe i will share after i make some good tests on it. Do you think one can trade with multiple systems.

1 Like
162

Hi.

Not sure to which other systems you’re referring to. Unless it’s those from many years back of course. This being said though: some of those systems can be profitable if trading the correct instruments with them. BUT none of them ever showed a profit on FOREX (same as this one so just bear this in mind). I just never had the patience in those days to follow the trades through is all. Takes some doing (back then anyway) to sit back and wait for a trend to develop and then sit back and hold the trades for weeks and even months on end and most all of those systems back then were trend following systems.

But yeh. See how you go with this. As I said: don’t try it on FOREX pairs because you will lose money. Plain and simple as that and no other way to put it gently I’m afraid. Only too happy to help if you need to know something (although it’s pretty easy to follow let’s face it).

Oh. Sorry. Re: multiple trading systems. I don’t see why not. As long as you have the capital and can keep track of them. And the other potential issue is that you have to be careful if you’re trading with a broker that doesn’t allow hedging. In other words: you may have one trading system that has you short and another that has you long and, well, you cannot do that on the same instruments if you’re not able to hedge. There’s about two other trading systems that I will use to take certain trades on. But they are so long term and mostly fire off a trading signal once or twice per year. So not something that I really factor into my trading. This system is the core system and the one that’s traded day in and day out.

By the way (and as I just mentioned to you in my reply to your PM): I did in fact look up #BTMM using Google. From what I gather there is some dude involved in trading using that hashtag on Instagram or Twitter (couldn’t quite figure out which). But nope. Not me. Just mentioning it here so that nobody else goes running off to look and makes the assumption that I have anything to do with that hashtag. Gave me an idea though. Maybe I should resurrect my Twitter account (cannot even remember what my name is on there but anyway) and Tweet for fun!!! LOL!!!

1 Like
163

Ok you have just said it, what many maybe have been missing including me, about your systems i have been using a good system in a wrong market. I think that’s where we/i been missing and lost money through. That’s a good point, thanks. Ok about your system, it’s more like martingale though with some edge. I have the similar system but mine is more on hedging but the concept are almost the same. No stop losses. It has some complex mathematics that gives you profit on any trending market. Am now trying to set it in a way that can handle any market conditions. I have done it on paper but not yet on real market.
About #BTMM it’s not on Twitter but on telegram official site of it. I thought it was you but i double checked and found that it wasn’t you. But you look alike though. Am sorry for that.

164

Hello again.

No problem about #BTMM.

Equities and Commodities (particularly Equities) move differently from FOREX pairs. Particularly something like the S&P 500 for instance. Although Equities and Commodities may trend from time to time: they mostly tend to revert to the mean (even when trending) and that’s why a system like this works the way it does i.e. it capitalizes on the assumption (fact???) that price will revert to the mean every few days (sometimes even the next day). Essentially you’re just buying or selling pullbacks is all. And there are a few other reasons why (in my opinion of course) trading Equities and Commodities is preferable but I"m not going to go into detail (I’ve documented this a few times around these forums already).

Don’t confuse scaling-in with a Martingale strategy. Big difference (although an easy mistake to make). With scaling-in you calculate your TOTAL position size based on your risk profile BEFORE you enter the trade and then you enter the trade in increments. A Martingale strategy is nothing more than adding positions of the same size (or even doubling up each time) while the trade is going against you. In other words: if I scale-in to a full position a maximum of four times then I only have one FULL position open by that time. With a Martingale strategy I would have FOUR FULL positions open (or even more if doubling) by the time I’d added four times to the position. See the difference??? With scaling-in: if I scaled-in to a full position my total risk on the FULL position is only 5% let’s say. If you apply the same to a Martingale strategy then your total risk is no longer 5% but 20%. Make sense???

165

Ooh yes! I get it.

1 Like
166

Dale used to confuse my intraday scaling strategy for martingale, until he later on understood that the scaling in I was doing a variation of what he was doing but just on a shorter time frame.

168

Hey Andy.

Nice to hear from you.

Should be asleep but I ain’t sleeping too well of late I’ll tell you. I’ll know early next week if this deal can be resurrected or not. If not I’m done for I’ll tell you. I’d have to make in excess of 60% per month to survive and that ain’t going to happen. And I’m not even going to take the chance and try because we know where that will end for sure. As I joked with somebody else just yesterday: if that’s the alternative I may as well withdraw everything and live it up for the next month. At least I’d get some joy from that. I hate to think that I spent the last days worrying like this!!! LOL!!!

Anyway. Until whatever we plod along.

I looked for your post there but couldn’t find it. I think he maybe has to publish comments (forget what the word is). But I have spent the wee hours reading through all of the comments on those various links. Jeepers. Some of those dudes sure do give Jeff a flipping hard time. And for what reason is beyond me. The guy is just providing a baseline for an RSI(2) based system and nothing more. And he is showing that it’s a pretty robust baseline i.e. adjusting different parameters doesn’t skew things out of all proportion one way or the other which proves it’s pretty robust. This unlike those curve fitted ideas where, for example, changing an EMA to an SMA makes the difference between night and day but only for a certain given period and then it all falls over the next. Maybe you and I should try get more involved over there.

A few things stand out though from those comments and his responses:

Only one guy briefly mentions TPS and doesn’t elaborate further. As I am sure you are aware: TPS is actually only the entry method and not a trading system in and of itself. And it can be applied to any of Connors’ trading systems (possibly even to other trading systems). I believe it is the reason for the profitability of what I am (you are) doing. Simply taking one position based on RSI(2) will yield the results that Jeff is publishing and nothing more.

One thing I disagree with is that Jeff says that the baseline (let’s call it that) will only work on US Indices. That may or may not be true but my experience with what I am doing here is way different. Some of the best trades over these past years have been on things like Italy, Spain, and Japan. But again I believe this has a lot do to with the TPS entry method and not so much that RSI(2) is ultra accurate.

All of those dudes seem to be having an issue understanding and choosing the instruments to be trading. It is a bit cold here now but later today when I am at my PC I’ll update my spreadsheets to current data for this coming week that show position sizing, the correlation to a fixed risk amount, and how to select the top four to six instruments to be traded out of a basket on Indices. I honestly believe I have found some sweet spots with all of this thanks to James’ hard work. Did play around a bit with different account sizes yesterday though. Must say that my findings put risk vs. position sizes in very clear perspective. One would think that with a $100K account you’d be trading big but not so actually. Not unless you want to end up with wild equity swings and flirt with margin calls. Not for me I’m afraid. Don’t have the stomach for it anymore.

I do think that my success with this lies partially in the fact that I am trading multiple instruments at any one given time as opposed to only trading, for example, the S&P. This seems to have eluded most of those guys over there. Simply put: my exposure at any one time is greater which obviously magnifies results (either way).

I found it interesting that Jeff emphatically states that this WILL NOT WORK ON FOREX!!! I feel that my trading life’s work and all of my rantings and ravings on this issue have been validated!!!

I found it interesting that he notes that this (well: the baseline version) will work on ETFs, Futures, and Cash. I concur with this.

Interesting to note that some of dudes have spent time comparing results with RSI and ConnorsRSI. This is something I have always wondered about but never bothered with. Matter of fact when I bought Connors’ book on ConnorsRSI I was totally put off. Seemed to me he was trying to peddle a revamped version of something that really did not need improving this in spite of him going to great lengths to prove otherwise. Anyway: more than one over there have tested and the differences in performance are negligible at best. In one case performance was actually degraded when using ConnorsRSI. Sounds about right to me based on what I saw anyway.

One comment that really stood out to me was where one of the dudes states that he has done away with the 200-day SMA filter. He even goes so far as to say that he spoke with Connors about this and he was told that it wasn’t necessary. He also stated that this doesn’t appear in any of Connors’ other works. I’m not sure of the validity of what he is saying re: having spoken with Connors but my experience is ignore that filter at your peril. It may be fine to ignore under normal market conditions. But when the markets move as they did last week or last year in December (as but two examples) that 200-day SMA definitely is a life saver. But the guy does also state that without it the swings are much wider as is maximum drawdown. This I can also attest to because I have indeed been tempted to ignore this filter on occasion and that is indeed what I saw in practice. Here I must qualify though and state that the implementation of a hard stop may facilitate the removal of the filter though.

Another of James’ interesting findings was that by simply changing RSI thresholds for entry: the number of trades could be increased substantially but oddly enough profitability did not change materially. In other words: only thing that really changed was the cost of trading. Once again proves robustness of the concept. But very interesting to me. And this is where my Welles Wilder method of rating which instruments to be traded comes in which ranks them according to volatility, margin requirements, and trading costs. Will show you later today.

Hmmmnnn… In just proof reading the above before posting: I’ve done so much work studying this darn thing and finessing it. Maybe I should bundle it up, get somebody to code it into all the different platforms, and flog it. May be a solution to my problems once and for all!!! LOL!!! Or sell it back to Connors!!! LOL!!!

169

Ladies and gentlemen and boys and girls… I give you the keys to the kingdom (for this system anyway).

As per the spreadsheet below I’ve calculated the correct position sizes to be taking with this trading system based on Risk-Based Position Sizing as detailed in earlier posts.

A 5% risk per trade is assumed.
A $100K trading account is assumed.

VERY IMPORTANT NOTE TO ANYBODY THAT SEES THIS AND DECIDES TO IMPLEMENT IT FOR WHATEVER REASON:

If using these calculations be aware that if an instrument is NOT denominated in the base currency of your account or if you’re not trading with a spread betting broker: you MUST convert the currency of the instrument being traded into the base currency of your account. This is VERY important. This is not something I have to concern myself with at my broker as all prices are quoted to me in the base currency of my account. This is really simple to deal with. But at other brokers the DAX, for example, will be quoted in EUR. You MUST convert EUR to USD (or whatever the base currency of your account) otherwise you’re going to land in very hot water. In addition to this: you MUST know what the tick size and tick value is at your broker. This can differ sometimes. And in order to calculate positions sizes and rate each instrument you will need to normalize the values depending on the tick size and tick value. In other words: you need to normalize the basic increment of ATR in $ across all instruments.

Regarding the spreadsheet:

First of all the position sizes are shown. And these are on a per trade basis. As it pertains to the TPS scaling-in: the figures are for FULL positions NOT per SIGNAL. Big difference between the two. In other words and based on the current figures: you’d be wanting to end up with or eventually scale-in to 5 FULL positions on the Dow. NO MORE.

In addition: you want to be trading the top four to six instruments that are the most volatile. In other words: you want to be trading those with the highest ATR values.

Taking the above even one step further: you’d also want to be trading the top four to six instruments that not only are volatile but that also have directional movement. Think about it: the more directional movement the sooner these trades will be over after their pullbacks. So if this is something that you wish to factor in then I’m just multiplying ATR by ADXR. This is a stripped down version of Wilder’s CSI as noted i.e. I’ve not included margin requirements and trading costs as I think it’s a bit of an overkill for our purposes here.

I can attest to the merits of the above. For the last few years I’ve been trading anything and everything that generates a signal. But I’ve noticed over the years that some instruments during certain periods are just not worth trading. They hog margin and seem to go nowhere so profits are less. Since implementing this I’ve seen a noticeable change in this regard.

In addition and since implementing the risk and position size calculations the wild intraday swings in floating P&L has all but disappeared. In addition: these calculations seem to normalize the instruments against each other (which is obvious given the different positions sizes indicated). What’s more: one should never even come close to a margin call on this basis.

In addition: just based on last week I’m confident that using a fixed stop is the way to go and on this basis will not interfere with the trading system itself. This fixed stop is for those times where these markets begin to trend against you without even so much as pausing to look back (hence not even giving you a signal to exit at a loss). Take a look at some charts and you’ll clearly see what I mean i.e. it’s happened before and it will happen again (and would not surprise me if these coming weeks do not serve as a prime example in real time). This fixed stop is for those times when things just get totally out of hand.

Lastly and as I stated earlier in another post: this entire method of position size and risk management seems to hold together almost in a perfect balance with this trading system.

So there you have it. Not the tidiest of spreadsheets. Sorry about that. Serves my purposes though.

TPS Risk Pos Size CSI 02062019 1636
TPS Risk Pos Size CSI 02062019 16361211×528 117 KB

Regards,

Dale.

P.S.

These calculations should be done weekly over a weekend and the figures would be valid for the coming week’s trades. Given that I’m using the default 14-day period for ATR this should be accurate enough. One could, I suppose, use a 7-day period for ATR and ADXR. Maybe even a 5-day period (possibly makes sense as these trades theoretically should only last about that long under normal market conditions). This would of course speed up the reaction time for the calculations. As to how much of a difference it may make: I know not. Just thought I’d mention it is all.

P.P.S.

Just another note that I believe is of interest. In just doing these calculations of late AND, oddly enough, doing something similar some years ago but for a different reason: the S&P 500 almost always is top of the pops. I believe this is proof of concept enough and why it’s the go to instrument for those that trade the indices. It is currenlty only surpassed by Italy and Honk Kong (depending which of the two rating systems you implement i.e. ATR only or ATR and ADXR). But most would not trade those indices I don’t think so it would be of no concern to them I suppose. As far as the three US indices are concerned: very rarely does the Dow top theS&P. The NASDAQ is always the slower of the three (this in spite of the fact that I do firmly believe that the NASDAQ actually leads the market due to its component stocks and sectors) (although this is a moot point really i.e. not something I’d base a trading decision on).

P.P.P.S.

With regard to the last paragraph above: a 5-day period is too short. It would have you rotating in and out of instruments far too often. Just too much work really. Seems to me that maybe a 10-day ATR and ADXR could be the sweet spot. And I’m willing to bet this is why Jeff used a 10-period ATR as well. And Wilder does actually state the the period for ANY indicator should be equal to one half of the period under review. Given that the markets are closed over weekends then a 10-period interval makes sense I suppose. It does of course beg the question as to why every single one of Wilder’s indicators defaults to 14-periods of course (seem to remember reading something in his Delta Phenomenon about this but don’t quite recall at this time).