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January 06, 2005
Filters and strategy performance

A minor tweak in a strategy filter can completely change this strategy performance; that's what I found when tweaking my trades' database of Trade-Ideas Alerts. My first screen consists as I said in previous posts, in simple but important filters (Liquidity, volatility, spread, relative volume). In this screen I checked all long alerts, to be able to previous all their performance after getting some data. When I check my database for all CHBO trades, I am getting about 1200 results (for near one month now). The average performance is not so good, but tweaking filters value improved my results.
Setting Day range or relative volume filters for CHBO improved greatly results.

Of course setting the same filters for another alert can decrease performance, so each alert must be associated with appropriate filters; this is what I noticed when exploring my database. To make sure that filters' setting is appropriate for each alert type, I am collecting more and more data so the performance shown by the strategy will be more accurate.

When making filters value more restrictive, we lower the number of trade for each alert and that's why I need some times (some weeks) to collect enough data.
I have now probably about 40 trades for each strategy.

Why each different alert need to have different filters setting?
First, each alert is completely different from others.
CHBO alert look for stocks that broke out its channel, so a day range filter may be appropriate; it is better to have a stock trading at its top (less resistance).

When dealing with ORU15 alert (15 minutes Opening range), day range filter is not really appropriate, and my researches show that price filter is more adequate.
ORU15 is used in my trading system 3, and it use “Price<40$” filter.
For double bottom alert, low day range look more reasonable.


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Filters and strategy performance @