best results. Just as was the case with relative strength band system, the short side
needs to operate a little more quickly to be at its best. In all honesty though, I was
surprised that this period wasn’t even shorter. Table 12.10 shows that the short side
also is profitable, with an average profit per trade of $586.65. Never mind that the
risk factor indicates that we’re only likely to make three cents for every dollar
risked.
Looked at all by itself, this seems hardly worth bothering with, but the key
question is whenthis small profit takes place in relation to the profits and losses
on the long side, and for any other system you’re trading. If it turns out that the
short side essentially broke even until Spring 2000, and only made money over the
last few years, wouldn’t it still be worthwhile to trade the short side during the next
bull market as well, since you never know when the next bear market will start
after that? Figure 12.1 shows a few sample trades for both the long and the short
side on the S&P 500 index during and after the September 11 tragedy. Note how
well the system coped with this situation in this market.TradeStation Code
Variables:
{These variables can also be used as inputs for optimization purposes.}
AllowLong(True), AllowShort(True), LongRelStrenLookb(80),
ShortRelStrenLookb(60), SlopeLookback(10), NoLongMarkets(4),146 PART 2 Trading System Development
Short only, no trailing stop, 1 percent stop,
3 percent target, 10-day long TR,
five-day short TR, reverse TR criteria,
60-day average, 10-day slope PercProf: 36.00
Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio
Average: 66.00 27.24 (7,415.45) 586.65 Market
St. Dev: 46.50 9.98 65,572.19 2,139.61 7,468.95 (0.02)
High: 112.50 37.22 58,156.74 2,726.27 8,055.60 Portfolio
Low: 19.50 17.26 (72,987.65) (1,552.96) (6,882.30) 0.27
ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength
Average: 1.12 0.03 55,184.50 48.95 22.32 11.20
St. Dev: 0.67 0.42 30,346.12 29.72 6.93 3.23
High: 1.79 0.45 85,530.61 78.66 29.25 14.42
Low: 0.46 (0.39) 24,838.38 19.23 15.39 7.97TABLE 12.10
Short-side Trading Using Revised Rotation System