Frequently Asked Questions
Hi Brent, Some questions to do with the SpiBandit™ (what a name!):
Do you trade SpiBandit yourself?
Yes. I began trading SpiBandit™ in December 2003 trading a single SPI® contract and continue to trade it following its upgrade in
March 2006.
This is important. I might need to know just a little bit more about the entry order and stop loss/exit orders if you don't mind. The problem is that I may be on the road at the SPI’s closing time. What I can do is that I can ring my broker and give him SIMPLE orders, eg. buy me x contracts at night session MOO. I can't instantly calculate complicated entry price/stop loss/exit price when I am driving my car!!!
Although the calculations are relatively simple I
believe an excel spreadsheet is required to help you trade SpiBandit. If
you're unable to be close to a spreadsheet and be close to the market between 4:30pm and
5:10pm each day then SpiBandit will not be appropriate for you.
If we know a
set-up is developing for the next day, can the entry and exit instructions
be prepared the night before so I can pre-calculate them and put them in my pocket and read them to my broker using my mobile phone when I am driving on the road?
Yes.
Do we need to chart the night session data ourselves to trade
SpiBandit? Or do we only need to chart the day session data?
Yes. You will need to chart both the Day and Night Session’s Open, High, Low and Close. I draw my daily Open, High, Low and Close in BLACK and follow it with the overnight’s Open, High, Low and Close in RED. So my chart alternates with BLACK and RED bars.
Will you be able to provide me a trade-by-trade profit loss excel spreadsheet, just like what you did with IndexTrader before? I need the history trade by trade P/L details to incorporate the P/L history in my own spreadsheets so I can blend it together with my other systems.
Yes.
The evening signal - do
you enter a trade in the night session or is it for the next day’s opening?
Its for the night session...so if SpiBandit™ has a
set-up following the day session’s price action then we have to put our
order in before 5:10pm for the evening session. For the next day, following
what occurred overnight we look for a set-up and if one appears we need to
have our orders in by 9:50am, and it repeats.
Have you tested the
model on other markets?
No, I don't have intra day data on any other market
and also I think it works on the SPI because of our time difference i.e. we
get so pushed around by the US's overnight action and SpiBandit™ takes
advantage of it.
Not exactly clear on
implications with SPI signals in IndexAlert? Do you take both or replace
with SpiBandit™?
There is no change to IndexALERT. It’s still the same
model with the same signals. SpiBandit™ is a completely different model. So
if you purchased SpiBandit™ you will be getting on average an additional 9
SPI trades per month on top of the IndexALERT SPI trades. So both
SpiBandit™ and IndexALERT operate independently and depending on your money
management rules you'd trade all the SPI signals in IndexALERT plus the
additional SPI signals produced by SpiBandit™.
The equity curve doesn’t
look very smooth. Can you explain why?
LOL! It doesn’t look smooth because it’s real. I’m
mean real in the sense it hasn’t been smoothed and curve fitted by the use
of filters to avoid some of the nasty loses. If you look at IndexALERT’s™
equity curve you’ll see it isn’t really smooth either but it stills makes
money. Unfortunately I haven’t yet learnt how to make money without
suffering loses along the way. When you do please let me know! :o)
What does Maximum
Drawdown Duration/Longest Flat Time mean? Does it mean you don’t trade for
443 days?
No, you still keep trading. What it shows is the
longest time it took to reach a new equity high following a prolonged
drawdown. In SpiBandit’s™ case the longest period it took to make a new
equity high was 443 days. So SpiBandit was in drawdown and it took 443 days
to trade out of it, which is shorter then the original SpiBandit™ which is
still in drawdown (500+ days). However the idea is to trade a number of
systems for diversification purposes, so that when a system goes into
drawdown, say like SpiBandit™, that your other systems (say like IndexALERT etc)
are doing ok, to smooth out your equity curve and vice-a-versa.
Why are you so excited
about SpiBandit when the average loss if -$627 and the average profit is only $402, giving
you a low 12% expectancy?
There are two reasons why I’m excited. Trade sample
size and performance in a challenging market.
Firstly, look at the number of trades in the sample size. Over 1,200! That’s one reason why I’m excited. As a statistical sample size it’s huge, providing significant support behind SpiBandit’s™ expectancy. Not only is it profitable but the 12% expectancy, which is still an edge, a real edge, has been tested over 1200 trades. This is huge giving SpiBandit™ a solid statistical basis.
And secondly, the other reason why I’m excited is because it has performed so well (hypothetically) over what is regarded as a very challenging market to trade.
Let me try and put SpiBandit’s™ performance on the SPI into perspective.
Looking at the SPI’s performance prior to March 2003 one would see an erratic behaviour, one described to me like a mad woman’s breakfast. Strong rallies followed by sharp reversals followed by sharp rallies etc, etc. Backwards and forwards it trades, sharply. Then if you look at the SPI’s performance since March 2003 all the trend traders would say what a sterling market it is. What’s all this talk about it being a challenging market to trade they would say. It trends nicely. All you have to do is buy the breakouts or wait for a pull back to jump on board. Oh yeah I hear you say as if it was that easy, which of cause we know it isn’t.
Now look at the SPI post March 2003. Bullish as hell with a beautiful trend. Prior to March 2003 it was choppy, post 2003 and to date (March 2006) it trends.
With the bull markets arrival the SPI has developed a real nasty Dr Jekyll and Mr. Hyde split personality. One month it’s nasty as hell and the next quite pleasant, so to speak. This is another reason why I’m excited. Yes SpiBandit™ does lose and experience drawdowns and has a low expectancy, but it stills makes money by using its edge to trade frequently allowing the small average net profits to accumulate into nice profitable months. Look at the monthly results and believe what you see. And as I said before it has an enormous sample size containing over 1,200 hypothetical trades to prove it, all the while the “Dr Jekyll and Mr. Hyde” SPI makes it very challenging at times to determine who we’re dealing with.
Remember from my book my Holy Grail is finding an edge that you can use with multiple opportunities?
That money in the bank equals expectancy x opportunities?
Well SpiBandit™ gives me this.
Certainly I’d be jumping higher if it had a higher expectancy, but when it’s supported by a sample size containing over 1,200 trades it’s enough for me!
Also please remember just because a system has a high expectancy doesn’t necessarily mean it’s a good system. For example if we had the best Melbourne Cup system with a 100% expectancy it really wouldn’t be that good as we could only use it once a year. Whereas SpiBandit™ allows us to trade its 12% expectancy on average 9 times per month giving me plenty of opportunities to chip away building up monthly profits.
I hope this makes sense.
What happens if too many
trade it, won’t it lose its effectiveness and cause too much slippage.
As I say on my web site I’ll remove a service or
system when I feel I’m being disadvantaged with too many people trading at
my levels as I’m a trader first and foremost.
See: http://www.indextrader.com.au/About.asp
But will too many people ruin SpiBandit™ or any of my models? Well only time will tell. However I doubt it as the SPI trades over $1billion in contract face volume each day so I think what I and my private SpiBandit™ traders do each day in the SPI will not really cause too much trouble. But if it does I do reserve the right to remove the model or service from sale.
It shows the largest
loss at -$6,350. Can you tell me what caused that?
Yes. That loss was caused by the Asian currency crisis
in October 1997. Unfortunately SpiBandit™ got caught up in the resulting
seismic shift that occurred in our market. However, as a testament to its
robustness, SpiBandit™ was able to trade itself out of its drawdown.
On the drawdown graph it
shows a -$6,000 drawdown in 2006 yet your monthly tables show SpiBandit™ has
done really well in January and February? Can you explain why as it doesn’t
make sense?
Good question. The drawdown refers mainly to 2005. As
you can see SpiBandit™ only made around $2,000 in 2005 and that was mainly
due to suffering a drawdown of -$6,350 during the year. SpiBandit™ actually
punched out of that drawdown on the 12th January 2006 and that is why it
appears in the chart in 2006. The Excel graph charts when the drawdowns
finish.
Most important. How do you know if the patterns are
robust and will continue to work in the future?
At the end of the day I don’t know, and I don’t think anyone who develops trading methodologies can guarantee their approaches will remain robust into the future.
We can have a strong belief they will, but only time and profits in the bank will tell!
Now do I believe SpiBandit™ will remain robust?
Yes I do (with the above qualification).
I have this belief because SpiBandit™ has most of the characteristics of a successful (i.e. robust) system. That is:
- Its simple.
- It doesn't contain any indicators. There are no parameters to tweak.
- It doesn't have a directional bias. SpiBandit™ consists of one symmetrical pattern providing both the buy and sell set-ups.
- It has performed well (hypothetically) in both bull and bear market conditions.
- It has a huge sample size (over 1,200 trades) giving it a solid statistically basis.
- Its designed by a Trader (me) and
- Its Developer (me) also trades the system.
You would have noticed above that I said I thought SpiBandit™ had most of the characteristics of a robust system. What it doesn’t have is the ability to work across multiple markets (say the Hang Seng, DAX, FTSE, S&P 500 etc like IndexTrader does).
Now this is an obvious weakness of SpiBandit™.
However having said that I believe there is strong logic why SpiBandit™ works on the SPI and not other index contracts. And it has to do with the different time zone where the SPI leads (or some may say lags) all other index contracts. I can’t say too much without giving away SpiBandit’s secrets except to say that owners of SpiBandit™, I believe, will see and understand the logic behind it’s effectiveness.
But having said all that there are still no guarantees except money in the bank and only time and our account balances will tell us this.
Do you have any limit on the number of SpiBandit systems you will sell? I currently trade an ASX short term system which has become a victim of its own success. The designer has now sold over 450 copies and the ASX liquidity is not sufficient to take the orders which are all placed at the same breakout price and with the same stops. Imagine the slippage when 400 people place a stop and it gets hit! One recent BHP was nasty. Is the liquidity in the SPI able to handle all we can throw at it? My one contract trades certainly don't create any worry, that’s for sure!
I'll remove SpiBandit™ from public sale when I believe I'm being disadvantaged from too many people entering where I do. I mention this
at the following link;
http://www.indextrader.com.au/about.asp
In addition, and not to give anything away ....you will be happy to know that SpiBandit™ doesn't use a volatility break out type entry ... so break-out slippage is not an issue. Can the SPI's® liquidity handle SpiBandit's order flow? .... I believe so .... however as I’ve said before if too many people are affecting my fills I'll remove SpiBandit from public sale.
Are there TradeStation results
for its back testing?
No.
Unfortunately I stopped using TS4 in 1998 and do my own modelling in VBA (Visual Basic for Applications). My model's performance statistics are similar to TS4 and are available with an equity curve at the following link:
http://www.indextrader.com.au/spibandit(tm).asp
If there are particular performance measurements you’re interested in that are not available on the web site please let me know and I’ll attempt to produce them with my model.
Can SpiBandit™ be coded into TradeStation?
I don’t know as I haven’t done so.
However if TradeStation allows you to use three data streams (one for the day
session's open, high, low and close, one for the evening session's open,
high, low and close and one for continuous tick by tick data) then you
may be able to. But as I said I don't know.
So we need day session OHLC data of SPI. Where can we get night session OHLC history data? Is there a place on
the net we can get the daily update/history? Where did you get yours? I think SPI night session OHLC data is not common. I look up my data vendor, which is CSI data. It has day session only data and 24hr data. NO night session data.
It goes without saying, just as I do with IndexTrader, purchasers of SpiBandit™ receive a copy of my data which for SpiBandit™ includes the SPI's® Daily and Overnight historical Open, High, Low and Close data.
Now I collected my original day and night SPI® session Open, High, Low and Close from the SFE itself many many years ago before it stopped making it available for free. In those days you could download the entire contracts history since the SPI's® inception for FREE. How short sighted were the SFE in making that stupid decision to outsource it to data vendors! If they wish their contracts to gain popularity they should make historical data available for FREE! Now you have to buy it! Its just rubbish in my opinion.
Anyway I collect my daily and nightly SPI® data (like I do for the other indices) from the web for free.
I monitor the SPI’s® overnight price action on FutureSource: The following link will display the SPI’s® night session (March 2004) data.
http://beta.futuresource.com/quotes/quotes.jsp?s=ANI&t=Future
To confirm the overnight data is correct I go to the SFE’s web site (which in my opinion is one of the worst exchange web sites I’ve seen – just look at the path you have to follow to get end of day data for one of their star contracts – unbelievable!):
To find the day and night session data you chase the following tortuous path;
SFE Home Page
Market Data
Historical Data
End of Day Market Summary
- and select what you want, see below.
