Ultimate Algorithmic Trading System

TABLE 2.12
Best Parameter Sets of Keltner Channel Algorithm
Ranking Based on Average Trade
No.
Net
Profit
Max.
Drawdown
Sharpe
Ratio
#Trades
Avg
Profit/Loss
Avg
Bars Held
%of
Winners
Len
Width
397 $576,442 −$216,503 0.19 1193 483.19 44.77 36.88 10 3
400 $1,131,833 −$291,100 0.18 2648 427.43 42.88 36.44 16 3
431 $1,497,797 −$399,590 0.17 3568 419.79 43.92 37.3 78 3
398 $755,357 −$277,970 0.17 1804 418.71 44.11 37.03 12 3
432 $1,500,595 −$394,719 0.17 3598 417.06 43.59 37.13 80 3
Ranking Based on Net Profit
No.
Net
Profit
Max.
Drawdown
Sharpe
Ratio
#Trades
Avg
Profit/Loss
Avg
Bars Held
%of
Winners
Len
Width
180 $1,626,520 −$406,001 0.14 7293 223.02 29.87 29.14 80 1.25
141 $1,623,026 −$420,401 0.13 8051 201.59 28.45 27.76 74 1
140 $1,622,844 −$415,479 0.13 7974 203.52 28.83 27.77 72 1
179 $1,606,297 −$409,864 0.14 7243 221.77 30.21 29.32 78 1.25
103 $1,596,825 −$422,709 0.13 9129 174.92 26.26 25.74 70 0.75
and the second set was derived by sorting by net profit. Table 2.12 shows the same
metrics for the Keltner Channel algorithm.
And the winner is? Tough call—I lean toward the Bollinger Bands because of
the higher Sharpe ratios. The Sharpe ratio is just an indicator of consistency, and
we will go over it and many more performance metrics in the next chapter. One
thing that does stand out is the holding periods of the two systems and how different
they are. The profit/loss is somewhat similar but the Bollinger algorithm holds on
to trades anywhere from 20 to 50 percent longer. There might be some synergy
here. Diversification is not only achieved through different markets but also through
different algorithms.
■ Summary
Another chapter, and still no Holy Grail. However, using indicators as building
blocks might get you very close to one. Several oscillators and trend indicators were
discussed but these are just a few out of many. The overall purpose of this chapter was
to show how to integrate these indicators into a trading algorithm. The flowcharts
and FSM diagrams that were introduced in Chapter 1 were carried over and used
to help explain this integration. Pseudocode was also used to demonstrate how the
indicators can be programmed. Keep in mind the actual computer code will be
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STOCHASTICS AND AVERAGES AND RSI! OH, MY!
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