
The video below shows a 10 year simulation run of the Precision stop 2011 version on 70 UK stocks. 

The vast majority of traders do not believe that trend following works, this video will show you most emphatically that it does. The theme of letting go of control and just riding the trends when they change is an alien concept to most who prefer to allow emotional decisions to cloud their judgement and even though they continue to lose, they don't seem to learn how simple it is to follow trends. There are long "underwater" periods. which means the number of days between new account highs being made. The draw downs can be high with trend following, but when all the factors are weighed up, it still remains the number one choice for serious professional traders.


Note If you have trouble viewing all the numbers when watching the video, try adjusting the resolution to 720 HD which is found on the video toolbar HD.
<<<Watch in full screen mode for a better view 

Some of the terms used in the video display may not be familiar to you, so lower down the page is a detailed explanation of the terms used. Shortly I shall be adding some comparison videos showing the Donchian 210 day trend system versus the Precision stop 2011 model. Richard Donchian is believed to be the first person to design a trend following system, and the very simple model he used went long ( bought ) when a 210 day high was hit, and went short ( sold ) when a 210 day low was hit. The opposite corresponding 210 day value is used as the stop entry for the next trade. Whilst the Donchian system is very basic, it does indeed tend to make reasonable profits over the long run at the expense of large drawdowns. Before traders dismiss the Donchian model as being crude and overly simple, it is as well to remember that his work is the corner stone of all the trend following systems available today. The Donchian system was tested by Ed Seykota on an old Fortran computer many years ago using punch cards, to his amazement Mr Seykota found it to be profitable so he went on the design his own exponential moving average trend following model, and inspired many other traders to develop their own. The Precision stop 2011 is purely a trend following model based on my many years of trading, testing and technical analysis experience. Some of my inspiration for designing this model is a result of studying the work of the two aforementioned gentlemen, seeking improvements where I was able to find them. It is unlike the Seykota model and the Donchian model, the only common factor being that it follows trends in more precise manner. There is some detailed analysis showing how to set up a system correctly for best results on the how to test a trading system pages. After you watch the video you will see me click on Generate Excel report, this actual report is available to download for your own perusal. The list of 70 stocks used is also available to download If you have trouble viewing all the numbers when watching the video, try moving the slider bar back and forth a few times, the video will then become HD. Roger Medcalf 2010.


Precision stop 2011 is due for release in January 2011, superseding the 2005 model currently available here 
Glossary of terms 

Open position profit  The total profit on all open long and short positions 
Max Loss  The in running maximum peak to trough draw down possible on a day by day basis assuming all trades get stopped out 
Risk  The intended risk from entry price to stop on all open positions ( preset to 0.25 in the simulation video) 
RPT (Risk per trade)  Risk divided by Trade divisor, computes the risk of entry price to stop on each individual trade 
Gearing used  Total value of longs and shorts divided by W Equity ( Working Equity ) E.G If W Equity = £20,000 and total value = £100,000 Then Gearing = 5 
Highest Gearing  The maximum gearing used during the run 
% Underwater  The total percentage of time that the equity line is not making a new peak 
Highest Equity  The highest value of W Equity achieved during the run 
Net longshort EXP  The value of exposure in the portfolio if net long or short E.G If long value = £10,000 ,short value = £20,000 then net short exp = £10,000 
Starting Equity  The initial starting capital used by the run 
Closed Equity  The profit  loss of all closed out trades + initial capital 
W Equity  The real time value of the portfolio 
Risk variable  0.25 = 25% of the W Equity is used to compute Risk (Adjustments to this value make huge differences to performance) 
Trades divisor  The number is used to divide Risk variable to allocate correct deal size to each trade. 
Max cost % per trade  The maximum value of a trade must not exceed this value, this is for limiting huge trades when stop values are tight. (A safety feature) 
Initial max trades pd  The maximum number of trades the system will activate on the first day of the run 
Max trades allowed  The maximum number of trades the system is allowed to have open on any given day 
Max gearing allowed  The maximum gearing allowed in the run 
Spread percent  The run uses open high low close data, so bid ask must be estimated. If set to 1.5 then it indicates bid 98.5 ask 100.( 3% a RT ) (Round turn) 
Noise less than 1000  Unused filter in the video 
Percent profit  The real time percentage profit generated during the run. 
Max draw down  The largest peak to trough value on the run expressed as a percentage. 
Long W/L ratio  The ratio of number long wins / number long trades (E.G 10 trades 6 wins = 60%) 
Short W/L ratio  The ratio of number short wins / number short losses 
Total W/L ratio  Both of the above ratios combined to give a system health reading in one number 
Long R/Reward  The ratio of average long wins / long losing trades 
Short R/Reward  The ratio of average short wins / short losing trades 
Overall R/Reward  The above two ratios combined 
Pie chart display  Shows the percentage balance of the portfolio in real time during the run. Notice the illusion of a spring pulling it back to long most of the time. 
Max underwater  The highest period between the account making a new peak. 
Total long trades  The number of completed long trades during the run 
Total short trades  The number of completed short trades during the run 
Total trades  Summation of the two numbers above 
Long profit  The value of the current open position long profit 
Short profit  The value of the current open position short profit 
Display mode  Basic display so as to be easily understood by the average trader 
Open position P/L  The value of the current open positions profit 
Locked in profit  The profit value locked in by the stops ( this assumes that the market will trade at the stop level ) See Slippage definition and footnotes 
Capital employed  The monetary value of all trades basis of their individual entry prices added up 
Total working  The monetary value of all trades basis of their individual bid ask prices added up 
Slippage  The amount of slippage applied to each trade. 50% indicates halfway point between the intended stop entry level and the worst price of the day 
Long cost  The cost of all open long trades when bought 
Long value  The value of all open long trades in real time 
Short cost  The cost of all open short trades when sold 
Short value  The value of all open short trades in real time 
Indicator generator settings  The settings applied to the Precision stop 2011. Multiplier = the multiplication factor applied, Min percent = minimum percent stop distance 
The lower windows  Show all the actual trades and their values in running. 
Generate Excel report  The generate report that goes with this video is available to download directly here on this page 
Additional clarification information As the test used closing prices for open high low close, it is not possible to extract the bid and ask prices. To get around this accurately there are two separate features added to give a realistic simulation. Spread percent. If the system buys a stock which has a closing price of 100p and the spread percent is set to 1.5 this means it will view the data ask 101.5 and book trades basis of that. The same happens when trades are closed out. So if the trade was opened and closed at the same 100p level it would sell at a price of 98.5p making a total deal cost of 3% per trade. Some stocks in the test have tight spread of less than 0.25% and others are wider up to 5% so this feature averages it out nicely. Slippage factor. This additional feature makes the system testing even more stringent, as it then adds more costs to the equation. E.G if the intended entry price is the above 101.5 and the days high is 105 the simulation will book this trade at (101.5 + 105 ) / 2 making an entry level at 103.2 Software. Please note the software that generated this simulation is not for sale to the public as it is my own proprietary software design. The for sale item is the Precision stop 2011 which is an add on for Tradestation (all versions) and Multicharts ( all versions) which is due for release in January 2011.

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