Turtle (Last Trade Was A Loser (LTL)) Filter – Part 2 in Series

How many of you believe if the last trade was a winner, the probability of the next trade being a loser is higher? The Turtles believed this and in this post I introduce the concept of filtering trades based on the prior trade’s success.

Here is a list of trades without the filter:


20090506    Turt20Buy  1  91.75000       0.00       0.00
20090622   Long10-Liq  1 103.14000   11290.00   11290.00
20090702   Turt20Shrt  1 102.26000       0.00       0.00
20090721   Shrt10-Liq  1 100.80000    1360.00   12650.00
20090803    Turt20Buy  1 104.61000       0.00       0.00
20090817   Long10-Liq  1 101.99000   -2720.00    9930.00
20090824    Turt20Buy  1 107.71000       0.00       0.00
20090902   Long10-Liq  1 100.97000   -6840.00    3090.00
20090902   Turt20Shrt  1 100.10000       0.00       0.00
20090917   Shrt10-Liq  1 105.87000   -5870.00   -2780.00
20090924   Turt20Shrt  1 100.02000       0.00       0.00
20091008   Shrt10-Liq  1 104.72000   -4800.00   -7580.00
20091012    Turt20Buy  1 106.13000       0.00       0.00
20091030   Long10-Liq  1 109.43000    3200.00   -4380.00
20091113   Turt20Shrt  1 108.95000       0.00       0.00
20091223   Shrt10-Liq  1 106.03000    2820.00   -1560.00

And here are the trades with filter engaged:


20090506    Turt20Buy  1  91.75000       0.00       0.00
20090622   Long10-Liq  1 103.14000   11290.00   11290.00
20090824    Turt20Buy  1 107.71000       0.00       0.00
20090902   Long10-Liq  1 100.97000   -6840.00    4450.00
20090902   Turt20Shrt  1 100.10000       0.00       0.00
20090917   Shrt10-Liq  1 105.87000   -5870.00   -1420.00
20090924   Turt20Shrt  1 100.02000       0.00       0.00
20091008   Shrt10-Liq  1 104.72000   -4800.00   -6220.00
20091012    Turt20Buy  1 106.13000       0.00       0.00
20091030   Long10-Liq  1 109.43000    3200.00   -3020.00
20100126   Turt20Shrt  1 104.09000       0.00       0.00
20100218   Shrt10-Liq  1 108.12000   -4130.00   -7150.00
20100219    Turt20Buy  1 109.37000       0.00       0.00
20100322   Long10-Liq  1 108.96000    -510.00   -7660.00

Check for yourself – you will notice that a trade after a winner is skipped. Trades are not picked back up until a loser is reported. Trading like this is quite easy but backtesting is quite a bit more difficult. I talk about this in the book where you have to switch between actual trading and simulated trading. The beauty of the Python BackTester is that it is somewhat easy to incorporate this into the testing logic. All you have to do is determine if the prior real or simulated trade is a loser. If it isn’t then you still must keep track of all trades, but don’t book the trades that follow the winner. I have created a testing module that does just that. Here is a snippet of the code:

# Short Logic
        if (mp == 0 or mp == 1) and barsSinceEntry > 1 and myLow[i] <= ll20: profit = 0 price = min(myOpen[i],ll20) numShares = max(1,int(dollarRiskPerTrade/(atrVal*myBPV))) if mp >= 1:
            profit,trades,curShares=exitPos(price,myDate[i],"RevLongLiq",curShares,lastTradeLoser)
                if lastTradeLoser < 1 : listOfTrades.append(trades) todaysCTE = profit if profit > 0 :
                    if lastTradeLoser < 0 : lastTradeLoser = 0 if lastTradeLoser > 0 : lastTradeLoser +=1
                else:
                    lastTradeLoser = -1
                mp = 0
            mp -= 1
            tradeName = "Turt20Shrt"
            marketPosition[i] = mp
            entryPrice.append(price)
            entryQuant.append(numShares)
            curShares = curShares + numShares
            trades = tradeInfo('sell',myDate[i],tradeName,entryPrice[-1],numShares,1)
            barsSinceEntry = 1
            if lastTradeLoser < 1:
               listOfTrades.append(trades) <strong># book the trade if lastTradeLoser < 1 else don't</strong>
               totProfit += profit         <strong># book the profit from the trade</strong>
Turtle Part 1

I will include this in an update to the Python backtester for registered users of this site.

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