Tuesday, August 29, 2006

Declan Fallon Reviews The Odds Maker

Thank you Declan! Declan Fallon reviews The Odds Maker (what's that?) and provides some great feedback we intend to use as we refine the tool. Last week Declan and several other fans of Trade-Ideas received the beta version of The Odds Maker to begin the process of kicking the tires and expressing their first impressions. The official release of the beta for The Odds Maker will be this Friday. Directions on getting started will be posted here.

Here is the link to Declan's review of The Odds Maker (with lots of good screen shots).

Declan asked us 2 questions and we responded. Here's our answer:

Dear Declan,

Let’s answer your first question about net winnings in The Odds Maker. The answer comes from our guidebook - [here is the relevant section:]


4.5 Net winnings: $62.45

Net winnings looks at the total amount of money made using this strategy. If the result is positive, then money was made. If the result is negative then money was lost. This measure is another that does not take the profit target into account. Winning is, quite simply, the difference between the entry price and the exit price.

Multiply the average lot size in trades by the net winnings to estimate a strategy’s hypothetical return minus any assumptions regarding commissions or slippage. In this case, if 1 share of each stock in the strategy were bought, $62.45 would have been made. Of course, if 1,000 shares of each stock had been purchased, $62,450 would have been made. This result looks different if percent, instead of dollars, is selected for the profit target. In that case the result would say something like
“Net winnings = 162.5939%”. In this case if $100 worth of each stock in the strategy were bought, $162.59 in profit would have been made. Of course, if $10,000 dollars worth of each stock had been purchased, $16,259.39 in profit would have been made.

The answer to your second question is a good one. We think there enough data points to evaluate strategies. Here’s why. First, remember that The Odds Maker looks at the entire market – unlike other backtesters who evaluate one stock. If this were the case with The Odds Maker we would have gone back much further in time. When you see the results look at the denominator that tells you the number of trades evaluated. This number can go into the 900s, 1000s. Over a 2 to 3
week time frame that’s almost too many trades for a human to make per day.

Second the 2-3 week timeframe puts more of an emphasis on the recent moves
of the market to highlight whats working now. Given these 2 points we think The Odds Maker certainly analyzes a lot of data to arrive at timely, relevant guidance in crafting a strategy that’s most in tune with the market.

Let me know if this explanation makes sense or not. Thank you for the blog mention and the Forbes information.

Best,

David

6 comments:

sternforpres said...

The review link asks me if I want to run an ActiveX script or something. Is this normal, or some kind of virus?

Anonymous said...

This is indeed very exciting... I have asked this question before, but how can folks who access TD via Scottrade Elite (like me)evluate/procure this new exciting development of oddsMaker???
I did contact Scottrade witht he same request and they told me that it was up to TD to decide?

D TradeIdeas said...

Dear Stern,

FallonD runs our Trade-Ideas scrolling ticker using ActiveX. You can ignore the message or click on it to activate the hyperlink stock symbols from it. Either way there is no danger from the app. FYI.

D TradeIdeas said...

Dear Anon,

We will post directions that answer your exact question on Friday when we make the beta available to everyone who reads our blog. Good question. We have an answer.

Best,
D

Anonymous said...

When will be the information on how to access Oddsmaker posted? Will it be posted on this blog?

D TradeIdeas said...

Good question - and good timing! Our latest post announces the beta-release. I look forward to reading your feedback. Thanks,
David