Lincoln B. Fiske Jr.
Founder, TradingVisions, Inc.
Program(s) Developed: AXIOM II WFO, Delphi II WFO, and Sentinel WFO Trading Systems
Interview Date: July, 2015
Interviewed by John F. Gallwas, Founder of Striker Securities, Inc.
Lincoln Fiske, Founder of TradingVisions Systems, Inc., is a well-known and prolific system developer, located in Sedona, AZ a town of 10,000 located 115 miles North of Phoenix, AZ. Since 1999, he has consistently used the latest research tool to develop proprietary trading systems for his personal use as well as for other traders. "Walk-forward optimization" ("WFO") is one of those tools, and Mr. Fiske is one of the first system developers to use and improve trading systems using WFO analysis.
John F. Gallwas: You are well known to many of our readers, how do you view the current futures market environment from a system developer's point of view?
Lincoln Fiske: Many systems--especially day trading--perform better in higher volatility environments. Since early 2012 we've been in a lower volatility phase, which tends to favor swing systems that hold for more than a day. These cycles are unpredictable, which is why I recommend trading a combination of systems using different time frames. Another factor making trading more difficult is the market's sensitivity and nervousness about when the Fed will raise interest rates, leading to whipsaws and lack of direction, both of which generally hurt system performance.
John Gallwas: Many of you readers prefer day-trading systems because they enjoy the "action" and the lack of overnight market exposure. Which of your day-trading systems would you expect to perform best in the current market environment?
Lincoln Fiske: For most day trading systems to perform well, they need to have enough range volatility and directionality to be able to carve out winning trades. The last several years have been a fair environment for day trading, and I'd say my Delphi II WFO TF (emini Russell) has been the best of my offerings. It uses a proprietary channel that adjusts to volatility and trend. However, as I mentioned above, during lower volatility, swing systems can outperform day trading, and my AXIOM II WFO NQ has been best overall during the last couple years. Ultimately, I believe the most successful approach is to diversify, trading different time frames, systems, and markets, rather than trying to find the best single system, and that's why I stress trading a portfolio. To achieve this, I offer the Vista Portfolios, which are low-correlation combinations of the TradingVisions systems. I find that's the most helpful way to smooth the equity curve and reduce risk.
John Gallwas: Please give us an update on your research using "Walk Forward Optimization"?
Lincoln Fiske: For the three systems in my WFO series--AXIOM II, Delphi II, and Sentinel--I annually re-optimize the main parameters, finding the values that would have led to the best performance over the entire data history, and using those values for the next year. This approach allows for conservative adaptation to market changes and, more importantly, it tests whether a system's logic holds up on previously untested data. In effect, it shows us a more "real world" performance and potential and tells us if a system is over-optimized. I like to use the entire data series because I feel that a system that can perform over a long period of time is demonstrating that it can handle lots of different market conditions.
I started trading the three systems (the Vista VI portfolio) in late May/June/July of 2013, and as it turned out, this was a very difficult trading period that yielded the worst portfolio drawdown in thirteen years--an uncomfortable trial by fire! Fortunately, since late August of that year it has been on a nice upward track, making numerous new highs and healthy returns on lower drawdowns, and operating within its historical norms. As a result, I'm very pleased with the WFO series. The lesson for me was, once again, that when you have a well-designed trading plan, you need to stick with it and give it time to succeed. This is especially true of systems that have lots of out-of-sample performance, where they have proven themselves by good performance on new data, establishing statistically significant norms and a reasonable basis for trust.
I did an interesting study recently that showed how important patience is in successful investing. I looked at the 7.5 year period starting in 2007 and calculated what percentage of rolling periods you would have made a profit over the prior three months (a reading was taken every day, looking at profit/loss over the prior thirty days). For the S&P, holding for three months was profitable most of the time.
It's common sense that the longer the hold, the more chance you'll be profitable. For the Vista VI portfolio, this is even truer. Especially in the arena of futures trading, it's easy to chase after what appears to be quick profits, but I've found that these are usually ephemeral, and that to increase the chances of success, it takes a longer-term commitment with sensible expectations.
John Gallwas: Do you have anything in the "What's New" section you can share with us now?
Lincoln Fiske: I'm currently working on a swing system that uses the VIX as the basis for trade decisions on the e-mini S&P, and I'm very excited about how it looks. The VIX is a volatility index derived from the pricing of options on the S&P 500 futures contracts. Designed to measure the implied market volatility over the next 30 days, it's called the "fear index" because high readings are often associated with steep market selloffs, and lower readings tend to accompany an up-trending market.
This interview is for informational purposes only and is not intended to be
a solicitation of any kind. Trade only with risk capital. The risk of
trading can be substantial and each investor and/or trader must consider
whether trading systems are a suitable investment.
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