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All posts by System Trader Success Contributor

In-Sample and Out-Of-Sample Testing

I am frequently asked if I do out-of-sample testing. The short answer is not always and when I do, it is not how most people do the test. There are lots of considerations and pitfalls to avoid when doing out-of-sample testing. Out-of-sample testing is not the panacea it is made out to be. There are […]

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Searching for an Efficient Market Regime Filter

The probability of our long term success as traders increases when we trade with the prevailing market trend. This means when trading stocks we should be buying when the overall market is rising and/or shorting when the overall market is falling. In order to filter trading opportunities therefore, we need an efficient way of determining the current […]

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The Better Rotation Indicator

The Better Rotation Indicator uses 8 major ETFs to track Global Macro trends. This indicator helps visualize the rotations from one Global Macro asset class to another – from unloved and over-sold to hot and being chased by the herd. Right now (4Q 2016) we’ve got a rotation taking place as Government Bonds get overtaken […]

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Why You Should Really Optimize and Even If You Don’t

optimization

Why You Really Should Optimize And Even If You Don’t… Today’s topic is on optimization. Some system developers don’t believe in optimization. However, I’m going to show you why you should really learn how to optimize, and second I’m going to demonstrate that even if you don’t believe in optimization then “not optimizing” is not […]

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The Art of Crafting an Automated Trading Strategy

For nearly every trader, there is one all-consuming question: How do you build a profitable strategy? Naturally, one would expect to dive straight into the statistics and begin crunching the numbers. Yet, before we delve further into the mechanics – and believe me there are plenty – I want to talk a bit about the […]

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Strategy Testing – Violating These Steps Will Damage Your Account

One of the most rewarding experiences for a TradeStation trader is to pick up a performance report that proves their great strategy idea is indeed a profitable strategy. Strategy testing done properly, as is outlined in this article, can verify the efficacy of your trading strategy and give you confidence to start trading it. But be forewarned, […]

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Looking Into The Ulcer Index

Investors utilize a variety of performance and risk metrics to evaluate strategies. These numbers provide a summary of what happened to the strategy historically and can be useful to quickly compare different strategies. To use these statistics effectively, it is helpful to look at some of the nuances of those frequently cited and cases where […]

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World’s Simplest Trading System

a-tree-on-the-horizon

Here’s the system: At the end of every month, if the index is above its 10-month simple moving average: the portfolio is 100% in the market if the index is below its 10-month simple moving average: the portfolio is 100% in cash  And that’s it. So, if we take the FTSE 100 Index as an […]

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Sharpe Ratio – the right answer to the wrong question?

TradingEdgeVisualiser

Sharpe was the right answer First, let’s start with what Sharpe does well. There are two things it does well: Cross-asset unified measure: we all know that the most important component in alpha generation is asset allocation. Now, the difficulty is to have a single measure of risk-adjusted measure of alpha. This is where Sharpe […]

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Avoiding Stock Market Crashes with the Hi-Lo Index of the S&P500

This daily indicator is calculated as the ratio of the number of S&P500 stocks that have reached new 3-month-highs minus those that have reached new 3-month-lows, divided 500. Exiting and entering the stock market according the indicator’s signals would have avoided major drawdowns of the market during the backtest period from Jan-2000 to Aug-2015. Switching according to the signals […]

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