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Distance Weighted Moving Averages (DWMA and IDWMA)

The distance weighted moving average is another nonlinear filter that provides the basis for further research and exploration. In its traditional form, a distance weighted moving average (DWMA) is designed to be a robust version of a moving average to reduce the impact of outliers. Here is the calculation from the Encyclopedia of Math: Notice […]

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Understanding the Relationship Between Stocks & Bonds

Intermarket Analysis is the comparison of potentially related markets. For example: S&P500 and 30 Year Treasury Bonds 30 Year Treasury Bonds and Gold S&P500 and Japanese Yen Shanghai Composite Index and Aussie Dollar, etc. The problem with using TradeStation for any Intermarket Analysis is the dreaded “You may not mix symbols with different delays in […]

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Backtesting the MAC-System – How Long is Long Enough?

Most of us entrust our savings to financial organizations in the belief that this will provide us with better investment results than we could have achieved ourselves. These companies advocate a buy-and-hold strategy of bond- and stock funds, charge fees, and usually perform poorly. A convenient way to improve on buy-and-hold and to do better […]

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Advantages With Mechanical Strategies

A lot of the best traders (at least the ones I know) use some kind of mechanical rules in their trading. “Mechanical” implies that the rules are based on some kind of objective rules, usually quantified data. The trader should follow these rules exactly without hesitation or emotion. In this respect mechanical trading is the […]

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Probability Tools For Better Forex Trading

In order to be successful, forex traders need to know the basic mathematics of probability. After all, it’s difficult to achieve and maintain trading gains without first having the ability to understand the numbers and measure them. Many traders use a combination of black box indicators to develop and implement trading rules. Yet, the difference […]

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Trading Ideas And Systems: Keep It Simple, Smart Guy

One thing that I have discussed in numerous NAS Trading articles is the tendency for traders to believe that complex ideas and systems are inherently better or more desirable than simple, conceptual ideas or systems. Just taken at face value, this notion is completely understandable. After all, if an idea is fairly simple, how could […]

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What Trading System Failure Means: Defining and Quantifying Strategy Failure, Part 2

On my last blog post we discussed how we can detect system failure based on some statistical thresholds that can tell us with a high confidence that our strategy has stopped performing in the manner expected from its historical results. However, the usage of such blunt stopping techniques should not be our only weapon for […]

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Comprehensive Guide to the Turtle Trading Strategy

Turtle trading is the name given to a family of trend-following strategies. It’s based on simple mechanical rules to enter trades when prices break out of short-term channels. The goal is to ride long-term trends from the beginning. Turtle trading was born from an experiment in the 1980s by two pioneering futures traders who were […]

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What Trading System Failure Means: Defining and Quantifying Strategy Failure, Part 1

One of the most important aspects of algorithmic trading is the removal of trading strategies from live accounts when they fail. Knowing when a strategy fails is extremely important as it allows us to avoid taking loses and missing opportunities while giving us the chance to reallocate our capital to use strategies that might be […]

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Adaptive Asset Allocation: A True Revolution in Portfolio Management

Modern Portfolio Theory (MTP) has been derided by practitioners, academics, and the media over the past ten years because the dominant application of the theory, Strategic Asset Allocation, has delivered poor performance and high volatility since the millennial technology crash. Strategic Asset Allocation probably deserves the negative press it receives, but the mathematical identity described […]

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