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Category Archives for System Development

A Complementary Approach To Trading Technical Indicators

In the October issue of Futures magazine, author Jean Folger discusses an important aspect in selecting two or more indicators when developing a trading system. While I don’t recommend simply combining indicators to create a trading system, and I don’t think that’s what Folger is suggesting either, when there comes a time to introduce two or more technical indicators to […]

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“Peel Off” Trading

Many traders have a favorite method for trading, and they rarely deviate from that plan, regardless of what they are trading. One method many people like is what I call the “peel off” method. In its simplest form, the trader starts out with two contracts, exits the first at a small profit (the “peel off”), […]

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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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Discover Best Trading Rules with Perceptron Search

Every system developer has a list of rules and indicators that they want to test out. The problem every developer faces is narrowing down that list of rules and indicators to the select few that are best worth focusing on. A quite similar and related problem that every developer has to deal with is having some inputs or […]

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Are Breakeven Stops Worth The Effort?

One favorite “gotta have” of many traders is a breakeven stop. By not letting a winning trade become a loser, the psychological lure of breakeven stops is strong. This is especially true for discretionary traders, where the winning percentage can play an important mental (not necessarily financial) role. The answer for automated traders may be […]

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Multiplex For Greater Profit

Two problems that often result from system optimization are, (1) a reduction in the number of trades, a system that generates too few trades can both be more difficult to trade and a low number of trades does not inspire confidence; and (2) there is a selectivity or specialization risk that, by sheer bad luck, […]

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System Performance and Confidence Interval

When you review the performance of a trading model, how do you know it’s worth trading for? How do you know it’s the right system for you? How confident are you that it will continue to profit in the future? When it comes to evaluating your trading model there are many factors to take into account. […]

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Back to Basics Part 2 – How to Succeed at Algorithmic Trading

Algorithmic Trading

–by Kris Longmore from blog Robot Wealth There is a lot of information about algorithmic and quantitative trading in the public domain today. The type of person who is attracted to the field naturally wants to synthesize as much of this information as possible when they are starting out. As a result, newcomers can easily be overwhelmed […]

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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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Two Swing Trade Systems – Part 2

Yesterday I discussed two swing-trade systems that work pretty well in out-of-sample data. While each works differently, they overlap enough that you don’t get any benefit from running them both at the same time. One great thing about these two systems is that they’re dead simple to manage. Trade at the open or the close, […]

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