Category Archives for System Development

Trading The Equity Curve & Beyond

Some trading systems have prolonged periods of winning or losing trades. Long winning streaks followed by a prolonged period of drawdown.  Wouldn’t it be nice if you could minimize those long drawdown periods?Here is one tip that might help you do that. Try applying a simple moving average to your trading system’s equity curve. Then, […]

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Getting Started with Neural Networks for Algorithmic Trading

If you’re interested in using artificial neural networks (ANNs) for algorithmic trading, but don’t know where to start, then this article is for you. Normally if you want to learn about neural networks, you need to be reasonably well versed in matrix and vector operations – the world of linear algebra. This article is different. I’ve attempted to provide […]

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Secret Weapon of Stock & ETF System Development

This is the second article in a two-part series where I discuss the top three pitfalls when backtesting Stock & ETF trading systems. In the first article, The Top Three Pitfalls of Stock and ETF System Development, I highlighted the top three issues system developers face. In this article, I’m going to show you how […]

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Simulation: Beyond Backtesting

beyond backtesting

One problem with traditional backtesting is that it relies on the presupposition that there are repeating predictive patterns in the market. In fact, most trading methodologies rely on this assumption. And yet we know the disclaimer that past performance is not indicative of future results. And yet backtesting largely assumes that the future will be […]

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Why I Prefer Trailing Stops

Whether you trade stocks, bonds, Forex, commodities, or other financial instruments, or whether you are short-term, intermediate, or long-term trader I am sure you will agree with the next sentence – “Being in sync with the market is vital for success“. It applies for both automated and discretionary investors. In this article, I will share […]

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The Top Three Pitfalls of Stock And ETF System Development

During my nearly 25 years of experience in the trading business, I have talked to many traders about system development. Futures trading systems and back-adjusted contacts are fairly well understood. Recent issues with the pits closing and markets being only electronic have created some issues but it’s still relatively straight forward to design a trading […]

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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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