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 philosophy and, indeed, the rules behind a good strategy. With all the numbers needing to be crunched, it’s unquestionably important to have a rough sketch of your ideas for building a strategy. Only with that rough sketch in hand can you then move onto the blue prints of actually constructing a sound, viable strategy. There is No Perfect Trading Strategy Having said that, let’s get […]
One of the most rewarding experiences for a TradeStation trader is to pick up a performance report that proves their...
With Christmas just a few weeks away, I thought it would be interesting to see how the S&P behaves in the days...
November is almost over and it’s often stated that November is the start of a historically strong period for the...
Emotionally it’s a lot easier to buy on strength than to buy on weakness. Buying into a falling market feels unnatural. Your instincts warn that price may continue to fall resulting in lost capital. On the other hand buying when the market makes new highs feels more natural. Price is moving in your direction and the sky is the limit! However, with so many other aspects of trading what feels natural or easy is often the opposite of what you should be doing. Trading psychology can make or break not only your mental state-of-mind but your trading account. In this post I’m going to compare these two different trading strategies on the S&P E-mini futures market and see which one produces better […]Read more ›
If you have been reading System Trader Success for a while you’re probably familiar with how I develop trading systems. The very first step is to come up with a simple idea to act as the seed or core of your trading system. I call this your key concept. This key concept is a simple observation of market behavior. This observation does not need to be complex at all. In fact, they are often very simple. For example, here is a key concept: most opening gaps on the S&P market close if the gaps are less than 4 points. This key concept is very simple, and testable. It is from such observation that I’ll often start to build a trading […]Read more ›
In this article I’m going to demonstrate an EasyLanguage technique to limit the number of trades your trading system will take within a given period. Most often this is done to limit the number of trades a strategy will open in a single day. For example, you may want your day trading strategy to only take a maximum of 20 trades per day. Once it reaches that number, you wish the strategy to not open any more trades until the next trading day. The code I’m going to write will be a more flexible method than the built-in TradeStation reserved word, EnteriesToday. This works fine in many cases, but what if you wish to limit the number of trades in the […]Read more ›
In this article I’m going to introduce you to some of the basic concepts which accompany an end-to-end quantitative trading system. This post will hopefully serve two audiences. The first will be individuals trying to obtain a job at a fund as a quantitative trader. The second will be individuals who wish to try and set up their own “retail” algorithmic trading business. Quantitative trading is an extremely sophisticated area of quant finance. It can take a significant amount of time to gain the necessary knowledge to pass an interview or construct your own trading strategies. Not only that but it requires extensive programming expertise, at the very least in a language such as MATLAB, R or Python. However as the trading […]Read more ›
You have created a trading algo. The Algo is profitable in the backtester. Before unleashing it with real money, you’ve got to first tighten the screws. That is, ensure your algo is fine-tuned so it can deliver optimal returns. There’s one major challenge ahead of you. Firstly, your strategy is rather simple. You may go through the detailed process of building and optimizing a strategy, including curve fitting, correlation, and so on. But you want a simpler process – something leaner, that will fit your modest needs. Secondly, you may not yet have mastered the full technique of optimizing. You are still learning and want to try off with a simple process. One technique I find especially simple in optimizing […]Read more ›
Many traders who try system trading have previously had difficulty at discretionary or manual trading. Most of these folks eventually recognize the benefit of trading a system with well defined rules – a system that has performed well in the past. It is nice to know a trading approach has historically worked, but as with all things related to trading, past performance is no guarantee of future results. Unfortunately, many people who try systematic/algorithmic/mechanical/rule-based trading for the first time bring along a lot of the baggage that they have acquired from their previous method. Depending on the pre-conceived notions they bring into mechanical trading, these new systematic traders may run into a lot of frustration and trouble. Many times, for […]Read more ›