Percent Risk Position Sizing in EasyLanguage

August 15, 2016 5:00 am4 comments

Many of the trading models and market studies on this website used a fixed share or fixed contract position size. This means the same number of shares or contracts is traded for each position. For the futures market this often means trading one contract. This is done simply to exclude the effects of dynamic positioning and reinvesting profits so we can focus on the performance of the strategy rules. Position sizing is an integral part of both system trading and discretionary trading alike. It answers the question, how many shares or contracts should I buy? More specifically, how many shares or contracts should I buy that will not overly put my trading account at risk? Too often this question is […]

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Trade Recorder Function And Strategy

August 8, 2016 5:00 am0 comments

When developing, testing, or simply tracking an existing trading system it can be helpful to have each individual trade exported to an Excel file. Such data can be useful in analyzing the system performance. For example, the data can be used to calculate the trading system’s Expectancy and Expectancy Score. Or, the data could be used within a Monte Carlo simulation to give you a better idea of how the system may behave when different position sizing models are applied. In this article I’m going to demonstrate two EasyLanguage programs that can be used to export your trade history to an Excel file. The first program is a TradeStation function called Trade Recorder Function. This was originally released in the fall of […]

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Using System Parameter Randomization To Estimate Future Returns

August 1, 2016 5:00 am10 comments

You just spent a ton of time creating a trading system and being very careful not to over-optimize. You then tested it on the out-of-sample data segment and the performance looks good. What’s next? Jump right into the live market? Maybe. But instead, you would like to perform one more test called System Parameter Randomization. The article, System Parameter Permutation – a better alternative?, provided a unique way to estimate possible future returns of a trading system. This method is called System Parameter Randomization (SPR) but, there was no practical example within the article. I like practical examples and I know you probably do too. So, in this article I’m going to take an example trading model from System Trader Success, and follow the guidelines found in the SPR article and […]

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Case study: Can a simple Market Internals technique actually improve trading strategy results?

July 11, 2016 5:00 am4 comments

In my 10+ years’ full-time trading career, I have found very few tools and tactics that would get my attention so deeply as Market Internals. In 2014, I spent about six months in a row with this unique traders tool, exploring its possibilities every single day, searching for new and creative implementation ideas for my own automated trading systems (ATSs). With a real obsession for this concept, I finally found almost 40 new ideas (mostly my own proprietary ideas) on how to squeeze the most out of this great tool, and slowly started implementing many of them into my own trading – with great success. I truly believe that Market Internals can give a trader a small, unfair advantage – if […]

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System Parameter Permutation – a better alternative?

July 4, 2016 5:00 am4 comments

When I wrote my Wagner Award winning paper, “Know your System! – Turning Data Mining from Bias to Benefit,” I had two goals in mind: Introduce a new method to reasonably estimate the long-run expected performance of a trading system; and Provide a simple method for the average system trader to understand and employ the method. I’ve subsequently realized that the paper’s focus on goal #2 was actually a bit limiting. Therefore I decided to write this addendum to the original paper to explain some of the assumptions and limitations of SPP and also describe what I now consider to be a better alternative. First let’s rehash System Parameter Permutation (SPP). As mentioned in the original paper, SPP generates sampling […]

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Gap Size Strategy Tool

June 27, 2016 5:00 am3 comments

A couple of weeks ago I sent my subscribers an email to a free eBook called “Understanding Gaps” by Scott Andrews. I’m going to assume that you know what a gap trade is. If not, please take a look at this article. I’ve never had much success with trading gaps but the topic interests me. After reviewing the eBook I thought it would be a good idea to begin building a strategy tool to help analyze gaps. The tool will be written in EasyLanguage and I envision it being loaded into a chart where it will provide various statistical based results on gaps. Information such as… Probability of a gap closing based upon gap size, day of the month, and day of the week Probability […]

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System Parameter Permutation Beats Data Mining Bias

June 20, 2016 5:00 am11 comments

Recently, an interesting new perspective has emerged regarding trading system development. The National Association of Active Investment Managers (NAAIM) has just announced a $10,000 Wagner Award for Dave Walton of StatisTrade for his pioneering work in exploring a new method for trading system development, which he calls System Parameter Permutation (SPP). It’s a well-merited prize, since SPP neatly solves the age-old issue of data mining bias. This article will summarize the implications of System Parameter Permutation, and the entire 33-page paper can be downloaded here. SSP is exciting because it opens up an entirely new horizon in trading system development. It has the power to help boost quant traders to the next level, so it’s worth taking a careful look. Many […]

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Higher Time Frame Stops Strategy Tool

June 13, 2016 5:00 am7 comments

This article deals with a tool to help you test various stops when building trading systems in TradeStation’s EasyLanguage. This topic is really a part 2 of the article, “Advanced Stops and Targets Strategy Tool“. In the original article the created tool called _Stops&TargetsAdvanced is a simple strategy based on an existing TradeStation strategy called  _Stops&Targets. I took this program and modified it with several other exit techniques and made it available. The original _Stops&TargetsAdvanced strategy tool could be applied to any strategy you’re working on to aid in testing various stops. With this tool you can quickly test several popular stops without writing any code. The stops were all based upon the same time frame you were currently trading. In […]

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Opening Range Breakout Trading Strategy Design and Implementation

May 30, 2016 5:00 am4 comments

The goal of this research is to find various set-ups and exit strategies that could be used for trading the opening range breakouts. The time frames we will be looking at are 10-min, 15-min, and 30-min opening range breakouts. We will focus our attention on the very liquid futures markets, in particular we will analyze the S&P500 futures. We would like to encourage you as the reader to participate in the discussion and share your knowledge and/or ideas about opening range trading systems. Our research is focused on a popular trading principle called the opening range breakout. We define that range as the first n-bars of minutes of a trading day. Isn’t the electronic futures market trading almost 24 hours a […]

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The Myth of Scaling Out

May 9, 2016 5:00 am3 comments

— By Matt Haines from  Throwing Good Money After Bad A common tactic for some traders is to scale out of successful positions. The logic is this: I’ve already made some money, so I want to hold onto some of that. I’ll cash out a portion of my trade now, and see how the trade continues, but with reduced risk. You see this behavior with day traders, as well as long-term investors. But it’s a fallacy. And it’s costing you money. Let’s devise a thought experiment to isolate the scaling out portion of a successful trade. Imagine you have a trading system where you can invest $100 each time (no commissions or fees), and are guaranteed to double your money the first […]

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