The Perils of Buying Trading Systems

About the Author Kevin Davey

Kevin Davey is a professional trader and a top performing systems developer. Kevin is the author of “Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading” (Wiley Trading, 2014.) . He generated triple digit annual returns 148 percent, 107 percent, and 112 percent in three consecutive World Cup of Futures Trading Championships® using algorithmic trading systems.His web site,, provides trading mentoring, trading signals, and free trading videos and articles. He writes extensively in industry publications such as Futures Magazine and Active Trader and was featured as a “Market Master” in the book The Universal Principles of Successful Trading by Brent Penfold (Wiley, 2010). Active in social media, Kevin has over 15,000 Twitter followers. An aerospace engineer and MBA by background, he has been an independent trader for over 20 years. Kevin continues to trade full time and develop algorithmic trading strategies.

  • wq says:

    Hi, Kevin,

    Can you elaborate what is incubation in yiu work process?


    • Thanks for the question. “Incubation,” in a nutshell, is waiting for 3-6 months after you develop the strategy, before you trade it with real money. This phase is useful because any unintentional development mistakes (forward peeking, for example) will usually show up with completely unseen data. Also, it dampens the excitement with any new strategy you create, which is good for your emotional state.

      I have found over the years that I would have saved a lot of money had I always incubated, instead of rushing to trade my latest and greatest strategy.

      • wq says:

        Thanks for the explanation.
        Yeah I also think it’s important to trade on a demo account before going live, or trade with very small position size (if the broker allows that) on live before using normal position size.

        • Actually, what I do is a bit different. In what I call “incubation,” I put the system away for 3-6 months, and only look at results once a month.

          After this period, then I may look at trading live with minimum size.

          Thanks again for the question!

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