Post Tagged with: "Automated Trading Development"

Strategy Testing – Violating These Steps Will Damage Your Account

December 12, 2016 5:00 am0 comments

One of the most rewarding experiences for a TradeStation trader is to pick up a performance report that proves their great strategy idea is indeed a profitable strategy. Strategy testing done properly, as is outlined in this article, can verify the efficacy of your trading strategy and give you confidence to start trading it. But be forewarned, strategy testing done improperly can lead you toward financial destruction. Strategy testing done incorrectly can result in false hope in a losing strategy. A trader recently shared his experience of getting great results from strategy testing his idea, but after trading it live in the market, he was losing money every day. He was baffled about what he did wrong. Having gotten excellent results on […]

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Market Seasonality Study

November 28, 2016 5:00 am8 comments

November is almost over and it’s often stated that November is the start of a historically strong period for the U.S. markets. This is a well known seasonality period which runs from November to May. Look back, it sure seems true this time around. In this article I would like to take a closer look at the seasonality bias which so many investors and traders talk about.  Seasonality Bias First, I would like to test the popular trading idea of buying the S&P in November and selling in May. I will test this on the cash market going back to 1983. The number of shares to buy will be adjusted based upon a fixed amount of risk. In this case, $5,000 is risked per […]

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Simple Shorting Strategy

October 17, 2016 5:00 am9 comments

Over the years I’ve looked at several very simple long strategies that were published in the book, “Short Term Trading Strategies That Work” by Larry Connors and Cesar Alvarez. Those articles include the following long strategies: Double Seven Strategy RSI(2) Strategy VIX Stretch Strategy RSI And VIX Strategy Buried within Connors and Alvarez’s book you will find one simple shorting strategy which can be used on the major market indices. In this article I will review this strategy and also combine it with the Double Shorting strategy we explored last week. Simple Shorting Strategy The rules of this system are very simple. The instrument must be below its 200 day moving average. If the instrument closes up for four or more days in […]

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The Double Seven Strategy

October 10, 2016 5:00 am4 comments

It’s time to look at another simple trading system which can be found in the book, ”Short Term Trading Strategies That Work” by Larry Connors and Cesar Alvarez. In this article we are going to look at the Double 7 strategy. This is a simple strategy that can be applied to the major market indices such as DIA, DOW and QQQ. It can also be applied to the futures markets. The rules of this system are very simple. The instrument must be above its 200 day moving average. If the instrument closes at a 7-day low – buy. If a long position is open and the instrument closes at a 7-day high – sell. The trading system follows two basic concepts we have talked a lot about on this […]

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Step One In Building An Intraday Trading System

September 26, 2016 5:00 am7 comments

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 […]

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Two Dimensional Market Environment Filter

September 5, 2016 5:00 am13 comments

In this article I’m going to demonstrate a technique to help adapt your trading systems to the changing market conditions. In a previous article entitled, “Trend Testing Indicators“, I tested several indicators that could be used to divide the market into two modes: bullish and bearish. These two modes were then used to dictate how the trading system should execute its trades. For example, during a bull mode only open long trades. During a bear mode only open short trades. In essence, we made our system adapt to the given market conditions. However, we can take this concept further by looking at a different market characteristic: trend strength. A market may be in a bull regime, but how strong is […]

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Finding Out What Works, And What Doesn’t Work

August 22, 2016 5:00 am12 comments

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 […]

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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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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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