|
PureBytes Links
Trading Reference Links
|
List-
I felt it thought provoking enough to share with
you all. Although I am smiling right now, as I know a
few of you, some I consider friends are saying to
yourselves. ...Mike just keep it to yourself!
So, with that said, here goes;
Thomas Stridsman's notes on System development,
performance, and expectations.
TOTAL NET PROFIT:
....is of very little value when it comes to
evaluating a trading strategy's estimated future
performance, no matter how rigorous the testing or how
robust
the system.
Average Trade:
....one of the most important things to consider
before starting to trade any system is the estimated
average profit per trade in the future.
The Profit Factor:
....to build a robust trading system that is likely to
continue to perform in the future, make sure that the
underlying logic is sound and Simple,
that the trading rules are as simple and as few as
possible, and that the gross profit and the gross loss
are evenly distributed through time
and in relation to each other.
Slippage and commission:
....First calculate the expected move you are likely
to catch, then transform that move into dollar terms
in today's market by multiplying by
today's market level and point value. The deduct the
proper amount for slippage and commmission. If the
dollar value still looks good enough,
you should take the trade.
on data:
....non-adjusted data is best for day traders or other
commodity futures traders with very short trading
horizons, who more often than not close
out all their trades at the end of the day.
on system building:
....In a correctly built system, your're interested in
exploiting something that should, on average, work
well in several different markets and over
several different time periods, Not with any specific
type of anomaly that might or might not still exist in
a particular market.
on systems:
....For a system to be profitable, however, it must be
traded in a market where the moves it is designed to
catch also are worth taking.
This has nothing to do with the system, but rather
with the level at which the market currently is
trading and the dollar value of that level.
On perspective of market:
....No matter what the long-term mode the market is
in, the short-term statistical characteristics are
likely to still look the same and be close to
stationary in nature. This is a very important
conclusion, because if this is true, the only way to
build a mechanical trading system that holds up
and behaves the same way in the future as it does
during testing-no matter what the longer-term
underlying trend looks like-is to focus on the shorter
time perspective, with trades lasting for no longer
than approx. a (insert time period) and using as
little historical data for the signals as possible
on systems:
....Because a system is working well on all markets,
it does not mean it will be tradable on all markets,
because not every system will produce big enough
dollar profits to over come the costs.
on system building:
....before we can put together the system, we also
need to understand what it is we are trying to
achieve, and consequently, how to go about doing it.
on bad systems:
....that the model is not working for these markets,
but simply that these markets, at this particular
point in time, are not trading at the appropriate
price levels and with a high enough point value to
generate a profit after slippage and commission.
Hence, a good working model is Not the same as a
profitable model.
on what it all boils down to: (MY Favorite set of
statements in the entire book as of yet)
....The really big winners are usually few and far
between;the rest are just a bunch of look-alikes there
to confuse you. By staying away from all of them,
you are freeing both your mind and capital to milk
that big winner several times over in A SEQUENCE OF
AVERAGE TRADES, while at the same time allowing
yourself to step in and out of other markets as well.
....Translated into trading terms, for a system to be
both as robust and as profitable as possible, you
should strive to make each trade as similar to all
other trades as possible, EVEN if it means that you
have to cut your profits short every now and then.
I wish everyone a Happy Thanksgiving, and to all those
on the List in Europe, I kinda wish I was there
instead! ;-)
-mike ball
|