Traders' Roundtable

Chris,

This is an excellent topic. My belief is that the appropriate way to look at drawdown is subjective. If the suit fits, wear it; if not, try on another one.

I look at Monte Carlo simulations, paying close attention to the distributions of possible paths. I also use heuristics to change the ...

Menelik,

ATR is a price based gauge of volatility. It is a measure of *historical* volatility. A $5 ATR for a $10 stock has exactly the same historical volatility as a $5 ATR for a $50 stock. One is not 5 times more volatile than the other, historically speaking. The $10 stock does not have a 10 ...

Darran,

I believe that we all bring biases into everything we do. In trading and testing, I bring a bias toward trading interest rates and (for those who get the joke) FX. This bias derives chiefly from a long career, recently chucked, on Wall Street in bonds (mortgage derivatives, actually). So, I ...

One of the things I've fooled around with, is simultaneously trading several extremely-similar systems at once. I wanted to see whether small diversification in entry date/price and exit date/price, would smooth out the equity curve.

Mark,

Thanks so much for this simulation idea. Recipes will ...

Monte Carlo simulations can help here, though this method brings its own baggage. Taleb's book "Fooled by Randomness" is good to get a sense of the method.

CSI has MC functionality in its Trading System Performance Evaluator (TSPE) that might be worth a look. You can read about it on their website ...

Doesn't CSI sell contiguous prices? Why would you bother with any other data than CSI ?

I use CSI. My concern is with the problem of biased time series (inflation, for example) that may overstate profitability of the trading sytems I test over past data. CSI linearly adjusts prices via its ...

Detrending methods can be used to remove an upward (or downward) bias in time series of prices, including continuous, back-adjusted series. This technique may remove any inflationary bias, for example, that might falsely imply that buying is better than selling.

Does anyone on this forum use ...

Red,

A very thorough analysis is not necessarily analysis paralysis, though the danger definitely, seductively lurks. In fact, thorough analysis is the foundation of a trading method that will, by virtue of its scope, make you comfortable with the resultant method, perhaps removing (but certainly ...

Thank you, gentlemen. Damian, the framework sounds interesting and worth a thorough perusal. I appreciate your taking the time to make the case for the book. Forum Mgmnt, I have read Jung (and Freud and May and many others) in grad school and can find no better justification than Damian's ...

Damian,

Do you recommend reading the books in sequence, or do you think one volume has more value than the other?

Also, can you talk a little about the process that the book recommends? I wish to learn more - I am deeply skeptical of self-improvement psych books.

Best,
Ken

A new topic?

Using two or more different trading systems, each with positive expectancy, should provide a trader with more opportunities to trade and, thus, realize on the positive expectancy of the systems.

Has anybody had any experiences they would like to share regarding the construction ...

These suggestions are from the perspective of the long term trend follower trading in leveraged financial instruments (e.g., futures).

The most helpful advice is to understand your personal risk preference/ avoidance profile. This requires experience and a strong capacity for truthful self ...

For data , after months of shopping, I've settled on Olsen.

http://www.olsendata.com/index.html?standard_datasets




The Olsen data are very expensive; however, they have done extensive scrubbing. Check out their book, I believe the title is "High Frequency Finance." They detail how they ...

Josh,

How does one avoid curve-fitting when determining one market's personality? Is post-dictive error a problem with systems made to fit a single commodity's (financial future's, currency's, etc.) personality? In constructing your TYPE of system (slow or fast, in grades; etc.), test your ideas ...

How does one handle commission costs in historical testing across backadjusted time series? Presumably, for long-term trend following systems, a long (short) position may carry over a number of different contract months/years. Commissions are charged on the rollover. Should one simply goose-up the ...