Search found 85 matches

by Paul King
Fri Mar 30, 2012 8:54 am
Forum: Trader Psychology
Topic: Question to those of you who are full time system traders
Replies: 10
Views: 6747

I think you alluded to the answer to your own question when you included "(if system trading were my only source of income)" so a slightly more finessed addition to Chelonia's rather blunt (but accurate) answer would be: Don't trade.... if system trading is your only source of income. There are only...
by Paul King
Sat Feb 04, 2012 4:39 pm
Forum: Futures Markets
Topic: Basics of Trading Futures
Replies: 4
Views: 2363

It's important to think of trading as a complex rather than a trivial exercise. I know at the basic level all you can do is one of 4 things: 1 Put money into an account 2 Take money out of an account 3 Buy something 4 Sell something So it is actually quite simple as far as the rules of the game go. ...
by Paul King
Sun Jan 15, 2012 6:09 pm
Forum: Trend Indicators and Signals
Topic: consistency of entry method AND symbol
Replies: 10
Views: 6907

Something to ponder: In roulette, the betting strategy of playing "red" (or "black") every time and doubling bet size after a loss is a positive expectation "system". However, this "system" also requires infinite capital, and a casino with no table limits - these are unrealistic implementation requi...
by Paul King
Fri Jan 13, 2012 1:31 pm
Forum: Trend Indicators and Signals
Topic: consistency of entry method AND symbol
Replies: 10
Views: 6907

As far as I can tell, what that article is saying (in 43 pages no less, but hey, it is rather a large font) is that if your historical testing ignores significant real-world implementation constraints (margin rules in this case) then actual trading results may differ considerably from the simulated ...
by Paul King
Wed Feb 16, 2011 8:09 am
Forum: Trader Psychology
Topic: A strong argument FOR systematic trading.
Replies: 1
Views: 3766

Remember it's still possible to let all those cognitive biases totally mess up the way you build and test systematic trading programs too! How often have you heard/experienced:

"How come this super-duper system works beautifully in testing and then totally sucks in real-money trading?" ;-)
by Paul King
Wed Feb 16, 2011 8:01 am
Forum: Testing and Simulation
Topic: Trade Management for 2 trading schools (Continuation Vs Mean
Replies: 5
Views: 2293

Yes, higher implementation costs and under-estimation of volatility while you're in the trade are contributing factors to erratic performance, but the real grizzly bear is basing a trading system on a concept that is really an illusion.
by Paul King
Tue Feb 15, 2011 8:54 am
Forum: Testing and Simulation
Topic: Don't know what to do when account < $40 million
Replies: 4
Views: 2715

There is no simple solution to your problem since it's a fact that futures trading systems do not scale down well because it's impossible to trade fractional contracts. Variability of return due to start date is an effect of the scalability problem i.e. you need a certain size of capital at a certai...
by Paul King
Tue Feb 15, 2011 8:35 am
Forum: Testing and Simulation
Topic: Trade Management for 2 trading schools (Continuation Vs Mean
Replies: 5
Views: 2293

My advice would be to firstly rethink exactly what you mean by "mean reverting system". In my world trading programs fall into 2 categories: 1 Those that make money when price moves 2 Those that make money when price does not move Type 1 is most common and is about capturing trends in price. E.g. go...
by Paul King
Fri Jan 07, 2011 11:58 am
Forum: Testing and Simulation
Topic: Objective function
Replies: 4
Views: 3387

As sluggo implies when he says "and choose the one whose curve is lowest", IMHO it's more useful to approach this problem by using increasing leverage as a measure of how robust your system is, rather than trying to find a measure of goodness that's independent of leverage (or includes some measure ...
by Paul King
Thu Jan 06, 2011 12:13 pm
Forum: Testing and Simulation
Topic: Profit Target exits improve this system's performance
Replies: 63
Views: 33253

"Everything should be as simple as possible but not one bit simpler" as Einstein said. Also, just telling you "this is exactly how I use rate of profit as an exit strategy" will not really help you determine how to effectively do it for your particular system(s) - hopefully it's just sparked a coupl...
by Paul King
Thu Jan 06, 2011 12:02 pm
Forum: Testing and Simulation
Topic: Profit Target exits improve this system's performance
Replies: 63
Views: 33253

rate of movement=distance/time

rate of profit=?/?; you work it out ;-)
by Paul King
Thu Jan 06, 2011 11:54 am
Forum: Testing and Simulation
Topic: Choosing between two similar systems
Replies: 4
Views: 2259

OK, if the 2 systems tend to take similar entries then I suggest delaying the start date by, say, 25 days for one of the systems to avoid simply doubling up on positions. If that doesn't work then you really need to think about a sound "measure of goodness" that incorporates all of the important asp...
by Paul King
Thu Jan 06, 2011 11:35 am
Forum: Testing and Simulation
Topic: Choosing between two similar systems
Replies: 4
Views: 2259

Mark,

Is there any reason why you can't trade both of the systems simultaneously with some portion of the available capital allocated to each? I'd try a TBB Simulation Suite with a 50% allocation to A and B and see how the results compare to either system traded individually.

Hope this helps

Paul
by Paul King
Thu Jan 06, 2011 11:03 am
Forum: Testing and Simulation
Topic: Profit Target exits improve this system's performance
Replies: 63
Views: 33253

Whether technique "X" creates better risk-adjusted return than a system without "X" depends on what other techniques are being used in the system. For example, if you don't do anything with portfolio correlation then scaling-in can improve results in some circumstances if it happens to scale-in to t...
by Paul King
Fri Nov 12, 2010 1:37 pm
Forum: Market Psychology
Topic: Email that I received today
Replies: 10
Views: 9151

Ah, yes, maybe a different subject line may have been a good idea - I didn't even notice the "not traders" part half way through the message I received.

"Markets Flashing WARNING SIGNS! Be Careful if you're a buy-and-hope investor!"
by Paul King
Fri Nov 12, 2010 12:03 pm
Forum: Market Psychology
Topic: Email that I received today
Replies: 10
Views: 9151

So what if the sky IS falling?

I know 2 things about trend capturing: 1 Nobody knows what's going to happen next 2 No exit strategy can get you out at the exact end of a trend If you have positive-expectation trading rules that capture (rather than follow) trends then the situation today is no different than yesterday, 10 years a...
by Paul King
Fri Apr 09, 2010 4:02 pm
Forum: Testing and Simulation
Topic: New goodness function
Replies: 14
Views: 4844

KS

Here's one I use:

If

R = net P&L / Initial Risk

System Value = (Average(R)/STDEV(losing R)) * Trades Per Year

Then the King Score (KS), a.k.a. Kitchen Sink:

KS = System Value * ((MC Confidence Return/MC Confidence DD)*10)/(MC Confidence DD Length /12))

Paul
by Paul King
Sat Feb 13, 2010 8:53 am
Forum: Testing and Simulation
Topic: Usefulness of Monte Carlo
Replies: 3
Views: 2380

"straight line equity curve to the moon will have great MC stats," This depends on what your personal definition of "great" looks like. If I see a MC simulation with very narrow range of possible equity curves, virtually no drawdowns, and an actual equity curve that's "a straight line equity curve t...
by Paul King
Mon Nov 16, 2009 11:33 am
Forum: Trend Indicators and Signals
Topic: How Do You Push A Good Holding Out to Make Room for Better?
Replies: 5
Views: 5198

As levi mentioned, it depends on what you define as a "better" position. If you believe that price movement is not predictable then any current position is just as good as any other one (assuming it's taking the same amount of open risk) and kicking one out to replace it simply generates more commis...
by Paul King
Wed May 13, 2009 9:41 am
Forum: Trader Psychology
Topic: It's boring to trade a system; how do you use your time?
Replies: 13
Views: 12121

"Trading is quite boring" Actually only, efficient, accurate, well-designed implementation of a sound and complete trading system is quite boring; most trading can be exciting, exhilarating, scary, surprising, etc. if you "design" it to be ;-). My personal answer is to make trading only part of your...