Traders' Roundtable

If you think about it logically, the whole idea is nonsense. What the originator of that post wants to do, is trade today at yesterday's prices. Obviously we all wish we could do that, but there is simply no methodology, however clever, that will ever let you do that.

-bbc

That's a great article c.f.. Too many people seem to have an irrational fear of sytem optimization. I think a key question that your article brings up is, what is the value to be optimized in order to maximize future profit. Is it simply maximum historical profit? Is it the "smoothness" of...

This is actually not so and the book explains why. This is totally off the top of my memory so my response may not be "technically" correct. When testing with each parameter that you use you will optmize it and play with it to get the result that you feel comfortable with. With each optim...

The authors use a lot of interesting techniques most notably a t-test. The t-test gives you an estimate of how much of your results are due to curve fitting (assumes a normal distribution which is probably not true but due to the central limit theorem we can assume the error due to this to be too s...

Traders often talk about all the different ways that they use to avoid curve-fitting in system designs. Elements like multiple markets, long test periods, long/short symmetry, simplicity of rules and out-of-sample testing are usually mentioned. These are all very subjective criteria though, as what ...

Here's an idea for a slightly different use of Neural Networks: Instead of creating a black box neural network system, and using it as a trading system, you could instead use it as a discovery mechanism for a rule based system. First, train your Neural Network on the sample data. Then reverse engine...

Apologies in advance for my ignorance. What does serial correlation tell you? Is it a good or bad thing? How good is good and how bad is bad? Take all your trades and put them into a column in Excel. For my understanding, would this mean I would have two columns of just the trade prices? Thanks red...

How do you do that? Take all your trades and put them into a column in Excel. Then put the same trades in the adjacent column, but offset the second column by one row. The use the Excel correlation function (dont remember exact name) to compute the correlation between the two columns. If one exists...

The strangest thing is that the market goes through quite long periods when the system is wrong (30-100 days which can include both shorts and longs). Then periods when its right (30-60 days). So, because it gets a signal virtually every day a short term moving average like an T3 on the equity curv...

The EC is the most important "instrument" you will ever trade. It is the curve of the profit. By "trading the equity curve" I mean that when my profit is increasing, in the direction of the trend - e.g. Long signals are winning - then, when the direction of the market changes an...

* Computes the standard deviation of Nlengs different lengths of * price action: C-C[1], C-C[3], C-C[8], C-C[15], etc. * In a pure Random Walk, the N^2-length sample will have a StdDev * of N times the StdDev of the 1-length sample. If a particular * price example shows larger-than-expected StdDevs...

I am slowly coming to the same conclusion as well. I was particularly interested though when I read Toby Crabel's disclosure document where he says that he trades all of his markets using the exact same system with the same parameters. While his recent performance hasnt been stellar, he has been ver...

I'd like to follow up on a question that came up in another thread. Do different commodities exhibit different characteristics in the short run? In particular, I'd be interested to hear if anyone has been successful (in real trading) with short term systems that work well with one commodity (or grou...

So why not adjust your trend following system to the commodity being traded? This is a really good question, that has been frustrating me for quite some time. For example, if we look at I-Master, we see a system, that works only on index futures, and worse yet, it only works on post 1996 data. Neve...

Consider a long-term trend following system, there are three important psychological considerations that give me reason to believe that long-term trend-following systems are psychologically robust: This may well be true, but I think its important to consider the evolution of computerized trading. I...

Bernd wrote: 2) What about the uptick rule when trading over ECNs? Does it apply when trading through ECNs?

I am not an expert here, but I believe that you can get around the uptick rule by using bullets, which are essentially synthetic positions where the stock is offset by a married put.

-bbc

Lately I've been playing around with the following idea: At each trading point, I have my trading system automatically calculate the profitability of each market over the last N-years and then only take trades in markets with a high enough % of winners. I am not quite done with the research yet, but...

This may not be the perfect solution, but in my backtesting I dont take trades on days where the daily high is equal to the daily low, on the assumption that the day was locked-limit the entire day. Unfortunately, I dont have any good way of dealing with days where some trading took place before the...

The combinations are endless. Yup. Which is why there is always substantial opportunity to find an edge that is not over-exploited. Also, unlike trend following, patterns erode much quicker if they are actively exploited. Over on the EliteTrader message board (www.elitetrader.com) a member by the n...

I know that this is mostly a trend following forum, but I was wondering if anyone here is involved in short term pattern based trading (ie Crabel's ORB breakout) and would be interested in having a discussion regarding developing such patterns and statistical testing to ascertain their validity.

-bbc