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I am looking at this question right now - applying my futures method to stocks. I suspect that is does work for the higher beta stocks. Time will tell as always

Good point. I know entire arcades of old school tape readers that are long gone. What I do relies on people overpaying or underselling for assets through impatience and not doing their homework - that has remained a stable earner since markets began - and yes I was also surprised that since the...

I fully agree with that rajesheck. And the best thing is that hope springs eternal - new players just keep on coming into the market.

Interesting post - I have an issue with three of your points: 2) - You need multiiple systems to diversify returns and smooth out drawdowns 3) - Money management alone will mean that a bad system of collection of systems will lose money slower. 4) - risk reward ratios alone are meaningless...

Good morning. Holding period on average 2,4 hours, win rate 74.8 % Profit factor 2.17 ES EuroStoxx FTSE Russell Nasdaq - strategy is the intraday gap trade sir. Cash stocks soon to be added.

Hi IAS_LLC In your previous post I understood your "Isn't looking for the entries with a higher expected profit a form of optimization" to mean a modification of an existing entry looking for more profit. No you are absolutely right. Using statistics that produce a decent expectancy of profit...

It has been a long road that has culminated into some hard hitting truths. First of all the equity curve of five systems in the portfolio (at this time)- non compounded of course - in-sample 01/2004-12/2012 Live as of 01/2013. PF 2.17 WR 74.8 % Average 12 trades a month. This is from...

syswizard - I did just what you suggest - and discovered that my discretionary skills are near zero. Made it an easy choice.

Thanks for the question. In the case of the strategy I trade I have always used the same entry point and have never looked at changing that to make potentially more profit. That would simply impose curve fitting on what is already a robust system. Regards and good trading

Aha - great questions. Optimization? NEVER. Not for strategy formulation, or tuning a group of strategies into a portfolio. All it does is make the in-sample testing less relevant for the future. Curve fitting is a dangerous path and totally unecessary if you have enough "ok" systems in your...

I thought it made sense to open a thread where I can try to answer those burning questions about Automated Trading / Financial Math. Particularly suited to those discretionary traders who are wondering where their money goes to :-). Feel free to post questions. Good trading to all

What is the win rate and average profit/average loss ratio? Regards

:-) well not a bad place to start.... a few market swings and interest rate cycles included since then. Nice low vol stretch from 04 to 06. Do a runs test on your system data... helped alot in my planning. Regards

Hi there Xela - perhaps I need to clarify.... if you conduct a runs test for randomness on your trades you will find out if they are random or not. My returns are close to randomly distributed so I have to expect the same odds of winning each time I trade. Therefore I trade a fixed percentage of...

Excellent post - I am sure there are traders out there that can trade very profitably in a non-statistically driven environment. Personally I just cannot trade without knowing the odds.

One good method is to know the historical drawdowns of your system/portfolio and increase your size when you hit a certain drawdown percentage. In my case there have been 24 x 4 % drawdowns for my portfolio of systems since 2004 - and 86 % of those formed the deepest point in that drawdown. If I...

Well you need decent latency to do that consistently. My game is not latency dependent at all.I use a decent random number generator, with a string of executions that is in line with the general current tape picture. I do have one advantage here though... with my FiveAlgo system it trades at...

yes increasing your trade timeframe helps - but the same issue of NBBO liquidity has to be dealt with by breaking up your order in a smart way. Market makers still cannot reliably detect and react to orders that are within certain standard deviations of the recent time and sales (tape)...

A system meaning a set of rules applied to one asset class... low correlation around 0.5-0.7 - you are probably as well diversified as it gets globalarbtrader.

No single system works in all market conditions right? So whats surprising is how few automated traders build up a portfolio of non-correlated systems to smooth the equity curve and reduce drawdown length and depth. Profit contributions from these systems add up, while the drawdowns do not...