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If you're trading forwards or futures, be sure to include the costs of continuously rolling over your positions: you pay the bid-ask spread AND the commissions, on each and every roll. I'll mention the fourth-best and the third-best ways to size positions in this context, and leave it to your...

I've read the book. I enjoyed it immensely. There are many ways to look at its contents; the one that I prefer is: This is a fully mechanical, zero-human-judgement mechanical system for trading stocks. Its performance can be tested by programming the rules (there are only 2 rules) in a...

There are, of course, ways of measuring the smoothness of the equity curve. If you're running thousands of computerized what-if scenarios and don't want to visually inspect each one of the equity curves, you can use one or more of these "how smooth is it" measurements to sieve out the most...

Perhaps you could do a Google search on some of the words and phrases in this image. The URL worked fine for me on 09 December 2005.

This package includes Monte Carlo. http://unicorn.us.com/trading/prosizer.html http://www.elitetrader.com/vb/showthread.php?threadid=37327&goto=nextnewest

A. % of profitable days B. % of profitable weeks C. % of profitable months D. Length of longest drawdown in months E. % of days making new all-time equity highs F. % of weeks whose return exceeded S&P 500's return that week G. Jack Schwager's RRR (returns retracement ratio, in Managed...

TAE = Total Account Equity = cash + Tbills + open trade equity Today's return = TAE(today) / TAE(yesterday) Step 0: decide on a nominal starting account value (NSAV) Step 1: enter the contest Step 2: trade for N days (until the contest ends) Step 3: calculate (N-1) daily returns Step...

There's no rush. Wait a while, see if the site grows. Meanwhile trade your method using your own money and build up your track record. If and when you decide to become a vendor on Collective, the site will be bigger and you'll have a more impressive track record. It's a win-win proposition.

A big thank-you to user freehouse for posting the article!

Or, if trading several instruments (a portfolio) simultaneously, drawing portfolio-wide returns from the return set (i.e. the equity curve) to produce synthetic account histories. You can then calculate the standard collection of trader's statistics on each of these histories, and build a...

Amazon dot com sells a book called "Monte Carlo methods in finance" and another one called "Monte Carlo simulation in finance." Maybe they might be of some benefit.

Suppose you had a team of five tremendously talented computer programmers working for you. What program(s) would you have them write, to analyze the recent price history of today's markets and compute a Trendiness Ranking for each one? Would you tell your team to use INDICATORS such as, for...

A mutual fund's manager charges a fee of 0.5% to 1.5% per year. On a million $Can that's 5K to 15K $Can per year. Not much of a salary. A private money manager such as the ones Charles Schwab refers million dollar clients to, charges a fee of 1.5% to 4% per year. On a million $Can that's...

How much out of sample testing is enough? However much you need, to feel confident. Fill in the blank: If I tested _____ months out of sample, then started trading my system, then experienced big losses, I wouldn't blame my test procedures.

Another candidate for the greatest feeling in the world: Closing out your positions for exogenous reasons unrelated to your trading system (example: getting flat before a two week vacation), then seeing a market meltdown happen that would have cost you huge losses. But you're out! You dodged a...

INDEX futures? Bought the Dec Nasdaq futures (fullsize) at market on the open. Bought the Dec DAX futures on Eurex too. Apart from indexes, Shorted the Feb 06 Crude Oil futures at MOO. Shorted the Dec Swiss Franc futures at MOO. Will hold all of these positions over the weekend.

Here is an example of something that NONE of the commercially available tools can do. Not one of them: Test the strategy of trading 3 different mechanical systems on the same portfolio of futures markets, AND correctly handle the commissions and slippage when one system is short and the...

I think the numbers of this system are quite good, and many people would be happy to trade it. For those who believe an equity curve is a waste of time, you'll be pleased to see that I've deleted it from the test report. Only the numerical statistics are shown.

I recommend you study the entire equity curve rather than summary statistics. If you are deciding between 3 systems, slurp their equity curve data into Excel and plot them all on the same graph. If you're down to one system and it's a go/no-go decision, get in touch with your intestines and...

If you're a professional money manager, the "best" thing to do is say you're a discretionary trader, even if you in fact religiously follow a 100% mechanical system. Why? Because asset allocators and fund-of-funds people, demand tons and tons and TONS of information from system traders, their...