Developing a Systems (Strategies) for Trading ETF's and Stocks

Murray Ruggiero

Murray Ruggiero

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This is a thread for developing systems (strategies) for trading ETF's and Stocks. There are lot's of issues that are not addressed when developing these strategies and most systems developed have invalid back tests. We will discuss how to do this right in this thread. We will use TradersStudio and my TradersStudio Stock methodology in our examples.

If you want to work along, you can get a 30 day demo of TradersStudio Professional. It's a single thread version and 400% to 1000% slower than TradersStudio Turbo, but it's fully functional.

Click Here for TradersStudio Demo


The demo is free, you will need to register and go though the store but no create card is required.
 
Any but the only vendor who supplies the data correctly so TradersStudio can use it is CSI. It's so important we have a special deal with CSI which is 40% off there normal price on our site. I will explain this all to you over the next few days.
 
Believe it or not , almost all of the stock and ETF trading analysis and systems today is just junk science because they do not handle dividends and splits correctly. The standard stock analysis uses split/dividend adjust data. This creates a requirement to always be invested the same dollars value in each stock/ETF. This means you can't size based on risk and you also can not exit one or more positions using a protective stop. Even if you follow these rules, you get distorted results based on how often you rebalance your positions so that you have the same dollar value in each equity. Remember rebalancing is expensive to do too often because of slippage and commissions.

We solved all these issues in TradersStudio using CSI data and TradersStudio stock analysis. We use three different directories per portfolio. Split only adjusted, Dividend only adjusted and Totally unadjusted. CSI is the only vendor I have found who give us dividend only adjusted. The reason for this is it's then easy to pull out the dividend data for all the equities which most data vendors feel is too valuable to let end user customers have access to. But these three directory which I process this way is key to getting real backtested and future results on your ETF and stock strategies.
 
Let's talk about how to convert a classic long/short trading system to an ETF system. This will require create two separate systems. One for long and one for short. The long system is easy, we only need to convert sell signals to exitlongs.
The short system is more complex. We find a inverse correlated ETF and convert the sell signals to buy, and exitshort and buy to exitlong.

Having to split this into two different systems creates some issues. We can simplify them by using the same parameters for both systems so that the systems are mutually exclusive and they both can't be in the market at the same time.
 
No it only works on windows and can also work on Apple MAC as a virtual windows box.
 
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