Developing a Trading System Step by Step

[Xephen]

I'm giving away another trade secret here, although this isn't much of a secret. Actually just pointing out the obvious.

If you are optimizing as a 1 lot, then your optimization is likely not a good choice across a diversified portfolio. The reason is that the trades are completely skewed toward markets that have big $ moves per contract. So, really you are skewing your results toward currencies, bonds, etc. while you are practically ignoring some beautifully trending markets like corn and eurodollars. This leads to a chcken and egg debate because you need a system to apply money management to, but you need money management to develop a system.

On the bright side, I ran some tests on Murray's system (using the handy-dandy features of TradersStudio) and for this system the "best" answer might be a bit different but isn't going to make much difference. Very robust.

Xephen

 

[BENG]

My question would be... even though it's a robust system, but somehow, the performance doesn't get hurt after revealing to the public. Why is that?

Was it because the number of trades are so few per year?

Or there is simply no way to trade against the daily cycle?

 

[Murray Ruggiero]

The reason is simple , the results are decent and real. They are not blow the doors off so people get bored trading it.

I am putting stuff together and we will have two new installments for this course by the end of the weekend.

 

[Murray Ruggiero]

Let's now discuss beginning to improve this system. The first issue we need to address is false breakouts. Next trade equity giveback. Finally trying to maximize risk adjusted returns. Let's now overview these issues

The issue of filtering false breakout is a big area of research. We will address some classic filtering trend indicators as well as trade dependency issues. The trade dependency issues are like the last trade was a loser filter in the turtle system. We will research how to develop these types of filters on the entries.

Next the issue of trade equity giveback means we will need to address developing smarter exits and target profits. We will also address the issue of reasonably large winning trades becoming losing ones.

Finally we will addressed how the system performs on a risk adjusted basis and try to improve that performance.

I will be address these issues over the next few days and into next week.

Please ask question if you have them.

 

[Murray Ruggiero]

I plan to spend time working on this course this week. The first issue I will address in our next installment is filtering breakouts. I will discuss and test several methods and then we will decide which ones we will use with our system.

 

[sbs17]

Quote from Murray Ruggiero:


Finally we will addressed how the system performs on a risk adjusted basis and try to improve that performance.

What does this mean "how the system performs on a risk adjusted basis"? Thanks.

 

[Murray Ruggiero]

I have been working very hard on getting 2.0 ready so I have fell behind on my posts.

Let me answer the last question. What I mean by a risk adjusted basis is that the systems performance needs to be compare to it's risk. If one system made 60% a year with a 40% max drawdown and another one made 20% a year with a 8% max drawdown. On a risk adjusted basis the second system is better.

 

[Murray Ruggiero]

I just wanted to update people. We are still working hard on getting 2.0 ready to ship in April. I also expect to be releasing several different addins which will be available when 2.0 ships, including my CycleStudio addin. This is similar to MESA.

I have not forgot about finishing this course. I am sorry that I got sidetracked but I wanted to get the new version out as soon as possible because I have many customers who are waiting for it including Elite Trader members.

I will get to publishing the next installment as soon as I can.
In the next installment ,I will test various filters on the entry for my adaptive channel breakout system.

 

[jgadefelth]

How is it going i hope this thread continues because i find it very intresting.


Best Regards John

 

[Murray Ruggiero]

I have been working on finishing the upgrade to 2.0 TradersStudio. After that I will restart this thread and recap everything. I might pull all the important points into a new thread and finish the course up there, what do you think ?

We should have the new web site and the new product ready by the end of the month.

If you think the course is interesting ,have you registered on TradersStudio.com ? We have a registered members only chapter of the opening range breakout video for viewing, registration is free.

We also have one chapter which does not require registration and can be viewed by everyone.

http://www.tradersstudio.com/Default.aspx?tabid=129