Developing a Trading System Step by Step

[swingman]

I think the most difficult part of designing a trading system is the exit strategy.

I was wondering if you could list a few nuggets of wisdom on volatility exits, true range exits, LeBeau exits, crossover exits, etc. and their respective strengths and weaknesses.

Finally, what exits have you found most robust and profit maximizing accross different markets and/or individual stocks.

Please post some code if possible.

BTW, is your Traderstudio software (multiple market trading) an alternative for Trading Recipes or Tradestation? Is it a substitute for Tradestation and other its competitors or an accessory for Tradestation?

 

[Murray Ruggiero]

I have been under the weather . I just check my E-Mail's a bit ago. I plan on starting this course back up and answering your questions in this thread as soon as I can. Just give me a day or so to catch up.

Sorry about this.

 

[Murray Ruggiero]

Quote from swingman:

What about currency markets? Are results any better with those? And, do you trade those at all as you do not include them in your recommendation?

I am going to answer the thread questions now. I am trying to catch up from being sick. I will get the course going again as soon as I can.

The results are better on the currency markets and other good trend following market but it is a relative term, still even for the best markets trend following are not much for than 50%-55% over a long term period, the problem is many markets have 25%-30% winners and that why the average is about 40%.

 

[Murray Ruggiero]

Quote from swingman:

I think the most difficult part of designing a trading system is the exit strategy.

I was wondering if you could list a few nuggets of wisdom on volatility exits, true range exits, LeBeau exits, crossover exits, etc. and their respective strengths and weaknesses.

Finally, what exits have you found most robust and profit maximizing across different markets and/or individual stocks.

Please post some code if possible.

BTW, is your Traderstudio software (multiple market trading) an alternative for Trading Recipes or Tradestation? Is it a substitute for Tradestation and other its competitors or an accessory for Tradestation?

I will cover exits in more detail later, a point I would like to make now is that how we judge the exit strategy is important. When we try to avoid equity curve give back, we exit trades too early and need a reentry methodology.

When I build trading systems my first step is to build the best stop and reverse system I can. I try to maximize profits as a stop and reversal system. Then I begin to design my exits.

 

[Xephen]

Quote from swingman:

BTW, is your Traderstudio software (multiple market trading) an alternative for Trading Recipes or Tradestation? Is it a substitute for Tradestation and other its competitors or an accessory for Tradestation?

swingman, I'll take a stab at this one. The answer is Yes. TradersStudio can be an alternative for TradeStation and for Trading Recipes and Rina's portfolio systems. Using a Visual Basic like language, which is a lot like the TradeStation programming language, as well as macros and trading plans, you can design trading systems and money management schemes and optimize/test their results across an entire portfolio of markets simultaneously.

You can use pretty much any data provider you want, unlike the current versions of TradeStation. I'm really a convert. And, no, Murray did not pay me to say all this. But maybe he will start!

 

[Xephen]

By the way, I agree about the exit strategy. I have a dozen systems that perform really great as stop-and-reverse. But I have always struggled with building really good exits. I have learned a few good tricks over the years. For a hint, see my first post to this thread. Some things you hear as common wisdom are not true once you start testing them on real data.

 

[swingman]

Quote from Murray Ruggiero:

I am going to answer the thread questions now. I am trying to catch up from being sick. I will get the course going again as soon as I can.

[....] the currency markets and other good trend following market but it is a relative term, still even for the best markets trend following are not much for than 50%-55% over a long term period [...]

I hope you feel better. I look forward to hearing about the stop and reversal exit technique, of which I had never heard previously.

BUT, I was wondering aside from trending markets selection improving success, do you find that decreasing the trading INTERVAL to very short-time frames (say 5-15 minute timeframes instead of hourly or daily) decreases risk and increases returns? Sometimes I notice this effect, and I've come to move away from the idea of longterm trend following to very short hyperfrequency systematic trading.

 

[Xephen]

Tell me more, swingman. I've personally never had any luck with very short term trading. All my success has come from the extreme long term view.

Xephen

 

[swingman]

Quote from Xephen:

Tell me more, swingman. I've personally never had any luck with very short term trading. All my success has come from the extreme long term view.

Xephen

Like you, that's what I thought and it certainly works. But, upon closer inspection, high frequency trading where you get in and out in minutes through automated trading is the new frontier. Just look at that MIT professor who set up that Renaissance Technologies and manages a fund with yearly 30% returns for many years! His name escapes me now, but you should be able to track him down.

Ruggeriero would have a lot more to say about that and this gentleman than I would. He's the expert. I'm sure in his tenure as Futures editor and author, he's come across all sorts of managers, probably this guy too and competitors who are looking to get into that space.

 

[swingman]

Quote from Xephen:

Tell me more, swingman. I've personally never had any luck with very short term trading. All my success has come from the extreme long term view.

Xephen

Xephen,
I'm curious how long you have been trading in general, how long have you been completely automated trading, and what markets do you trade? Do you trade for a living?