How to research and verify trading ideas

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fixed income = snooze
forex... hmm not sure. i used to trade the IMM futures a bit but I think just so busy with other things. all of our trades are tied into forex in one way or another so it would introduce correlations i'd have to really think about... would rather not deal with it.

pure personal choice is the bottom line.

Quote from DrEvil:

Thanks for the thread. Is there a reason why you don't trade forex or fixed income or just personal choice?
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Quote from TraderZones:


There have been many starting "I will teach you" threads, almost none of them were what they originally said. So you would be on rare ground, if true.
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LOL - sound familiar?
 
Quote from talontrading:

you know... no one is possibly more cynical than i am so i do understand what you're saying. if i was selling something or asking for students or something then you have a point. however in this case i would think the appropriate course of action would be for the forum to read with an open mind and evaluate the ideas... again that's why i chose this first system as a lead in because it's easy to evaluate.
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go for it...
 
Hi Talon,

Good thread, please ignore the aholes and keep with it. Also for the skeptics I can somewhat vouch for the idea - I have seen the research and know somebody who trades (or used to) trade it.

But I am particularly interested in knowing how you get confidence that it still works - it is pretty widely known and only has so much capacity so at some point I would expect it to go away. I know of one case on the Russell where it looked like the people trading the reconsitituion strategy overdid it and the stock went down when it was added. Is this why you won't chase the stock?

Edit- I just looked at your rules again and saw you trade in the opposite direction after a big runup, so I guess you are trading against the basic strategy when the stock price tells you it is overdone?
 
Quote from talontrading:

The basic idea is to disassemble the pieces of the system and test them separately.
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After this comment at least I'm quite sure you are the real deal :p Not that my word counts because I don't post much to this particular forum.

One thing I'm curious and never have understood myself is why people like to use monte carlo. I don't really understand what you can read from monte carlo results because market conditions are not random or non-connected. You can see the "worst" results but they are still based on non-real world data (or random data).
 
Hi Talon,

Thank you so much for this thread. I always wanted to learn how to verify trading idea and backtesting.

I never really know what software I should use or what kind of programming language I need to learn until now.

Both Tradestation and Metastock are quite expensive. I am just wondering if there is any cheap alternatives platform out there?

Thanks!

PA
 
Quote from mikkom:

After this comment at least I'm quite sure you are the real deal :p Not that my word counts because I don't post much to this particular forum.

One thing I'm curious and never have understood myself is why people like to use monte carlo. I don't really understand what you can read from monte carlo results because market conditions are not random or non-connected. You can see the "worst" results but they are still based on non-real world data (or random data).
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Despite having an outperformance edge, trading systems can still have an extraordinary amount of randomness in them, which is not going to be revealed until your trading system hits different market conditions than those under which it was created (which, ideally, were optimal for that style of trading).

To my understanding a monte carlo simulation is designed to cut down on the amount of screen time you would need through combining all of the variables and testing a systems performance under all conditions, not just the best case scenarios.

Good job, talontrading.

Successful trading is never about making money, and always about managing risk.
 
Good thread talontrading, I would also like to say ignore the jackasses. I have seen the same type of response when I try to provide help, and it pisses me the $%#@!!!!! off.

Quote from mikkom:

One thing I'm curious and never have understood myself is why people like to use monte carlo. I don't really understand what you can read from monte carlo results because market conditions are not random or non-connected. You can see the "worst" results but they are still based on non-real world data (or random data).
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Market conditions are random once accounting for the data that puts these market conditions in a certain bucket of random events. More specifically this is Bayesian probability in action:

http://en.wikipedia.org/wiki/Bayesian_probability

So from here Monte Carlo simulations can be used to analyze the risk of many of these random variables (conditional on something) acting together through time. For more detail, research it yourself and perform some basic examples in excel that are available online. You could start at either of these urls:

http://en.wikipedia.org/wiki/Monte_Carlo_method

http://excelmontecarlo.com/
 
On trading simulations using monte carlo usually refers to randomizing your trade sequence to see the possible risk/reward combinations because there is "not enough" data available, I'm not sure if this is what talon means but it's not about randomizing market data, more about randomizing your equity curve.

(I have my personal trading research platform but I haven't implemented monte carlo because I find it a bit useless - that's why I'm asking these questions)
 
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