Based upon my own experiences, I wrote up an article summarizing the methodology I’ve developed and adopted for trading systems development. In particular, I strive to balance out technical aspects of systems development with human factors such as psychology:
Find Your Niche by Developing Balanced and Individualized Trading Systems
While more technical aspects of system and strategy development are important, my experience has been the trader can be the “weakest link” if the right interest level or psychology isn’t in place. Even if a system is technically profitable, it will fail if a single human factor is out of balance or missing.
In other words, a system requires an overlap of interest, skill and psychology to succeed. Even something as technical as algorithm development and backtesting requires creative input from someone with an interest to study and understand the markets. Similarly, if the performance characteristics of a backtested strategy cause a trader to capitulate or system hop to another system, this is likely not a good strategy.
The following diagram summarizes this relationship between human factors and trading systems:
I should note that Matt Zimberg of Optimus Futures read the article above and reached out to me for an interview. We discussed the concepts describe, finding an edge and how to design systems which balance out the human factors. Matt rounded out the discussion with his own unique insights and extensive knowledge:
With respect to the overlap of human factors, trading methodology and systems development, I hope this information provides some food for thought to other traders. I'm also interested if anyone has any unique insights or knowledge they can share.
Find Your Niche by Developing Balanced and Individualized Trading Systems
While more technical aspects of system and strategy development are important, my experience has been the trader can be the “weakest link” if the right interest level or psychology isn’t in place. Even if a system is technically profitable, it will fail if a single human factor is out of balance or missing.
In other words, a system requires an overlap of interest, skill and psychology to succeed. Even something as technical as algorithm development and backtesting requires creative input from someone with an interest to study and understand the markets. Similarly, if the performance characteristics of a backtested strategy cause a trader to capitulate or system hop to another system, this is likely not a good strategy.
The following diagram summarizes this relationship between human factors and trading systems:
I should note that Matt Zimberg of Optimus Futures read the article above and reached out to me for an interview. We discussed the concepts describe, finding an edge and how to design systems which balance out the human factors. Matt rounded out the discussion with his own unique insights and extensive knowledge:
With respect to the overlap of human factors, trading methodology and systems development, I hope this information provides some food for thought to other traders. I'm also interested if anyone has any unique insights or knowledge they can share.
