Trading System Concepts and Design
Trading models are created so that the so called human factor can be minimized. Most of the time, production trading models are utilized by firms like hedge funds and larger institutions. Retail traders having access to backtesting tools like TradeStation and other trading platforms can build their own trading systems easily but rarely do they successfully deploy any models to trade their own money.
Over the years I have helped many hedge funds and pro traders developing, refining and maintaining trading models. The sharp contrast between professionals and the retail traders in understanding what trading systems are driving me insane sometimes.
Here is a partial list of articles I have written on building trading system over the years. I have organized the material below into several sections so that it would be easier to find them. Whenever I can locate the rest of the articles I have written will add them here.
alphabetical order | posting date
Bear Putting is the concept of taking advantage of an established down move to capture a part of the move from its remaining momentum to the down side. Similar to the Bull Putting concept, many traders simply ignore this part of the swing if they are not in a short position already. Some will even try to pick bottom against the prevailing down trend. This article will show you that the correct approach to situation like this is to join the side that is still in control.
Bear Putting Models
Following is 24 hour euro dollar chart with dollar gain per $10K lot in the lower panel. The models are in the market 5% to 6% of the time only.
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Bull Putting is the concept of taking advantage of a strong up swing to catch some profit from the remaining part of the move. The idea is sound but most people would not participate in this kind of trades. Many traders think that they can do better than just collecting scrapes. Well, what they fail to see is that these scrapes add up to a lot of money.
The Daytrading Models
Following is a euro dollar 24 hour chart with dollar gain per $10K lot in the lower panel. The models only stay in the market 7% of the time. It is mutually exclusive with the daytrading version of Simplex Trading System, meaning that their trades do not share the same trading days.
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Simplex was created along with several other models long time ago to provide daily guidelines to a group of forex traders who worked with me long time ago. These models are still working fine through the turbulent years since 2008. I think this set of trading models a good starting point for all traders to understand what mechanical bias is all about.
The Daytrade Model
Following is EURUSD 24 Hour chart with dollar gain per $10K lot (small lot size) in the bottom panel. The amount of money made is not that much on the first glance. But if you know that it only traded 93 times over 2500 trading days, with almost 70% winning rate, you would understand why it is a superior trading setup all by itself.
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Quid Piker is a mechanical forex trading system designed to trade British Pound. It is profitable consistently since it was created more than 10 years ago. It is not a complex strategy and can be followed quite easily. Quid Piker is a trading strateg ...
A simple forex trading signal that exploits the mean reversion behaviour of Euro and its Monday weaknesses. Do not underestimate a simple system like this. It is a very profitable system by itself and a strong mechanical filter for forex day traders ...
Another simple forex trading signal that exploits the weekly mean reversion property of Euro. The strength of this system is in its simplicity. For those who have read the classic Taylor Trading Technique (from George Douglass Taylor), this setup i ...
Just a short explanation to clarify these two terms - High Frequency Trading (HFT) and Algorithmic Trading (AT). Algorithmic Trading (AT) is a generic term referring to the use of rule driven computer models to execute trades on behalf of their huma ...
Everyone on the street talks about Quantitative Erasing and that it is messing up the markets, causing inflations, etc. Can we really identify the characteristic change in the S&P that distinctly separate its behaviour from its normal self, or, is th ...
Many beginners in trading system development like to play with position sizing scheme. It feels great when you get a great equity curve with spectacular performance by simply twisting what position sizing rules to use and experiment with various sizi ...
The trading models presented in this article is direct application of the gap classification framework from Master Emini S&P Gap Trading Techniques. I am talking about trading models because there are multiple ways to take advantage of the bias, ...
