In this post, I wanted to share a few of my graybox tools that I’m currently using in my active futures trading. My setup is still very much a work-in-progress. As a tape reader, I use my AlphaReveal software which gives me key insight into the market micro-structure: Beside AlphaReveal, I have Tradestation running. On […]
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Typically, I do not included trade costs in my initial exploratory work because I want to understand the general properties of a market which is best understood without imposing trade costs. Many times a strategy that shows promise but one that does not overcome trade costs can be improved to overcome those costs– but including […]
Continue readingSystem Trading , Trader's Mindset
In my recent exploratory analysis and back testing, I have started to employ the formal process of capturing the entire change history of my work. Programmers have long made use of the concept of “version control” or “revision control” which is the formal process of saving all the modifications of a program’s source code to […]
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Two problems that often result from system optimization are one (1) a reduction in the number of trades, a system that generates too few trades can both be more difficult to trade and a low number of trades does not inspire confidence, and two (2) there is a selectivity or specialization risk that, by sheer […]
Continue readingHere’s one quick tip for a backtesting mistake to avoid: on Tradestation, if you develop a strategy using a stop market and a stop loss that gets you out on the same bar: the platform won’t be able to verify whether your stop or target was hit first unless you enable “Look Inside The Bar […]
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Traders are always looking for what the secret sauce to achieving higher levels of performance. I’ve found that the secret sauce is creativity. But, it must be cultivated, nurtured in a systematic way, and backed by rigorous work.
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We will explore a simple concept in trading: scale up or scale out. Scaling up tends to be the preferred technique for the discretionary day trader. The idea is to get really good at trading one market and then increase size. Futures markets are ideal for scaling up. On the other hand, scale out tends […]
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Traditional systems are designed to trigger a buy or sell signal. Discrete buy and sell signals are very useful in that they give clear unambiguous direction. However, a simple buy or sell signal is authoritative and doesn’t convey any additional information that the discretionary trader can make use of. Traditional indicators can be difficult to […]
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The difficulty of building your graybox is that there’s no blue print. But, looking to identify both strengths and weaknesses in your trading may be a start: What do you do already do well? How can you improve what you already do well? Where do you struggle? What do you do poorly? Where are the mistakes? […]
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