A recent Google study (or read Quartz’s summary here) on AI agents showed that AI agents acted aggressively in environments where competition was encouraged but collaborated when the environment fostered collaboration. Trading is ultimately competitive. As individual traders, our primary limiting factor tends to be a lack of capital. There are two basic risks for sharing ideas. The […]
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Every system developer has a list of rules or indicators that they want to test out. The problem every developer faces is narrowing down that list of indicators and rules to the select few that are best worth focusing on. A quite similar and related problem that every developer faces is having some inputs or indicators that they […]
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Phil Ivey is one of the great poker players. As cited by Wikipedia, he’s regarded by many as the best all-around poker player in the world. But, some may not know that his story is one of perseverance. He blew out multiples of times as a teenager trying to make it as a pro. I think I […]
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There are many metrics that can be used to evaluate a system’s performance. Of course, the best fitness function is the one that produces the best OOS performance. The most important metric might or might not be the best fitness function. On considering the most important metric: we have many reasonable candidates: total return, return/max dd […]
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We will introduce a somewhat hypothetical, but nonetheless realistic, walk forward analysis (WFA or WFO) scenario that returns poor results, and then we will suggest alternative strategies that might reveal much better results. There are two common types of WFA; anchored which can use all the data and rolling. In this scenario, we are only considering […]
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The vexing problem facing every system developer is the need to validate their backtest. One rigorous way to do that is to use walk forward optimization. However, an argument can be made that the alternative approach of taking all of the data into consideration can also make sense, and, in fact, some highly experienced system developers […]
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A Misguided Idea That Might Make it Difficult to Develop Very Profitable Systems I want to share a popular and misguided idea that might make it difficult to develop very profitable systems. However, in order to understand why the idea is misguided; we first have to understand why and how it makes sense and the […]
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Today’s topic is on finding the optimal periodicity for the RSI indicator and the techniques should apply to other sorts of indicators as well. The good news is that it won’t require any rocket science. John Ehlers has written a lot about this topic, and his articles spurred my interest in the topic, which frankly […]
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One technique for optimizing systems is to create a regime filter. A most common example is a binary classifier that classifies the market into either bull or bear markets based on closing above or below the 200 day moving average. But, there are problems with binary classifiers and we will demonstrate why a multi-state classifier […]
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There are a few good reasons to build graybox systems and some not-to-so good reasons. One not-so-good reason might be if you really haven’t developed the skills required to develop profitable systems. But, if you can develop profitable systematic systems then why should you still be interested in graybox systems? First, if you have a strong market […]
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