Feb 09

WFA Failure Scenario

System Trading

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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Feb 09

Drop Out for OOS Sanity

System Trading

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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Feb 02

Misguided Idea Might Make It Difficult

Trader's Mindset

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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Jan 29

Finding The Optimal Period

System Trading

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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Jan 26

Multi-State Classifiers

System Trading

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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Jan 26

Why Graybox Trading

Graybox Trading

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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Sep 22

Why You Should Really Optimize and Even If You Don’t

System Trading

Why You Really Should Optimize And Even If You Don’t… Today’s topic is on optimization. Some system developers don’t believe in optimization. However, I’m going to show you why you should really learn how to optimize, and second I’m going to demonstrate that even if you don’t believe in optimization then “not optimizing” is not […]

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