Graybox Trading , System Trading
A central question on my mind has been, how can I improve my discretionary trading with quantitative advantage while still retaining my discretionary advantage in reading the market? System trading can benefit from iterative improvement, can execute with greater consistency, benefits from execution speed, and is more efficient and can wait for the optimal setup, […]
Continue readingThere are many futures markets that one can trade. The question worth asking is which markets are offering the best opportunity and thus most worth focusing on? One measure that may be of use that is widely used in the options world is IV Rank and the associated IV Percentile. Sage Anderson, over at TastyTrade, […]
Continue readingIf you are restricting yourself to day trading futures, you are limited as a trader, and you might not be using the best tool for the job in all cases. At least until the Micro’s are introduced in May, most of the futures products are very large contracts which can make it difficult to hold […]
Continue readingI like the simplicity of the directional futures trade. However, the large notional values can be a problem for smaller accounts. Many system traders believe that it is easier to build consistently profitable swing trading systems over day trading systems. Yet, many futures accounts are not properly capitalized to swing trade futures. While the CME […]
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In Murray A. Ruggiero’s “Cybernetic Trading Strategies”, a book that I think was ahead of its time, Ruggiero shared the concept for “nearest neighbor matching” for statistical pattern recognition. The concept was shared in the context of looking for market patterns and market analogs. However, I wanted to share a slight variation on this concept. Instead […]
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Mean reversion systems, such as those based on RSI, suffer significant performance degradation when stop losses are applied for risk control. In previous posts, I shared how one could could create more powerful RSI systems by using adaptive periodicity and multi-state regime classifiers. The key idea for better RSI entries is that there may be […]
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Recently, I had a discussion with a trader who expressed a belief that it was not possible to test for an edge when using asymmetrical risk to reward. The idea he expressed was that the skew would make it impossible to know whether or not one had an edge. And, it is more generally the […]
Continue readingSystem Trading , Trader's Mindset
Early in my trading career, I had I think above average success developing profitable systems. But, I didn’t have enough capital to deploy them all. As such, my interest in developing new systems waned and growth stalled. This was combined, also, with a strong discretionary capability to call markets and a strong desire to use […]
Continue readingGraybox Trading , System Trading
Most system developers are aware of the Max Favorable Excursion and Max Adverse Excursion measures. These measures track the max profit and loss a trade experiences over its lifetime. However, a very useful metric that I’m unaware of being even tracked in most trading platforms is Max Favorable Consecutive Ticks (MFT) before Max Adverse Consecutive […]
Continue readingSystem Trading , Trader's Mindset
The topic is everything about stop losses. A stop loss is a kind of exit criteria. Typically, a stop loss is defined as a MAE price based stop. For systematic traders, the optimal stop can be determined during back testing. I have seen that stop losses near extremes tend to work better then “comfortably sized” […]
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