Friday, September 24, 2010

Trading system Development

Hi All,
I am posting a message after a very long time.
Trading system optimisation is very difficult : in the sense that whether it should be done or not.
Everybody does some kind of optimisation in trading systems , isn't it an optimisation when we discard one system over other simply because it has performed well over others in the past.

It is neccessary that we start with the right kind of logic which suits our personality : whether we are comfortable doing trend trading or mean reversion trading.

Ideally if the logic of the system depends on the personality of the trader , it would be easier emotionally to trade it in real markets.
Here one should search for stable parameters and not curve fitted ones.

After developing the logic which can be as simple as crossover of two moving averages or crossing of high of past 20 days (turtle traders used it  as system 1)  one should think about when to enter.

Here , it would be prudent to know that only entering a buy trade if the high of buy signal bar is broken and entering a short trade only if a low of short signal bar is broken.
Then the exits should be planned which can come in observing the MAE and a trailing stoploss is advisable.
Welcome for comments from readers ..................

1 comment:

  1. I really appreciate your post and you explain each and every point very well.Thanks for sharing this information.And I’ll love to read your next post too.
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