Author Archive
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A custom Optimization Profile using R
Milk Trader, Milk Trader | January 15th, 2010 at 7:28 am
While the backtest gives us a historical perspective on the viability of a trade system, the optimization process illumines how stout, sturdy, strapping and hardy (yes, I know how to research synonyms for robust) our trade system is across a variation of parameter sets.
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Programming a custom Backtest Profile in R
Milk Trader, Milk Trader | January 7th, 2010 at 7:44 am One of the many issues with systems trading is trying to make sense of the vast amounts of data you accumulate with the backtest of a system. Historical backtesting is the first step in testing your trading idea. If it is a trading idea that ought to work across many different markets, then you need to test it on many different markets to see how it performs.
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Three Things I’ll Do in 2010 to Improve My Trading
Milk Trader, Milk Trader | December 21st, 2009 at 10:44 am Going over-budget on the Christmas shopping, eating too much food and participating in the the annual ritual of goal-setting for the next year. Ah, I love this time of year. But why fight it? Sometimes you need to acknowledge your membership in your current culture and simply participate in its collective practices. Today, I'm setting about three things I can do in 2010 to improve my trading. We're all going to do it soon, I'm just getting it out of the way before the onslaught of petty goal-setting lists and tips comes crushing down on our already over-sated body politic in January and renders the exercise banal. The three things I will do in 2010 to improve my trading is to 1) take 10 strokes off my golf game, 2) read four books and 3) learn to play the violin.
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The Breakfast Spread
Milk Trader, Milk Trader | December 17th, 2009 at 7:44 am Trader's oftentimes will look at different markets from the one they are trading to get a gauge on what may be looming ahead. The US Dollar is oftentimes cited as a leading indicator to the US Equities market. The price of Gold is sometimes looked at as a market consensus on inflation.
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I am Tiger Woods
Milk Trader, Milk Trader | December 7th, 2009 at 10:32 am Yes, I'm talking about the professional golfer. And no I'm not comparing my ability to drive 300 yards. What I have in common with Tiger is my weakness to certain indiscretions. In my case, though, the cocktail waitress is discretionary trading. I've committed myself to system trading, but over the past few months I've participated in trading based on hunches, opinions and intuition.
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Evaluating the Fitness of a Fitness Function
Milk Trader, Milk Trader | November 9th, 2009 at 8:25 am The walk-forward process of system development is the final test of a system before real capital gets allocated. It validates the system on out-sample data, or data that hasn't been peeked at during development.
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A Short List of Candidates
Milk Trader, Milk Trader | November 6th, 2009 at 8:21 am You can't trade everything. Well, at least you can't trade everything well. At some point, you should limit the universe of things you trade. And it's okay. You don't need to trade everything because quite frankly, nobody knows what you're talking about anyway at the weekend cocktail party, and they don't care.
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Long R, Short Excel
Milk Trader, Milk Trader | October 30th, 2009 at 8:27 am R is very speedy statistical package that's like an F-18A Hornet, versus Excel which is like a paper airplane. R is professional sports, Excel is Pop Warner. R is Mona Lisa, Excel is stick figures. R is ... okay, you get the idea. I'm long R, and short Excel.
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System Trading is Quicksand without the Quick
Milk Trader, Milk Trader | October 28th, 2009 at 11:35 am Perhaps the best way to describe the path to system trading is slogging. It's like one of those dreams where you're trying to run in the sand, and it keeps sinking.
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Are you related to Perfect Profit?
Milk Trader, Milk Trader | October 9th, 2009 at 8:23 am Okay, by now you've probably discovered you are not the perfect trader. You are but a fraction (if that) of the money-banking machine. He is no longer your friend, this creature known as Perfect Profit is your competition.
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How close are you to perfect?
Milk Trader, Milk Trader | October 8th, 2009 at 8:43 am Becoming the perfect trader is no easy task, and I daresay that nobody has been able to achieve this great feat. The perfect trader buys at the absolute low of the day and sells at the absolute high. And depending on whether the high happens first or the low happens first determines if he is long or short for the day. It's really easy to calculate this metric. It is simply the absolute value of the daily range or the high minus the low.
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Rusty Apple
Milk Trader, Milk Trader | October 3rd, 2009 at 11:08 am The main objective of system trading is to create a trade system that has predictive value and can make money for years to come. If a system historically doesn't make money, it's not worth pursuing. Or is it? In the curious world of trade system development, some have stumbled upon good trading systems by fading their original idea, which performed so abysmally that you couldn't lose that much money unless you started throwing it out the window as fast as you can.
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Goodbye Bumblebee, Hello Ladybug
Milk Trader, Milk Trader | September 25th, 2009 at 8:13 am I had grand schemes and lofty goals for the Bumblebee system. But barring an egregious mistake in my walk-forward of the system, I have to let the critter go. The White Bumblebee (first version) suffered massively in its synthetic real-world experience, like a patient etherised on the table only to suffer reality's cruel but necessary knife. I had other versions queued up and ready to improve upon the simplest version, but they did no better in their walk-forwards.
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Trade your Equity Curve
Milk Trader, Milk Trader | September 24th, 2009 at 11:38 am System traders understand that their approach to trading requires nerves-of-steel patience while in a drawdown, gut-wrenching discipline in taking every signal generated by the system (and I mean every signal - no ifs, ands, buts or maybes) and cat-like reflexes in executing signaled trades before doubt can creep into the kernel regressing, quadratic equation.
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Walking forward the Bumblebee – We have issues
Milk Trader, Milk Trader | September 23rd, 2009 at 8:11 am was hoping it would be a non-event to blog about how successful the Bumblebee trading system performed under the rigors of walking forward. But alas, the little critter has been tripped up a bit. The initial results I've gotten are abysmal.
