3034 Sistema Mecánico De Comercio

Aprovechar el poder de los sistemas mecánicos de comercio

. Y sobrealimentar su comercio automatizándolo!

Mecánica de los sistemas de comercio son uno de los mayores avances en la historia del comercio. Enciéndalos, conéctelos a su corredor, y ellos cambiarán por usted. Sin embargo, el desarrollo de un buen sistema mecánico no siempre es tan fácil, especialmente si no eres consciente de los muchos escollos involucrados. Aunque Earik es mejor conocido por algunos de sus enfoques discrecionales, consiguió que su empresa comenzara a construir sistemas de trading automatizados mucho antes de que Wave59 existiera. Desde sus días de trading de bonos del Tesoro de los sistemas en el CBOT, a través de su trabajo la creación de un fondo privado para el comercio de la ES, que tiene más de veinte años de pruebas, ajustes y sistemas mecánicos innovadores para el comercio de los mercados financieros.

Este curso se trata de sistemas de negociación mecánica. Cómo evaluarlos, cómo construirlos y cómo comerciarlos. Pero en la moda típica de Wave59, vamos a hacer eso un poco diferente. A diferencia de todos los demás libros de sistemas existentes, aprenderá desmontando los sistemas de trabajo reales que Earik ha utilizado en los mercados en vivo a lo largo de los años. Estos no son dumbed-down, por ejemplo, sólo los sistemas, pero la vida real, los métodos comerciales reales que usted puede tomar hoy en día y aplicar en su propio comercio. Todo se revela completamente, incluyendo el código fuente de QScript, por lo que si sólo quiere saltarse el libro y comerciar con los sistemas, vaya por él. Puede encontrar los scripts en el apéndice.

Este es el libro más grande que hemos publicado y está repleto de ideas y técnicas del sistema, así como de sistemas totalmente operativos. A continuación se muestra un breve resumen de la tabla de contenido.

Capítulo 1 Introducción

Discute los pros y los contras del sistema de negociación en comparación con el comercio discrecional. Los sistemas tienen algunas ventajas distintas. Específicamente, evitan muchos problemas de estrés y psicología que afectan a los comerciantes discrecionales, pueden implementar técnicas demasiado complicadas para que los humanos las dominen, y pueden ser fácilmente apalancadas para convertir pequeñas cuentas en otras increíblemente masivas. Lo mejor de todo es que pueden hacer todo eso sin necesidad de interacción humana, lo que los hace ideales para las personas que tienen mejores cosas que hacer durante el día que mirar a los gráficos de precios.

Capítulo 2: El informe del sistema explicado

Los buenos y malos sistemas comerciales tienen maneras muy distintas de decirle si seguirán o no trabajando al avanzar en el futuro. Después de trabajar en este capítulo, comprenderá los conceptos básicos de cómo evaluar un sistema y obtendrá experiencia al utilizar estos métodos mientras desmontamos y discutimos los sistemas buenos (y malos) que trabajan a través del libro.

Capítulo 3: Guillermo dice enlaces

Este sistema se desarrolló en 1997 y se utilizó activamente no sólo en las cuentas personales de Earik, sino también en las cuentas de sus socios y clientes cuando trabajaba en la Junta de Comercio. En los años en que se comercializó activamente, este sistema aplastó el mercado de bonos con precisión aproximándose al 90%. Aunque ahora es un sistema antiguo, y los futuros de bonos han cambiado significativamente en los últimos 16 años, las ideas fundamentales detrás de este método siguen siendo válidas, y si la precisión es su taza de té, no encontrará nada que pueda contener un Vela a esto.

Para darle un gusto, aquí está el informe de sistema de apenas uno de los diecinueve patrones individuales que entran en este método:

Observe el número de precisión. Más del 91% de los oficios fueron ganadores, con la peor racha de pérdidas nunca fue un conjunto de dos derrotas consecutivas. Este informe del sistema se ha funcionado a partir de 1990 a 2013, y este patrón continúa a manivela lejos como ha sido por los 16 años pasados ​​que funcionan en datos vivos.

Todos los sistemas se pueden hacer para ser extremadamente precisos, y después de leer a través del capítulo de Guillermo Tell, usted sabrá exactamente cómo construir el 70%, el 80%, e incluso los sistemas exactos del 90%. Los métodos que resultan en este nivel de precisión son universales, por lo que si ya tienes un sistema que te gusta, las probabilidades son que se puede transformar en un sistema hiper-preciso, así, simplemente añadiendo algunos cambios a la forma de entrar y salir Sus oficios.

Capítulo 4: La Falacia de la Optimización

En este capítulo, veremos la migración de parámetros. Donde un conjunto de parámetros optimizado funciona un año, pero luego falla el siguiente. Este fenómeno de los mercados es la razón principal por la que muchos sistemas encontrados para la venta en los anuncios clasificados en la parte posterior de las revistas comerciales no obtener nunca un dólar de beneficios cuando se negocian en vivo. Si alguna vez has comprado uno de esos métodos, sabes lo que estoy hablando!

No sólo cubriremos los problemas que causan la migración de parámetros, sino que también discutiremos la solución. Para probar que nuestra solución funciona, ¡en realidad construiremos un sistema que haga simples cruces de media móvil rentables! Sí, se pueden hacer crossovers de media móvil para ganar dinero cuando se intercambian datos fuera de muestra, pero sólo si se puede resolver el problema de la migración de parámetros. La comprensión de este concepto de un núcleo le ahorrará de innumerables horas de trabajo de desarrollo no rentable, y le permitirá construir sistemas extremadamente robustos que no se desmoronan a medida que avanzan en datos no vistos.

Capítulo 5: Sistemas de reversión media

Los sistemas de reversión media son una clase de sistemas que, cuando se implementan adecuadamente, son extremadamente robustos y rentables. Una vez que entienda el concepto de núcleo, también son muy fáciles de diseñar. Echa un vistazo a este del libro, que se puede ejecutar con sólo dos líneas de programación:

Claro, es un poco salvaje, pero también hizo casi $ 750.000 de comercio de un contrato de la SP! Piense en esto como el borde crudo, que puede ser tomado y desarrollado más lejos. Eso se hace en capítulos posteriores, y si usted está buscando algunas ideas para basar sus propios sistemas, este es un gran lugar para comenzar. El sistema mostrado en la tabla anterior es en realidad más de 12 años de edad, y funciona tan bien hoy como el día en que se construyó por primera vez. Estas técnicas no pierden su eficacia con el tiempo, por lo que nos gustan.

Capítulo 6: Detener las pérdidas, objetivos y otras formas de perder dinero

Este capítulo rompe algunos mitos. Una de las cosas peores absolutas que puedes hacer a un sistema mecánico es agregar paradas y objetivos basados ​​en el dólar a él. Pero por cualquier razón, este error se hace cada día por los desarrolladores del sistema novato y los comerciantes. Hay mejores maneras de proteger su cuenta contra pérdidas, y mejores técnicas para usar en su propio comercio. Esto también es válido para los comerciantes discrecionales. Usted no puede darse cuenta, pero las mismas herramientas que está utilizando para protegerse contra las pérdidas de hecho, también puede ser la razón por la que su comercio no está generando ningún beneficio. Aprenda la verdad sobre paradas y objetivos, y comience a usar las técnicas que realmente le ayudan a generar ganancias en lugar de pérdidas.

Capítulo 7: Sistema Lunar

Muchos en la comunidad Wave59 pueden tener cierta familiaridad con el Sistema Lunar de Earik, presentado por primera vez en la Conferencia PowerUser de 2011. Este capítulo revisa la Astrofísica Esférica, una nueva forma de definir aspectos planetarios, y discute las funciones dentro de Wave59 que permiten que esta tecnología sea implementada en sistemas comerciales. A diferencia del astro típico, podemos contrastar la Astrofísica Esférica, y demostrar que realmente proporciona un límite de tiempo. ¿Qué tipo de borde? Echa un vistazo a la siguiente tabla:

Si alguna vez pensaste que la Luna y el Sol podrían tener algún impacto en los mercados, esa curva de equidad demuestra que tenías la razón. Este capítulo avanza construyendo un sistema de astro desde el principio, desde las ideas teóricas detrás de la Astrología Esférica, a través de la implementación y ajuste del enfoque en el Dow.

Para aquellos que ya están familiarizados con este sistema (o ya están intercambiando una versión de él), estarán interesados ​​en algunos de los trabajos realizados en Venus, que proporciona un punto de partida para desarrollar algo aún más potente que el sistema lunar central.

Capítulo 8: Aprendizaje automático

Este capítulo discute los algoritmos de aprendizaje de máquina disponibles en Wave59, tanto en la actual plataforma PRO2 como en la próxima plataforma PRO3. Además de una visión general de las tecnologías, también evaluaremos los sistemas reales construidos utilizando Hives y el nuevo conjunto de herramientas de Algoritmo Genético.

Después de que Earik lanzara la Teoría Unificada de Mercados hace un año, entró en un período de trabajo de desarrollo muy intenso que resultó en la creación de un asistente de investigación artificial. Dale a tu asistente varios sistemas e ideas de sistemas, y usando el poder de la inteligencia artificial y el aprendizaje automático, puedes hacer saltos extremadamente eficaces en la creación de sistemas mecánicos de trading. ¿Cuán efectivos son estos saltos? Echa un vistazo a la tabla de abajo, que detalla un sistema de comercio ES desarrollado con esta nueva tecnología:

Este acercamiento hizo casi $ 200k que negocia un contrato del ES desde 2000. Gana sobre el 60% de sus oficios y nunca ha tenido un año que pierde. ¿Qué se utiliza? UltraSmooth Momentum, uno de los principales indicadores técnicos de Wave59. Estoy seguro de que muchas personas están familiarizadas con este indicador, pero dudo que muchos hubieran podido utilizarlo con tanta habilidad como nuestro programa de aprendizaje automático. No hay necesidad de perfeccionar tratando de leer esta herramienta más, sólo deje que este sistema lo tome y ejecute.

Este capítulo presenta cuatro sistemas basados ​​en algoritmos de aprendizaje de máquina, dos desarrollados con Hive Technology y dos desarrollados con las nuevas herramientas disponibles en PRO3. Los cuatro de estos sistemas se pueden utilizar en las ediciones más actuales de Wave59.

Capítulo 9: Números aleatorios

Algunos enfoques de salida, como la mayoría de las paradas basadas en el dólar, tomarán un buen sistema y lo convertirán en un perdedor consistente. Otros pueden tomar un sistema mediocre y convertirlo en una estrella de rock. Este capítulo discute una de las técnicas más sorprendentes del curso, un enfoque de salida tan potente que realmente funciona cuando se utilizan señales de entrada completamente aleatorias.

Echa un vistazo a la curva de equidad abajo:

Este gráfico sale del libro y muestra lo que le habría pasado a una cuenta teórica si hubiera comprado y vendido cada barra en el ES e implementado este sistema de salida en cada uno de esos comercios. En otras palabras, este es el resultado de tomar cada único comercio posible disponible en el ES desde 2000 utilizando este enfoque de salida. Dado que estamos rastreando tanto la compra como la venta de cada barra, la tendencia y la sincronización se cancelan mutuamente, y todo lo que nos queda es el resultado de cómo gestionamos esas operaciones.

El resultado práctico de hacer esta prueba es que ahora tenemos un método de salida que realmente puede generar beneficios por sí solo, independientemente de la señal de entrada utilizada para entrar en el comercio. Debido a eso, usted puede hacer el comercio del dinero FLIPPING UNA MONEDA para sus entradas. Seriamente. Combine esto con una señal de entrada que realmente tiene un borde de tiempo, y usted tendrá un sistema que significativamente supera a casi todos los otros métodos que has visto.

Capítulo 10: Sistemas fusionados

Este capítulo discute una técnica para crear un enfoque adaptativo basado en el uso de muchos sistemas juntos. Al permitir que la fuerza de un sistema para contrarrestar la debilidad de otro, dos sistemas que trabajan juntos pueden generar más beneficios con menos riesgo que cada uno era capaz de lograr por sí mismo. Hecho correctamente, este enfoque hace que el resultado general sea extremadamente reducido y lo suficientemente robusto como para estar casi inmune a problemas de migración de parámetros, ajuste de curvas y una serie de otros problemas que afectan a sistemas menores.

Al reunir todo lo hecho en capítulos anteriores, podemos llegar a un sistema base que tiene una curva de equidad increíblemente suave como se muestra arriba. Este sistema genera $ 13k por contrato de ES por año, en promedio, con más del 60% de precisión, reducción muy baja y muy alta confiabilidad. Si no haces nada más que leer este capítulo e implementar este sistema, tendrás una manera impresionante de intercambiar el ES que te dará la posibilidad de generar algunas ganancias anuales sorprendentes que rivalizan con los mejores fondos de cobertura del mundo.

Capítulo 11: Dimensionamiento de la posición

Para completar un comercio, debemos saber tres cosas: cuándo entrar, cuándo salir, y cuánto comercio. La mayoría de los comerciantes minoristas concentran su energía en el menos importante de estos tres elementos, la entrada. Nuestra salida al azar demostró que podemos ganar dinero sin siquiera necesitar una señal de entrada, y este capítulo muestra cómo tomar un sistema rentable y aprovecharlo en una fortuna. Hay varios enfoques de dimensionamiento de posiciones que flotan alrededor de la industria, y en este capítulo Earik comparte el que él usa él mismo, que es una fórmula modificada que da como resultado un crecimiento de la cuenta extremadamente rápido, manteniendo las deducciones razonables.

Esta curva de equidad es del mismo sistema combinado que el mostrado anteriormente, con una excepción: hemos implementado el dimensionamiento de posición. Dar al primer sistema un contrato y 13 años, y generó casi $ 200 mil en ganancias. Darle al segundo sistema un contrato y 13 años, y sacó $ 200 millones. Mismas señales, misma cantidad de esfuerzo, mismo tamaño de cuenta inicial. Si usted es serio sobre el comercio, entonces usted debe implementar el tamaño de posición apropiadamente.

Capítulo 12: Opciones

Este capítulo sigue los pasos de la última, detallando una forma de utilizar las opciones en lugar de las compras de acciones directas con el fin de obtener el apalancamiento masivo en un sistema de comercio basado en acciones. El comercio de futuros se puede hacer con un gran apalancamiento, pero el tamaño de la cuenta inicial requerida para el comercio de futuros es a menudo bastante grande, especialmente para los nuevos operadores. Por otro lado, los contratos de opciones se pueden comprar por sólo un par de cientos de dólares, y proporcionar una manera de lograr un apalancamiento similar con sólo una fracción del tamaño de la cuenta requerida.

Desafortunadamente, hay muchas maneras de perder el comercio de dinero, e incluso más si usted está negociando opciones. Si tiene un buen sistema de valores y simplemente compra tantas opciones como sea posible para un porcentaje fijo de su cuenta, verá que su cuenta se desmoronará, a pesar de que su sistema sigue siendo teóricamente rentable. Este capítulo presenta una fórmula de dimensionamiento de posición para el comercio de opciones que será extremadamente útil cuando se negocian pequeñas cuentas, sobre la base de una técnica desarrollada aquí en Wave59. Simplemente ingrese el tamaño de su cuenta, varios números de precios de opciones y su señal comercial, y escupirá exactamente cuántas opciones contratará para comprar a qué precio de ejercicio para maximizar sus resultados.

El gráfico anterior muestra los resultados de la implementación de este enfoque en los últimos dos años. La línea azul es un sistema de comercio de acciones (que actualmente se comercializa en vivo en el SPY), y muestra el resultado de lo que habría sucedido con el margen máximo de comercio de una cuenta inicial de $ 20k. Usted puede ver que hacer esto ganó 150% en dos años, un gran resultado. La línea roja muestra lo que habría pasado si hubiéramos intercambiado este enfoque usando nuestra fórmula de opciones en su lugar. No sólo ganamos más del doble, lo hicimos con menos riesgo. Aprovechar la volatilidad es clave, y cuando se hace bien, las opciones ofrecen más influencia que cualquier otro vehículo de inversión en el planeta. Este capítulo detalla la fórmula, y los pasos a través de cómo implementarla en su propio comercio.

Apéndice: Los sistemas

Por último, pero no menos importante, tenemos el apéndice: casi 30 páginas de código fuente Wave59 QScript, que le permitirá implementar cada sistema discutido en el libro por su cuenta. No hay métodos secretos de caja negra aquí. La lógica de todo es completamente revelada, y preprogramada para usted. Sólo tiene que introducir los scripts en Wave59, aplicarlos a un gráfico, y tendrá una versión completa de trabajo de cualquier sistema que le interesa. Un script de auto-trading también se proporciona, que le permitirá establecer Wave59 hasta manos de comercio Sin necesidad de ninguna entrada humana aparte de asegurarse de que Internet está encendido y el corredor está conectado.

El propósito de este curso es triple. En primer lugar, queremos involucrar a la comunidad con los sistemas mecánicos y, después de leer este libro, comprenderá completamente los informes del sistema y podrá evaluar con rapidez y precisión los puntos positivos y negativos de cualquier sistema comercial. Huelga decir, si alguna vez has sido engañado por un sistema de caja negra para la venta en un anuncio clasificado, que no sucederá de nuevo.

En segundo lugar, queremos compartir algunos de nuestros sistemas de trabajo, y tendrás acceso a alrededor de una docena de sistemas completamente operativos, cada uno de los cuales fue diseñado para su uso en el comercio en vivo. Éstos no son sistemas simulados construidos solamente para el valor instruccional cualquiera - trabajan realmente. Si sólo quiere saltarse la teoría y empezar a operar, puede. Vaya a la página 312 y tiene el código fuente de un sistema que convirtió $ 25k a más de $ 1M en sólo 5 años. ¡Que te diviertas!

Por último, como con todos nuestros otros materiales, esperamos que al liberar estos sistemas a la comunidad, ellos encontrarán su camino de regreso con mejoras. Hay algunas personas realmente inteligentes que usan Wave59, y poner buenas herramientas en manos de gente inteligente nunca es una mala idea.

El manuscrito ha sido enviado a la impresora, y esperamos que los libros estén listos para ser enviados en el próximo mes. En ese momento, el precio de este manual será de $ 1995, pero si usted ordena ahora y está dispuesto a esperar para la entrega, puede obtener en el precio de pre-venta de $ 1795, un descuento del 10%. No es barato, pero no es una locura caro, especialmente teniendo en cuenta que podríamos haber vendido cualquiera de los sistemas individuales por más que el precio de todo el libro que queríamos. De hecho, hace 15 años, una versión del sistema de William Tell fue vendida por más de $ 4k por pop, y ninguna de esas personas nunca se quejó de tener que pagar demasiado. Eso es sólo un capítulo de trece!

Hay más de veinte años de conocimiento del sistema, consejos y trucos incluidos en el libro más grande que Wave59 ha ofrecido (casi 330 páginas!), Y estamos muy emocionados de poder lanzar esta información a la comunidad. No pierda esta oportunidad de obtener su propia copia de lo que está destinado a ser un clásico.

Haga clic aquí para comprar

Gobierno de los Estados Unidos Exención de Responsabilidad - Commodity Futures Trading Commission El comercio de futuros y opciones tiene grandes recompensas potenciales, pero también un gran riesgo potencial. Debe ser consciente de los riesgos y estar dispuesto a aceptarlos para invertir en los mercados de futuros y opciones. No negocie con dinero que no puede permitirse perder. Esto no es ni una solicitud ni una oferta para comprar / vender futuros, acciones u opciones sobre el mismo. No se hace ninguna representación de que cualquier cuenta tenga o sea probable obtener ganancias o pérdidas similares a las discutidas en este libro. El desempeño pasado de cualquier sistema o metodología comercial no es necesariamente indicativo de resultados futuros.

CFTC REGLA 4.41 - LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICOS O SIMULADOS TIENEN CIERTAS LIMITACIONES. DESCONOCIDO UN REGISTRO DE RENDIMIENTO REAL, LOS RESULTADOS SIMULADOS NO REPRESENTAN COMERCIO REAL. TAMBIÉN, DADO QUE LOS COMERCIOS NO HAN SIDO EJECUTADOS, LOS RESULTADOS PUEDEN TENERSE COMPARTIDOS POR EL IMPACTO, EN CASO DE, DE CIERTOS FACTORES DE MERCADO, COMO LA FALTA DE LIQUIDEZ. LOS PROGRAMAS DE COMERCIO SIMULADOS EN GENERAL ESTÁN SUJETOS AL FACTOR DE QUE SEAN DISEÑADOS CON EL BENEFICIO DE HINDSIGHT. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O ES POSIBLE PARA LOGRAR GANANCIAS O PÉRDIDAS SIMILARES A LOS MOSTRADOS.

_________________________________________________________________________ Copyright & copy; 2013 by Wave59 Technologies Int'l, Inc. Todos los derechos reservados. Este documento no puede ser copiado en parte o completo sin el permiso expreso y por escrito del editor.

Diseño y prueba de sistemas mecánicos de trading

Última actualización 1 de junio de 2012

CON EL ADVIENTO DE MICROCOMPUTERS A DECADE AGO, la ventana de oportunidad abierta para los comerciantes de futuros individuales para diseñar y probar los sistemas comerciales comerciales. Inicialmente, sólo aquellos comerciantes que también eran proficientes programadores podría hacerlo, ya que el software comercial temprano no era ni muy elegante ni fácil de usar. En un primer momento, dos enfoques básicos estaban disponibles para los comerciantes: "caja de herramientas" Y "caja negra".

Enfoques Tempranos Falta de Capacidad de Pruebas

El enfoque de la caja de herramientas se limitó a calcular los precios y calcular los indicadores técnicos individuales. El principal inconveniente era que los comerciantes todavía tenían que analizar subjetivamente toda la información para decidir qué acción tomar. Dado que este enfoque no generó señales comerciales reales, no puede considerarse un sistema comercial.

En comparación, el enfoque de la caja negra generó señales. Sin embargo, se basaron en indicadores secretos que tenían valores fijos y preestablecidos. No había forma de verificar si la lógica de un sistema se basaba incluso en principios de análisis técnico sólido. Por lo tanto, todos los comerciantes que utilizan un sistema de caja negra particular, independientemente de sus diferencias en la propensión al riesgo, el estilo comercial y los objetivos financieros, recibieron la señal idéntica al mismo tiempo y se esperaba que actuaran sobre ella en fe ciega.

Ninguno de los dos enfoques tenía un probador de historia. Los comerciantes no podían diseñar y probar sus propios modelos comerciales sobre datos de precios reales para encontrar el mejor modelo a utilizar para cada mercado.

Introducción al modelado histórico

ProfitTaker, que desarrollé, fue el primer sistema de comercio de futuros completo con reglas de comercio divulgadas. Permitió a los comerciantes diseñar y probar modelos de negociación personalizados usando contratos reales con rollovers en condiciones simuladas de comercio en tiempo real. Con su innovador concepto de modelado, ProfitTaker inauguró una nueva generación de software.

Pero el modelado histórico no se hizo práctico hasta la sustitución de la computadora de Apple (con su memoria limitada y capacidad de disco) por la IBM mucho más potente y de bajo costo compatibles como la computadora de elección entre los comerciantes. En poco tiempo, una plétora de sistemas comerciales siguió el ejemplo, adoptando el concepto de modelado de ProfitTaker. Luego, a medida que la tecnología de satélites se hizo más rentable y los precios diarios más volátiles, los comerciantes se volvieron cada vez más a la negociación diaria. Ahora, incluso los comerciantes con capital comercial limitado pueden analizar en tiempo real los precios de tick-by-tick en sus computadoras. Los servicios de cotización, que anteriormente sólo proporcionaban cotizaciones de precios e información sobre noticias, ahora ofrecen un análisis técnico y un software de modelado de sistemas integrados.

Se deben evitar los errores costosos

Los comerciantes de hoy en día desarrollan y prueban fácilmente modelos de negociación personalizados, que pueden volver a probarse y ajustarse a medida que cambian las condiciones del mercado. Todo lo que los comerciantes tienen que hacer es recoger los datos de precios para ser probado y especificar los valores de los indicadores a utilizar. Dependiendo del número de modelos implicados y de la velocidad de la computadora, este procedimiento puede necesitar ser realizado en un proceso de dos pasos: prueba gruesa seguida de la prueba fina. En primer lugar, el tamaño de incremento entre valores se establece relativamente grande para cada indicador. Una vez que se encuentra una estrecha gama de modelos rentables, se reduce el tamaño del incremento. Estos modelos se prueban a continuación dentro de este rango más limitado, hasta que el mejor modelo es aislado.

Este proceso, mediante el cual los comerciantes diseñan modelos comerciales, prueba su rentabilidad y busca el mejor modelo para usar, es ampliamente conocido como "optimización histórica". Con demasiada frecuencia, sin embargo, después de que los modelos basados ​​en datos históricos se aplican a los precios actuales en el comercio en tiempo real, los beneficios esperados no se realizan. Con tantos comerciantes que ahora utilizan computadoras para diseñar y probar sistemas comerciales, es importante examinar las complejidades del propio proceso de modelado e identificar los errores comúnmente cometidos que podrían resultar costosos para su rentabilidad.

La divulgación completa

En primer lugar, debe evitar el uso de sistemas comerciales que intencionalmente mantener algunas o todas sus reglas comerciales secreto. Estas restricciones injustificadas le impiden comprender la lógica detrás de las señales y socavar la disciplina y la confianza necesarias para implementar una estrategia comercial sólida.

La prueba es el medio hasta el final

Otro error se produce si usted se vuelve tan involucrado en busca de modelos rentables en los datos históricos que perder completamente de vista del bosque por el bien de los árboles. La prueba es sólo un medio para un fin, no un fin en sí mismo. Usted no debe tratar de encontrar el modelo de comercio más rentable sobre los precios históricos. De lo contrario, se corre el riesgo de seleccionar un modelo aislado que está rodeado en ambos lados por los malos. Llamo a este tipo de modelo una "isla de beneficio".

El objetivo de la modelización histórica es encontrar modelos que tienen una alta probabilidad de producir ganancias y permanecer estables en el período subsiguiente cuando usted está realmente el comercio en tiempo real. Para ello, debe buscar una amplia gama de modelos rentables con el mejor rendimiento situado cerca del centro. A ambos lados del mejor modelo son otros modelos rentables, con su rendimiento cayendo poco a poco a medida que son más de la mejor. Un modelo elegido de este grupo de beneficio es más probable que se mantenga estable, incluso con cambios posteriores en las características de los precios.

Mantenlo simple

Al hacer un aumento aritmético en el número de indicadores en un sistema o en el rango sobre el cual cada uno de los indicadores puede variar, el número de modelos a ensayar aumenta geométricamente. La tabla 24-1 ilustra el efecto que tiene el número de indicadores en el número de modelos a ensayar.

Efecto del número de indicadores sobre el número de modelos a probar Número de indicadores

Rango de valores de cada indicador como: 1 2 3 4 5 5 5 25 125 625 3,125 10 10 100 1.000 10.000 100.000 15 1 5 225 3.375 50.625 759.375 20 20 400 8.000 160.000 3.200.000 25 2 5 625 15.625 390.625 9.765.625

Se puede ver que un sistema con tres indicadores, cada uno de los cuales puede tener un rango de 25 valores, da como resultado un universo de más de 15.000 modelos. Cuando se agrega un cuarto indicador, el número de modelos aumenta a casi 400.000. La adición de un quinto indicador eleva el número de modelos a casi 10 millones. Aumentar el rango de valores sobre los cuales los indicadores varían también hace que el número de modelos aumente, pero menos drásticamente. Por ejemplo, un sistema con cinco indicadores, que pueden tener cada uno 20 valores, crea un total de más de tres millones de modelos. Mantener el número de indicadores constante en cinco, pero aumentando su rango de valores de 20 a 25, aumenta el número de modelos a casi 10 millones.

La cantidad de tiempo que se tarda en probar un sistema varía en proporción directa al número de modelos probados. Por lo tanto, sería poco práctico para un microordenador probar un sistema en un solo mercado utilizando más de cuatro o cinco indicadores. Se requeriría el método de pruebas gruesas y de pruebas finas, e incluso entonces los tamaños de incremento podrían ser tan grandes que solo un pequeño porcentaje de modelos posibles podría ser probado. Bajo estas circunstancias, existe una tendencia, después de elegir un modelo para usar en tiempo real, de sentirse obligado a cambiar a otros modelos o cambiar de indicadores cada vez que incurra en una serie de transacciones de espalda con espalda. Este síndrome, conocido como parálisis del análisis, puede llegar a ser inmovilizante.

Sin embargo, muchos comerciantes creen que cuanto más indicadores un modelo comprende, mejor será la rentabilidad del sistema. Esto puede ser cierto hasta cierto punto, pero luego los rendimientos decrecientes establecidos pulg Si utiliza un número limitado de indicadores en el proceso de modelado, se discernirá un patrón general de un mercado que existe objetivamente. Por el contrario, cuando emplea demasiados indicadores, simplemente superpone un patrón, que en realidad no existe, sobre los datos históricos. Esto es particularmente cierto en los indicadores que están altamente correlacionados entre sí. Entonces se arriesga a usar modelos aparentemente rentables en el comercio en tiempo real. Se ven bien en el papel, pero se ajustan tan estrechamente a los datos históricos que tienen poca o ninguna predictividad. Este grave obstáculo se conoce comúnmente como "ajuste de curvas". Estos modelos tienden a ser inestables, se desintegran rápidamente y, por lo tanto, le someterán a pérdidas innecesarias.

Algunos programas de software ahora dan a los operadores una considerable flexibilidad para escribir sus propias reglas comerciales. Mientras que esta flexibilidad mucho puede ser útil para ciertos comerciantes que tienen el tiempo y los recursos para participar en el diseño del sistema de comercio extensivo, la mayoría de los comerciantes encuentran esta gran flexibilidad para ser un obstáculo para su éxito como comerciantes. Dicho software alienta a los comerciantes a construir sistemas complejos con numerosos indicadores, en la búsqueda del "Santo Grial". De este modo, los comerciantes se arriesgan a la recolección "ajustada en curva" Modelos, o inmovilizarse por el síndrome de la parálisis del análisis. La mayoría de los sistemas disponibles ofrecen ya más que suficiente flexibilidad del usuario. A menos que tenga un considerable tiempo libre para gastar, o sea un analista técnico profesional de tiempo completo, realmente no es rentable recrear la rueda diseñando su propio sistema desde cero. Es mejor dejar eso a los desarrolladores profesionales del sistema de comercio.

Saber cuándo reoptimizar

Cada mercado debe reoptimized rutinariamente, sobre una base preventiva. Muchos programas de software pueden buscar modelos para encontrar aquellos que cumplen sus objetivos de rendimiento financiero, guardando esta información en un archivo de disco. A continuación, puede ver la información en su monitor. Con las computadoras rápidas, como las basadas en el microprocesador 80286 o 80386, las pruebas se pueden hacer sobre una base rotativa, un mercado cada noche, y varios en un fin de semana. De esta manera, incluso con una gran cartera diversificada, puede reoptimizar fácilmente cada mercado que comercialice al menos una vez al mes.

Para que este proceso sea virtualmente una operación llave en mano para mis clientes, les proveo un reporte mensual llamado ProfitTuner, el cual prueba dieciocho mercados activamente negociados en una computadora mainframe. En algunos, los modelos pueden cambiar de un mes a otro, mientras que en otros mercados los modelos son bastante estables. Dado que el objeto es encontrar modelos que no están ajustados en curva, ProfitTuner lista los 50 modelos con mejor desempeño para cada mercado, en lugar del modelo que produce el máximo beneficio.

Siempre que ocurre un evento fundamental que afecta a mercados específicos de una manera que no podría haber sido anticipada por el proceso de modelado, debe volver a probar. Por ejemplo, una reunión de fin de semana de los socios comerciales del G-7, con un anuncio inesperado de un rango de cambio revisado para el dólar estadounidense, debería levantar inmediatamente una bandera roja para que usted realice reevaluación en esos mercados.

Revise sus modelos para ajustar la curva

Realice pruebas de simulación ciega para ver si sus modelos están ajustados en curva. Para ello, probar sus modelos en un período de tiempo definido de los precios históricos, que yo llamo una ventana de prueba. El mejor modelo seleccionado se aplica entonces a una ventana de negociación compuesta por precios históricos completamente diferentes que no fueron incluidos en la prueba original. De esta manera, las condiciones de comercio en tiempo real se simulan, con el rendimiento del modelo evaluado por su estabilidad, predictividad y rentabilidad antes de arriesgar realmente el capital.

Las pruebas de simulación de ciegas deben ser realizadas como parte de las pruebas de rutina. Se pueden explorar diferentes tamaños de ventanillas de prueba y de comercio para cada mercado, ya que los tamaños de las ventanas afectan los resultados de la prueba y la elección de los modelos. Encontrar los tamaños de ventana óptimos para cada mercado podría mejorar sustancialmente el rendimiento en tiempo real.

Hacer suposiciones realistas

También debe establecer suposiciones realistas sobre los gastos generales, en particular la cantidad de deslizamiento. Si el modelo elegido no se obtiene en condiciones realistas, su rendimiento en tiempo real puede ser decepcionante y costoso. La Tabla 24-2 ilustra los efectos que varios costos generales tienen sobre el rendimiento de un modelo.

Como puede ver en este ejemplo, el Modelo A tiene un beneficio total de $ 10.000, 25 transacciones y un máximo de $ 2.000. El modelo B tiene un beneficio de $ 12,000, 45 operaciones, y también $ 2,000 de reducción. A primera vista, cuando se excluye la sobrecarga, el Modelo B parece superior al Modelo A. La relación riesgo / beneficio del beneficio a la reducción es mayor para el Modelo B.

Entonces, cuando se incluye una sobrecarga de $ 100 para el resbalón y las comisiones, ambos modelos producen una ganancia neta idéntica y una relación riesgo / beneficio. La inclusión de gastos generales de $ 100 es más perjudicial para el Modelo B debido a su mayor frecuencia de negociación. Este patrón se exacerba aún más a medida que se incrementan los gastos generales. A razón de $ 250 por turno redondo, la proporción de beneficios del modelo B es inferior a 1,00. A $ 300, tiene una pérdida neta de $ 1,500.

En efecto, el impacto de la sobrecarga se magnifica en los modelos que generan un número sustancial de operaciones. Models that look good when overhead costs are not taken into consideration may prove to be big losers when realistic costs are factored in. Overhead assumptions regarding slippage should reflect differences in each market's price volatility.

You also need to set realistic values for the limit move in each market. Otherwise, your modeling results will not be based on realistic execution prices. It is incorrect to record the execution of a trade as occurring at the time that the signal is generated when that market is lock-limit. Limit conditions must be accounted for and executions deferred until feasible. The big move in the silver market in 1979-1980 is a classic case where hypothetical track records of trading systems overstate profits due to unrealistic lock-limit assumptions.

A major improvement in this area could be made if data suppliers were to report each market's daily limit value and the 90-day T-bill rate on a daily basis along with prices, volume, and open interest. Then modeling software could be programmed to check precisely for normal and expanded daily limits during testing to avoid unrealistic price executions, and compare a system's daily rate of return to the risk-free return.

Comparison of Two Trading Models with Various Overhead Assumptions * Overhead per roundturn (OPR)

MODEL A Total Net Max Ratio Net $P/L Test Assumption Trades $P/L Cost $P/L Drawdown to Drawdown Excludes OPR 25 10,000 0 10,000 2,000 5.000 Includes $100 OPR 25 10,000 2,500 7,500 2,000 3.750 Includes $250 OPR 25 10,000 6,250 3,750 2,000 1.875 Includes $300 OPR 25 10,000 7,500 2,500 2,000 1.250

MODEL B Total Net Max Ratio Net $P/L Test Assumption Trades $P/L Cost $P/L Drawdown to Drawdown Excludes OPR 45 12,000 0 12,000 2,000 6.000 Includes $100 OPR 45 12,000 4,500 7,500 2,000 3.750 Includes $250 OPR 45 12,000 11,250 750 2,000 0.375 Includes $300 OPR 45 12,000 13,500 -1,500 2,000 -0.750

Test the Right Contracts

The type of contract tested also affects the results and model selected. You can choose between actual contract months with rollovers, single contracts, or artificially derived continuous contracts. My suggestion is to use actual contracts with rollovers because this minimizes unnecessary distortions. Results are less valid when you test single contracts over periods of low volume and open interest. Distortions also occur when you test continuous contracts that don't realistically handle the price spread between two contract months, at a time when the model has a position on in the expiring contract.

Test the Right Data

It is better to err on the side of more rather than less data. Statistical validity is increased when the testing window size is larger. It would be unwise to select a model based on just a few trades that occurred in the past couple of months. Such a model would not work very well under different market conditions that you might be faced with in the immediate future. Also, you should know about the model's distribution of profits. If you discover a highly profitable-looking model, but most of its profits were made over a year ago on one or two good trades and it has lost money since, that's not a worthy model. One quick way to look at the distribution of profits over the test period is to calculate for each model its ratio of profits in the last half of the test period to total profits over the entire test period. Any model with a ratio of less than 50 percent should be rejected, regardless of how well it does on other performance measures.

Of course, you should also verify the accuracy of your data. If it is not clean, your test results will be distorted. Automatic daily updating using a modem will eliminate typo errors that would otherwise be introduced when prices are updated manually from daily newspapers. The cliché garbage-in, garbage-out must be respected when doing historical testing.

Know Your Own Risk Propensity

Experiment with a trading system before actually trading it in real-time. You should be comfortable with it, both in terms of its operation and the indicators that it employs to generate buy/sell signals. Table 24-3 lists a number of performance measures that you can look at when comparing models to one another.

Check the ratio of cumulative net profit to maximum drawdown. Examine the drawdown. Drawdown should not be calculated as the dollar value of back-to-back losing trades. It's the maximum equity drop from a high point in equity to the subsequent low point in equity until the high point in equity is breached to the upside.

Table 24-3 Performance Measures to Use When Evaluating a Trading Model

Total number of closed out trades Percentage of winning trades Percentage of long winning trades Percentage of short winning trades Gross cumulative profit or loss Net cumulative profit (Gross profit less overhead) Maximum drawdown Ratio of net cumulative profit to drawdown Maximum winning trade Maximum losing trade Average winning trade Average losing trade Average profit or loss per trade Number of consecutive losing trades Unrealized profit or loss in open position Distribution of profits over time

This ratio gives you a good indication of your risk/reward payoff. Essentially, it tells you the number of dollars you can expect to win for every dollar you put at risk. You should know your own risk propensity. Some traders are willing to risk a dollar to make a dollar. Others need more payoff for each dollar put at risk. Ask yourself how many dollars you would need to make on a given trade to motivate you to risk a dollar by taking that trade. That's the minimum ratio of profit to drawdown that you should accept.

Make sure that the system's characteristics and performance are compatible with your temperament, style of trading, and the depth of your pockets. If you can't handle emotionally or financially the frequency of back-to-back losing trades or the short term drawdowns that a particular system incurs, what good is it if it's a big money maker in the long run?

Other Modeling Ideas to Explore

Instead of developing models based on recent price data, you might want to test data from previous time periods that closely resemble today's market conditions. For instance, if you want to find a model that works well during a current drought affecting the soybean market, you might go back and test prior data in which beans were bullish because of earlier drought conditions. The grain markets, in particular, lend themselves to this type of seasonal testing.

Another interesting approach is to incorporate economic or fundamental indicators into your trading strategy. For instance, you might use one or more fundamental indicators to identify a bias for each market as either bullish, bearish, or sideways. Then, for instance, you would only act on your technical system's buy signals if, at the same time, that market's fundamental "bias" is bullish. In effect, you are applying a fundamental filter to confirm the technical signal generated by your trading system. This approach can eliminate false signals and alert you to impending turning points in the markets. Recently, I developed a software program called Trader that lets the user do just this by correlating the effects of 50 economic indicators on the price direction in each market.

Conclusión

With system design and testing still more of an art than a science, you are not guaranteed a free lunch from the futures markets. Common sense and businesslike decision making are needed for sound money management and proper portfolio diversification. Costly mistakes in designing and testing trading systems must be avoided. The computer is only a tool. It can help improve your trading if you are already knowledgeable about market dynamics, technical analysis methods, and modeling pitfalls to avoid. But it can't turn a trader who has not done his homework into an instant winner.

Reproduced with permission Louis Mendelsohn

How To Win With Mechanical Trading Systems

Much ink has been devoted to pinpointing the causes of mechanical trading systems failures, especially after the fact. Aunque puede parecer oxímorónico (o, para algunos comerciantes, simplemente morónico), la principal razón por la que estos sistemas de comercio no es porque se basan demasiado en la naturaleza manos libres, fuego y olvidar el comercio mecánico. Los propios algoritmos carecen de la supervisión e intervención humanas objetivas necesarias para ayudar a los sistemas a evolucionar de acuerdo con las cambiantes condiciones del mercado.

Mechanical trading systems failure, or trader failure?

Instead of bemoaning a trading-system failure, it’s more constructive to consider the ways in which traders can have the best of both worlds: That is, traders can enjoy the benefits of algorithm-managed mechanical trading systems, such as rapid-fire automatic executions and emotion-free trading decisions, while still leveraging their innate human capacity for objective thinking about failure and success.

El elemento más importante de cualquier comerciante es la capacidad humana para evolucionar. Traders can change and adapt their trading systems in order to continue winning before losses become financially or emotionally devastating.

Choose the right type and amount of market data for testing

Successful traders use a system of repetitive rules to harvest gains from short-term inefficiencies in the market. Para los pequeños comerciantes independientes en el gran mundo de los mercados de valores y derivados, donde los spreads son delgados y la competencia feroz, las mejores oportunidades para obtener ganancias provienen de detectar las ineficiencias del mercado basándose en datos simples y fáciles de cuantificar, posible.

When a trader develops and operates mechanical trading systems based on historical data, he or she is hoping for future gains based on the idea that current marketplace inefficiencies will continue. If a trader chooses the wrong data set or uses the wrong parameters to qualify the data, precious opportunities may be lost. Al mismo tiempo, una vez que la ineficiencia detectada en los datos históricos ya no existe, entonces el sistema de comercio falla. The reasons why it vanished are unimportant to the mechanical trader. Sólo los resultados importan.

Elija los conjuntos de datos más pertinentes al elegir el conjunto de datos desde el cual crear y probar sistemas de negociación mecánicos. And, in order to test a sample large enough to confirm whether a trading rule works consistently under a wide range of market conditions, a trader must use the longest practical period of test data.

Por lo tanto, parece apropiado para construir sistemas mecánicos de comercio basado en tanto el conjunto de datos históricos más largo posible, así como el conjunto más simple de parámetros de diseño. Robustness is generally considered the ability to withstand many types of market conditions. Robustness should be inherent in any system tested across a long time range of historical data and simple rules. Las pruebas largas y las reglas básicas deben reflejar la gama más amplia de condiciones de mercado potencial en el futuro.

All mechanical trading systems will eventually fail because historical data obviously does not contain all future events. Any system built on historical data will eventually encounter ahistorical conditions. El discernimiento y la intervención humana evitan que las estrategias automatizadas salgan de los rieles. The folks at Knight Capital know something about live trading snafus .

Simplicity wins by its adaptability

Successful mechanical trading systems are like living, breathing organisms. The world’s geologic strata are filled with fossils of organisms which, although ideally suited for short-term success during their own historical periods, were too specialized for long-term survival and adaptation. Los sistemas de negociación mecánicos algorítmicos simples con guía humana son los mejores porque pueden experimentar la evolución rápida y fácil y la adaptación a las condiciones cambiantes en el ambiente (lea el mercado).

Reglas comerciales simples reducen el posible impacto del sesgo de minería de datos. Bias from data mining is problematic because it may overstate how well a historical rule will apply under future conditions, especially when mechanical trading systems are focused on short time frames. Simple and robust mechanical trading systems shouldn’t by affected by the time frames used for testing purposes. – The number of test points found within a given range of historical data should still be large enough to prove or disprove the validity of the trading rules being tested. Stated differently, simple, robust mechanical trading systems will outshine data-mining bias.

If a trader uses a system with simple design parameters, such as the QuantBar system. and tests it by using the longest appropriate historical time period, then the only other important tasks will be to stick to the discipline of trading the system and monitoring its results going forward. La observación permite la evolución.

On the other hand, traders who use mechanical trading systems built from a complex set of multiple parameters run the risk of “pre-evolving” their systems into early extinction.

Build a robust system that leverages the best of mechanical trading, without falling prey to its weaknesses

It’s important not to confuse the robustness of mechanical trading systems with their adaptability. Systems developed based on a multitude of parameters led to winning trades during historical periods – and even during current observed periods – are often described as ‘robust.’ That is no a guarantee that such systems can be successfully tweaked once they have been trade past their “honeymoon period.” That is an initial trading period during which conditions happen to coincide with a certain historical period upon which the system was based.

Simple mechanical trading systems are easily adapted to new conditions, even when the root causes of marketplace change remain unclear, and complex systems fall short. When market conditions change, as they continually do, the trading systems which are most likely to continue to win are those which are simple and most-easily adaptable to new conditions; a truly robust system is one which has longevity above all.

Los sistemas de negociación mecánicos algorítmicos simples con guía humana son los mejores porque pueden experimentar la evolución rápida y fácil y la adaptación a las condiciones cambiantes en el ambiente (lea el mercado).

Desafortunadamente, después de experimentar un período inicial de ganancias al usar sistemas de negociación mecánicos excesivamente complejos, muchos comerciantes caen en la trampa de intentar ajustar esos sistemas de vuelta al éxito. The market’s unknown, yet changing, conditions may have already doomed that entire species of mechanical trading systems to extinction. Again, simplicity and adaptability to changing conditions offer the best hope for survival of any trading system.

Use an objective measurement to distinguish between success and failure

A trader’s most-common downfall is a psychological attachment to his or her trading system. When trading-system failures occur, it’s usually because traders have adopted a subjective rather than objective viewpoint, especially with regard to stop-losses during particular trades.

La naturaleza humana conduce a menudo a un comerciante para desarrollar un accesorio emocional a un sistema particular, especialmente cuando el comerciante ha invertido una cantidad significativa de tiempo y de dinero en sistemas mecánicos de comercio con muchas piezas complejas que son difíciles de entender. However, it’s critically important for a trader to step outside the system in order to consider it objectively.

En algunos casos, el comerciante se vuelve delirante sobre el éxito esperado de un sistema, incluso hasta el punto de continuar el comercio de un sistema obviamente perdedor mucho más largo de lo que un análisis subjetivo habría permitido. Or, after a period of fat wins, a trader may become “married” to a formerly-winning system even while its beauty fades under the pressure of losses. Worse, a trader may fall into the trap of selectively choosing the testing periods or statistical parameters for an already-losing system, in order to maintain false hope for the system’s continuing value.

An objective yardstick, such as using standard deviation methods to assess the probability of current failure, is the only winning method for determining whether mechanical trading systems have truly failed. Through an objective eye, it’s easy for a trader to quickly spot failure or potential failure in mechanical trading systems, and a simple system may be quickly and easily adapted to create a freshly-winning system once again.

El fracaso de los sistemas de negociación mecánica es a menudo cuantificado sobre la base de una comparación de las pérdidas actuales cuando se miden contra las pérdidas históricas o las reducciones. Tal análisis puede llevar a una conclusión subjetiva e incorrecta. La reducción máxima se utiliza a menudo como la métrica de umbral por la cual un comerciante abandonará un sistema. Sin considerar la manera en que el sistema alcanzó ese nivel de reducción, o el tiempo necesario para alcanzar ese nivel, un comerciante no debe concluir que el sistema es un perdedor basado sólo en la reducción.

Standard deviation versus drawdown as a metric of failure

In fact, the best method to avoid discarding a winning system is to use an objective measurement standard to determine the current or recent distribution of returns from the system obtained while actually trading it. Compare that measurement against the historical distribution of returns calculated from back-testing, while assigning a fixed threshold value according to the certainty that the current “losing” distribution of mechanical trading systems is indeed beyond normal, to-be-expected losses, and should therefore be discarded as failed.

Así, por ejemplo, supongamos que un comerciante ignora el nivel de reducción actual que ha señalado un problema y activado su investigación. En su lugar, comparar la actual racha de pérdidas contra las pérdidas históricas que habría ocurrido durante el comercio de ese sistema durante los períodos de prueba históricos. Depending upon how conservative a trader is, he or she may discover that the current or recent loss is beyond, say, the 95% certainty level implied by two standard deviations from the “normal” historical loss level. Este sería ciertamente un fuerte signo estadístico de que el sistema está funcionando mal, y por lo tanto ha fracasado. In contrast, a different trader with greater appetite for risk may objectively decide that three standard deviations from the norm (i. e. 99.7%) is the appropriate certainty level for judging a trading system as “failed.”

The most important factor for any trading systems’ success, whether manual or mechanical, is always the human decision-making ability. El valor de los buenos sistemas mecánicos de comercio es que, al igual que todas las buenas máquinas, minimizan las debilidades humanas y potencian los logros mucho más allá de los alcanzables mediante métodos manuales. Yet, when properly built, they still allow firm control according to the trader’s judgment and allow him or her to steer clear of obstacles and potential failures.

A pesar de que un comerciante puede utilizar las matemáticas en forma de un cálculo estadístico de la distribución estándar para evaluar si una pérdida es normal y aceptable de acuerdo con los registros históricos, él o ella sigue confiando en el juicio humano en lugar de tomar puramente mecánica, Basado únicamente en algoritmos.

Los comerciantes pueden disfrutar lo mejor de ambos mundos. The power of algorithms and mechanical trading minimizes the effects of human emotion and tardiness on order placement and execution, especially with regard to maintaining stop-loss discipline. Todavía utiliza la evaluación objetiva de la desviación estándar con el fin de mantener el control humano sobre el sistema de comercio.

Be prepared for change, and be prepared to change the trading system

Along with the objectivity to detect when mechanical trading systems change from winners into losers, a trader must also have the discipline and foresight to evolve and change the systems so they can continue to win during new market conditions. In any environment filled with change, the simpler the system, the quicker and easier its evolution will be. Si una estrategia compleja falla, puede ser más fácil reemplazarla que modificarla, mientras que algunos de los sistemas más sencillos e intuitivos, como el sistema QuantBar. are relatively easy to modify on-the-fly in order to adapt to future market conditions.

En resumen, se puede decir que los sistemas de negociación mecánica debidamente construidos deben ser sencillos y adaptables y probados de acuerdo con el tipo y cantidad de datos adecuados para que sean lo suficientemente robustos como para producir ganancias bajo una amplia variedad de condiciones de mercado. And, a winning system must be judged by the appropriate metric of success. Instead of merely relying on algorithmic trading rules or maximum drawdown levels, any decision about whether a system has failed should be made according to the trader’s human judgment, and based on an assessment of the number of standard deviations of the system’s current performance when measured against its historic-test losses. Si los sistemas mecánicos de comercio están fallando para realizar, el comerciante debe hacer los cambios necesarios en lugar de aferrarse a un sistema de perder.

Comentarios

Just because a system worked 20 years ago doesn’t mean it should work today. Be careful when you suggest testing a system over a long period. How long is long?

Likewise, how simple is simple? Four rules with a total of four variables? Seven rules with a total of ten variables? I will generally agree that simpler is better but what is simple?

Using the standard deviation of returns should provide similar conclusions to running a Monte Carlo analysis which is not difficult with software that is available. Con un análisis MC, como usted sabe, se pueden ver las posibles devoluciones y posibles rebajas. The future doesn’t have to resemble the past but a MC analysis is one way to test a system.

Easy to give guidelines hard to develop a system with an edge……….and hardest to trade.. if possible share some variable 2 make a trading system. for simplicity sake make it simple

Buy Rules Exit Rules (Stops or Profit Exit)

Short Rules Short Exits (Stops or Profit Exit)

Stay out (if required as per system) position size (considering max. drawdown)

Thats it… can add any piece of advice u want…

Thanks for the post, I agree with many things that you mentioned. And besides, gives me a couple of ideas to try.

¡Hola a todos! Shaun, i agree. focusing on not losing is a very important success of success.

Tarun, an EA that i have built that is very successful uses a simple pivot point swing trading strategy. Un indicador personalizado de mi propio me da un sesgo de premercado (hacia arriba o hacia abajo) y mi gatillo para la entrada es el precio de mercado dentro de un rango de 2 pip del pivote diario principal. La estrategia de la salida es simple también, el precio o parará hacia fuera o cerrará la mitad de la posición en Support1 o Resistance1. El Stoploss se mueve entonces al punto de equilibrio. El precio se detendrá entonces o alcanzará S2 o R2 en cuyo punto la mitad de la posición restante se cierra de nuevo, el stoploss se mueve a S1 o R1. El precio se detendrá entonces o se moverá a S3 o R3 en qué punto la posición restante está cerrada. & # 8211; That simple strategy is worth 1million dollars over a 15 year period. free, my pleasure. La mayoría de la gente no hará nada con esta información de todos modos lol.

El Dilema: estrategia simple, EA altamente complicado. ¿por qué? because every strategy has limits and knowing what causes it to fail is the first step to “focusing on not losing”. Aka, poner meausures en lugar de anaylize el mercado y hacer su EA apagado o adaptarse cuando el mercado está actuando en malas formas para su estrategia. También, R / R, la protección del balance y el uso de una escala LOT hace que el EA bastante complejo, pero vale la pena el esfuerzo. Combinar una estrategia simple con un sistema de gestión detallada dentro de un EA complejo vale 50 millones de euros en 15 años. No esperes que este tipo de sistema se reúnen durante la noche, pasé 2 años construyendo la mía, pero ha sido un viaje muy emocionante. If you’re passionate about trading and EA’s just dont give up. Mantenerse enfocado y seguir aprendiendo.

En efecto. Podrías publicar la mayoría de las estrategias en el periódico. Casi nadie haría nada con él.

I love the emphasis on “not losing” rather than winning. You’re speaking my language!

I would add 3 points to consider when evaluating the performance of programmed trading systems. En primer lugar cuando la prueba posterior de un sistema en MetaTrader es importante recordar que MT4 no proporciona una corriente verdadera de la señal. Esto simplemente simula los datos de las garrapatas usando barras de datos almacenadas en el Centro de Historia. Esto significa que el historial de precios muy reciente puede ser construido a partir de barras de 1 ó 5 minutos y la historia más lejana puede construirse a partir de barras de 15 o 30 minutos. Las pruebas en curso durante períodos de varios años pueden obligar a MT4 a simular los datos de las garrapatas usando barras de períodos de tiempo aún mayores. Esta es la razón por la que verá muchas pruebas de rendimiento que se ejecutaron en MetaTrader durante varios períodos de un año que tienen una curva característica. There is a steeply profitable curve in the early years and a flat to losing curve in the recent time period. If the system was run on the true tick data most likely it would perform poorly throughout the testing period because the early years were simulated on 15M or 30M bars and were less volatile than the actual price action of the period.

Secondly, most of the people who design trading systems tend to over optimize their system to maximize the profit obtained during the time period which was used to test the system. As an example let’s say the system designer tested his system over a 5 year period. La inclinación natural es ajustar las variables para maximizar el beneficio. The thought process goes something like this: If the system produces a 50% profit and a 2.5 profit factor over this test period then I should get at least an acceptable performance in real time use. Creo que este es el beso de la muerte en la programación de EA y la razón de tantos asesores comerciales expertos fallan. El cliente compra en el rendimiento rentable durante el período de prueba de nuevo y luego inevitablemente pierde cuando se trata de ejecutar el EA con dinero real. La prueba posterior adecuada intenta encontrar el rendimiento promedio real de la EA en función de varios períodos de prueba.

Por último, existe el problema que se abordó en el artículo de saber si los resultados que está experimentando son estáticamente válido. Of course as Mr. Flower states if a losing streak is outside 2 standard deviations then chances are something has changed. I would like to point out that the distribution of winning and losing trades is always random and determined by the overall percentage of winners or losers in a sample of trades assuming that it is large enough to be statically valid. To give an example let’s say your system requires a 50% win rate to be profitable. Well, we already know from flipping a coin that has the same 50% win rate that the winners and losers will tend to clump together in winning streaks and losing streaks. Further more we know from the study of statistics that the distribution of winners and losers in the EA with a 50% win rate will be the same as the distribution obtained from tossing a coin. Namely, there will be in a group of 1000 trades on average 8 losing streaks of 5 losers in a row and 8 winning streaks of 5 winners in a row. Similaridad en un grupo de 1000 operaciones también deberías ver en promedio 4 rachas perdedoras y ganadoras de 6 en fila, 2 rachas perdedoras y ganadoras de 7 en fila y 1 racha ganadora y perdedora de 8 y 1 rachas ganadoras y perdedoras de 9 en una fila.

Es importante que el usuario tenga una idea realista del tamaño y el número de vetas perdidas que encontrará con EA. Otherwise he will surely give up and quite the first time he encounters an expected losing series of trades.

That’s one of the many reasons that I don’t test anything in MetaTrader. I only use it for live trading. The weak data and inability to test portfolios makes it unusable for my purposes.

You’re right about over-optimizing. La manera más fácil de evitar esto es minimizar el número de parámetros en su estrategia. Sólo tengo 4 en mi estrategia de Dominari, por ejemplo.

Thanks for the detailed thoughts!

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Mechanical Trading

A mechanical trading system is often touted as the end-all to Forex trading. Traders choose a system to follow and enter it into a program that will then pick starting and stopping points for trades as well as maintain a position, without requiring a trader be present to control those actions.

Implementing a mechanical trading system can be the best decision a Forex trader can make. However, it can also be hard for those traders who work off of emotion. The idea of putting future profits into the hands of a computer program can be a scary situation, however, with free platforms available now, it is a limited-loss system: a computer program won’t ride a trend just to see it plummet in the end, and a program can’t get cold feet and sell too early.

As an automated system, a mechanical trading system is a good all-around program to keep in the background. Whether a trader wants to implement a break-out system, reversal, indicator or trend-following system, there are plenty of options available.

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The Mechanical Trading System Finance Essay

Publicado: 23 de marzo de 2015

This chapter is organized as follows. First the basic principle of trading is explained. Then the review of Mechanical Trading System including advantage and disadvantage is discussed. The backtesting technique and issues is discussed next. The data mining which is used in analyze technical analysis is reviewed. Finally, the technologies relate to this project in example java web technology and web application architecture is explained.

2.1 Ingredients of Trading

According to Tharp, V. K. (1997) the most important areas of trading that successful trader should consider are Trading System, Money Management, and Trading Phycology, where the psychology takes the largest proportion of around 60%, money management 30%, and system development 10% [1].

Figure 1: Ingredients of Trading

Even though the proportion of system development role in successful trade is the least (only 10%) it usually takes a lot of though and times to create one. Traders might not develop all of his system but they can take other system and make an adjustment to their need. It take consideration of how traders and investors enter and exit the market, how long they will stay, objective of trade, self-inventory skill (strength and weakness) [1]. For example it might be a good decision for traders who have only one hour per day to develop a long-term system which require him only to read the data at the end of the day.

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Money management has been used widely used in the gambling for long time. The idea is that gambler must manage his bet and stake each time. In order to enable them to generate returns and stay in the game which has certain risk as long as they possible. The concept has been developed and applied to the investment. In financial money management of investment with risk control focus on managing the appropriate ratio of investment and recording and tracking investment for analyzing and making decision making future investment [13]. Position sizing is the other term to define money management which simply means 'how much' on trade [1].

In Matthew McKay (2005) define psychology as 'systematic study of human and animal behavior. The subject includes diverse areas of study and application, among them the roles of instinct, heredity, environment, and culture; the processes of sensation, perception, learning and memory; the bases of motivation and emotion; and the functioning of thought, intelligence and language' [14].

Even with good system and money management the profitability of traders cannot be successful without trading psychology which includes discipline, and human emotion. When trading your hard earned money can be either loss or gain which is effect directly to emotional and decision. Once the control over emotional is collapse, a bad decision usually arise.

2.2 Mechanical Trading System

The procedure where traders use to decide an investment such as when, how, and what to trade by taking an account of plans or conditions that they specify, no matter the external circumstances are, without the use of emotion and personal judgments is called 'Mechanical Trading System' (MTS) [4] or 'Automated Trading'.

2.2.1 Technical Analysis

Technical Analysis (TA), the study of stock behavior by using graphs to predict future price trends based on trading volume and behavior of the stock as a source of important information is called technical analysis [11].

The key elements that cause TA are as follows.

1. The behavior of stock can absorb all the events, such as the expectation of future economic trends, politics. These factors will influence demand and supply which make the price of the shares change.

2. "History repeat itself" a pattern or behavior of the stock in the past can be used in the present and the future. Psychology In terms of greed or fear is not changed regarding the time and can be used to indicate the price and trading volume which is used to predict the movement of the stock price. He was not ever change the format in the past, so it remains in the forecast the movement of the stock.

3. The price movement of the stock will move according to trend until the trend changes.

TA is usually used in MTS to create a treading system.

A good trading system can give an appropriate signal of when to buy or sell which gives adequate profit and cut loss. Traders who stand on their system will have guarantee that they can exit the trade fast when it gone wrong and they will not miss opportunity when the market is rising or boom which will give maximum profit. This gives the traders rule in trade.

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Because MTS gives trader a principle to trade, the method can be test with the historical data which can give various statistic results such as risk reward ratio, expectation, and average profit per year [28]. This will help with calculation of trade result that when deduct the trade commission and fees the system will still make enough profit to trade or not. It also helps analyzing trade system which situation the system will work best. The important point is to know the weakness of the system and can adjusted it to make a successful trade system.

Since the system gives the signal when to trade without have to predict the future outcome which will reduce stress from trade. This is suitable for traders who fluster up because of stock price is increase or frighten when the price is falling because of afraid of they will suffer a loss. This reduces pressure from having to observe stock price or trend all the time because traders only have to wait for signal before trade.

MTS also gives us the principle of selection. The stock that meets the set of rules will be considered to buy and sell. It reduces the time to find stocks to invest, because if the stock price chart does not meet the qualifications, no need to pay attention to other details of the share. Some specific programs such as MetaStock, AmiBroker can execute to program to check all the shares in the market then select only the stock that qualify the requirement [29].

Since a trading system can judge stock by only judging some criteria, it can be used to increases the diversification of trading especially across model of trade, markets and time periods. Diversification can increase the possibility to be in the trade position that benefit from market's big move because nobody will know that when and where the move will occur [5].

MTS is composed of a set of rules which is set up beforehand. This is resulted in a lack of flexibility to react to external market movement such as news, change in political policy, etc. More importantly most MTS is created based on TA that relies on historical data which usually has many pitfalls such as data integrity, system integrity, and quality and quantity of historical data [4].

The use of TA to simulate trading system on historical data and analyses its accuracy level of performance is called backtesting. Backtesting is the objective methods of testing that is repeated, which trading performance can be tested and may be proved by statistical evidence. This allows an experiment which objective methods are tested to search for effective one [11]. Backtesting does not guarantee future performance but it be used as metric to compare performance of trading strategy before participate in real market.

2.3.1 Backtesting Process

Sean D. Campbell (2005) reviews the backtesting and backtesting procedure and gives the framework for VaR1 backtests model to determine the precision of VaR by observe the position where the loss of portfolio exceed loss calculation from VaR as follow.

Xt, t+1, portfolio position over time t and t+1

VaRt, Value at Risk of. at time t

The algorithm for backtesting trading system uses the same principle which can be outline as follow [15]. First, pick the time frame from historical data. Second, pick the security(s) from the market. Third, inject the price of stock into the model start the time at t equal 0. Fourth, the agent will then compare time t = 1 with the previous time t = 0 if the price is meet the position condition the order will be placed. Finally, repeat the step two to four until the end of data. The model is expressed as follow.

Figure 2: Backtesting Algorithm (from Raghavendra et al. 2008)

2.3.2 Backtesting Result and Measurement

There are many outputs that can be generated by backtesting technique but Jeffrey Owen Katz (2000) indicates that gross profit, net profit, number of winning trades, number of losing trades, maximum drawdown are information that basic simulator should have. 'Maximum run-up, average favorable and adverse excursion, inferential statistics, and more' are information that should be provided by moderate simulator. The advance simulator ought to have 'annualized risk-to-reward ratio (ARRR) or the Sharp Ratio [2], an important and well-known measure used to compare the performances of different portfolios, systems, or funds' [9].

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2.3.3 Backtesting Issues

1. Survivorship Bias

The survivorship bias refers to the change in rank of company in the indexes such as S&P 500 or Russell 3000. The trading strategy backtesting that perform on these indexes, at the time which ranking is changed, tend to get better result as the underperforming stock will be replaced by outperforming stock price company. This make the result of the testing wrong as the traders will never see the effect of underperforming stock on trading system. In reality the trader will trade the underperforming stock but in backtesting the trader test the outperforming stock which is totally different [16].

The data provider in this study is Yahoo! Finance which has survivor ship bias so the users have to bear in mind that the result might be error or it will be better than it should be.

2. Data Snooping Bias

If you build a trading strategy that has 100 parameters, it is very likely that you can optimize those parameters in such a way that the historical performance will look fantastic. It is also very likely that the future performance of this strategy will look nothing like its historical performance and will turn out to be very poor. By having so many parameters, you are probably? tting the model to historical accidents in the past that will not repeat themselves in the future. Actually, this so-called data-snooping bias is very hard to avoid even if you have just one or two parameters (such as entry and exit thresholds), and I will leave the discussion on how to minimize its impact to Chapter 3. But, in general, the more rules the strategy has, and the more parameters the model has, the more likely it is going to suffer data-snooping bias. Simple models are often the ones that will stand the test of time. (See the sidebar on my views on arti? cial intelligence and stock picking.) [16]

In a more subtle form, pre-test bias is manifested in the form of 'data-snooping' bias as suggested by Lo and MacKinlay [19]. If an investor forms a stock portfolio based on some? rm-speci? c characteristic that is empirically motivated (either due to some casual observation of the data or observed experience from a foreign market), then to the extent that there is even a very small spurious correlation between stock returns and this characteristic, the resulting portfolio could have signi? cantly higher returns in the back-testing period. Therefore, the investor could wrongly believe that a trading strategy based on this? rm-speci? c characteristic is pro? table.

3. Regime change

Finally, 'regime shifts' in the? nancial markets can mean that? nancial data from an earlier period simply cannot be? tted to the same model that is applicable today. Major regime shifts can occur because of changes in securities market regulation (such as decimalization of stock prices or the elimination of the short-sale rule or other macroeconomic events (such as the subprime mortgage meltdown). [16]

4. Split and Dividend Adjusted

If the stock has been split into x parts such as 2 for 1, 3 for 1, and 3 for 2 are the most common combination but any number is possible. The price of stock will also decrease according to the number of sections, but the number of shares also as well. This policy is called 'Stock Split'. The operation where the company pays the dividend by a share of stock which will give the same effect as 'Stock Split' (total stock increase and price per share decrease) is called 'Stock Dividend' [16]. For example the following table is the stock split of IBM.

Table 1: IBM Stock Split (IBM Investor Relations, May 2008)

If the data is using without an adjustment the price of the new stock and old stock will be different and it will make not only the backtesting but other analysis method error. The data from Yahoo! Finance that is being use in this study is already split and dividend adjusted.

5. Impact of transaction costs

When trading system is backtest, it is assumed that buying and selling price is exactly the same as the market price but in reality there are hidden fee that investors have to pay in order to complete the trade. From Raymond Kan and George Kirikos (1995) studies there are two kinds of trading cost, explicit which includes Bid/offer spread and broker commission, and implicit that is the price impact on securities from a trade (in an undesirable way) [18]. Backtesting result could be bias or overstate if traders are not taking those transaction costs in to account.

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6. The importance of paper trading

Backtesting method is based on assumption that 'What's happen in the past will happen again in the future', this assumption is sometime hold and sometime not. The market activity is changed overtime. This is where paper trading plays a role. Paper trading or so called 'Forward Testing' is a testing method where the trading strategy is applied on real market but without real money. This way the trading system can be tested in real-time but the downturn is that it takes time to do testing this way.

The process which search information or message in the large and complex database to find the knowledge or pattern behind them and use it to make decision in the future is called 'data mining' [23]. Knowledge that has been extract from data mining may be used to forecast or model a classification of units or groups, or show relationships between various units. It is compose of applying a statistical process and computer systems on large databases to create a form of rule and knowledge in forecasting. The data mining process require different techniques or methods, such as grouping, forecasting, and relation and function. The forecast operations usually are modeling to describe the past, explain the situation that has not happened, or do not know the answer [24, 25]. These models range from a simple to complex model and may use a combination of concepts and tools together to be able to extract the knowledge in the large-scale data such as the technology of data warehouse (Data Warehouse) to help manage information to improve the performance of data mining [26]. If a large database containing information of good quality, data mining technology can help in finding or seeking new business opportunities. The data mining process will automatically cause knowledge discovery in databases by using methods such as forecasting trends and automatically consumer behavior or the automated process to find a format or model that had never discover before, using the search into the details of the database to find hidden patterns in the database.

2.4.1 Data Mining Processes

There are 5 major stages in data mining as follow

1. Analysis of business requirements will help to better understand the issues that executives need which will relate to the success of the business. It will help understand the current state of the business and executives can make decisions about the improvement better.

2. Analysis of data requirements: Because of the large data warehouses, a variety of information including those that not necessary for data mining at the time can exist in database. This must have procedures for scheduling and filtering the type of information that will be used by checking the quality of the information, the quantity of the content, and accessing to information. Sampling data may use to define the information that needs to do data mining in the case of a large amount of data to reduce costs.

3. Transforming the data, when the data to be used in mining has already been selected it may need to be converted or modified data in a form that suitable for use in data mining, which typically data conversion is determined by the conditions of process and methods of data mining.

4. The process of data mining is using one or more methods or techniques of data mining to extract the message from the database that can answer questions such as what will customers buy next, may be analyzed from a group of clients and customers by categorized the groups to buy or not to buy while the data mining. There might need to access other information in its archives other than customer data including the need to convert any other data.

5. The interpretation or applying to the business is a step that a decision maker uses the results from data mining to answer the question. The analysis is included filtering appropriate information to the user and interpretation. If the purpose of data mining is create a model for classification, the process of interpretation must consider the reliability of a model such as cross-validation [27] etc. If the results are not satisfactory, I have to do this step again as well as the previous step. This interpretation might translate the science and technology in data mining into business results to assess the outcome of data mining.

2.4.2 Data Mining and Trading System

Data mining associate with XML techniques can be used to predict the trend of stock [30] which stock data will be pulled out using XML techniques and store in the database ready for data mining technique [31].

2.4.3 The Future of Data Mining

Tool for data mining are developed regularly and a system has more options. The existing system, including IBM, SAS, and Oracle's Darwin is a tool designed for professional users. These tools can be used to create the opportunity from knowledge extract from large and complex databases. The obstacles of the data mining are the lack of data mining specialist and collaboration between business, data mining, and program development

Data mining is interested to researchers in machine learning, pattern recognition, statistical database, artificial intelligence, and expert system and imaging data. Many techniques and algorithms have been created from these researches. In the future, there will be a new data mining programs that will facilitate the end user which prevent them from having to know too much about the technical details of data mining. This allows the analysis of the various activities in the future and daily use of data mining which will allow businesses to create more opportunity and profit.

In this section the technology relates to the study is discussed.

2.5.1 Java Web Technology

Originally Java was created to build applications on electronic devices such as TV receiver. However, the concept of creating a cross operating system program is a concept that also works with Internet network. For this reason, Java has expanded its role to the world of the Internet and eventually to the world of enterprise computing. Because of the expanding of the use of Java, there is a need to add a new set of commands. In 1999, Sun has classification of a new set of Java Language instruction divided into three levels as follow Java 2 Micro Edition (J2ME), Java 2 Standard Edition (J2SE) and Java 2 Enterprise Edition (J2EE).

Because of classification occurred after the beginning of the Java language some instruction set lies in both categories for example JDBC can be both J2SE and J2EE. In fact, Java enterprise may be considered as an extension of the Java standard. J2EE instruction set is included J2SE. That said J2EE cannot be used without J2SE associate.

2.5.2 The 2-tier and 3-tier architecture

In 2-tier architecture the applications are break into two layers that are the client side which includes and the server. The business logic may be implemented in either client side to reduce load on server or it can be the server that perform the calculation task. This type of architecture is associated with a small number of users, usually not more than 50 users, and often used in intranet application [20].

The 3-tier architecture is presented by three layers as follow, presentation tier, business Logic tier, and data tier [22]. In this architecture each layer is independent and has clear purpose and responsibility. The presentation layer send request to the application server, it will then send request to the database server, the database server send request data to the application server to do calculation and then send the processing data to the client [21].

Figure 3: Two-Tier Architecture

Figure 4: Three-Tier Architecture

Is this section the literature that is related to the project is reviewed. The review includes ingredients of trading which are trading system, money management, and phycology. The mechanical trading system is explained next, and then the backtesting technique that uses for measure the quality of trading system is discussed. The last topic is reviewed the data mining and technology use for web application. The next section will be software requirements.

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You see them all the time in the news groups. S&P futures mechanical trading systems, commodity trading systems, stock systems. All are pretty much the same in principle, some sort of algorithm for creating buy and sell signals for trading with.

Now right at the start of the FAQ there is an article on speculation vs investment, there are other articles on trading and some articles on gurus and software. Some trading programs are ok, but most are downright fraudulent.

Mechanical trading systems go for anything from a couple of hundred dollars to a hundred thousand dollars. Money-back guarantees are not worth very much really, since the company may not even exist when you come back to claim your money, or there may be fine-print clauses that prevent you getting your money back.

Writing a system is easy, you can either make up just about any old thing and flog it for a high price, which is common enough, sell it at $5,000 a pop and you won't need too many customers to pay for your professional spamming software, or make something at least remotely plausible. Work may have gone into creating the system, but it will be curve fitted by a computer, or is some tricky little scheme that worked over the test period, but not necessarily at any other time.

Try not to get overly impressed with tables of past results that are computer backtests, give a neural net program a completely random curve and it will be able to find some sort of mathematical equation that will follow this exactly, and mathematicians and engineers do this all the time with Fourier series. What you must insist on is an actual trading record. You want to see a broker's trading statement, showing genuine trades pulled off in the real market. You also want to see all trades, not just a selection of them. Very very few system sellers will provide this, though apparently there are a few that do. If they don't provide the trading statements (which any reputable vendor should be happy to do, since they would be the most compelling form of advertising possible!) then forget it. A computer can generate a "predictive" system out of any data at all, the system may be spurious though and won't work once you take it out of the box.

The vast majority of trading systems available are garbage, truly worthless. It is a very lucrative business though, at $2,000 a pop you find 50 suckers through the Internet and ads in the back of magazines then you have $100,000! The promoters of trading systems flaunt their wealth as "proof" that they are great traders, in light of this figure though one can see that just because a system promoter drives a Ferrari to the marina to cruise around in a big yacht doesn't necessarily mean he made all that cash through trading. In fact the majority of real traders make a relatively modest living, with returns that would not excite most punters. You are more likely to become a millionaire flogging crappy systems than you will day trading, not that I am suggesting you give up your dreams of becoming a trader or investor and becoming a con man instead!

The system may be a proprietary indicator of some sort. As it will probably be generated by computer back-testing, and because it is "proprietary" you won't be told how it works, it will be a true long/short black box program. Or it may be a completely transparent system that you follow like a robot. An example being something along the lines of "Buy S&P minis on a Monday if the price rises after gapping down over the weekend, add to your position Tuesday if the trend continues and confirmation is seen in the Dow and use a 5% trailing stop at all times. If the price falls below the Monday open use that as a short selling stop, with a 2% trailing stop, to be closed out if there is bullish divergence in the Russell 2000 index." Whatever you do, don't trade that system as I just made it up while typing (I don't want to type out a "real" commercial system as that might not go down too well with ASIC) . it is quite similar to a couple of systems I have seen, they were just as simple and even managed to produce large historical returns.

For $2,000 or more, that is what you will get. Either some little. exe file on a disk that runs some strange test over the data or half a page of instructions. Needless to say the provided trading historical returns will be excellent, they may reflect "actual" simulated results (the computer did test this and this is how it went in the last 18 months) or the results may be completely fabricated.

Occasionally the information may be more voluminous. David Bowden's Safety in the Market system is an ultra simple trend following system that can be summarised in a little booklet, though of course the package is bulked up with plenty of videos and audio tapes, posters, basic commodity info. We are supposed to be impressed by his trading wealth, yet he has sold thousands and thousands of these packages for almost 20 years at $995 each. Yeah, I'm sure he is a millionaire, but that means exactly zilch really as far as he goes as a trader.

Why hasn't word gotten around that his material stinks? Well it has, all over the Internet there is critical stuff, few people who buy the system do proper searches for reviews first. As long as he provides standard disclaimers and offers some sort of money back guarantee the law can't really touch him. In the SITM case the money back guarantee doesn't carry fine print, but the money back period is very short and it is doubtful a beginner will have the time to fully analyse the system fully enough in the period allowed to conclude conclusively the program is at fault. The SITM money back period is only just long enough for most people to read through the material once, never mind actually getting a chance to first do a month or two of paper trading and then some of the real thing. If you have never traded before, how do you differentiate between an initial setback with a good trading plan and a truly bad system?

Unless the results given are actual trading records, showing all the bad trades as well as the good, from this trader who had real money on the line, don't bother. Of course another possibility, and something that is common enough is that for your $2,000 you don't get anything, the guy takes off with your money!

Sometimes system sellers come up with mumbo-jumbo reasons why the statements can't be provided. They say such a thing is in breech of ASIC rules concerning traders/privacy/proprietary information or some other excuse. Before you hand over that much money you really should insist on proof that it works. Like I said earlier, money back guarantees aren't proof, nor is "pay 25% now, the balance out of your trading profits". Both can be used by the unscrupulous, the former could be abused by people who vanish or refuse to pay on a technicality, the latter could simply mean they want to milk you for the 25% of $20,000, knowing that this of course looks much more attractive than a system that is simply sold for $5,000. When you fail to make profits they can then vanish or get you on the technicalities.

Just because someone has an adviser's license doesn't mean much, there are a variety of ways of getting one. Plenty of ripoff merchants "borrow" a license from some third party who has no idea what is going on, others may have a certain restricted license but intend to vanish soon after. The license might be fake. They might have a legitimate license but are selling a system for someone else (they won't keep that license if ASIC finds out, but the rewards are attractive enough to risk it). They might have a license but have decided to leave the investment industry, as it doesn't matter if they get banned they can secure themselves one last golden handshake by flogging a system. Alternatively they might even be operating from overseas, outside of the regulation of Australian authorities.

You may note that apparently software sellers have little trouble getting restricted investment licenses. Many vendors of rather sus software packages manage somehow to get hold of advisory licenses from ASIC, albeit ones restricted to talking about a very narrow range of topics. When I got my proper authority as a financial planner I was made to jump through a variety of hoops and pass a variety of exams. This seems to mainly apply to financial planners, as far as I can tell anyone with a trading package can apply for a license to sell their software or system, and there seems to be very little scrutiny from ASIC over this. I wouldn't go so far as accusing ASIC of rubber stamping applications from gurus, but I must admit that it certainly seems to be what happens. The ASIC consumer protection web site (http://fido. asic. gov. au ) does everything but actually name the shonky operators, they describe in detail the operations of shonky system vendors but don't actually mention them by name. Somehow these companies got licenses, I don't know why. Suffice to say that certain restricted advisory licenses are fairly worthless as an indication of that vendor being "straight" or not.

While there are professional traders who do quite well, they rarely use a rigid system. If they do use one they use something they developed themselves, and of course it is under constant development, with many refinements and nuances.

What sort of argument could possibly prevail here? The exchanges are full of full time floor traders who spend every waking hour trying to refine their techniques. They run from trend followers to market makers and scalpers. They use techniques like dynamic hedging (continuous purchase and sale of options) in a complex mathematical system based on the Black-Scholes option pricing model. They get in on every single technique available and milk it for all it is worth. If they find some little exploitable anomaly in pricing you can be sure that they will be on it as soon as they see it. They don't just read the same technical analysis books you do and see the same trading adverts, they read a whole lot more. If a mechanical trading system is out there that can be encapsulated in a video tape and little indicator they already know about it. If Gann is such a well kept secret and enables you to make unlimited wealth, why do trading pros not use these methods? So David Bowden advertises in the Sunday newspaper every week on the quotes page, fills auditoriums with total beginners, yet somehow this has failed to attract the attention of a single professional trader?

Professional floor traders have the advantage of very low transaction costs and access to every single piece of data that is publicly known, they have their orders filled faster than any home trader listening to a broadcast announcement could, often they make up a large proportion of trading volume by sitting on thinly traded securities providing both the bid and the ask offers, making money all day long as the market simply trades up and down without going anywhere. They use sophisticated options strategies a lot, using live data fed computers to calculate fair option prices. If you are interested you can quite easily find out what these techniques are by reading various trade journals. Unless you are a floor trader though you won't make a cent after paying brokerage. Floor traders do frequently use what might be described as mechanical trading systems, but at the same time also throw a lot of money after rumours (then closing out as soon as the rumour hits the rest of the market).

In the interests of being long winded, to summarise: floor traders sometimes use sophisticated mechanical trading systems but only with discretion, they constantly adapt their techniques as conditions change, mainly profiting via their low trading costs and the speed of execution you can only get by putting on the rainbow jacket and being there in the trading pit. Those that trade from home expose themselves to far greater risks per trade, but are master speculators with a keen eye for trends and a disciplined approach to risk management. The percentage profit per trade has to be much higher of course, and very few are really this good.

Between these two lie those that use mechanical trading systems from home, lacking the sophistication of the speculator and the cheap trading costs of the floor trader, but equipped with a boldness that comes naturally to the most blissfully ignorant, they trade with all the finesse of a crash test dummy for a few days or weeks until the margin calls force them to stop and quit trading for ever, or at least until they can save up enough money to buy a "better" system.

Comercio Automatizado

Utilize the Technology - Let the Computer Do the Work

Automated forex trading is becoming increasingly popular as brokers offer more advanced platforms that facilitate algorithmic trading. Automated trading software can be a great help to those who have managed to develop a trading strategy with mechanical rules for entry and exit. Below we discuss some of the automation options currently available to forex traders.

May 16, 2013 at 7:43 AM • 1 comentario

As the forex market moves enthusiastically into the electronic age, individual currency traders are increasingly turning to software products that help them watch the market and even assist them in performing the actual mechanics of trading without human intervention. Lee mas

April 09, 2013 at 10:13 AM

Many forex traders, whether knowingly or not, tend to incorporate a belief that "History repeats itself" into their forex trading systems. Market observers and technical analysts have often found that the overall predictability of human behavior when acting in large. Lee mas

April 09, 2013 at 8:00 AM

Trading involves numbers. We need to make a lot of calculations to analyze the price action and gain an understanding of market movements. While economic events usually follow a discernible pattern of cause and effect that may be evident even. Lee mas

April 09, 2013 at 7:53 AM

In the previous article we discussed how you go about setting up mechanical forex trading systems. These automated software systems look for technical market indicators and buy or sell accordingly - sometimes without any input from a human operator. Lee mas

April 09, 2013 at 7:42 AM

As forex software becomes more complex and automation becomes more common, many traders now rely on mechanical forex trading systems. These software systems execute trades when certain market conditions are met, with or without the confirmation of the operator. Lee mas

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La negociación de divisas en margen conlleva un alto nivel de riesgo, y puede no ser adecuado para todos los inversores. El alto grado de apalancamiento puede trabajar en su contra, así como para usted. Antes de decidir invertir en divisas debe considerar cuidadosamente sus objetivos de inversión, nivel de experiencia y apetito de riesgo. Ninguna información o opinión contenida en este sitio debe ser tomada como una solicitud u oferta para comprar o vender cualquier moneda, capital u otros instrumentos financieros o servicios. El rendimiento pasado no es ninguna indicación o garantía de rendimiento futuro. Por favor lea nuestra renuncia legal.

The underlying concept is, that, if we cannot accurately predict our own performance, and as we cannot influence how the markets will behave, we should at least exercise control over those variables that we have actually control of. And that is the risk that we as traders take when entering a position.

Few, if any, have the ability to view their portfolios as a whole and even fewer are able to optimize capital usage. Traders and investors must move from a defensive or reactive view of risk in which they measure risk to avoid losses, to an offensive or proactive posture in which risks are actively managed for a more efficient use of capital.

NO set of indicator rules will ever make money in futures trading. So forget about fractals, alligator, turtles . waves, cycles, etc. The best these and ALL other indicators, including Moving averages and Breakouts, will do is make you break-even and at worst blow your account.

The KEY is in your Risk and Money Management. Combined with sound risk and money management I could even reverse the above statement: "ANY set of indicators rules will make money in futures trading."

Choose a CLEAR, TREND following indicator. One that an 8 year old could tell you whether it is long or short. ONLY trend following indicators will work. If you have to think for more than 1 second whether it is long or short, it isn't clear enough. Stick to 1 indicator in 1 time frame. NEVER pay any money for other people's systems. They will NOT work.

ENTRY: Decide on whether you want to use Reversals or retracements. I recommend reversals.

RISK Management: Trading only 1 contract at a time will cause you to FAIL. Make sure you are well capitalized. This is not a game for those who are not.

The only way to win at futures trading is for you to be larger (have more positions) when you are right and less positions when you are wrong.

THIS IS THE KEY TO TRADING. Maintaining the same number of contracts for each trade will cause you to FAIL. Varying contract size is the MOST important thing you must do, if you want to be successful.

Buying and Selling using the same number of contracts will at best, lead you no where and at worst, wipe you out in the long run. You can vary your positions with the following: 1) Stagger out of your trades when wrong (Phantom of the Pits points out that you should let the market prove you correct instead of letting it prove you wrong by hitting your stop loss). The market goes against your entry (. ). BUT hold on to all your positions when right. 2) Make sure your profit goal is larger than your stop loss point.

MONEY Management: Never let a winner become a loser. Adjust your stops as the market moves with you. TREND: Use trend following indicators only. I recommend Moving average 2 lines and Break outs. -----> Pick the shortest time frame with the longest trend indicator.

Principles of Money Management: While Risk management dealt mainly with maximizing profits using contract size, Money management deals mainly with minimizing losses using stops, as well as showing you when to take profits. They are both very closely intertwined with each other. You cannot have all risk rules but no money management rules, and vice versa. I gave you Rule #1 which says to stagger your stop losses, and here is ONE very important principle that you have to learn in Money management:

80% of your Profits will come from 20% of your trades (Pareto Principle). What do I mean by that? Let's say we are playing the game of 50/50. So 50% of our trades will be losers. There is no way avoiding it and we will attempt to keep those losses small by staggering our stops with multiple contracts.

The other 50% are NOT all going to be big winners. Out of that 50%, roughly half will be where you really make your money and the rest will pay for your losses. It is similar to running a business. 80% of your clients will pay your costs for running the business and 20% will be the reason you are in business.

¿Porqué es eso? You will have trades where you are right initially but they will come back and become only small winners. This is okay, you will never be able to predict the exact perfect exit for a trade, but you can see where the problem is. If you don't capitalize on that 20% of trades where the price just keeps on going in your direction, you will end up just covering your losses and you will not get anywhere.

Aquí hay un ejemplo:

50 trades are immediate losers but kept small using stops

30 trades are moderate winners

20 trades are big winners

50 losing trades x average of 4 points = 200 points

30 winning trades x average of 8 points = 240 points

20 winning trades x average of 20 points = 400 points

Net Result: 440 points

So if we did not hold out for those 20 points on each of those winning trades, we would probably just break even after paying commissions, and we are definitely not going through all this hardship to make the broker rich, right?

So while rule #1 dealt with cutting losses, rule #2 will deal with when to Exit. with a PROFIT! This is usually the most difficult of the rules to quantify. Getting into a position is elementary. Exiting for a loss, expected. But when do you take your profits?

For a trader this can be very difficult. You have entered your position, sat there while the market was ticking back and forth, and now finally it is showing a small profit.

The natural tendency will be to take it. Will you be right? Sure, sometimes you will catch the top before it retraces, but when you get into a habit of doing that, you will miss the big trenders and you will curse and stomp around and there is nothing you can do except pray it stops and do you know what? It won't and you will miss it all. Truly a sad tale, but luckily there are many more trends where they came from, so don't worry.

Alright, let's get back to our example. The market is ticking, and is now showing a small profit. Here is where the true test of your nerve will be played out. Where all those other traders are going to try to scare you out of your position, so they can get in. Will you know when? No claro que no. No one knows how long a position will go in one direction.

This is where position size again plays a crucial role. What will happen if you enter with only one position? Well, when you exit, that's it. You will now have to wait for another trade. And if you try to hold out for the big trade, you will have a lot more losers or break-even trades.

With multiple contracts, you have many more options. First, have a profit objective that is larger than your stop loss points. It is important that it is larger. You can see why in the example above.

This is where you will exit some of your positions for profit. Now with the use of trailing stops, you are going to sit back and try to go catch a big move. You will never know when it will happen, but it is critical that you are there when it happens.

So before we continue, here is Rule #2.

STAY with ALL your positions until they meet the minimum profit objective.

Exit a portion of your trade at the minimum profit objective. Hold the rest using a trailing stop to take advantage of huge trenders.

Use a breakeven stop to never let a winner become a loser.

The markets are going to try to scare you out of your positions. DON'T LET THEM. This is when you are right and you CAN'T AFFORD to not capitalize on this. If you get out early, even if you made a small profit, IT IS A LOSS.

Fear and greed are emotions felt when you don't have specific rules in place. Follow your rules, and the only way to have confidence in them is to test them.

So let us break down all the Money Management principles from the point of entry:

You have entered a trade with 4 contracts ( green arrow ). You immediately enter your stop loss orders ( red lines ) IN the market. We do that because the market will go to where it will go, with or without you. Keeping the stops in your head will not help you if the market starts racing against you.

We have followed rule #1 and staggered our stops as you can see with the red lines, now we wait.

Well you can't win them all. The market retraced and took out your break even stops. If the market is very volatile and you really want to get back into this position then fine, re-enter. I recommend that you wait for your next entry, however

Time to come to papa! The remaining 2 stops are now showing some serious profit, and we will have our trailing stop (as seen in blue) right there to catch it in case the market reverses.

Where to place that trailing stop? Estas son algunas ideas:

The first should be put just above your 1st profit objective. Then the market may reverse slightly. If it continues in your favour, put the stop just below that retracement. Any retracement that holds is a good place.

Now if based on your research, you have seen that huge moves like this are usually x ticks, and we have now made that size move, there is nothing wrong with taking profits here, before the market retraces. In fact I would recommend it, but just don't jump the gun at any move. You can also remove 1 more contract here and hold out the last on the trailing stop or wait for the close.

There are countless possibilities and no "perfect" camino. The main goal is if it is going your way, do everything you can to be part of the action.

Many successful money managers trade systems that do take the same trades without trying to measure 'market environment'. The size of the trade is determined by the money management parameters which again are systemized rules. They do not change from trade to trade. One could also build rules to react differently to different 'market environments'. That would be part of the system. System or mechanical trading is not limited to anything but a set of rules that govern each and every trading decision. These rules are decided before hand. This example also assumes that one has a system that provides a market edge. This also assumes that the trader has the ability to correctly follow the system. Both of these are large assumptions. A system will have winning trades and losing trades, but the winning trades either from their number or their size, will make up for the losers and leave a profit. From this scenario the trader MUST trade the exact same way for every trade/environment. He/she has an edge. If the edge is used the same way every time over a large enough set, a profit will be made. The trader acts as the HOUSE in a casino. The edge works for him. You apply the edge the same way over and over. While you know certain market action will produce losing trades, you also know that the winning trades will overcome that. You do NOT want your judgment getting in the way. If someone was paying you 7-5 every time you correctly guessed heads but only 4-5 every time you correctly guessed tails, you would not sit out flips or throw in some tails guesses. You would sit and guess heads until you had all the money you wanted. IF you can correctly determine 'market environment', then you should work that into your system. Most good systems have fewer than three parameters, filters etc. They are very simple which adds to their 'robustness'.

- emotions can be managed but not controlled - view each trade merely one in a series of probabilities - know why you take a trade and what must happen for you to remain in it (. ). If it fails to happen - get out even if your stop has not been triggered.

- You cannot have one without the other. It is not the 'system' (and I despise that word when it comes to trading) that makes the trader, it is the trader that makes the 'system'. - important: the ability to trade WITHOUT a BIAS or OPINION as to market direction (NO EGO), and realize that there is no such thing as overbought/oversold, and no price is too high to buy or too low to sell. You also need to learn to like your losses as they just put you one step closer to a winning Trade(s) and are nothing more than the cost of doing business. - I take the same trades each day, but how I manage each trade is dependent upon my read of the environment (discretion). You cannot trade the exact same size and exit the exact same way for every trade/environment. For example, a trending market requires a different approach than a range bound market. In the end it boils down to your ability to read the PRICE action and adopt your game plan to the current conditions - AND THEN EXECUTE. And all you 1-lot traders out there better re-think your approach as trading 1-lots is a fool's game (***. ***). You are far better off trading 3 ES/NQ than you are trading 1 SP/ND. I'll make the same challenge to the 1-lot traders that my mentor made to me when I was a 1-lot trader - I'll trade 3 NQ/ES to your 1 ND/SP and we'll see who wins. I took him up on that and he cleaned my clock. I have not traded 1-lots since and never will again.

Trading is all about management - yourself, your money, your attitude and your position. It is NOT about predictions, forecasts or OPINIONS. You cannot learn how to drive a car without being behind the wheel - and you can't learn how to trade by just reading a book, attending a class or buying a 'system'.

Bob Heisler bheisler@swbell. net http://www. rjhtrading. com

System trading is only good if the computer automatically enters the orders, the stops and the exits. If not, if the individual decides to not take a trade the system is flawed. I only know of one person that is set up this way. He uses a break out system and it produces approximately 37% winning trades. His profit picture is about a 22% annualized return. I did not see his sheets or look at his numbers. But the computers do put in all the trades. Any system where an individual trader puts in the order is discretionary to a degree. The party that says he is trading totally system may be using the system as a crutch to blame for the losing trades. The system I use is 80% mechanical and 20% discretionary. If I lose it is my mistake, the system has a 20% losing factor, but I have to look at it as my error. I am not blaming myself for the lose, I am saying that the lose is part of the system. I developed the system, therefore the lose is mine. If I did everything the system said to do, and took every trade the system gave me, then I could blame the system if my percentage of winners to losers changes. If my profit per trade goes down, or if the graph of my profits has lower highs and lower lows, I look for a problem, not in the system, but in me. If you did what the system said and you lost money, it was still a good trade. It is good only because you had the discipline to follow the system. Did you bother to analyze the trade after the close to see why the trade lost? Was there something that you didn't see? Was it something that you over looked? With me, I usually find that I got lazy and didn't do my homework. I assumed that because I was successful that I was bullet proof. No tan. No one is bullet proof. Self, ego, and the psychological need to be right are the discretionary traders worst nightmare. The other problem is ones belief system. Taking everything into consideration, I still believe that the human brain is the best computer ever developed. The thing that people forget is that the brain sees in pictures and not in numbers. The first thing most traders want to know is to were do I get in and how much will I make. This is overbought or oversold. Volume is up or volume is down. They start seeing numbers and figuring. They start back testing, they start using indicators that they don't understand. They look at the past rather then the future. Wrong, look at the picture and it will tell you the whole story. Like a road map. A good trader can take almost any system, astro, volume, eliot, Gann, even some of Larry Williams stuff and make a good living. He does it because outside of the system he is looking at the chart and that picture is what triggers his final decision. Like everything in life, you have to visualize what you want to accomplish before you can get there. Trading is a business. You need a plan for everyday that will take care of the contingencies that might arise. With the proper planning there are very few surprises. You won't get rich over night, but you will be able to get there. Many have done it. Ira.

Learn to trade the leading edge of the market, by following the price action. Furthermore, it means only using the very liquid markets with a daily range and movement that is consistent with their ability to withstand drawdowns that their account will allow. Not easy! Now, clever people with sophisticated computer programs and all the other factors necessary to trade a system, with all its implications, have to have a bank account or other people's money of sufficient size to trade. Most on this list are individual traders who don't have the money or systems. If they cannot trade with discretion, they cannot trade at all. Therefore, it follows that effective means of day trading is for the little guy and systems, indicators et al, are for those who, shall we say, live to play, rather than play to live.

Bill Eykyn www. t-bondtrader. com ______________________________________________________________________________________________________________

- Which money management strategy best fits your risk profile? In general terms, the more stable your equity curve, the more aggressive you can be in your money management strategy. It should come as no surprise to those who have studied Optimal f, that it can be aggressive in its position size. Therefore, to properly implement this strategy it should be applied to systems with very stable trading results. Systems with Sharp Ratios above 2, Return Retracement Ratios above 8 and K-ratios above 2.5, will (in general terms) satisfy our stable trading condition. Now in real world trading it is very rare that systems will generate these results. To help focus on the appropriate money management strategies that will fit most trading systems, consider the least aggressive strategy before moving onto the most aggressive strategy. In general terms begin with the Fixed Fractional and Secure f strategies before moving onto Diluted f and the ultra aggressive Optimal f money management strategy. This will save you a great deal of time and effort when testing some of the more popular money management strategies.

Trading Metaphor: Trading is like driving. Where you want to go etc. the "how much do you want to make" metaphor, depends on me. How fast do I want to go? Well, how much risk do I want to take, e. g. tickets, accidents, etc. or in trading, how quickly do I want to achieve my goals. How much wear on my car (me and everyone around me) do I want to incurr? I could wear my breaks and tires out by starting and stopping at every stop light - i. e. entering the market by choosing too tight of stops or exits. What if I never get where I'm going? Have I prepared a road map (trading plan) with check points.

A low risk idea is an idea with a positive expectancy that is traded in such a way to allow for the worst possible conditions in the short run so that you can achieve the long term expectancy.

Q: Percent Risk Model (using e. g. 2.0% of you capital for position sizing): if a trade moves in your favor you add additional contracts in different or the same markets? A: You might simply decide to keep a constant risk. In that case, you adjust your stop according to your system and peel off (=reduce) contracts when the risk got above the level you wanted to maintain.

Q: Which is "better" mathematically, a 20% chance of winning a dollar or a 10% chance of winning two? In each case the expectancy is 20 cents but they are clearly not the same. - Why are they not the same?

A: Question including full background: In an interview in Stocks & Commodities you described a simple position size game (60% win, 40% loss and expectancy 1.2). The expectancy is 0.6*1 - 0.4*1 = 0.2 or 20 cents per dollar risked. I immediately started trying to derive the optimal bet size. In consultation with my colleagues we broke the problem up a little, derived some intermediate goals and came away with a few results: 1. The first problem was to define "optimal". We decided that optimal meant "highest risk / reward ratio". Well "reward" was obvious but. 2. So the second problem was "define risk". Do you define risk as the probability that a certain outcome will occur or do you define risk as the variance of possible outcomes aka standard deviation or do you use something different again? We found this problem intractable and decided to approach from a different angle. 3. There must be some kind of function which will define optimal betsize - but what are the independent variables? We assumed that the system would have to work regardless of how much money was involved so the betsize couldn't be fixed, it had to be some sort of percentage. Secondly it couldn't only be based on the expectancy of the underlying system. Consider the following two games: A game with a 50% chance of a 3:1 win and a 50% chance of a 1:1 loss has an expectancy of 0.5*4 + 0.5*0 = 2 No, the expectancy is 0.5*3 - 0.5*1 = 1.50 or $1.50 per dollar risked. A game with a 100% chance of a 1:1 win and 0% chance of a loss has an expectancy of 1*2 = 2 No, the expectancy is 1.0*1 - 0 = $1.0 Same expectancy but vastly different optimal betsizes. In each of those cases the Kelly criterion defines the optimal bet size--(i. e. for maximum return only). We were back to being stumped but at least now we could clearly state the core problem: Which is "better" mathematically, a 20% chance of winning a dollar or a 10% chance of winning two? In each case the expectancy is 20 cents but they are clearly not the same. How would you define "better"? Here your opportunity factor would make the key difference. If you only had one chance, I'd want the 20% opportunity. If you have unlimited chances and there was no cost to playing, it wouldn't make any difference unless you like more rewards in which case you'd still want the 20% opportunity. We are currently refining some software that will answer the question of optimal bet size for you and help you determine what optimal means for you. It will be included with a new money management report that we are planning to offer soon.

Q: Suppose you have a $10,000 account and wish to trade using volatility. Using an example similar to Van's book, say you want to purchase a $50 stock with an ATR of $4. You elect to set a stop at 3x volatility and you will risk 2% or $200.00. If I understand your logic, this means you could only purchase 200/12 or 16 shares and stay within the guidelines. Now here is my real question. If you set the stop at 3x volatility, but find statistically that Van is correct, and on average you stop out at 1.5x volatility, then could you increase your risk to 4% and achieve the same results. Somehow this seems mathematically equivalent, but logically I think the overall risk increases. A: Volatility has nothing to do with the stop. If the ATR is $4 and your 2% allocation is $200, then you would purchase $50 shares. If you are using a 2% risk allocation (i. e. $200), and your stop is a three times volatility stop, then you would purchase 16 shares. Risk and volatility are not the same thing for position sizing allocations. Since that is the case, your logic is wrong. You would probably only use a volatility allocation when you were using a very tight stop like a dollar. In that case, you would by 200 shares, so a 2% volatility allocation of $50 is safer. In a nutshell, volatility position sizing is totally independent of your stop. You keep you same stop, you just size your positions based upon volatility. If you are using stock data, then I wouldn't recommend a volatility stop. I'd trail a 45 day moving average.

You have stated that a good money management plan should involve risking a percentage of total equity and that the volatility should also be a percentage of total equity. How would one measure volatility so that it is a percentage of total equity? Answer: You would measure volatility according to a 10 day exponential moving average of the ATR. Let's say that's $3.00 Thus, for 100 shares of stock it is $300. If you have $100,000 and wanted to trade a 1% volatility algorithm, you could expose $1000 to volatility. Since volatility is $300 per hundred shares, you could have 333 shares. --------- 80% - 90% of traders lose - 10%-20% are consistent winners. ---------- Van Tharp: 3 MM algorithms (Minimum will be taken): 1) 1% of core capital: a) (core capital - Total outstanding risk)*0,01 = x b) x / $ value of initial stop = Nr. Contracts I 2) new risk limited (total risk 0, y / $ value of initial stop = Nr. Contracts II 3) ongoing volatility (10 day M. A. of ATR): max 2% of equity ---------- My initial stop I place very close sometimes to close but statistically it works and I always limit my losses to very small amounts when I am wrong. My initial stop is placed 1 tick below the previous days low. As the stock goes up I move my stops up to continually protect my profit. I will loosen my stops some as the stock moves so as not to get stopped out by general fluctuations, but I generally keep stops with in 10 - 15% of where the stock closes. unesdoc. unesco. org unesdoc. unesco. org

Use expectancy + know what it means to be wrong ten times in a row in a good system.

Trading Program/Software is difficult because most vendors cater to the model of predicting the market and they give people what they want.

Market Wizard System -- here's a candidate

Mark Johnson mjohnson@netcom17.netcom. com 1997/04/21 misc. invest. futures

Here's my test results of a Market Wizard System. It is profitable, averaging a compound growth rate of 65% per year for twelve years (net gain 420X in 12 years). It traded an initial stake of $100K and ran the equity up to $42 million after twelve years.

The system is found on page 60 of LeBeau and Lucas's book, _Computer_Analysis_of_the_Futures_Market_. Unfortunately that means the system is unacceptable to Andrew St. John Goodwin, the originator of this news thread. Ah well, he no doubt has accumulated better systems anyway. Still, this one might perhaps be useful for "diversication across a number of different systems," which itself is a Market Wizard principle.

A few details about my tests: * I used commissions = $50 per contract per round trip * I used slippage = 4 ticks per contract per round trip (for example in the Deutschemark, 1 tick = $12.50 so the commissions+slippage in DM is $100.00/contract) * I tested from 01 January 1985 to 18 April 1997 (last Friday) * I tested the system on the 25 markets that I myself happen to trade in my own real-money futures account. These are the markets for which I always have continuous, up-to-date data files ready for testing: BP C CD CL CT DM DX ED FY HG HO HU JO JY KC LB MB MP NG SB SF TB TU TY US * I used a Market Wizard "money management" rule: always risk exactly 2.6% of total (closed + open) account equity on every trade. * I used the software package "Trading Recipes" by RW Systems to perform the tests * I started the historical test account at $100K. You may dispute whether this is too much (or too little) to start simultaneously trading 25 futures markets. But that's what I did.

File: LEBEAU. GO Date: 21 Apr 97

Net Win Loss 42,053,156 Capital Required 36,143 Percent Wins 41.6% Date of Requirement 850404 Trades, Trades Rejected 1427 0 Wins 594 153.3M Total Slpg + Commssn 24,733,183 Losses 833 111.2M Start Up Capital 100,000 Long Wins 346 94,867,737 Margin Calls, Max 0 0 Long Losses 427 52,638,274 Max Items Held 13,617 970404 Short Wins 248 58,478,932 Days Winning, Losing 1630 1424 Short Losses 406 58,655,237 Expectation, Kelly 22.1% 11.4% Max Consecutive Wins 8 15,950 Comp. Anul. ROI, ROI 65.0% 42053.2% Max Consecutive Losses 14 9,202,127 Largest Winning Trade 5,325,899 Start Date, End Date 850326 970418 Largest Losing Trade 1,183,200 Total Items Traded 217623 Average Winning Trade 258,159 MAR Ratio 1.38 Average Losing Trade 133,606 New Highs, Percent 269 8.8% Avg $Win to Avg $Loss 1.93 Max Drawdown by %, $ 46.95% $15.76M % on 891101 $ on 960304 Longest Drawdown 1.39 years 950707 to 961125

Here's the "equity curve". For brevity I've only included 6 equity readings per year; this keeps the message length manageably small. There's nothing sinister here; I'm just "saving bandwidth" as the Usenet expression goes.

850201 100000.00 850401 97830.15 850603 114061.95 850801 128820.94 851001 138293.08 851202 169813.23 860203 216806.97 860401 288582.59 860602 285737.25 860801 254516.64 861001 230563.89 861201 243111.95 870202 327757.22 870401 328005.34 870601 416479.59 870701 400805.09 870803 471144.72 871001 498039.31 871201 678973.75 880201 755799.69 880401 714359.19 880601 688729.88 880801 1067212.50 881003 1039365.00 881201 1201548.50 890201 1363686.00 890403 1484712.38 890601 1684390.50 890801 1887812.75 891002 1256556.75 891201 1103038.00 900201 1820179.38 900402 1966021.63 900601 1868241.38 900801 2269144.75 901001 3050966.25 901203 3390288.25 910201 2887254.25 910401 2751789.75 910603 2450820.50 910801 2247085.50 911001 3246755.00 911202 4257608.50 920203 6582033.00 920401 5058539.50 920601 5094387.50 920803 8523964.00 921001 10232035.00 921201 8946255.00 930201 8634425.00 930401 10871372.00 930601 10686823.00 930802 11951045.00 931001 11933584.00 931201 10493555.00 940201 10365359.00 940401 11514206.00 940601 12596234.00 940801 17350238.00 941003 14743892.00 941201 17446028.00 950201 15582884.00 950403 24957432.00 950601 30482370.00 950801 28926444.00 951002 23099142.00 951201 25886892.00 960201 27243478.00 960401 27255586.00 960603 31130510.00 960801 29642532.00 961001 27338004.00 961202 37941076.00 970203 36292488.00 970401 43538832.00 970418 42153156.00

In article ubchi2@aol. com (UBCHI2) writes: > I am a professional hedge fund trader looking for some new > technical systems. If you know the rules of a Wizard system, > email a description and statistical summary of results. If it > checks out, I will make you a cash offer on it. If you need > privacy, just leave a phone number or email for mine. > Publicly available systems not acceptable. > --Please no day of week, volatility expansion, channel breakout, > oscillator, bar chart pattern or other common methodologies. > Only a totally mechanical method will be purchased. > Andrew St. John Goodwin

Re: Turtle Trading Seminars Mark Johnson mjohnson@netcom17.netcom. com 1995/08/09 misc. invest. futures

In article kskaggs@pinn. net (Ken Skaggs) writes: # I just received a direct mail peice telling me that # for $2500 I can learn from one of the Turtles, Russell # Sands. With all the usual caveats, like why is a successful # Tutle going public, does anyone know anything about # this seminar?

> Subject: Simulation of the Turtle system (Re: What's the best system?) > Date: Fri, 14 Apr 1995 18:12:14 GMT > Here's a copy of an email I placed on the omega mailing list > in November 1994. > Despite Dave Chamness's provocative subject line > "What's the best system", I don't mean to state, imply, or > suggest that the Turtle system is in any way "best". It's > a system, a long term trend following system. Eso es todo. > > > > A while back I used Omega Research's System Writer Plus > > (abbreviated SWP) to analyze the Turtle System as > > propounded and sold by Russell Sands, one of the original > > "Turtles" trained by R. Dennis and W. Eckhardt. See > > the book _Market_Wizards_ by Schwager for more of the > > Turtle story if you're interested in the history. > > Anyway, because of limitations in the System Writer > > Plus software, I deviated from Russell's teaching in two > > ways that _might_ be important. > > 1. Russell adds more contracts onto trades that show > > a profit, under control of a table of what-to-do > > contingency instructions created by Richard Dennis. > > (Adding more contracts onto existing positions > > is called "pyramiding".) SWP doesn't do > > pyramiding, so I left it out. In Russell's terms, > > I always traded "single, 1N units". > > > > 2. Russell provides a specific formula for determining > > how many contracts to trade (one aspect of "money > > management") which is a function of the equity level > > in your account on the day you initiate the trade. > > I didn't do that. I made constant-size bets > > throughout the year, and I only adjusted my betsize > > once per year, on December 31, based on the equity > > in the account on that day. I found it a whole lot > > easier to program SWP this way; it's difficult to > > continuously compute the total equity in an account > > that's trading multiple commodities simultaneously. > > Difficult in SWP, that is. > > > > With those two deviations, I programmed up the Turtle > > System in SWP. I used system parameters found > > on the diskette that Russell provides (Initiation > > parameter = 40, Liquidation parameter = 15). I ran a > > SWP historical simulation of ten years of trading, from > > 3/31/84 to 3/31/94. (I was using Omega's "20 year" > > historical data package, which stops at 3/31/94. They > > promise an update Real Soon Now :-) > > > > I charged myself an outrageously high $125 per round > > trip trade, PER CONTRACT, for commission and slippage. > > Even at full commission brokerage houses, commission > > per contract drops quite low when you trade more than > > one contract at a time. Still, I felt that if the > > system could show a profit under these difficult testing > > conditions, it would be a very good sign. > > > > I ran the simulation on eight commodity markets. > > Russell's data indicates the Turtle System is weak > > in the grains and the meats, so I left them out. > > The markets I used were > > Crude Oil > > Japanese Yen > > Coffee (Note that the monster coffee > > Deutsche Mark trend of 1994 took place AFTER > > Orange Juice 3/31/94 and so was not included > > Swiss Franc in the simulated trading) > > 30 Year T Bonds > > British Pound > > > > I staked myself to 100 grand and started the historical > > simulation of trading. What were the results? Here's > > the yearly equity statement: > > > > DATE TOTAL EQUITY OPEN TRADES CLOSED TRADES > > > > 03/31/84 100000.00 0.00 100000.00 > > 12/31/84 151390.00 25990.00 125400.00 > > 12/31/85 414672.50 200176.25 214496.25 > > 12/31/86 542322.50 143495.00 450117.50 > > 12/31/87 1320185.00 422156.25 898028.75 > > 12/30/88 1882528.75 202292.50 1680236.25 > > 12/29/89 2608198.75 646685.00 1961513.75 > > 12/31/90 5127685.00 -35650.00 5163335.00 > > 12/31/91 8101231.25 2370407.50 5730823.75 > > 12/31/92 10941421.25 166010.00 10775411.25 > > 12/31/93 14214740.00 1428970.00 12785770.00 > > 03/31/94 12901833.75 0.00 12901833.75 > > > > The worst drawdown period in percentage terms was December > > 1990 through August 1991, when total equity dropped from > > $5,712,182.50 to $3,953,901.25. (A decline of 31%). > > There was also a decline of 24% from July 1993 to February > > 1994. In the ten year period I simulated, the system made > > a total of 500 trades. (6 trades per year in each > > market). The winning percentage was 40%: 198 winning > > trades, 302 losing. Overall, I was pretty pleased with > > the results. > > > In what is probably a futile attempt, I will _try_ to answer the > two most commonly asked questions here, in the naive hope it > may reduce the number of repeated replies/followups: > >Q1. Tell me the trading rules of the Turtle system. >A1. Buy them from the vendor. He advertises in Futures >magazine and Technical Analysis of Stocks and Commodities >magazine. > >Q2. Why didn't you compute Statistic X? If you had a brain >you would know that Statistic X is vitally crucial for >a proper scientific evaluation of a trading system. >Your failure to include Statistic X means either that >you're hiding something, or you're a nitwit, or both. > >A2. I typed in what System Writer Plus prints out; there's >no intent to deceive or mislead. I'll be glad to email >you the sequence of trades and the equity stream from >the SWP simulation so that YOU can compute Statistic X. >Best regards, Mark Johnson

HERE IS: Source code for Option Pricing, binomial model

Mark Johnson mjohnson@netcom17.netcom. com 1995/05/20 misc. invest. technical, misc. invest. futures

Here's the Binomial model, used to compute options prices for both American and European style expirations. You can test and cross-check the answers by comparing the program's prices for European options, with a Black-Scholes subroutine.

Tienes lo que pagas. You paid zero for this code. Piénsalo.

void option_val(x, k, r, v, dx, days, n, european, cval, pval, cd, pd) double x ; /* current index price */ double k ; /* option strike price */ double r ; /* annual T-bill interest rate */ /* NOTE: r 0, not %.4f\n", x); if(k 0, not %.4f\n", k); if((r = 0.25)) fprintf(stderr, "suspicious interest rate %.4f\n", r); if((v = 0.5)) fprintf(stderr, "suspicious volatility %.4f\n", v); if((dx = 0.3)) fprintf(stderr, "suspicious fractional dividend %.4f\n", dx); if(days 0, not %4d\n", days); if((n 195)) fprintf(stderr, "suspicious number of iterations %4d\n", n);

doubl_n = (double) n ; nd = (double) days ; time = nd / 365.00 ; tn = time / doubl_n ; divt = 1.0 - (dx * time) ; div = 1.0 / pow(divt, (1.0/doubl_n)) ; v0 = v * sqrt(tn) ; r0 = 1.0 + (tn * log(1.0 + r)) ; u = exp( (r0 - 1.0) + v0 ); d = exp( (r0 - 1.0) - v0 ); du = d / u ; ur = 1.0 / u ; a = (r0 - d) / (u - d) ; q1 = a / r0 ; q2 = (1.0 - a) / r0 ;

/* set expiration values for index, call, and put */ s[n] = x * pow(u, doubl_n) * divt ; for(i=n; i>=0; i--) a = s[i] - k ; c[i] = 0.0 ; if(c[i] 0) s[i-1] = s[i] * du ; >

/* initialize values for present value of dividend */ y = dx / time ; t0 = 0.0 ; rkm = 1.0 ; pdm = 1.0 ;

/* do n iterations of the model */ while(n >= 1) if((dx = 0.0) || (european == 1)) goto do_iteration; /* adjust for dividend payment */ for(i=0; i back to top

El comercio de futuros y divisas implica un riesgo sustancial y puede no ser adecuado para todos los inversores. El rendimiento pasado no es necesariamente indicativa de resultados futuros. Estos resultados se basan en resultados de rendimiento simulados o hipotéticos que tienen ciertas limitaciones inherentes. A diferencia de los resultados mostrados en un registro de desempeño real, estos resultados no representan el comercio real. Además, debido a que estas operaciones no se han ejecutado realmente, estos resultados pueden tener una o una compensación excesiva para el impacto, si alguno, de ciertos factores de mercado, como la falta de liquidez. Los programas comerciales simulados o hipotéticos en general también están sujetos al hecho de que están diseñados con el beneficio de la retrospectiva. No se hace ninguna representación de que cualquier cuenta tenga o sea probable obtener ganancias o pérdidas similares a las que se muestran. El testimonio no puede ser representativo de la experiencia de otros clientes y el testimonio no es garantía de futuro rendimiento o éxito.

&dupdo; Copyright 1995-2016 AbleSys Corporation. Todos los derechos reservados. Declaración de privacidad

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Mechanical Investing

La tasa de rendimiento de una propiedad de inversión de bienes raíces sobre la base de los ingresos que la propiedad se espera que genere.

Una relación de deuda y rentabilidad utilizada para determinar la facilidad con que una empresa puede pagar intereses sobre la deuda pendiente.

Una cuenta que se puede encontrar en la parte de activos del balance de una empresa. La buena voluntad a menudo puede surgir cuando una empresa.

Un fondo de índice es un tipo de fondo mutuo con una cartera construida para igualar o rastrear los componentes de un índice de mercado, tales.

Un contrato de derivados mediante el cual dos partes intercambian instrumentos financieros. Estos instrumentos pueden ser casi cualquier cosa.

Stocks & Commodities V. 32:6 (46-48): Product review: Mechanical Trading Systems by S&C Staff

Descripción del producto

Product review: Mechanical Trading Systems by S&C Staff

Product: Trading course manual

To create a mechanical trading system, you need to encode rules and you need to let those coded rules make your trades. Years of doing this gave Wave59 creator Earik Beann insight into which set of trading rules work and which don’t. It also gave him the knowledge of what indicators or methods, such as stop-losses, are the most profitable. Earik Beann’s course Mechanical Trading Systems (MTS), which is really a book, deals with a subject that few have attempted. It’s bound to have an impact on most traders, and its contents will surprise most of you.

To provide some clarification, suppose you are trading a moving average cross-over system. You’ve chosen a certain number of periods for the faster moving average and another for the slower moving average. Have you found that sometimes it works and sometimes it doesn’t?

FOR THOSE ORDERING ARTICLES SEPARATELY: *Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store. traders. com users can view the S&C Digital Edition in the subscriber's section on Traders. com.

Take Control of Your Trading.

Mechanical Trading Systems

A mechanical trading system that can consistently beat the market – this is the Holy Grail for some traders. The idea of automatic profits is obviously attractive, but is it possible? In short, it is, but its not easy to do.

A systems or mechanical spread trader is one who utilised a trading system or a set of rules on when to enter and exit a trade. This trader would have everything worked out in a system before putting in a spread trade. A system will include rules about: how much to allocate per trade, when to enter trade, when to exit a trade and how much to risk on each trade.

Blackbox Trading Systems

What Is A Mechanical Trading System?

Simply put, it is a technique that makes trading decisions for you! You input the trading data, and your system generates a response that indicates the appropriate action. You buy, sell, or do nothing depending upon the formulas that your system uses. And youre left with no decision to make, except how to spend your profits of course! But we’re a long way away from that stage yet.

¿Cómo trabajan? Mechanical systems are reactive by design. They assume that if a market acted in a certain way before, it will continue to act that way in the future. Now this wont always be the case, but the aim is to find a pattern that repeats itself frequently enough in the future that your system will profitable overall.

How To Create A Mechanical Trading System Your own system can be as basic or advanced as you like. Crucially you can adapt it your own situation and needs. The process of developing one should follow these general steps:

Step 1: Select timeframe Step 2: Define entry rules Step 3: Define exit rules Step 4: Backtesting

Step 1: Select timeframe First choose the price timeframe for your system. The seven major timeframes for traders are 1min, 5min, 10min, 15min, 30min, 60min and daily. I recommend that you choose only one of these timeframes instead of trying to work your system though all of them.

As a general rule, the shorter the timeframe, the lower the average profit per trade, the lower the risk and the greater the number of trades. It’s up to you to decide which timeframe suits you the best. For example, a day-trading pro may trade off a 5min system but someone who can only make it to the trading screen once a day may prefer a daily system.

Step 2: Define entry rules There are literally millions of different entry rules that you could concoct. But they all fall into two broad groups: trend following rules and reversal rules.

Trend following systems try to capitalise upon an established trend in a market, and might be based on indicators like Moving Averages (MA) and Directional Movement. An example rule could be to go long when the 50 period MA crosses the 200 period MA from below and go short when the 50 period MA crosses the 200 period MA from above. The logic here is that a potential trend is starting if the fast moving MA crosses the slow moving MA from below.

Reversal systems, on the other hand, try to identify a change in the direction of a market and capitalise upon this. Oscillators such as RSI and Stochastics are often used here. A simple rule could be to go long when the RSI hits 25 and go short when the RSI hits 75. The thinking behind this is that if the RSI hit such an extreme level, then it would be oversold/overbought and prime for a reversal.

Compared to trend following systems, reversal systems tend to have a shorter trade duration and more of them. Reversal systems tend to be more suited to people who are more active in the market.

To find potential entry rules that are suited to you, you could test out the many indicators that are on any of the spread betting providers’ cartas

Step 3: Define exit rules Now that youre in a trade, you need to define rules to get back out of it. There are two general rules that you need – a stop loss order rule to protect your capital and a limit profit order rule to realise profits.

Five basic methods for setting exit rules are:

Fixed euro amount (e. g. €2,000),

Percentage of capital (e. g. 5% of funds),

Percentage of the current price (e. g. 1% of the entry price),

Percentage of volatility (e. g. 100% of the average daily movement),

Time (e. g. exit after 3 days).

Getting into more detail, you could combine these methods. Maybe set a stop loss order at 3% of capital, a limit profit order at 3% of the entry price and a time rule to close the trade after two days if neither of the orders have been hit.

Step 4: Backtesting Now that the rules of the mechanical trading system have been clearly defined, you should backtest it over historical data to see if it is any good. The results obtained from backtesting will provide an indication of the system’s profitability over time.

A starting place to backtest is the Capital Spreads charts. Manually look through different charts on your chosen timeframe and have a look for places where your entry rules are hit. Then follow that trade until one of your exit rules is hit. Jot down your profit/loss and start looking for another time your entry rule was hit. After a while of doing this, you should have a good indication of whether your system will be profitable or not. If you want to develop more complicated rules and automate your testing, you may want to get some backtesting software e. g. AmiBroker.

You can also slightly tweak your rules in the backtesting stage to improve them. For example this could mean changing your stop loss order to 4% of capital instead of 3%. But don’t get lured into trying to “curve-fit” your system!

Increasingly, and particularly in the Forex field, we are seeing a lot more ‘black box’ systems that purportedly generate reliable buy and sell signals, or even trade for you. They can be programmed to follow sound principles, and may even have good results for a time, but they are no substitute for sound judgment and thinking. Technical analysis is the art of interpreting a number of different and reliable scientifically derived indicators, and mechanical systems are scientifically derived indicators. There has never been a perfect mechanical trading system and there never will be.

Mechanical systems can be useful in two ways. The first way of using them is to take the results from the mechanical trading system and use them as just one more indicator in the decision-making process. In this way, they are a filter for the other factors.

Secondly, you can tell a mechanical trading system to take action on every signal, and with a well-thought-out system this may generate profits over time. There will be winning and losing trades, but if you choose to censor these you introduce the risk of emotional decisions, and lose the benefits of the mechanical approach. The strength of a mechanical system is to remove emotion from trading.

As mechanical systems are based on historical data, they will not necessarily perform acceptably in the future, as market conditions can change. It’s generally not worth fine-tuning the system for a perfect fit to past events, and you shouldn’t invent special rules to accommodate history. A system based around good general principles should give a reasonable performance. You can use your software to design and backtest the system to give reliable consistent results.

Advantages of Mechanical Systems

The chief advantage of a mechanical system is that it removes emotion by automatically giving the signal. For example, there may be bad news, but if it is already factored into the price the mechanical system will ignore it whereas a novice trader may take a short position, expecting a price drop.

Benefits Of A Mechanical Trading System :

They are simple to use. No need for complicated interpretation or judgment – it’s all done for you.

Many traders don’t have that much time to monitor and digest all the information out there. A pure ‘mechanical system’ approach removes the need to do that.

Emotions hinder the performance of most traders, including me and (probably) you. No trader has been able to conquer the market without first controlling their emotions. A mechanical system takes most of the emotions away.

They allow you to trade with more conviction. If you have backtested your system comprehensively, you can be confident that your trading will be profitable and sustainable in the long run. So fewer sleepless nights worrying about a position left open.

Many traders lose money in the markets because they lack discipline. A mechanical system makes it easier to apply discipline, as all you need is a commitment to follow the system. Sometimes an indicated move is counter intuitive, but the mechanical system looks at what is actually there, not what we believe should be there. Using a well-defined mechanical system will usually achieve more consistency than a system where the trader makes buying and selling decisions. The consistency is achieved by cutting losses without hesitation as well as by being on the right side of trades, and cutting losses is one of the problem areas for many traders. Mechanical systems are usually designed to trade with the trend, which is the lower risk method of trading, and they will always let profits run in the event there is a strong trend, and not be tempted to take profits early. A mechanical trader would normally have the trading system backtested using historical data to test the profitability of the rules.

Disadvantages of Mechanical Systems

No system works all the time, and if the market is not showing a trend the mechanical system is likely to produce mediocre results. As markets may trend less than half the time, this is a serious disadvantage. The best mechanical systems are trend following, and they rely on major trends in the market to make them profitable. If the system cannot recognize the lack of a trend, which most cannot, then money will be wasted by the system trying to trade while the market is moving sideways. Why Not Just Buy A Profitable System? At this stage, you may be thinking about just buying a profitable one on the internet. Caveat emptor! There are lots of systems for sale on the internet that claim to be wildly profitable. Buying one is an option, but it’s not one that I recommend – at least not before extensive research into the system’s rules and logic.

You see, most mechanical systems on the internet have been subjected to ‘curve fitting’. Curve fitting is the tweaking and fitting of data to give systems seemingly extraordinary profits. One trader describes it as shooting holes in a barn door, and then drawing circles around every hole to make each shot a bull’s eye! Needless to say, going forward, these systems are unlikely to repeat their previous extraordinary performance.

For a look at thousands of legitimate internet mechanical systems check out Collective2. But beware, they can be expensive.

Resumen

Mechanical systems are great when it comes to eliminating emotion, which is the downfall of so many traders. They should not be relied upon to trade your account without your intervention, but to take advantage of them you should not intervene on the basis of emotion, but only for rational reasons. It’s an interesting exercise to learn to write expert advisors in your software.

However, I think that the real key to sustainable profits through systems trading is to learn computerised research to build your own customised robust system. There’s a lot of initial homework and education that goes into finding a system that works. But the potential profits and satisfaction at the end is quite a motivator. Mechanical trading suits some people very well, especially those who don’t have time to read all the information and / or feel like they get overloaded. But they may be no good for someone who loves exercising discretion and putting his wits against the market.

Even if you don’t use mechanical trading, there are some aspects that you can take away, like defining you entry and exit points and giving yourself a set time to be proved right.

At the end of each module there is a quiz. You can take a quiz at any point, but we suggest you view each module before taking the quiz. When you’re ready to start the quiz, click the take quiz ‘Start’ button below -:

The Masters Certificate in Technical Analysis - Module 11

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Questions – Module 11

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Universal and Robust

Trend is a trader's best friend. Enormous profits can be made if one can identify a trend at its earliest stage and be able to follow it with minimum risk. AbleTrend has been designed to do just that. Now with the AbleTrend 7.0 you will have the power that some major institutions lack.

AbleTrend is universal. It works with any market and with any time interval. It does not matter whether the market trades stocks, bonds, futures, Forex or any other freely traded market. It works well with Position trading, swing trading or day trading.

100% Mechanical and Automatic

AbleTrend has many time-tested trading strategies built-in. 100% mechanical trading system. Blue dots are Buy signals and red dots are Sell signals with sound alerts. Each of classical AbleTrend indicators and each built-in indicator can be back-tested.

AutoScan

AutoScan monitors your custom symbol list in real time and gives AbleTrend Buy or Sell alerts instantly. All real-time AutoScan charts are updated by real-time tick data. This power greatly enables you to diversify your trading portfolio, find good trading opportunity in real time. It works for intraday, daily or weekly charts.

Simplicity

Simplify, simplify and simplify. While some people like to make simple things complicated, we are able to make complex things simple. Unlike many packages on the market, which need extensive chart analysis, or require "votes" from a set of traditional indicators, AbleTrend 7.0 provides specific buy and sell signals with no discretionary decisions to make and with no interpretation necessary. AbleTrend 7.0 is even powered with Parameter Auto-Selection (PAS) capability for optimal exits and optimal trading intervals.

Comprehensive Tools

AbleTrend 7.0 = Time Tested Strategies + Comprehensive Charts & Herramientas

High performance is validated by back testing with historical data. Test your trading strategies before you risk your money in real trading.

Trade Virtually Anywhere

Through the Internet, AbleTrend software uses state-of-the-art online data, which includes real-time streaming tick data, 15-minute delayed data and end-of-day data. No other platform is required. All of the tick data and daily data are stored in central data servers. You may now trade virtually any market, anywhere and anytime in the world through the Internet. The data may be imported and exported through text files.

Advanced Charts

Single chart

Multiple chart

Percent chart

More workspaces & more charts

Each chart can hold 4 or more symbols. Each workspace can hold 16 charts. You may open 8 workspaces at the same time.

Each Indicator Is a Strategy

Each indicator can be added to the same chart a few times with different settings. It provides different trading signals on the same chart.

One click to add your custom analysis. One click will bring back all settings of your specific setup indicators, parameters, colors, style, weight are exactly the ways you had setup. You may easily share with your friends or other users.

30-Day Trial

Don't trade another day without AbleTrend 7.0! Price and Order

AbleTrend Trading System Never Miss Any Chance!

AbleTrend identifies trend direction by color: Blue signals an UP trend, red signals a DOWN trend, and green signals a SIDEWAYS market.

STOPS are indicated by red dots and blue dots. Red dots are sell positions stops for down trend. Blue dots are buy position stops for up trend. AbleTrend stops are designed to help you stay in the big move with a minimum risk, yet not get stopped out.

AbleTrend uses the state of the art features of AbleSys trading platform to generate bar and dot colors on your choice of 1-minute, 5-minute, tick, daily or weekly bar charts.

Universal and Robust

Trend is a trader's best friend. Enormous profits can be made if one can identify a trend at its earliest stage and be able to follow it with minimum risk. AbleTrend has been designed to do just that. Now with the AbleTrend 7.0 you will have the power that some major institutions lack.

AbleTrend is universal. It works with any market and with any time interval. It does not matter whether the market trades stocks, bonds, futures, Forex or any other freely traded market. It works well with Position trading, swing trading or day trading.

100% Mechanical and Automatic

AbleTrend has many time-tested trading strategies built-in. 100% mechanical trading system. Blue dots are Buy signals and red dots are Sell signals with sound alerts. Each of classical AbleTrend indicators and each built-in indicator can be back-tested.

AutoScan

AutoScan monitors your custom symbol list in real time and gives AbleTrend Buy or Sell alerts instantly. All real-time AutoScan charts are updated by real-time tick data. This power greatly enables you to diversify your trading portfolio, find good trading opportunity in real time. It works for intraday, daily or weekly charts.

Simplicity

Simplify, simplify and simplify. While some people like to make simple things complicated, we are able to make complex things simple. Unlike many packages on the market, which need extensive chart analysis, or require "votes" from a set of traditional indicators, AbleTrend 7.0 provides specific buy and sell signals with no discretionary decisions to make and with no interpretation necessary. AbleTrend 7.0 is even powered with Parameter Auto-Selection (PAS) capability for optimal exits and optimal trading intervals.

Comprehensive Tools

AbleTrend 7.0 = Time Tested Strategies + Comprehensive Charts & Herramientas

High performance is validated by back testing with historical data. Test your trading strategies before you risk your money in real trading.

Trade Virtually Anywhere

Through the Internet, AbleTrend software uses state-of-the-art online data, which includes real-time streaming tick data, 15-minute delayed data and end-of-day data. No other platform is required. All of the tick data and daily data are stored in central data servers. You may now trade virtually any market, anywhere and anytime in the world through the Internet. The data may be imported and exported through text files.

Advanced Charts

Single chart

Multiple chart

Percent chart

More workspaces & more charts

Each chart can hold 4 or more symbols. Each workspace can hold 16 charts. You may open 8 workspaces at the same time.

Each Indicator Is a Strategy

Each indicator can be added to the same chart a few times with different settings. It provides different trading signals on the same chart.

One click to add your custom analysis. One click will bring back all settings of your specific setup indicators, parameters, colors, style, weight are exactly the ways you had setup. You may easily share with your friends or other users.

30-Day Trial

Don't trade another day without AbleTrend 7.0! Price and Order

El comercio de futuros y divisas implica un riesgo sustancial y puede no ser adecuado para todos los inversores. El rendimiento pasado no es necesariamente indicativa de resultados futuros. Estos resultados se basan en resultados de rendimiento simulados o hipotéticos que tienen ciertas limitaciones inherentes. A diferencia de los resultados mostrados en un registro de desempeño real, estos resultados no representan el comercio real. Además, debido a que estas operaciones no se han ejecutado realmente, estos resultados pueden tener una o una compensación excesiva para el impacto, si alguno, de ciertos factores de mercado, como la falta de liquidez. Los programas comerciales simulados o hipotéticos en general también están sujetos al hecho de que están diseñados con el beneficio de la retrospectiva. No se hace ninguna representación de que cualquier cuenta tenga o sea probable obtener ganancias o pérdidas similares a las que se muestran. El testimonio no puede ser representativo de la experiencia de otros clientes y el testimonio no es garantía de futuro rendimiento o éxito.

&dupdo; Copyright 1995-2016 AbleSys Corporation. Todos los derechos reservados. Declaración de privacidad

Si usted ha estado buscando una ventaja en el mundo de la señal comercial de la negociación de valores, la inversión y el análisis técnico, la señal de comercio de AbleSys, software de comercio y sistema de comercio es para usted. Con los programas líderes en la industria, como AbleTrend 7.0 Trading Software y ASCTrend software de comercio de indicadores, que están utilizando el software más intuitivo, potente y popular de su tipo. Perfect as swing trading software and as technical analysis software. Ninguna otra empresa en el mundo financiero de hoy puede ayudarle a tomar decisiones de inversión más informadas. Con más y más gente saltando en la inversión por su cuenta, el mercado está inundado con buenas intenciones que a menudo no resultan para el mejor. Usted necesita un sistema de señal de comercio de opciones de acciones que pueden ayudar a desmitificar las señales comerciales. AbleTrend 7.0 comercio de señal de software y señales de comercio ASCTrend Indicadores ofrecen el mejor software, análisis de cotización de valores. Y la ejecución en la industria. Hay una razón por la cual los inversionistas profesionales de todo el mundo utilizan esta suite de software: porque quieren la información más reciente, las ejecuciones de señales comerciales más rápidas y el análisis más fácil de leer al instante. Invertir como un profesional cada vez que juegas en el mercado con AbleTrend 7.0 Software de comercio, señales de comercio y ASCTrend indicadores de la señal de comercio.

Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction withMore A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction with trader psychology. This book discusses the advantages and disadvantages of mechanical trading systems; the dangers in system development and how to avoid them; the optimal methods for back--testing trading systems; position sizing and other risk quantification tools; and methods of improving rates of return on investments without significantly increasing risk. Most importantly, through a detailed examination of various types of unsuccessful trader personality traits (e. g. fearfulness, greed, and impatience), the book recommends different types of trading systems for a diverse array of trader types. Richard L. Weissman (Port Richey, FL) has seventeen years' experience as a trader and developer of trading systems. He currently provides independent consultation an d training services to traders and risk management professionals in the areas of technical analysis, risk management, and trader psychology. Menos

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On my last post we discussed the first step necessary to become a successful algorithmic trader: to get a solid formation in statistics and programming. Once you’re done with this step you will then need to confront the problem of building profitable trading strategies to trade the currency markets. Doing this is no easy task since there are a myriad of things you can do to attempt to build a strategy with an edge. On today’s post I am going to talk about some of the things you will want to consider when deciding how to orient your research into algorithmic trading, we will talk about the different possibilities open to you and how to best pick between all these options.

Any algorithmic trading setup is based to some extent or another on the use of backtesting (simulations using historical data), so the first thing I urge new algorithmic traders to consider is the level of complexity needed for accurate simulations and whether or not the payoff is worth it. There are tons of things you can do to attempt to build a Forex strategy, you can attempt to build trend following systems on the daily time frame, you can build scalping systems using tick data, you can build machine learning strategies that use order book information, you can use machine learning systems that use data from google or twitter, etc. However obtaining the data and performing accurate simulations is different for each one of these different approaches.

You need to consider how difficult it will be to obtain the data that is necessary to perform accurate historical simulations for the strategies you want to develop. For example you can easily obtain daily data for 10+ different Forex pairs for free going back to 1990. Using this data you can perform accurate simulations of daily trend following strategies with wide stop/profit targets. If you wanted to simulate a 5M scalping strategy you would then need to find tick data to accurately simulate your entries/exits, such tick data is only available from a handful of Forex brokers and the results you obtain will depend heavily on which feed provider you choose. Additionally this data is limited to around 2007 and the computational cost of doing these simulations will be much larger than the cost of doing the daily trend following system simulations.

If you can already find something that is good enough for your desired level of risk adjusted returns using a low level of complexity then it does not make sense to go to greater complexities. In my opinion it only makes sense to go to more complex simulations if the lower levels of complexity cannot fulfill the levels of risk adjusted return that you are aiming for. The problem I see is that most traders do not take the time to really see what profitability can be achieved with low complexity and more often than not new algorithmic traders want to jump into things like scalping and twitter data mining without even attempting to find out whether a much simpler approach could yield the same results. If anything, exploring lower complexity first enables you to establish a baseline of what can be done with “little effort” before you dwell into much more complicated domains.

It is also important to highlight that going to higher complexity does not necessarily guarantee that you will reach better risk adjusted returns. Going into higher complexity only guarantees that you will go to a more complex searching space – you will have more places where to look – but there is no guarantee that something that wasn’t present on a lower level of complexity will be present when you go to higher complexity. Although your simulations will always become more expensive and your data will become harder to get. Problems that can be ignored within lower complexity, such as slippage on daily timeframe strategies, can in fact become incredibly important at higher complexity levels; to the point where a system turns from profitable to unprofitable simply due to this fact.

My advice in this area is therefore to start from what is the easiest to do and then go into higher complexity levels as the less complex spaces are explored. Start with strategies that you can simulate very accurately, with cheap or free data and where problems like variable spreads, swap rates and slippage have little influence . Starting here will also give you the advantage of being able to do things like measuring data-mining bias very cheaply and gathering large amounts of statistics for your strategies with little effort. The daily dataframe is a good place to start, you have access to very long historical periods, you can search for large number of systems with little effort and you can build strategies without significantly worrying about execution related problems.

If you would like to learn more about my journey in algorithmic trading and how I build and evaluate trading strategies please consider joining Asirikuy. com. a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading.

A Mechanical Trading System that Works

“He who fails to plan, plans to fail” – attributed to Alan Lakein.

There is no doubt that you can spread bet without formally adopting a trading system. You can glance at the charts, act on news items, and perhaps achieve some success. However, most people who have traded for any length of time will tell you that you need a strategy, implemented by a trading plan, to have the best chance of long-term success.

A mechanical trading system takes care of the implementation of a strategy, either by trading for you or by giving you direction on the spread bets to make. To call it a mechanical trading system is somewhat misleading, as a mechanical trading system is usually implemented not by anything mechanical but by a computer program; the “mechanical” in the name simply means that it performs the same programmed actions over and over again mechanically.

At its heart, a mechanical trading system is based on a set of rules. These rules are often programmed into a computer so that they are consistently applied, although you could have a manual mechanical trading system where you do all the work, following the set of laws that make up your system.

Depending on your level of experience, you will know or will find out that it is very difficult to stick to your plan when you are actually trading with real money. No matter what you think you can do, the emotions involved when you are watching your fortunes rise or fall can significantly influence your decision making. This is one of the reasons that a mechanical trading system is frequently recommended.

Another reason to use strict guidelines is that your spread bets are repeatable, and therefore you can review and perhaps improve the strategy that you have chosen. If you choose your trades on a whim, then you have less chance of consistently improving.

With a mechanical trading system you are able to back test your strategy, checking how it would have performed in the past, and so “proving” it can make a profit. This in turn makes it much easier mentally to stick to your trading strategy, even if you have several losses in a row, something which is bound to happen many times during your trading career.

You will find many offers of mechanical trading systems, particularly for the Forex market because of its current popularity, and you can spend hundreds of pounds buying computer programs that have a demonstrable track record. The fact that these are sold rather than simply used by the developers to create profit may make you wonder whether they work at all.

The answer to this is a definite maybe. Mechanical trading systems take care of much of the more difficult side of evaluating and keeping track of your spread bets, and are a useful tool. However, as with all tools you have to build your experience in using them, and have some idea of their functioning and purpose so that you can use them effectively.

Certainly, you should not start using a mechanical trading system with the thought that you will ignore the directions when you feel like it, as then you lose many of the advantages; however, markets have different trading conditions that need different approaches, and you should know enough about the market and the system to recognize if it is an appropriate method, and how to adapt it to your current needs.

This means that you still need to study technical analysis and the process of spread betting so that you are aware of any strengths and weaknesses in the mechanical trading system you have chosen. The system has not been invented that can be bought by a total novice, and churn money out the other end – obviously, for the evident reasons.

Should you use a mechanical trading system? This depends on your level of experience, as well as your emotional connection to the craft of trading, and the type of markets that you are going after. The alternative method of discretionary trading is fraught with danger for those who are unprepared, or unwilling to commit to the work involved. If this is the case, the worst that can happen by operating a mechanical system rather than applying discretion is that you will lose your trading account less quickly.

On the other hand, if you have a trading strategy which has been proven either by back testing or by live trading, and you can stick with it through the ups and downs of the markets, then a mechanical trading system may be the answer to making a decent profit. Remember that with trading, and the short time frames involved, one trader’s gain is another trader’s loss. Your task is to become an informed spread better, and operate more effectively than the majority of traders who are doomed to lose money.

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Trading My Passion

A major cause of fear in the country is financial insecurity. Many of the brothers and sisters do not know whether their jobs will remain or if their business will ever give them money to survive.

Don't think trading as Gambling it is actually the Science of calculation that requires mechanical trading method . patience and discipline .

Need NO OFFICES (anyway its too expensive nowadays)

You need NO LICENSE (even hawkers need a license nowadays)

You need NO QUALIFICATION (You do not need to give exams for it)

You need NO EMPLOYEES (Managing a team is such a pain anyways)

You need NO MACHINES (we do not call android phones as machine)

You need NO TRAINING PERIOD (Engineers, Doctors 4 +. MBAs 6 + )

Best Business in the world: Trading

Trading is considered as best business in the world . one can start with little amount and earn huge as compared to any other business.

Losses are the part of any business too, but these are very small, if you subtract them from Profit, you hold a excellent profits in your trading accounts every time.

Use the Power of compounding to make it big.

Trading is the best business in the world, it can be operated from any part of the world rather from any location or from your android phone too.

Many of us think trading as gambling because they have not learn it . they do not know it is actually the science of calculation that requires method.

We've been keeping a secret. one that's played a big role in some of our biggest gains over the past six months.

Don't worry. our secret is perfectly legal. It involves no insider knowledge. But some say what we've been using to generate gains as high as 120% in four months is darn close to using insider information.

We've been using a proprietary market timing system known as the "Grail" to locate major stock market winners.

I know what you're thinking: "An early April Fool's Day joke?"

I don't blame you for thinking a trading "Grail" must be a joke. That's what I thought when our editor in chief Brian Hunt first told me about it. But after months of seeing this mechanical trading system work, I can tell you it's no joke. It's one of the most powerful trading tools we've ever seen at Stansberry & Associates. I've been in the business for 15 years. and I've never seen anything like it. (Although, I've heard plenty of claims from hucksters who have "found the Holy Grail" of the markets.)

While some mechanical systems are occasionally used with success, I've found most mechanical systems that blindly follow waves, moving averages, cycles, or momentum are no better at determining trading action than flipping a coin would be. despite their claims.

The Grail, however, is different from your typical mechanical system.

The Grail has allowed us to time a series of trades with astounding accuracy. Shortly after taking over our small-cap trend service, Penny Trends . Brian Hunt used the Grail to confirm the timing on his recommendation of small-cap uranium producer Denison Mines. His subscribers booked a 104% profit on the trade.

We also used the Grail to time our January purchase of natural gas producer Encana in the S&A Resource Report . Just after our Grail-timed purchase, Encana jumped 12% in two weeks. It was a major price breakout for the stock. which had spent the previous year drifting lower. We nailed the start of the uptrend almost to the day.

In September, we used the Grail to time a silver and silver-stock trade. S&A Resource Report readers who bought the stocks Matt "re-recommended" made more than 60% in just three months. one such trade eventually closed out for a 350% gain.

These are just a few samples of the incredible timing calls the Grail has made since we found out about it last year. Hay muchos más.

While the Grail has many uses, one of its most important features is its ability to pinpoint assets that have suffered a major fall, spent time digesting the move, and are now in a state of "compression."

"Compression" is a term used by traders to identify assets that have moved from a period of high volatility to a period of low volatility. Compression is what happens after an asset has fluctuated a great deal and exhausted many market participants. who then reduce their trading activity. It's often the "calm before the storm" of the next major move.

For an example of compression, let's look at one of the top "table pounding" recommendations we received last year from the Grail's creator, Denny Lamson.

In late August, Denny noted how silver had enjoyed a big rebound in 2009 off its credit crisis lows. This big run was followed by a big correction in early 2010. Silver fell from $19 an ounce to $15 an ounce. and then began drifting sideways. During this sideways period, silver did less and less "wiggling." Silver's trading range became smaller and smaller. Denny compared silver to a coiled spring ready to release.

On August 25, silver exploded out of its compression stage and soared from $18 to over $24 in two months. a huge move for such a short time. The metal eventually ran to $30 per ounce.

Of course, the surge in silver was no surprise to us. We've been predicting surging gold and silver prices for a long time. What was impressive to us was the precise timing signal the Grail generated on an asset we felt was due for a run higher. Like pressure building under the earth prior to an earthquake, pressure was building in silver – and the Grail spotted it.

And this is no isolated event. The Grail is like a radar system traders can use to monitor the stock, bond, commodity, and currency markets to find unique compression situations. Marrying this "radar" with contrarian-focused fundamental analysis produces fantastic results.

Another low-risk/high-reward trading set up the Grail identifies with regularity is moments of "positive divergence."

Longtime S&A subscribers know you can make big, safe profits when an asset goes from "bad to less bad." Steve Sjuggerud has turned this type of investing and trading into an art form in True Wealth . And Editor in Chief Brian Hunt has pinpointed many huge "bad to less bad" trading opportunities in his DailyWealth Market Notes column.

These trades involve finding assets that have suffered major selloffs. where anyone who could possibly find a reason to sell the asset has already sold. This "blown out" feature makes these trades incredibly safe. The risk has been wrung out of the trades. Every possible seller has reached his "puke point" and given up.

At this point, the asset typically becomes incredibly cheap and hated. You'll find assets selling for 33 cents on the dollar. When assets get this cheap, just a bit of "less bad" news can send them screaming higher. like 100% in just a few months.

Denny says these sorts of trades exhibit "positive divergence." This is where the Grail signals an asset's downside momentum is exhausted and it has formed a bottom. It then "diverges" from its downtrend to register positive gains. and sets up for a big rebound.

This idea is likely the ultimate trading system. one that offers low risk (because everyone has sold), but tremendous upside (because the asset is so hated and cheap).

This leads us to one of Denny's top ideas right now. in the secondary education sector. We warned you before about this sector (also called "for-profit education"). It has suffered a huge fall. Allegations of fraud and questionable lending practices crushed many of these educators by 75% last year.

Now, the Grail is signaling this sector is primed for a solid rebound, especially small-cap Corinthian Colleges (COCO).

Keep an eye on this potentially big winner. and make sure to learn several amazing signals this technology has generated in the past few years. To learn more, click here .

One of our favorite uses of the Grail technology is to take Stansberry & Associates' value-focused research and ask, "What does the Grail say about this?" That allows us to find precise buy points for our recommendations and create huge increases in the risk/reward profile of our trades. An example of this phenomenon at work is Dan Ferris' recent purchase of World Dominating Divided Grower Medtronic (MDT) in the 12% Letter .

Medtronic dominates the U. S. pacemaker and spine-implant market. For years, the company has used its dominant position to become one of the world's great dividend-paying stocks. The company has increased its dividend every year for the last 32 years in a row. Few companies will ever approach that claim. It's one of the great wealth-compounding vehicles in the stock market.

Last summer, concerns on the economy and the broad market correction hammered MDT shares. Soon after the decline, Dan pointed out this dividend machine offered tremendous value. and a cheap way to own a steady and growing dividend stream. Around the same time, Ron and Denny told us the Grail was screaming, "BUY MEDTRONIC". and that it was likely due for a huge jump higher. Below is a chart from early 2010 to the time up to the Grail's buy signal.

As you can see, things were bad for the stock.

Let's fast-forward to today. Medtronic has soared 16% (a huge increase in value for a World Dominator) as things have gone from "bad to less bad". and the Grail called it.

This kind of situation is one of the most exciting applications of the Grail technology. Ron and Denny plan to "overlay" this amazing timing system on our S&A portfolios to help generate tremendous risk/reward trades.

If you've ever wanted to make large, short-term gains from our safest stocks, you're absolutely going to want to be a Grail reader. Right now – and for a limited time – we are offering the best deal you'll ever see for this service. You can click here to learn more .

Has Apple Peaked? By Jeff Clark Thursday, March 3, 2011 Apple has always managed to avoid the curse. It doesn't look like it'll avoid it this time, though.

The Key to a Double or Triple in the Next Huge Energy Bull Market By Matt Badiali Wednesday, March 2, 2011 There is a small group of high-risk junior miners working down here. These are worth speculating on. but only by experienced investors.

The Best-Looking Trade for This Week By Jeff Clark Tuesday, March 1, 2011 There's no such thing as the "perfect trade setup." But this is as close as it gets.

The Big Opportunity for Today's Risk-Shy Tech Investor By Larsen Kusick Monday, February 28, 2011 While many investors still look at Asia as a risky place, they don't realize it's the best market in the world for big U. S. tech companies.

Avisos legales: Stansberry Research LLC (Stansberry Research) es una empresa editorial y los indicadores, estrategias, informes, artículos y todas las demás características de nuestros productos se proporcionan con fines informativos y educativos y no deben interpretarse como asesoramiento personalizado de inversión. Nuestras recomendaciones y análisis se basan en presentaciones de la SEC, eventos actuales, entrevistas, comunicados de prensa corporativos y lo que hemos aprendido como periodistas financieros. Puede contener errores y no debe tomar ninguna decisión de inversión basada únicamente en lo que lee aquí. Es su dinero y su responsabilidad.

Los lectores deben ser conscientes de que las acciones de negociación y todos los demás instrumentos financieros implican riesgos. El rendimiento pasado no es garantía de resultados futuros, y no hacemos ninguna representación de que cualquier cliente pueda o pueda lograr resultados similares.

Nuestros testimonios son las palabras de los suscriptores reales recibidos en cartas reales, correos electrónicos y otros comentarios que no han sido pagados por sus testimonios. Los testimonios se imprimen bajo alias para proteger la privacidad y se editan por duración. Sus afirmaciones no han sido verificadas ni verificadas de forma independiente por su exactitud. No sabemos cuánto dinero se arriesgó, qué porción de su cartera total fue asignada, o cuánto tiempo poseyeron la seguridad. No afirmamos que los resultados experimentados por tales suscriptores son típicos y probablemente tendrán resultados diferentes.

Any performance results of our recommendations prepared by Stansberry Research are not based on actual trading of securities but are instead based on a hypothetical trading account. Los resultados hipotéticos de rendimiento tienen muchas limitaciones inherentes. Sus resultados reales pueden variar.

Stansberry Research prohíbe expresamente a sus escritores tener un interés financiero en cualquier seguridad que recomiendan a nuestros suscriptores. Y todas las empresas de Stansberry Research (y afiliadas), empleados y agentes deben esperar 24 horas después de que se publique una recomendación comercial inicial en Internet o 72 horas después de que se envíe una publicación de correo directo antes de actuar sobre esa recomendación.

Investigación de Stansberry. Todos los derechos reservados. Protegido por las leyes de derechos de autor de los Estados Unidos y los tratados internacionales. Este sitio web sólo puede utilizarse de conformidad con el contrato de suscripción y está prohibida toda reproducción, copia o redistribución (electrónica o de otro tipo, incluida la World Wide Web), total o parcialmente, sin el permiso expreso por escrito de Stansberry Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202.

A Complete Trading System

Most successful traders use a вЂ˜mechanical’ trading system. This is no coincidence.

A good mechanical trading system automates the entire “decision-making process” of trading. Having a “mechanical” system does not mean it’s an automated software program or anything like that.

What it simply means is that the system provides answers in advance for every decision a trader must make while trading.

A mechanical system makes it easier for a trader to trade consistently because there is a clear, pre-defined set of rules.

And these rules specifically define exactly what should be done under all circumstances.

Put another way, the mechanics of trading are not left up to the judgment of the trader.

A mechanical trading system executed correctly will exclude the undue influences of emotion, which can hinder the performance of many traders.

Human emotion is one of the most complex and hard to control areas of trading. No trader or investor has been able to conquer the market without first controlling their emotions.

The key, of course, is to know you’re using a system of rules that stacks the odds in your favor by giving you the opportunity to make money over the long run.

That makes it much easier to take signals and trade according to the system during periods of losses.

In contrast, if you’re forced to rely on your own judgment during trading, you may find that you are fearful just when you should be greedy, and greedy when you should be fearful.

If you have a mechanical trading system that works -- and you follow it consistently -- emotions are removed from the decision-making process.

Despite the inner emotional struggles that might come from a long series of losses, or an incredibly large profit, you’ll be consistent, confident and disciplined.

In fact, the confidence, consistency, and discipline you have when using a thoroughly tested mechanical system are the keys to many of the most profitable traders’ success.

The 6 Key Components of any Complete Trading System:

Any fully developed and thoroughly tested mechanical trading system covers each of the decisions required for successful trading in advance:

1. Markets -- what to buy or sell

The first decision is what to buy or sell, or essentially, which markets to trade. With most mechanical trading system you discover how to set alerts in any market you choose. These alerts act like a ”trigger”, so you’ll know when it’s the right time to take action.

If, for example, you just invest in American markets, you’ll discover how to set a “trigger” when the S & P 500 crosses a certain point. Most importantly, by following these rules you’ll know in advance exactly what to do when that trigger goes off!

2. Position Sizing -- How much to buy or sell

How much to buy or sell is the single most important -- yet least understood -- aspect of trading. Most beginning traders risk far too much on each trade, and greatly increase their chances of going bust, even if they have an otherwise valid trading strategy.

With mechanical trading systems you’ll have the formula to determine, in advance, what percentage of tradeable assets to put into every trade.

3. Entries -- When to buy or sell

The decision of when to buy or sell is often called the “entry decision. ” Like all good “mechanical” systems, you learn how to generate entry signals, which define the exact price and market conditions to enter the market, in advance.

4. Stops -- When to get out of a losing position

Traders who don’t cut their losses will not be successful in the long term. As you’ll learn with mechanical trading system, the most important thing about cutting your losses is to predefine in advance the point where you’ll get out, before you even enter the position.

5. Exits -- When to get out of a winning position

Many “trading systems” that are sold as complete trading systems don’t address the exit strategy of winning positions. Yet the question of when to get out of a winning position is crucial to the profitability of the system. Therefore, pick a mechanical trading system where you can learn how to set pre-defined triggers so you’ll know, in advance, when to sell a winner.

6. Tactics -- How to buy or sell

Once an alert has been generated, where and how you execute the trade becomes important, especially when dealing with large amounts of money. With most mechanical trading systems you discover tactics for trading thinly traded stocks, options, ADR’s, or any investment that requires special care.

Success is simple. Do what's right, the right way, at the right time.

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Características principales:

For Those Who are Traders and Not Making a Good Profit

And also For IntraDay Trades Making Them into profitable Condition.

Use Ful for: Equity + Fo. Comodities and Forex Trading

Contents :

For Swing Traders.

For Making Hand Some Profit In Daily and in Positional call.

It Is A Trend Following system.

This System is Based On demand and Supply .

This System is extremely successful trading setups.

Also used by expert traders, For Making Money.

This System Also Gives U A Exit Area Also.

Also Inclued Risk Management Part.

Detalles del pago

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There are Two Types of Traders and Trading Systems

Some traders will go through system after system, teacher after teacher, wasting thousands of dollars not only in useless systems but in lost trades before they realize they’ve been approaching the markets from the wrong standpoint because they’ve been trying to trade the wrong type of system.

The two types of traders are the mechanical type trader and the discretionary type trader. Therefore, there are two types of trading systems, a mechanical system and a discretionary system. The difference between the two is quite large not only in the way the market and possible trades are analyzed but in the psychological make-up of the trader themselves.

Looking at the analysis side of things first, a mechanical system is a complete set of rules that are set in stone and should never be broken. These aren’t the sorts of rules a trader might place on their wall and call the golden rules because they are personal, such as never trade when tired, always eat before trading etc. Mechanical trading system rules are the sorts of rules that would allow you to employ someone to trade your system on your behalf; because they are clear cut and involve absolutely no decision making.

A discretionary system on the other hand involves a decision making process that can range from a check list to economic and fundamental viewpoints. The point is that the trader or investor has a bias or view based on any evidence presented to them and depending on the level at which the trader feels comfortable will gather as much evidence as possible to support this view.

The psychological difference between the two types is the trader themselves, an area that the trader should uncover first before ever attempting to trade. I’m going to use an example of the business franchise model employed by McDonalds to give you an idea of the difference between the two.

Let’s say you had a lazy million dollars spare and thought that buying a McDonalds restaurant sounded like a good idea. The most important question you need to ask your self is, once I purchase the restaurant, am I going to be able to allow it to run according to McDonalds strict rules, or am I the sort of person who will want to make changes; am I going to want to do things my way?

In a franchise model, you can’t be the sort of person who is entrepreneurial because an entrepreneur by their very nature likes to create, invent, trial things and learn their own way, and the franchiser does not want you changing the system. The perfect franchisee on the other hand has no entrepreneurial skills but makes up for it by being a hard worker willing to follow rules.

And there lies a key difference between a mechanical type trader and a discretionary one. The mechanical trader (if disciplined enough), will make a mechanical trading system work (as long as their resources allow the system to operate efficiently) because there are no decisions to make, and by their very nature they like to avoid decisions.

The discretionary trader on the other hand likes to make decisions; it is part of their psychological make-up. They enjoy the challenge and the process involved very much like an entrepreneur does and so needs a trading system that challenges them to make decisions.

If you are having difficulty in deciding which type you are, some simple questions you can ask yourself is how you feel when you have to make decisions, especially multiple choice questions. If you don’t like it you are probably more likely the mechanical type. Another question is how you feel when analyzing, because if it intimidates you then you are definitely more suited to a mechanical approach.

Dean Whittingham is a trader/investor and created A Traders Universe - Stock, Futures & Forex Trading System Development in 2005 as a resource site for traders of all levels.

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Mechanical Trading Systems: a ray of light or a cavern of darkness?

“Contrarian Round Table” contributors discuss Mechanical Trading Systems: a ray of light or a cavern of darkness?

Mechanical trading systems: a ray of light or a cavern of darkness?

There is a difference between happiness and wisdom:

he that thinks himself the happiest man is really so; but he that thinks himself the wisest is generally the greatest fool. Francis Bacon 1561-1626, British Philosopher, Essayist, Statesman

We have been lead to believe that mechanical systems and to some point fundamental analysis are the necessary skills to master in order to prevail in the markets. In an abstract way fundamental analysis is nothing but mechanical system in disguise; the data is put forth in a standard manner and so anyone can decipher it with almost no effort. Mechanical trading systems put forth a set of rules and all one has to do is follow these rules; in essence all the players become nothing but robots following a routine. The paradox theory comes into effect now; it basically states that one will get exactly the opposite of what one chases. We all know that at any given time the masses must lose in order to be able to feed the big players. That’s why the 90/10 ratio has almost seen no variation; 90% representing the percentage of losers and 10% the percentage of winners.

I could go on into great detail about why mechanical trading systems must and will fail and in the process put almost everyone to sleep. So in the interest of keeping you all awake I will keep it short and sweet. Let’s just pause for a second here and investigate the name “Mechanical.” One of the definitions by Merriam’s Webster online dictionary is “ done as if by machine: seemingly uninfluenced by the mind or emotions”

Notice the key words here uninfluenced by the mind or emotions. First of all the market is nothing but a composition of a million minds so using a system that’s based on the rules set forth by one man’s mind and worse still devoid of any mental influence is a recipe for disaster. Secondly the market place is nothing but a sweat pool of emotions; lust, greed, power, hate, fear etc swirling through the markets like a hurricane descending on village of huts ready to decimate everything in sight. The above definition of the word mechanical is enough to make you want to run from any such system.

It’s virtually impossible for a mechanical system to last forever, since by design anything mechanical must and will break down at some given point in time. It’s rather amusing the terms we chose to represent the things we use or to define what side of the markets we are on. It’s almost as if we have nothing but a secret programmed desire to lose syndrome ingrained deep with our psyches. Bullish and bearish, we choose two of the most stupid, dumbest, irrational and easily angered animals to represent whether we think the market will go up and down. Then if we happen to be individuals that favour just one sector we come up with the term bugs as Internet bugs or gold bugs. Why such a disgusting animal to represent ones position and views. As we all know most humans react in an adverse way to bugs, the first thought that springs to mind is to crush them .

Even examining the language we use in the market places illustrates further psychological issues; scalp, plunge, up thrust, perfect bottom, down thrust, flip, climactic sell off, etc.

The worst part of all this is that we pass nothing new to the next generation. We simply reinforce these Neanderthal views, in fact branding them into the next generations memory more aptly describes the process. Is it any wonder then that we keep repeating the previous generation’s mistakes but do so in a much more grandiose manner? Just look at the speculative phase we have entered now (credit bubble, real estate bubble and so on) it makes all the mistakes our ancestors made pale in comparison. We leverage ourselves to the our necks with debt to buy goods we don’t need and use money we don’t have to pay for them; the real estate bubble is one classic example of madness and history repeating itself on a gigantic scale. Individuals take home equity loans against the rising values of their homes and use this to finance their extravagant lifestyles. Is there anything more insane, taking credit to buy something more on credit .

Anyway getting back to the topic at hand; no one is taught to look at the markets as a game and study the mass mind and behaviour of individuals and then learn how to use a few TA tools that are open to subjective interpretation. By subjective interpretation we are referring to the statement that “beauty lies in the eye of the beholder.” Each individual should see something different when using such an indicator; this TA tool must never be allowed to become standardized. If it is, the end is near. The ones that learn to correctly master this tool will come out ahead, however since the method is not available in a standardized format this system could work almost indefinitely.

In the end mechanical trading systems are reflective of our lifestyle and the way we are as group of individuals; the 9-5 rat race and the zombie like nation where everyone thinks and acts like one. A mechanical system is also reflective of the fact that most of us do not want to think, we want everything handed down to us and when we get whacked on the head we cry like babies. It is for this reason we never seem to learn from history but only look for ways to perpetuate the same mistakes on a flamboyant style. The only way to break from this way of thinking is to actually attempt to start thinking and using your mind. There is nothing wrong with making a mistake because you might actually learn something as a result of one; perpetuating someone else’s mistakes provides no clues for improvement but only rules for self-destruction.

At the very least some customization should be attempted so that the system is adapted to ones own needs. It amazes me that the easiest and most effective system in the world is not studied or followed more widely. The system I am referring to is trend analysis ; all you do is spot a new trend and stay on board till the trend ends. Trend analysis involves the drawing of simple lines; it takes a little practice but is worth its weight in platinum.

So let’s look at what type of system can and will work in the markets. First of all one has to understand the difference between contrarian investing and investing based on Mass psychology. Contrarian investing is a very simple system as it basically involves taking a position against the masses. Mass psychology measures the frenzy periods or periods of extreme hate or disgust towards a specific sector or sectors, and then a position is taken during these extreme times. Furthermore it measures the level of euphoria in the camps of those that believe in the investment. In other words it will measure how many of the so-called contrarians are now extremely bullish and euphoric on a given sector. In most cases when a contrarian takes a position in a specific sector he is doing so as counter move to what the masses are doing. However the majority of the contrarians are still nervous and keep checking their positions rather frequently to make sure that at the very least the bottom is in. Once the sector starts to take off and produce returns they actually lose this nervousness and become very bullish; in other words they have now entered the euphoric phase. This is where mass psychology kicks in. At this point it will be time for the smart investor to bail out, you may not be selling at the top but you will be pretty close to it.

So understanding mass psychology is really an important and integral part of a trading system.

Second is to master several TA tools and make sure you do not use them in a standardized manner.

Thirdly you need to understand be patient and disciplined. You have to understand that sometimes you might have to wait for months on end before you can take a position, however you could be rewarded in weeks for your patience.

As irrigators lead water where they want, as archers make their arrows straight, as carpenters carve wood, the wise shape their minds Buddha 568-488 BC, Founder of Buddhism

Mechanical systems, a ray of light or a cavern of darkness?

Any system is good for the time in which it was developed. In the early part of last century we had Dow theory, Elliot Wave and Fibonacci. They still have a place but they need revising to account for the new rule. The new rule is that money has no set value, not like under the gold standard where money was defined in terms of a base. Sure human emotion does follow set patterns, and to some extent median averages can follow those patterns. I am putting up a chart and you can put your own interpretations to it using whatever system is your favourite, there is only one interpretation I have. The Dow has already crashed and burned.

In terms of constant dollars based on 1990 the Dow hit a high of 7065. It lost about half of it’s value to hit 3669. Since then it has broken out of it’s down channel and is holding. In terms of constant dollars the Dow is valued today at 1.7 times its 1990 value, hardly a bull market. I read as many commentators as I can; many for them seek to find the correct count or ratio, the correct historical model. But until everything is based on a constant nothing will work properly for them. That is the joy of a fiat system; everything is hidden in plain view. When inflation, an increase of the money supply, is factored in we can see the evil of it. “Smoke and mirrors.”

But this diatribe is about mechanical systems and do they work. I have tested nearly every indicator man has developed, some come close to perfect but are not to be relied on 100%. Mans emotions come in floods, extreme swings of mood in short periods, there are very few systems that can predict those mood changes and technical analysis is about prediction not history. My prediction is that the Fed will keep pumping the money supply at the current rate of 56 billion a month because M3 is dropping. Until money is lost to the system there will be no effect on the market. The fear is not there.

Wayne Krautkramer Proprietor Zarathrusta

MECHANICAL TRADING SYSTEMS! A BROKER’S BEST FRIEND!

WHAT IS A MECHANICAL TRADING SYSTEM?

Mechanical trading systems are techniques that make trading decisions for you! You input the trading data, and the system generates a response that indicates the appropriate action. You buy, sell, or do nothing depending upon the formulas the system uses. The latest computer versions of these mechanical systems are complete “black box” Operaciones. Turn the computer on, start the system, and it updates your data base, and generates trading recommendations, and places your orders directly to the brokers. Speed is of the essence in these hectic times. Cada nanosecond cuenta cuando usted está negociando con gráficos de cinco minutos.

HOW DO MECHANICAL TRADING SYSTEMS WORK?

The most basic systems rely on moving averages. The more “sophisticated” Los sistemas utilizan combinaciones de promedios móviles tanto de precio como de volumen. The most “expensive” systems incorporate stochastics, which are the mathematical techniques for a non-linear science. These systems are reactive by design. If a stock or a commodity acts in a certain way, the system assumes that the stock or a commodity will continue to act that way. It generates this conclusion based on the formulas programmed into the system. Some” Black Boxes” also compute a large array of indicators in an attempt to increase “confidence” of an action recommendation.

Most mechanical trading systems buy or sell “ breakouts “. The stock market calls these traders “momentum players.” Their formulas assume a continuation of that movement. Should that movement fail to continue, the system will generate a loss, plus the commission cost. We must also recognize that most mechanical trading systems always have you invested in the market, either long or short! Their primary assumption is that the movement that created the breakout will continue. It therefore follows that you must take each trade to increase the chance of profits.

Mechanical trading systems also require trading in many markets. This is an attempt to reduce total portfolio risk. Simultaneous long and short positions in many markets can reduce total risk, but it dramatically reduces profitability. The ultimate hedge results in no change. Trend following is the mission of mechanical trading systems. There have been many attempts to accomplish this goal. Defining the trend is the biggest hurdle. There is no universally accepted definition of a trend. Therefore, there is little agreement on how to follow the trend.

CURVE FITTING or DATA MINING is the techn ique used to develop almost all mechanical trading systems.

Christian Schaer of Agora Capital Services SA calls Curve Fitting a pernicious illusion!

“Curve fitting, or data mining, is the “art” of drawing conclusions based on past information. When applied to an investment scheme, or trading strategy, history shows that (too) often such conclusions do not hold true once they are implemented. The end result is an unpredictable performance, often coming short of expectations. In people’s minds, the issue of curve fitting is mostly limited to systematic traders such as commodity trading advisors - who are perceived to build models by optimizing simulated past performance based on given assumptions.”

“This article argues that the trap of curve fitting occurs across a wide spectrum of investment activities and that most investors engage in curve fitting without know it”

WHAT RESULTS DO MECHANICAL TRADING SYSTEMS ACHIEVE?

We will first look at the daily charts for the last six months. This will give us some insight as to the actual profitability of momentum trading (acting on breakouts). We will use Mar Soybeans as one example for this discussion. We can assume that some mechanical trading systems bought Beans at 596 or higher in August. We may safely assume that these same systems sold Beans in September, at anywhere from a small to a large loss.

Jan Crude Oil is our next example. We may assume that some systems gave a buy signal at $51 or better in Sept. They probably gave a sell signal at break even, or at a loss in Oct.

Jan OJ is interesting. We must assume that many systems gave a buy signal on 10/01. We can assume a loss on this trade.

Dec Cotton is revealing. Many systems bought at 48 or higher in August. Many sold at 47 or lower in September. Furthermore, many systems would have gone short at 47 or lower in September. This trade would have been covered, and you would have gone long at 47 or better in November. A look at the monthly March Wheat chart is more revealing. The latest CRB factbook discusses the much heralded ” breakout ” to the upside after many years of consolidation. A quick look at the monthly March wheat contract ( Use March to March basis! Not nearest month continuation charts!) reveals that the “breakout” was an fake. You would have bought March Wheat at 334 or better during July 2002. By April of 2003, March Wheat was selling at 279 ½. That is a loss of 54 ½ cents per contract, or $2700 plus commissions per contract! Of course you were using the margins recommended by your broker ($400 to $600), so you were forced out of the market by the margin calls. This assumes that you did not encounter “ limit ” moves, which lock you in until the market actually trades!

Fortunately, other observers have described their experiences. Therefore, we are not dependant on any one person’s experience or biases.

Bruce Babcock offers these observations:

Mathematical analysis of commodity price data has shown that these price changes are primarily random with a small trend component. This scientific fact is extremely important to those desiring to pursue commodity trading in a rational, scientific manner. It means that any attempt to trade short-term patterns and methods not based on trend are doomed to failure. A good example of such a doomed method is Japanese Candlestick patterns. This theoretical conclusion is consistent with my previous research. Many years ago, just as Candlesticks came into vogue, I attempted to create a profitable trading system incorporating Candlesticks. I tried many patterns and many types of systems, all without success. I have never seen anyone else demonstrate the effectiveness of Candlesticks using objective rules either. Successful traders use a method that gives them a statistical edge. This edge must come from the tendency of commodity prices to trend. In the long term you can make money only by trading in synch with these trends. Thus, when prices are trending up, you should only buy. When prices are trending down, you should only sell.

Turtletrader offers us this observation on breakouts:

If you believe Trend Following is simply buying or selling a 20 day breakout, you are dead wrong. If you focus on breakouts as a Holy Grail . you’ve missed the point and are probably already on your way to losing your capital and, ultimately, your shirt. A trader who focuses on market entry only is in big trouble. Good trading is mostly money management or risk management. Keep in mind though, once you have the money management down, trading is 100% your personal discipline and psychology. For a discussion for on the effectiveness of STOP loss orders in money management, see DO STOP LOSS ORDERS LIMIT RISK? ABSOLUTELY, POSITIVELY, MAYBE! This article may be found at http://onlypill. tripod. com/factsthebrokersandfinancialreporterswonttellyou/id16.html

Victor Niederhoffer claims that trend following is an illusion:

Although Niederhoffer peruses the National Enquirer for insights into investor sentiment, he also uses less provocative trading methods. Niederhoffer makes money by finding small anomalies in the day-to-day ripples of markets for everything from currencies to coffee. He uses a statistical model to reveal how movement in one market might influence another, such as sugar affecting the price of soybeans. Most important, Niederhoffer is an inveterate contrarian. He feeds off panic, making short-term bets when prices get frothy. He condemns the common strategy of trend-following, which helped make his buddy George Soros super-rich. ”A delusion,” he declares. Trying to read the future in chart patterns doesn’t work, either. ”Deception,” he insists. And when forces outside the natural order intervene in the markets, watch out. ”I think of governments as if they’re run by a professional criminal class, taking from one set of pockets and putting into another,” él dice.

The 53-year-old trader came by his unusual theories via a blue-chip education: squash champ at Harvard, finance doctorate at the University of Chicago, and an assistant professorship at the University of California at Berkeley. His transition to full-time trader is chronicled in a new autobiography, The Education of a Speculator. ”By paying attention to the little things, the nitty-gritty, the humdrum things in life,” he says, ”you become a great speculator.”

Striker Trade Systems was candid enough to share this observation:

Catscan was released in 1994. It used the same rules to trade 23 different commodity markets. It was a very unique, dual nature trading system. 99% of the current commodity trading systems are Trend Following systems. There is absolutely nothing wrong with that except for the fact that 70% of the time markets are not trending. Instead, they are in a Choppy mode. Trend following systems tend to get whipsawed to death in these Choppy time periods.

Anthony W. Warren Ph. D reports:

Trend-following methods typically utilize moving averages of closing price data for buy and sell signals. Often, the signals turn out to be false due to short-term market fluctuations. Here, longtime STOCKS & COMMODITIES contributor Anthony W. Warren, correcting one of the major drawbacks of moving averages, introduces a trend-following method that smoothes the data for trend identification and measures short-term price fluctuations to establish statistical boundaries.

Rule No. 1, carved in stone for all technical analysts, is that the trend is your friend. If ever there were a time that we could, along with the Cabot Market Letter, report the beauty of using a simple trend-following indicator that makes it “virtually impossible to miss a major market move,” this would surely be that time. No wonder that 830 aspiring chart-readers, the most ever, registered for the Market Technicians Association’s annual competency exams on April 26 in Jupiter Beach, Fla. Granted that some users of trend following have achieved success. Doubtless their intelligence and insights are quite superior to our own. But it’s at times like this, when everything seems to be coming up roses for the trend followers’ theories and reputations, that it’s worthwhile to step back and consider some fundamental questions:

Is their central rule, “The trend is your friend,” valid?

Might their reported results, good or bad, be best explained as due to chance?

But first, a warning: We do not believe in trend-following. We are not members of the Market Technicians Association, or the International Federation of Technical Analysts or the TurtleTrader Trend Followers Hall of Fame. In fact, we are on the enemies list of such organizations. Another observation by Bruce Babcock. He gives a general warning to those individuals who are searching for winning trading techniques.

One of the few real secrets in commodity trading is that most of what you read in books about how to trade does not work in the real world. Even books by respected authors are full of trading methods that lose money when put to the test. You may find this shocking, but almost no commodity authors demonstrate the effectiveness of the methods they advocate. The best you can hope for are some well-chosen examples or a few cursory tests.

Futures Truth Reports…Do the FT Rankings Constantly Change Because the Systems Tested Are Curve-Fitted? & # 8211; Vern Nord

Have you ever tried to pass up a rope? I have spent the last two days trying to analyze the Feb/March issue of Futures Truth. I would like to share my conclusions with your readers to start a discussion.

I know we are all looking for the perfect system which works on all commodities with similar rules and parameters, but are we really looking for the impossible.

The very best systems in Futures Truth were only good on a maximum of 4 commodities, and if you throw out such things as Pork Bellies, Live Cattle, Soybeans and Eurodollars, then no system was any good on more than three commodities. The best systems all had three or less unrelated commodities at the top of their lists. I thought that a good trend following system would test well on all the Currencies because they are very good trending markets. None of the systems tested well on more than one currency.

No system worked well on any two commodities in the same group with the possible exception of Gold and Copper. They both tested very well under Welles Wilder’s Volatility Movement System.

There was no system that tested both T-Bonds and T-Notes, but they should test similar on a system.

As I expected, the few systems that tested well on the S&P 500 were very poor on all other commodities. On non-trending markets like the S&P 500, Wheat, Lumber, Silver, Gold, etc. there probably is no perfect system to handle the random nature of these markets.

So what I am trying to say is that there can never be only one perfect system for all markets. You need one type of system for trending markets; one type for random walk markets and one type of system for commodities that trend for a few months and then go into a trading range.

In all three systems you would need an indicator like the ADX from Wilder’s Directional Movement to tell when to shift gears from trending to trading range or to random markets when you should stop trading for now.

Another surprise from my analysis is that pattern recognition systems don’t test well in related markets.

Arnold’s Pattern Probability System (PPS) tested well on the Jap Yen, Lumber & T-Bonds – all totally unrelated markets. This reminds me of something that Hulbert said about his one-year ratings on stock market newsletters and their track record

After over 10-years of tracking all the best timers, he finally realized that his six month and one year rankings were almost totally worthless. It seems last year’s Guru is this year’s goat. There’s no consistency from one year to next, and you can’t make money following last year’s expert. This leads to one last conclusion – Futures Truth rankings continually change and I think this happens because all these systems are curve-fitted. If you test any one system’s across 36 commodities and stock indexes, you should get the traditional bell shaped curve results which means that 10% or three commodities would test very good, and 10% would test very poorly and the balance of 80% would fall in the middle inside the bell curve. This might explain why only 3 or 4 commodities test well on any one system and why they are totally unrelated. They probably found an algorithm and then curve-fitted it until they got good results in 10% of the commodities.

These price histories will never repeat the same way and systems are doomed to fail. Look at an old Futures Truth and see how many systems are still around, or even compare the “Top 10 since Release Date” with the “Top 10 for the past 12 Months”. Only 4 out of 10 in the “Top 10 since Release” are in the current list of “Top 10 for past 12 months.”

Louis Mendelsohn made the following points about curve fitting, while giving a speech at a Harvard Business School Alumni Club Dinner:

“Of course, the underlying assumption is that history repeats itself, that somehow by looking at past data, by doing some work on the past information, by modeling a market in that respect, you’re going to be able to make money in the future. Needless to say, that’s an assumption that hasn’t fully proven itself in the real world. Nevertheless, that’s all that analysts and traders have to go by. Unfortunately there’s really not much new in the mass-marketed trading software area. Most of the technical indicators that are in software today are really rehashes of technical indicators that have existed for many years, for decades in fact, since the 70’s at least, and early 80’s.” “Examples are things like moving averages. While they are very good at identifying trends, they by their very nature tend to lag the market. Of course there’s been a great effort over the years by technical analysts in the futures markets to try to tweak out the moving averages, to try to reduce the lag in their response to the market. They’ve done that with various efforts like weighted moving averages, exponential moving averages.”

“There’s been a tremendous effort by technical analysts trying to tweak out these various technical indicators that have been used for decades. Even displaced moving averages, which I find kind of interesting because basically it is taking like a 5 day moving average and computing it’s value as of tonight’s close and then just displacing it out, maybe 2 days or 4 days, into the future and making the assumption that the value 4 days from today is going to always be what today’s value is”. “It is an extremely primitive forecast that’s being made. But at least, I saw, there, an effort towards forecasting rather than always looking at trend following. We’re at least beginning to start to look at some form of trend anticipation, or being able to look at price anticipation, looking forward rather than just backwards. I felt, of course, that there had to be better solutions to the problem than just using things like displaced moving averages.”

“And, of course, there are other limitations that exist in technical analysis software today. The whole problem of curve fitting with system testing, which you may or may not be familiar with. Basically it relates to the fact that you can take a trading system, whatever that system may be, it could be as simple as a 5 day moving average crossing a 10 day moving average, and you’re long when the short average is above the long, and vice-versa. You might tweak out the sizes of moving averages to optimize them to a specific market.”

The CFTC has declared war on fraudulent mechanical trading systems:

Commodity Futures Trading Commission Office of External Affairs (202) 418-5080 Three Lafayette Centre 1155 21st Street, NW Washington, DC 20581 Release: 5023-04 For Release: December 2, 2004 U. S. COMMODITY FUTURES TRADING COMMISSION CHARGES NORTH CAROLINA RESIDENT ROGER OWEN AND HIS COMPANIES WITH DEFRAUDING CUSTOMERS IN SALES OF A COMMODITY TRADING SYSTEM WASHINGTON, D. C. – The U. S. Commodity Futures Trading Commission (CFTC) announced today the filing of a complaint in the U. S. District Court for the Middle District of North Carolina against Roger Owen, Longhorn Financial Advisors, LLC (Longhorn), Phoenix Financial Group (Phoenix), all of Greensboro, North Carolina, and Daniel Belbeck of Nashville, Tennessee, alleging that Owen, Longhorn, and Phoenix used fraudulent advertising and promotional materials to solicit customers to purchase their computerized commodity trading system. According to the complaint, Owen and Longhorn, as part of their estate planning services, and Phoenix fraudulently solicited customers to purchase a computerized trading system by falsely representing that their system had generated huge customer profits. The complaint charges that, in reality, no customer who purchased and used the commodity trading system ever profited from its use. In addition, the complaint alleges that customers who purchased the trading system lost funds totaling more than $200,000 trading futures, in addition to paying Longhorn and Phoenix an aggregate $120,000 for the computer trading system. The complaint further alleges that Longhorn and Phoenix held themselves out to the public as commodity trading advisors (CTAs) and should have been registered with the CFTC. Similarly, the complaint alleges that both Owen and Belbeck, the individuals who solicited customers, should have been registered as associated persons of a CTA. Finally, the complaint alleges that Longhorn and Phoenix failed to provide disclosure documents to customers, as required by CFTC regulations. In its continuing action, the CFTC seeks full restitution and disgorgement, civil monetary penalties, a permanent injunction, trading prohibitions, and such other remedial ancillary relief as the court may deem appropriate. The following CFTC Division of Enforcement staff members are responsible for this case: Frank Rangoussis, Jan Folena, and Richard Glaser. # # # Media Contacts Alan Sobba (202) 418-5080 Dennis Holden (202) 418-5088 Office of External Affairs Staff Contact Richard Glaser Associate Director CFTC Division of Enforcement (202) 418-5358 Related Documents Complaint.

We are forced to stay with what we “KNOW ” to succeed in business. Thankfully, we do know the following:

90 percent of all traders lose.

5 percent of all traders make no money.

5 percent of all traders make all the money/

Markets are in a trading range 70 to 85 percent of the time (called ON THE SIDE prior to 1948).

Markets only trend 15 to 30 percent of the time.

The real profits from markets come from trending markets.

Trend following systems are wrong 60 to 80 percent of the time.

Mechanical trading systems generate a lot of trades. (Most of these trades will lose money.)

Trend following traders experience “huge” equity drawdowns.

More trading generates bigger commission bills.

Brokers prefer accounts that generate big commission bills.

Only you can determine whether a mechanical trading system is for you! After all, it’s your money!

FORGET THE DRAMA! TRADE WITH THE TREND AND PROSPER!

© 2004 Wayne N. Krautkramer Proprietor, Zarathrusta Email

MTS better than guess?

Mechanical trading systems (MTSs) sound like a good idea: a winning formula is incorporated into a set of rules or a piece of software, and all you have to do is follow it to make money. That’s what the promoters would like us to believe: an endless cascade of cash generated by their system.

Do any, in my own experience, work ?

A most definite YES . Some are computer programs, and others are knowledge and rule based like our own Nifty 50 Trading System. There is no such thing as a foolproof system. A fool can find unique ways to misuse a system that has taken decades to develop. Greed can make fools of us all!

I can only speak with the authority of personal experience on The Nifty 50 System. It has been back tested to 1920, and I’m currently working on a set of tutorials starting with the Dow Industrials from 1900.In real time it has been profitable since 1998, and each year owners of the system are sent an update.

It is not the Holy Grail however for a number of reasons -

Why many don’t work

There are MTMs that just use incorrect methodology or were optimized for a market dominated by a certain characteristic e. g. high volatility. This market characteristic then changes, so the system no longer produces profits.

The most common reason is that the system just doesn’t suit the trader:

There are too many trades. Some generate 200 trades a week. Great for the brokers and automatons, but not for humans.

There are not enough trades to occupy the trader. Traders like to occupy themselves and think that the harder they work, the more money they’ll make. In my experience, the majority of traders will benefit from slowing down. This means waiting longer before entering a trade, and once in, being prepared to sit it out – at least as far as stocks are concerned. Time should be our friend and not foe.

Systems may only be appropriate for certain markets and certain stocks. I emphasize to our traders that in illiquid stocks, the technical signals may not be accurate as they rely on accurate sampling.

It takes discipline and nerve to stay with a system. Many just don’t want to put in the time required to learn a system, and some just find it difficult because of undeveloped computer skills and atrophied mental capacity. These can be overcome, new skills learnt and the brain sharpened again, but that’s hard in a world of instant fix answers.

What is the role of an MTS?

For many traders, an MTS has no role whatsoever if they want an instant fix and an effortless stream of riches. If such a system were to exist, the market would soon discount it. Nature abhors excess and deals with it in her own way, even if it means destroying the user with their own success.

They are ideal for many however who are either starting out or lost their way.

An MTS can be like a set of training wheels.

It may teach you to think in new ways.

A system will be your mentor in uncharted territory.

It may teach you money management and portfolio rules.

It may even start bringing you profits that you’ve never had before!

I Believe in Santa Claus

It has absolutely amazed me that Mr. Greenspan has been able to re-inflate the DOW Jones Averages including Transports, Utilities, and the Industrials. He has failed, however, to get the NASDAQ Bubble back over 5,000. Some magic wand Mr. Greenspan has. Through the world of the repurchase agreements, the Working Group on Financial Markets, and the Big Boys diddling with the futures markets, “all that money on the side” appears to have been put to good use in a Great Secular Bear Market. Of course Bob Bernanke has been busy in the back room printing all that money on the side they so eloquently talk about on CNBC Bubble Vision, while that McTeer at the Dallas FED urges folks to hold hands and buy a brand spanking new SUV that eats gasoline. Greenspan says real estate cannot be a markets bubble, because all real estate markets are local. In a similar vein of Fool’s Gold, he urges folks to commit Hari Kari by taking out an ARM mortgage loan so they can save all that money in a rising interest rate environment. The great illusion is that the Bull has been reborn. Some pundits have even had their head handed back to them on a silver platter, much like John the Baptist. We suspect most mechanical systems will work fairly well in the short term and the short view, whether one is a proponent of Elliot Wave, DOW Theory, or just plain Technical Analysis. There is something in this market for everyone. Google. com at $175.40 per share today, defies my imagination and reason. Of course $300/share for JDS Uniphase at the height of the NASDAQ Bubble seems like a fairy tale when we are now in its LA LA LAND of $3 and change/share! This is what I call a chain saw massacre.

Bright Beam of Light for Day, Pivot, and Swing Traders with Google at $175.40/Share

Let’s look at the DOW Industrials containing 30 stocks:

We have been to the Abyss and done a hop scotch over it, apparently. Whether one uses Wave Analysis, TA, Pivot Analysis, Dow Theory, Martin Weiss Theory, our your own brand of market and chart analysis that works for you, there is money to be made in the above chart. Today’s FOMC at the FED gave us another 25 basis points in the FED Funds Rate, now at 2.25% and the mumbo jumbo from DA FED on the CNBC Bubble Vision is all about “Balanced Risks.” The truth in the above chart is that there is no such thing as “balanced risk,” when family money, and my money is on the line in this market with me as the “caretaker” of the family cash. One is damned if they do, and damned if they don’t. The savvy trend is your friend trader, using whatever mechanical trading system they use, can still make money buying and selling stocks… if that is all they are doing 8 AM to 5 PM. This is what I call baby sitting the market and one’s money, investment capital, and profits [in order to make money and avoid trading losses]. A lot of my global markets guru friends are doing quite well in the gambling casino with their mechanical systems, even though they are smart enough to understand that a Great Secular Bear Market exists for generally 10 to 12 years. These guys earn my respect and admiration for having very little fear. These rascals have the ability to stare at the Black Bear in the Dark Cavern and reflect the light of the Bear’s eyes and teeth into their mechanical system. That’s a feat of magic in our view! That is NO FEAR, and in our view the RED BADGE OF COURAGE! – should they get a little mauled…

The Cavern of Darkness – Rogue Waves, Don’t Buy Treasuries, and Fannie Mae

I think everyone is too sanguine about this de facto competitive devaluation by the US. To me, this is very serious, and a very dangerous policy pursued by the US. I’ve never heard any central bank telling the world not to buy their assets. But this was essentially what Alan Greenspan said in his Frankfurt speech on November 19. We are now talking about a gradual sell-off in US Treasuries that would take yields on 10-year notes to 5.0%. But if the world really were convinced by Greenspan, why would bond yields stop at 5%? Why should US equities be spared? – Stephen Li Jen from Debating the Dollar

Anyone with half a bird-brain knows that Greenspan told folks at his speech November 19, 2004 in Frankfurt, Germany, not to buy US Treasuries in a “daunting and measured balanced risk” FED$PEAK-EASE to weaken the US Dollar. John Mauldin’s “Outside the Box” editorialDebating the Dollar is a most interesting read, and full of good stuff in this Cavern of Darkness. Thanks, John!

What was the all time high on the DOW Industrials? About 11,600 to somewhere about 11,800, wudn’t it? Heck, I don’t remember, as that’s Ancient Wall Street History Class 101! Let’s Assume 11,800, shall we? I measure currency destruction by the FED and Bernanke’s printing press in the so-called inflation of real estate prices [novices and idiots call it realty price appreciation – See: Blitzkrieg Essay #5 – Ponzi and Electricity ]. Let’s assume that realty in all markets of the USA appreciated [currency destruction, or inflation] 10% per year since Year 2000. That’s four years. 11,800 would coincide with the top of the morning, and the top of the DOW. Assuming compound interest like your typical banker [11,800 x 1.1 x 1.1 x 1.1 x 1.1 = 17,276], the DOW should be at 17,276 today. Sorry, Charlie, It Ain’t! ¡DE ACUERDO! Assume your realty market’s not so hot. Let’s use 5% appreciation [measure of currency destruction]! Doing new math [11,800 x 1.05 x 1.05 x 1.05 x 1.05 = 14,343]! Sorry, Charlie, It Ain’t!

Ye Gads Gerome! Gee Whiz! I just love playing with a Hewlett Packard 12-C Financial Calculator! This is what I call the time value of money, albeit paper. The point is, if the mechanical systems huggers, are doing pretty short trades as they baby sit their capital, profits, and money, they probably are making some pocket change for the risk they are taking. If their trades are not short term, effectively they could be losing their long-term assets in their mechanical system model – Time Value Money-Wise. Now, that’s a true Cavern of Darkness with a lot of risk when DA FED actually controls the Financial Markets, including real estate which cannot be a markets bubble, since it is all local. Sir Alan, give me a break, Pal. I ain’t stupid, and, Nope! – I like my Gonads and my Feet [shooting oneself in the foot, if you miss and hit a more vital spot! Big Ouch!]. I will also steer clear of an ARM mortgage just as I would avoid going into a city infested with rats with fleas [hummm, the FED could be infested?] carrying the Black Death!

Fannie Mae? See: Realty Reality for our favorite fudge candy.

Call It a Rap, Put the Moon to Bed, and Boogie On, Baby!

We recognize the ability to play the casino on Wall Street. Some Folks [Pundits] can make money buying and selling stocks when these folks’ only pre-occupation is baby-sitting their capital, profits, losses, and the markets — whether they are reading tana leaves, tea leaves, used coffee grounds, chicken entrails, or a mechanical trading system that works for them. To be sure, there are profits to be made, in coming inches to eyeball with the glint of light in the Great Secular Black Bear in this Cavern of Darkness. I applaud their courage, tenacity, bravery, and skill. They have more Gonads than I, since the bulk of my portfolios belong to folks over 75 years of age who can only tolerate minimal risk. I won’t risk the Family Jewels on a trading model given the circumstances of the Family Trust. But, it can be done, if the trader can sell at the pre-ascribed set trading loss to recover capital. Mechanical Systems to me are like Baby Sitting 101, in our view, when I have another job to do to take care of making my income. Besides, when there’s a rigged DA FED controlled Gambling Casino, why bet and play, and lose your capital?

I take a more holistic approach to the markets for the portfolios I manage. I recognize that at any time I wake up, any stock or mutual fund [Eliot Spitzer, read me, Baby!], can get hammered on the news, insider fraud, accounting irregularities, or a financial melt-down. I understand the destruction of the current money system [Federal Reserve Notes] and the FED’s role in manipulating the heavy metals markets, because I follow Midas Bill Murphy and www. gata. org. I believe in ownership of physical heavy metal as part of my investment strategy. I believe that I cannot play options with any degree of certainty because of the FED and its Wall Street Shenanigans. What should go down does not, and they snick my money. Playing the Bull, makes no sense in a Great Secular Bear Market. Moving money off-shore to alternative currencies in numbered accounts makes sense, in addition to goldgrams at www. goldmoney. com. Being in a trading house money market fund exposed to the GSEs’ ability to use money market fund intermediation is pointing the loaded .45 Colt at my Feet. I prefer cash only US Treasuries [I can only lose how much Bernanke prints!]. When one recognizes that the FED has destroyed at least 95% of the purchasing power of the 1913 US Dollar, that the FED will do anything to perpetuate their Ponzi Shell Game of Paper Funnie Monie and the Financial Markets, this all is one big rigged Gambling Casino Crap Game that I can’t play in with short term trading mechanisms, since I don’t want to baby sit Family Money every waking minute. I have a Life and a Future! Some would say that I am just a Chicken. Perhaps, so. Cluck, Cluck, Cluck!

Interesting essay on www. mises. org. I direct y’all to Sean Corrigan’s The Saga of John Law and Richard Cantillon. A most interesting read. We would also direct to this scribe of Reg Howe: Déjà Vu: Central Banks at the Abyss, which was fortuitously posted on 7 December 2004.

We view the financial markets as a cavern of darkness, a deep dank black hole that sucks in the believers cash for the long term pivot play. In this black hole are a multiplicity of players waiting to fleece the investor of their hard earned cash if they don’t carry a flashlight or lit candle to illuminate their trading model. Given the real returns to Wall Street gambling with the current destruction of the paper money system, short term gains can be made, however, the long term prospects of doubling one’s money are Fool’s Gold in our view. The best trading mechanism for pivot plays in the financial markets will include several delta hedges that include physical ownership of real money, aka gold and silver bullion. The DOW at 14,000? The DOW at 17,000? Possible, perhaps. But why take the risk in such a black hole of Calcutta? Besides, I would rather believe in Santa Claus than financial markets acting freely for my money. Baby sitting, in our view is just too much work. Been there, and done that getting all of my portfolios to safe positions.

Art Soukup “In the land of the blind, the one-eyed man is king.”

Mechanical systems – Are they a ray of light or a cavern of darkness

What an interesting question that the Contrarian Roundtable has decided to address.

The above question is being asked in the context of an observation written as ” To many people have been fooled into following a mechanical system or a newsletter that follows one, only to lose their pants and their shirts.”

Before that question can be examined, in order to generate a correct answer, it is necessary to address two other questions. Once done, we are prepared to talk about light beams and dark caves as the roundtable members polymorph into quantum-mechanical physicists dressed up as spelunkers.

We are spelunkers because we are going into a dark cave. We are quantum-mechanical physicists because we are carrying a electric torch ( flashlight); which is a quantum mechanical device. A long rope with lots of knots will get us into the cave and then serve as our abacus to do calculations. If you want to think of the rope with knots as your trusty newsletter or your computerized trading software, that’s fine. Its a really good rope with plenty of knots for everybody to hold on too and do the calcs. Chris Laird and myself built it many moons ago, so we could proceed to “do the cave thing on a vast range of subjects.”

Also, somebody is going to have to strap on a waistband that carries “THE POUCH”. Now at this point in time, because I am the only guy at the Roundtable who knows what’s in “THE POUCH” I guess I should carry it; a grim task that I do not relish.

“Wait a second.” says Sol Palha.

“I second the motion.” says Alan Lunt.

“What was the question that got seconded?” says John Tyler.

“Oh” says Sol. “Grim task. What’s in THE POUCH?” and “Is this going to hurt anyone?” says, Sol.

“Yeah” says John. “‘We want to know before we go! Harump…. Harump…. All this stuff about rays of light and dark caves with stinky bat dung, pools or water that have fish with big sharp teeth and of all things NO EYES, spiders running everywhere, slippery rocks, holes with no bottoms,…almost wish we never asked the dumb …errr. Brilliant question.”

“Yeah, and what about the poisonous snakes. Don’t forget the snakes, Art. Be a heck of a way to go.” says Alan. Alan silently thinks to himself…”Hmmm…maybe the pouch is a med kit. & # 8221;

Well Roundtable, to answer the TWO questions that were seconded before they were asked:

No, I am not going to tell you what is in “THE POUCH”; at least not yet; and YES you are probably going to be hurt, but the bright side is that the pain will probably only last forever. Besides, Mary Puplava is standing at the top of the cave doing what Mary does best; and as far as question go I would like to say that there is no such thing as a dumb question or a brilliant question. There are only dumb answers.

“Which is?” says Sol and John and Alan in unison.

Why hosting this Contrarian Roundtable you see; and of course praying.

“Oh yes. Ya veo. Hosting the roundtable. Thanks, Mary. Without your wonderful support we would not be here” says All.

“Say” says Sol, “What’s Mary praying about?”

Well, In addition to holding onto the rope so we can climb out later, she is praying “Please, please, please… Whatever happens from this point on and until they all come back, please do not let events unfold in a manner that will compel Art to open the pouch to perform the grim task.”

“Gee” says John Tyler. “Sounds like we are supposed to be more fearful of the pouch than anything else in the cave…I mean bat dung, blind fish, spiders and all.”

“Yes! Of course!” says Alan Lunt. “By being most fearful of what Art has in the pouch, nothing in the cave can bother us, and we can all do the quantum thing; find out why people are losing their shirts as good quantum-mechanical physicists should.”

“Wow” says Sol. “You have nothing to fear but fear itself; and Art’s got it in the pouch!

Time to Rock and Roll. I got the flashli…. err TORCH, so I’ll go first. John, Alan, take shotgun along with the other roundtable members, Art bring up the rear.”

As the Contrarian Roundtable ropes down into the cavern of darkness, I take the time to remind Mary that this is a good time to start praying. In fact, it would be a real good time for all the readers of this article to pray along with Mary. We are going to need it.

As the party rests a bit half way down the cave, we find questions scribbled on the wall. Sol does not turn on the torch as we still have a little light from above.

John and Alan notice that all the readers have come along with us and are murmuring and humming. Casting a glance at each other, they say nothing. The readers are probably just reacting to the first whiff of bat dung and assume they will adjust in a moment. Alan thinks that he heard one of the readers whisper “peas, peas, peas,” but because of the strange way sound echo’s then muffles, he can’t be sure. Besides, Art is looking at the questions and explaining.

Question 1 – Is there any system that has ever been effective?

Question 2 – Is there is such a thing as a “black box system”?

For Question 1 the answer is yes.

An example is a scissors, a closed mechanical cyclic system, which always performs as long as the critical parameters of the system remain within limits. The parameters are sharp blade edges, un-broken pivot point, strong hand to provide the energy for cyclic repeat. Snip, snip, snip goes the scissors to the front-page of your newspaper. Look kids, a bunch of paper dolls to dress up the Christmas tree.

For Question 2 the answer is yes.

An example is a red-tipped paper “match”, or as the Germans like to say, a “lucifier.” Has-du-ein-lucifer-bitte. Do-you-have-a-match-please? A lucifer is an example of an open non-cyclic “black box” mechanical system. An input of friction to the red-tip, an brief output of fire and light, a gentle wisp of smoke as a reminder of its past. Something happened here.

I started out with a red tip and ended up with a black tip. An input to the black box system and an output from the black box system. Trying to figure out what is inside the black-box system is what research is all about.

So with two examples we now know that “systems are effective” and “black box systems exist”. And more examples can be searched on the net after we get out of the cave.

With everyone rested and Q1 and Q2 answered the readers start climbing back up the rope. They see that the way down is getting darker, the passage is narrowing, and by now they have heard something about a pouch, a fearful pouch, a pouch full of fear, and the “peas, peas, peas” guy is insisting that the Roundtable guys were talking about a “pouch potato.” Whatever the rumor was, a few decide to stay at the half way resting area, and shout up to the top what they manage to hear.

The Roundtable proceeds to the BOTTOM.

At this point voices and names all blend together and it is just a stream of sound when anyone speaks. No one can tell who said what, so we all agree to speak slowly with plenty of pause time between sentences. Plenty of think time between sentences.

We are now ready for the headline question…….

“Mechanical systems – Are they a ray of light or a cavern of darkness?”

Strange as it may be, the mechanical systems question has five answers.

FIVE answers you say.

Wait a second, that’s impossible. I only see TWO choices in the question!

Well, when it comes to math, 1+1=2.

But the way the question is stated, it allows for 5 events; because a two choice “OR” question has 4 knowable events and 1 NON-knowable event.

In order to understand the 5 events, I will reduce and restate the question; always keeping in mind that we are doing this in order to find out why “To many people have been fooled into following a mechanical system or a newsletter that follows one, only to lose their pants and their shirts.”

MECHSYS equals “A” “OR” “B”.

MECHSYS equals “NO ray of light” or “cavern of BRIGHTNESS” <–FIRST knowable event.

MECHSYS is 0 0 <–FIRST knowable event….reduced view.

MECHSYS equals “NO ray of light” or “cavern of darkness” <–Second knowable event.

MECHSYS is 0 1 <–Second knowable event….reduced view.

MECHSYS equals “ray of light” or “cavern of BRIGHTNESS” <–Third knowable event.

MECHSYS is 1 0 <–Third knowable event….reduced view.

MECHSYS equals “ray of light” or “cavern of darkness” <–Fourth knowable event.

MECHSYS is 1 1 <–Fourth knowable event….reduced view.

MECHSYS equals Fifth non-knowable event.

MECHSYS is x x. <–Fifth NON-knowable event….reduced view.

x means we do not care what the bit settings are.

is the NON-knowable event.

The first 4 events are knowable and we will now name them.

Event 1 is called OFF-Bright. The flashlight is off, but the cave is glowing with light.

Event 2 is called Cavern of Darkness. The flashlight is still off, and we can not see anything.

Event 3 is called Light-Bright. With a ray of light now present, the cave is also glowing brightly.

Event 4 is called Light-Dark. With a ray of light now present, but the cave is now dark.

Notice how the Fourth knowable event is also an output that you can get from the word “AND”.

MECHSYS is 1 and 1

MECHSYS is “ray of light” AND “cavern of darkness”.

The torch is turned on. We heard a “click.”

We all assume that Sol turned on the torch, because he was carrying it when we started into the cave.

Everyone hears a swishing sound and thinks it bats or something, but I know it is just Sol busy waving the torch; wondering how come he cannot see a light beam, and how come when he shines it at what he knows to be a cave wall, there is no reflection.

Lost in thought, no one wants to admit that the torch is on but the cave is dark (according to EVENT number 4) so everyone pretends that the cave is bright (according to EVENT number 3); and it is so.

The conversation continues.

Man, This rope and knot calculator is really neat.

I can feel the 0 or 0.

Yeah, And I can feel the 0 or 1.

Me too, I can feel the 1 or 0.

And I can feel the 1 or 1.

On top of that I KNOW that as I feel the 1 or 1, it is also a 1 AND 1.

At least for a moment, until it changes.

Which gives me a real big problem.

Well my math says 1 OR 1 = 1, but 1 AND 1=2, but 1 only get 1 out, so the AND is kind of like an ADD, and the OR is kind of like a what.

Yeah, that’s it. A merge.

This is getting creepy. Let’s get out of here. Say, Art. your not going to open the pouch are you?

No aún no. We still have event 5. Remember, How 1+1=5?

Oh yeah, the NON-knowable event…

Yeah, that’s right. MECHSYS is x x? <–Fifth NON-knowable event…. reduced view.

So how are we going to know the non-knowable event?

¡Qué! But I thought you said we could!

Remember, I told you about 1+1=5 only after we were at the bottom of the dark cavern.

Everybody feel the rope again. Slide your hand along the rope. Feel all of the EVENTS.

¿Notar algo? As you slide your hand back and forth along you will feel the “X” “X” and the question mark.

Minutes pass in total dark silence.

Finally some one speaks.

“We have a mechanical system inside of which, there are many black-boxes.”

And then someone else.

Yeah. “We also have a black-box inside of which, there are many mechanical systems.”

Guau. “I can feel it, but I can’t know it.”

And so 1+1=5. You can feel, but not know, the Fifth EVENT.

A few minutes pass in silence.

Does everybody feel comfortable, tossed away your newsletters, and so on?

Have you gotten used to the logic pain and know that it is with you forever?

Hearing no complaints, I ask, “How would you now like to see an actual fifth Event?”

An actual XX?…. ¿Es eso posible?

Well, you are all well prepared; and up to now, I have seen no need to open “THE POUCH.”

Besides, to see the Fifth event we must leave the cavern. I’ll take point, Sol has tail-light.

As I climbed out of the cavern, it seemed about a 100 times faster than the climb down. It was all quite orderly of course, no pushing or shoving, like we all had on some kind of anti-gravity boots or something. As we past the half way rest area and popped out of the cavern on to the grass, we heard an echoing sound coming from a reader at the half-way point. “The Roundtable just shot by us like a bat out of hell. Let’s get out of here.”

With the Roundtable on the grass, completely safe, I noticed that Mary was thrilled. Her prayers worked.

The Pouch was still closed. Of course, the Pea mumbler wasn’t sure if he should quit, so with a funny smile on his face, he kept on mumbling…”Peas, Peas, Peas.”

Now quickly, before we lose our quantum-mechanical physicists mindset, close your eyes. To see the Fifth event, you must close your eyes and just listen. And then you will see.

Before we went into the cave, I read this phrase on the web.

“Catastrophe requires multiple failures – single point failures are not enough.”

“Catastrophe requires multiple failures – single point failures are not enough.”

With that in mind, listen some more and paint the picture in your mind.

Actually, it is the exact reverse. All catastrophes are ALWAYS caused by a single point failure. And the specific “single point failure” is always the one that was never considered. As a group, single-point failures all have one common amazing property, the ability to get around or bypass all built in defenses in the system; and they all end with a common five word lament….”We never thought of that.”

Now see the Fifth EVENT that is un-knowable.

Seven and one half million parts.

Billions of dollars.

Millions of engineering man-hours.

Positive temperature coiefficient o-ring for Morton Thiokol booster rockets part number x-xxx-xxx.

A single point failure occurs… a temperature inversion.

Ka-Boom. May the Challenger Astronauts rest in peace.

Do you see it everybody? Do you see the Fifth EVENT?

Before any quantum-mechanical spelunkers could speak, pea-mumbler yells out, “I do.”

“It’s the temperature inversion.” Horray! Horray!

Exactly, say I. And what is the name of the Fifth EVENT?

The Roundtable yells, “The name of the Fifth EVENT is “We never thought of that.”

An article reader chimes in “Yeah. It’s even got five words in its name too.”

John Tyler is jumping up and down, shaking pea-mumbler by his shoulder in pure joy, yelling “And that’s why there are no dumb questions or brilliant questions.”

The only things that are, is, “DUMB ANSWERS.” Horray! Horray!

After everyone quiets down, Sol Pahla says, “O. K. Art. We get it. 1+1=5. So what’s in “THE POUCH?”

“A butterfly net.”

“A what?…a butter…a butterfly net? There are no butterflies down in that cavern of darkness that we just spelunked. You mean all this time the fear in THE POUCH was a butterfly net?

“Yep. Think of it as some kind of med kit.”

Sol says “Huh?”

Now Alan Lunt is thrilled. He knew it all along. It was a med kit after all.

So he chimes in with “Sol, let me explain. What Art is saying is that while we were down in that deep dark cavern hole, learning the other events and stuff, if any one of us as quantum-mechanical physicists had said that we understand quantum-physics,… well, Art would be forced to open THE POUCH and gently slip the butterfly net over the person who spoke. We would then proceed to safely get the insane physicist out of the cave and hopefully into a rest home. And he did not lie, for he truly carried the most fearful med kit in all of human existence. What’s neat is that we all got back safe, and we still have our pants and shirts on, and all of our marbles seem to be intact….maybe.”

That’s right say I.

And because of the o-ring in all of the newsletters, and computer calcs, we are all just pounding sand with a yo-yo, waiting for a K-Boom world wide.

Tell we meet again,

Art Soukup –

© 2004 Art Soukup “In the land of the blind, the one-eyed man is king.” Email

Contrarian Round Table Series

Your repeated bullish outlook on the dollar helped me save a fortune. When President Jakowi came to power in Indonesia in 2013, the rupiah dropped to 11,500, and everyone assumed that it would remain strong. However, you stated that you expected the dollar to continue its journey to new highs. I converted a huge some of my money into dollars … Lee mas

This article draws your attention to the brief review of the method and program code of the mechanical trading system based on the technique proposed by Stanislav Chuvashov. The market analysis considered in the article has something in common with Thomas DeMark's approach to drawing trend lines for the last closest time interval, fractals being the reference points in the construction of trend lines.

MQL4 Comments 2012.05.01 04:19 2012.05.01 04:19:31 #

I don't think many traders outside of Russia are aware of Chuvashov's Forks. It's great that you've taking the time to describe them & how they work, let alone create a proof-of-concept EA. ¡Gracias!

MQL4 Comments 2012.05.27 06:58 2012.05.27 06:58:31 #

The Trade Robot software is an automated order execution software that automatically places mechanical systems trades directly into your dealers trading platform without any human intervention.

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Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis

Descripción

"The book is highly recommended for almost anyone involved in trading, forecasting, or studying the markets." ( Technical Analyst . July/August 2005)

From the Inside Flap

When mechanical trading systems were first introduced into the arsenal of trading tools, the trader interested in utilizing these tools would have needed programming expertise, a strong background in mathematical technical analysis, and iron-willed discipline. Today, trading system software developed by market-data vendors has become so user-friendly, that nonprogrammers with only a rudimentary understanding of mathematical technical analysis can successfully create and backtest simple trading systems like those offered throughout this book.

In Mechanical Trading Systems, Richard Weissman uses his experiences as a trader and trading systems expert to take this concept to a new level. Filled with in-depth insight and practical advice, this book examines the development process for choosing and using mechanical trading techniques in conjunction with trader psychology. Mechanical Trading Systems skillfully explores the dangers in system development and how to avoid them; how backtesting and forward testing of trading systems aids in quantification of price risk; and the methods of improving rates of return on investments without significantly increasing risk. It also provides a detailed examination of the personality traits common to the three basic types of trader—trend-following (long to intermediate term), mean reversion (intermediate-term), and short-term (swing and day traders)—and illustrates how a strict adherence to specific types of trading systems can foster a psychological flexibility that will allow you to succeed in all kinds of trading environments: countertrending, choppy, or trending.

Some of the other issues discussed within these pages include:

Why mathematical technical analysis is anideal building block in the development of mechanical trading systems

How various flaws in trader psychology—fearfulness, impatience, greed, and lack of discipline—can be overcome

The pros and cons of various traditional price risk management methods, such as stop loss and volumetric price risk management

The psychological aspects of price risk management and how utilization of mechanical trading systems can aid in fostering confidence during drawdowns

How your knowledge and experience can be utilized within the framework of a mechanical trading system

Mechanical Trading Systems offers a wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory. If you plan on improving your trading skills, this comprehensive resource can help you succeed.

From the Back Cover

Praise for MECHANICAL TRADING SYSTEMS

"Mr. Weissman's work is a metaphysical journey through the art of war. One need only read his preface to gain the true wisdom of market trading. What follows is a clearly marked guide to trading discipline and market mathematics. a stand out in a forest of technical works." — Timothy Kelly, Founder and CEO, FOREX Television

"Mechanical Trading 101. The most complete, concise, and thorough analysis of every aspect of mechanical trading, from detailed case studies to enlightening reviews of psychological trading profiles. A real systematic approach to mechanical trading that will certainly improve your trading at any stage of your career." — Frédéric Bettan, Business Development Manager, Institutional Clientele, Montréal Exchange

"A serious and sophisticated book for the advanced technical trader. Mr. Weissman emphasizes exactly the right aspect of designing and using a trading system——it has to match your character and personality to be of practical day-to-day use." — Barbara Rockefeller, author of The Global Trader and Technical Analysis for Dummies

"A great contribution from a brilliant thought leader. Mr. Weissman offers intriguing insight into trading by traveling across many disciplines in the process. His analysis of transformational psychology within the context of a mechanical trading system is a must-read for everyone involved in investment management. I am sure that institutional investors will benefit a great deal from his intuitive and innovative style." — Kurtay Ogunc, PhD, MBA, CMFC, Managing Partner and CIO, Alpha Dynamics Group, LLC

"Mr. Weissman synthesizes a wealth of research and observations about human behavior and the use of mechanical trading systems in order to reprogram the trader. No other book so splendidly lays out the task of mental system creation, system construction, and system testing. The tools in this book go beyond system development in aiding to defuse erroneous human behavior in trading. I recommend this book to anyone who intends to trade utilizing systematic or discretionary programs in today's financial markets." — Jesse M. Van Luvan, Managing Partner, Ambidex Fund and CEO, South Paw Strategic Investment, LLC

Sobre el Autor

Richard L. Weissman has seventeen years' experience as a trader and developer of trading systems. Formerly, he was president of R. Lloyd Associates Ltd. where he focused on the development and implementation of mechanical trading systems that were applicable to all trading vehicles. Mr. Weissman has written articles on technical analysis and mechanical trading system development for various industry publications, acted as a lecturer at industry conferences, and is recognized globally by industry leaders and the financial media as a leading authority in the field. He currently provides independent consultation and training services to traders and risk management professionals on technical analysis, derivatives, mechanical trading system development, risk management, and trader psychology.

Acerca de este artículo

Welcome to Gold Silver System !

GoldSilverSystem. com is a pure mechanical impulse system for trading the gold and silver Exchange Traded Funds (ETFs), which are GLD and SLV. Our system uses a combination of 'trend following' and 'momentum' to identify tradable impulses, which means we are reacting to price action as opposed to predicting a direction.

As a member you will receive specific buy long and sell short trading signals for GLD and SLV based on our time-proven proprietary algorithms for any market condition (bullish or bearish).

Our number one goal is to maintain profitability with solid absolute returns. We want to be primarily buying long during uptrending cycles of the market, and selling short during bearish cycles. It is key not to lose substantial ground to the market under any circumstance. The objective of our system is to prosper from trending markets (bullish or bearish) and protect capital during market crashes.

We do not measure our performance based on relative terms as compared to the performance of the GLD and SLV indexes. Our methodology is designed to generate absolute returns that increases an investor's net worth. If one was to measure the performance of our system in relative terms, our track record shows we have consistently outperformed the buy-and-hold strategy of investing on all time horizons.

Our system is simple - we provide either two signals - Buy or Sell for each ETF (click here for a trade alert sample ). As a member you will receive:

- One-year membership to our service. - Instant Access to the exclusive Members Only page with the latest trading signals for GLD and SLV. - An E-mail Alert when there is a change in status of a trading signal for either index. - Our monthly newsletter which discusses the long-term trend of the gold and silver indexes.

Mechanical trading systems save you from yourself!

Why do you need saving from yourself and why do I believe that mechanical trading systems are the best way to do this? Let’s explore this question…

…One of the biggest challenges that stops new traders from becoming successful and consistent is their own psychology! The more you trade and the more you consciously observe yourself, you will realize that we all have unconscious biases that impact the decisions we make. This is true no matter whether you trade stocks, futures or forex (FX).

Our everyday decisions in life are impacted by countless things including:

Our moods

Our feeling of self-worth

Degree of confidence

Whether we are being observed by someone else

Lo que pasó ayer

How well we slept

What happened last time we tried to do what we are doing

And the list goes on…

Most of these things are not conscious, and we don’t tend to think about them in day to day life that much…But trading is different:

Trading gives you immediate & honest (brutal?!) feedback on decisions you make – in the form of profits or losses!

If you make bad decisions in every day life as a result of issues like those listed above you may end up having a bad day. But if you make bad trading decisions as a result of any of these things you will lose money!

How do I know you have a problem?

This is the beauty (and the curse) of trading. Our personal psychology impacts everything we do – Including our trading profits. So in a sense, we all have a problem that we need to resolve or at least address before we can become consistent, profitable traders.

Every trader needs to learn about themselves and master their psychology to become consistently profitable

I don’t mean to suggest that we all have psychological problems that need medical treatment, but, our psychology does impact our trading and most often it will be a negative impact.

¿Por qué? Because people are more often in a low state than in a peak state, and we all have baggage from the past which adversely impacts our trading.

The fastest way to fix psychological trading problems

In many cases the quickest way to reduce the impact of your psychology in trading is not to change your psychology, but to remove it from the equation all together! We do this by trading with mechanical trading systems that make the decisions for us.

Having a trading system make the decisions for us means we have less opportunity to stuff them up with our psychological issues!

Mechanical trading systems make our trading more consistent by making trading decisions for you

Consistent profits come from consistent application of a trading system that has a positive expectancy. The easiest way to improve consistency in trading is to ensure your trading system makes all the decisions for you – Removing your personal judgment and biases from your trading.

This way, even if you are in a bad mood or feeling depressed or down on yourself it doesn’t impact your trading decisions because your system is making the decisions for you.

Of course you then have to implement the decisions that come out of your trading system, so that is a potential risk area. But at least you have a consistent decision making process to start with.

So what is a mechanical trading system?

A mechanical trading system is simply a trading system that does not require discretion in order to make the trading decisions.

In a mechanical system all trading rules are fully codified and are created to cover all possible situations that you may encounter in the market. This way the trading decisions you need to make are predetermined by the rules of the system and not impacted by your psychology.

Advantages of mechanical trading systems

There are many advantages of mechanical trading systems:

Counteracts biases and psychological issues many traders have

No decisions to make other than to follow the trading rules

Decision making is consistent regardless of the trader’s mental state (because it is codified)

Less room for emotions to impact trading

The time required to execute the system is short, so you can spend less time in front of the computer and more time living

It removes the trader from the equation – the rules can be given to someone else to run for you (when your trading plan is well developed)

If you don't like something that happens you can 'blame' the system and not have to beat yourself up (then go and fix the system)

The last point is particularly important because if you are beating yourself up it is hard to trade well, however, if you don't like something that 'the system did', then you can do some extra research and improve or change the system.

I want a mechanical trading system – What do I do next?

The major issue that prevents people trading profitably is their psychology, and mechanical trading systems go a long way towards addressing this issue.

Many new traders can quickly improve their profitability by building a mechanical trading system that suits them

If you are interested in learning more about different types of mechanical systems, check out our discussion of trading systems here. I also recommend people read 'Mechanical Trading Systems' by Richard Weissman which is reviewed here .

A good place to start is to look at trend trading systems because they are relatively easy to understand and implement. More information about trend trading systems is found here .

No matter what type of trading system you develop, you need a trading plan. Your trading plan captures all of your rules and explains how you will trade so that you do not have to make it up as you go – trading plans are explained in detail here. Your trading plan is the most important document you will ever write for your trading business so I suggest you learn how to write a good trading plan!

Artículos relacionados:

Mechanical Systems

Everyone who is trading, but not for a living, has probably asked themselves this question . When people ask us, we respond: Well, what is a living? For one person, it is $50,000 a year, for another it is $500,000 a year. We don’t know how much money you have or how much you want to make. One trader might risk more and make 100% on his money, but another might risk less and make 30% a year. Some traders may have a losing year — it happens to the best. The real crux of the matter amounts to what is a living for you, and whether you are able to follow a system to make your goals happen. The answer ultimately depends on your self-discipline and whether you have that needed deep desire to win at all costs. Famed trader, Jim Rodgers, gives this perspective:

Most of us don’t have the discipline to stay focused on a single goal for five, ten, or twenty years, giving up everything to bring it off, but that’s what’s necessary to become an Olympic champion, a world class surgeon, or a Kirov ballerina. Even then, of course, it may be all in vain. You may make a single mistake that wipes out all the work. It may ruin the sweet, lovable self you were at seventeen. That old adage is true: You can do anything in life, you just can’t do everything. That’s what Bacon meant when he said a wife and children were hostages to fortune. If you put them first, you probably won’t run the three-and-a-half-minute-mile, make your first $10 million, write the great American novel, or go around the world on a motorcycle. Such goals take complete dedication.

How Much Time is Needed? Not much if you follow a Trend Following system. Trading signals can be generated manually via a simple PC spreadsheet in a few minutes per day. Just keep careful records and a trading log. You can also automate trading signals with products as discussed here .

Orders can be placed before the market opens and do not need hourly monitoring. Most top traders don’t spend all day trading . If the markets are not moving there is nothing to do! What do they do? They manage their trades in 10 to 60 minutes per day. Richard Donchian offered great wisdom decades ago:

If you trade on a definite trend following loss limiting-method, you can [trade] without taking a great deal of time from your regular business day. Since action is taken only when certain evidence is registered, you can spend a minute or two per [market] in the evening checking up on whether action-taking evidence is apparent, and then in one telephone call in the morning place or change any orders in accord with what is indicated. [Furthermore] a definite method, which at all times includes precise criteria for closing out one’s losing trades promptly, avoids…emotionally unnerving indecision.

Tim Arnold’s Trading Blox software is one of the few software trading packages that traders actually use to accurately test technical trading concepts. While not as well known as many more popular packages, Trading Blox has a dedicated and loyal following. If you can imagine a trading idea, there is a good chance you will be able to “write” it into Trading Blox and backtest your idea. For more information see: www. tradingblox. com .

“There’s something very reductive about the stock market. You can be right for the wrong reasons or wrong for the right reasons, but to the market, you’re just plain right or wrong.” John Allen Paulos

Are you comfortable with the concept of right and wrong? The price you analyze everyday is the truth. Price does not lie. The price is always right .

Taking price a step further we can see…

Markets are also the same because of price . All markets are most directly measured by their individual price movements. What do cotton, crude oil, Cisco, SUN, GE, US Dollar, Australian Dollar, soybeans, wheat, Microsoft, JDS Uniphase, EMC and Oracle all have in common? Let’s say you know nothing about trading cotton. Moreover, you also know nothing about fiber optic networking (a specialty of JDS Uniphase). Oracle and databases? Let’s say you are clueless about them as well. Does it matter that the fundamentals of cotton, JDSU and ORCL are all different? What if you just analyze their market prices?

Trend following does not require an understanding of the market fundamentals. Take the price data and apply your rules. If your trading is pure trend following, all markets are the same in terms of price analysis.

William F. Sharpe, Reprinted from The Financial Analysts’ Journal Vol. 32, No. 4, July/August 1976. p. 4, Copyright 1976, Association for Investment Management and Research, Charlottesville, VA:

Some years ago, in a land called Indicia, revolution led to the overthrow of a socialist regime and the restoration of a system of private property. Former government enterprises were reformed as corporations, which then issued stocks and bonds. These securities were given to a central agency, which offered them for sale to individuals, pension funds, and the like (all armed with newly printed money). Almost immediately a group of money managers came forth to assist these investors. Recalling the words of a venerated elder, uttered before the previous revolution (Invest in Corporate Indicia), they invited clients to give them money, with which they would buy a cross-section of all the newly issued securities. Investors considered this a reasonable idea, and soon everyone held a piece of Corporate lndicia. Before long the money managers became bored because there was little for them to do. Soon they fell into the habit of gathering at a beachfront casino where they passed the time playing roulette, craps, and similar games, for low stakes, with their own money. After a while, the owner of the casino suggested a new idea. He would furnish an impressive set of rooms which would be designated the Money Managers’ Club. There the members could place bets with one another about the fortunes of various corporations, industries, the level of the Gross National Product, foreign trade, etc. To make the betting more exciting, the casino owner suggested that the managers use their clients’ money for this purpose. The offer was immediately accepted, and soon the money managers were betting eagerly with one another. At the end of each week, some found that they had won money for their clients, while others found that they had lost. But the losses always exceeded the gains, for a certain amount was deducted from each bet to cover the costs of the elegant surroundings in which the gambling took place. Before long a group of professors from Indicia U. suggested that investors were not well served by the activities being conducted at the Money Managers’ Club. Why pay people to gamble with your money? Why not just hold your own piece of Corporate Indicia? ellos dijeron. This argument seemed sensible to some of the investors, and they raised the issue with their money managers. A few capitulated, announcing that they would henceforth stay away from the casino and use their clients’ money only to buy proportionate shares of all the stocks and bonds issued by corporations. The converts, who became known as managers of Indicia funds, were initially shunned by those who continued to frequent the Money Managers’ Club, but in time, grudging acceptance replaced outright hostility. The wave of puritan reform some had predicted failed to materialize, and gambling remained legal. Many managers continued to make their daily pilgrimage to the casino. But they exercised more restraint than before, placed smaller bets, and generally behaved in a manner consonant with their responsibilities. Even the members of the Lawyers’ Club found it difficult to object to the small amount of gambling that still went on. And everyone but the casino owner lived happily ever after.

When most people first start trading they often start small. As they get better at it, they trade more. They might start with one contract and then move to ten contracts. As time progresses, they reach a certain comfort level with their trading, but are still afraid to take risks beyond that level. As a result, they never trade at levels of 100 contracts or 1,000, so they never experience large profits.

There is a better way in which the object is to try to keep things in constant leverage terms. In other words, you trade the same as your equity increases. By using a trend following approach to money management, you are never afraid of getting big. You are prepared, so you know what you will do in advance as your account grows. This is a key to the trend following money management .

Mechanical Systems

Risk taking is essential to successful trading, as long as it is calculated risk. When you take a risk it is useful to have a mechanical trading system for several reasons: You increase your diversification . reduce your work load and make your trading life easier . Mechanical trading systems enable you to take a risk without getting personally involved. Although you might not be happy when you are going through a drawdown or taking a loss, at least you’re not agonizing over your trading decisions on a day-to-day basis. It’s the rare individual who can sit in front of a quote screen and make consistently good trading decisions day after day. Other components of your life will always impact your thinking generally and your trading decisions specifically, unless you rely on a mechanical system.

Trend following trading is predicated on the fact that human beings are not psychologically equipped to interact profitably with markets. When money is involved, psychological pulls interfere with objectivity. As a result, human beings who have money on the line tend to take their losses too late and their profits too soon. The problem of taking profits too soon particularly affects traders. They often feel a strong desire to close out a profitable position when it starts to move against them. Mechanical systems overcome these psychological and emotional reactions.

Consider the following table:

Bear in mind that consecutive runs of losses are not merely possible, but will ultimately occur over time, given enough trades. However, when they do happen, this is the point when it is crucial to have a strong money management plan to keep you in the game.

Trend followers know the trick of letting their profits run is key to trading. Once you learn that to maximize your profits you must be willing to give up some part of your accumulated profits, you are on your way to sustained success. For example, let’s say you start with $50,000. The market takes off and your account swells to $80,000. Many people might quickly pull their $30,000 profit off the table. They feel that if they don’t take those profits immediately, they will disappear. Refusing to give up a part of that accumulated income due to fear is their big mistake.

Trend followers understand the nature of the market. They realize that a $50,000 account may go to $80,000, back to $55,000, back up to $90,000, and from there, perhaps, all the way up to $200,000. See the mistake of quickly taking a profit just because you might not like volatility? Those people who took profits at $80,000 were not around to take the ride up to a $200,000 account. Pretend you are one of those people with the $30,000 gain in your account. Instead of simply protecting your entire $30,000 profit, why not be more aggressive with it? Do you think great traders have been successful by taking profits? Or have they compounded their profits ?

Letting profits run is tough psychologically. It’s counter-intuitive for most people. It feels risky. But, once you understand that in trying to protect every penny of your profit, you actually prevent yourself from making a bigger profit, you have learned an important reason why trend followers are so successful.

If You Consider Volatility in Your Trading You Can Adapt and Adjust Your Direction

¡Rápido! Volatility is changing. What move do you make?

What direction do you take now?

Trend following traders use a philosophy of trading that adapts to different markets and different market conditions. Trend following is based on keeping things proportional to the market’s current volatility. The ability to adapt to changing volatility (the market’s daily ups and downs) is built into the core of any successful trend follower’s trading system. If you don’t measure and consider volatility everyday you are missing a core component of trading success.

What do we mean? During a high volatility period, for example, a good trend following trading system will dictate that you trade fewer contracts or shares of a given market. During periods of lower volatility, trend following dictates that you trade more contracts or shares. In other words, trading commitments are increased during favorable risk/reward periods (low volatility) and decreased during less favorable periods (high volatility). This doesn’t mean high volatility is a bad time to trade. It simply means that you can’t trade as much as you can during low volatility periods. Trading the same number of contracts or shares no matter the volatility simply decreases your odds of success. Who wants to do that?

A main reason for always measuring volatility is for the psychological benefit. If you have too much volatility (and your trade size is not correctly decided) in any one position it attracts your attention. Your focus shifts to one particular position and you can lose sight of the big picture. Measuring volatility and then adjusting your risk exposure for any given trade keeps you psychologically balanced. If one particular market has an explosion of volatility you can trust your rules to decrease your trading size to reflect the new level of uncertainty. Sounds simple enough? Perhaps it is, but most people ignore the wisdom.

Stock Tips & Volatilidad

Have you ever received a stock tip from a friend, CNBC, or your broker that also included a volatility measure? Have you ever heard a market commentator tell you how much of a stock to actually buy or sell within the context of what current volatility is? If you do not consider volatility daily are you not one step closer to the blowout of all blowouts?

“Jim DiMaria learned an important trading principle in the less lucrative arena of baseball statistics: The players who score the most runs are home run hitters, not those with consistent batting records. It’s the same with trading, DiMaria says. Consistency is something to strive for, but it’s not always optimal. Trading is a waiting game. You sit and wait and make a lot of money all at once. The profits tend to come in bunches. The secret is to go sideways between the home runs, not lose too much between them.” Jim DiMaria

Why is basing your time horizon on quarters such a big mistake? The preoccupation that so many people have with twelve month returns is not smart trading. Top traders could not care less about twelve month returns, so why must you? The prime objective of top traders worldwide is to make money.

Quarters do not predict: Top traders know that focusing on quarterly objectives has nothing to do with success since that would assume you can control how much you make. Does anyone believe they can control how much they make? Quarterly performance reporting is nothing more than another way to mislead yourself pretending you can predict the market or shoot for profit targets.

Quarters are not real: They are artificial start and stop points. You are bombarded by references to quarterly performance numbers from almost every media outlet right? Most people focus on their portfolios from a quarterly perspective only. ¿Por qué? Because the perspective may not be real, but it is easy, and most people prefer to go through life mindlessly. However, to properly evaluate any trading style a rolling 36 month window must be employed at a minimum. For example, say your trading system had little performance gain for the last 3 months of the year, but since trend following is long term in nature, it explodes with profit in the first month of the new year. With quarterly reporting you would look at this system as having a bad fourth quarter and a good first quarter. How does this interpretation help you? It does not.

Ponder what Jim DiMaria said above. Home runs may not feel easy or safe, but what is your alternative? You can either trade aggressively putting yourself in position to get rich or you can give your money to a mutual fund and buy and hope . DiMaria is really talking about being trapped in the quarterly performance cycle spin. You can worry about meeting some artificial time objective or you can be a home run hitter and take what the market gives no matter when it arrives.

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If you’re currently at a crossroad on whether discretionary trading is your cup of tea, or a mechanical trading system suits you better; it’s best to do your due diligence and see the advantages of mechanical trading systems as opposed to discretionary trading. Créame; choosing one over the other makes all the difference in the success – or dismal failure of your trading career.

What is a mechanical trading system?

Succinctly defined, a mechanical trading system is a method of timing the entry and exit points of a trade. There is a defined and rigid set of criteria, parameters and signals that triggers the execution of any given trade.

What are the Benefits of a Mechanical Trading System?

If you’ve spent considerable time in discussions, forums and the trenches of the trading world; you’ve probably heard of traders raving on the advantages of mechanical trading systems and how it has generated much profit for them. Here, in this article, we dwell on the real score why this trading system works for many traders.

A solid trading strategy that lets you know when you’re supposed to enter a trade and close the position has been devised. Everything is all planned. But then one glance at the P&L and the trader begin to feel that gut-wrenching, all too familiar emotions swarm in. Ever been in this situation?

Let’s be real. Even the best traders still have to struggle with all those nerve-wracking emotions. And that’s to be expected because traders are first and foremost, humans. Experience will probably tone down emotions but it will not completely eliminate it.

Having said that, we’re also well aware of the fact that an ounce of fear or greed is enough to make the best laid plans and strategies go awry. And that’s why taking emotions out of trading is one of the major advantages of a mechanical trading system. It doesn’t care about anything else save for the defined rules that’s set in the system.

Market movements are uncertain – that’s one thing that you can be sure of. However, you need to have system in place that remains consistent to in the face of all the uncertainties. To achieve this, you need to do some back-testing on a large number of trades by using historical data. Mechanical trading system is perfect for this purpose.

You can use historical market movements to crunch numbers and probabilities; test the criteria; and basically, pound the whole strategy on the anvil. With an automated system in place, you’re in a much better position to devise a very solid trading strategy that will stack the odds in your favor.

In trading, you won’t only have to struggle with your emotions; you can also get waylaid from your goals. Some trading decisions are done in split seconds; and there are times those tempting opportunities that are irrelevant to your goals present itself at a moment’s notice. That’s well and good if it’s bringing in the profit. But the problem is; trading decisions that are done on a whim is a sure recipe for disaster in the long run. The best traders think of probabilities as opposed to thinking in terms of single market movement. That’s why mechanical trading system is set to ensure long-term success.

Framework for Effective Trading

Life is so much easier when everything runs the way it should be; when plans are executed without hesitations; and when results are objectively assessed. Every successful business is run on planning, implementation, feedback and improvement. Trading is no different; and to effectively go through the process seamlessly, a mechanical trading system is pretty nifty.

Technology has made major advancements in the last couple of years and the world of trading is keeping pace. Some traders would argue that a mechanical system takes the human factor out of trading. That’s not a completely valid sentiment; every system is dictated by well-formulated inputs, behind which are traders and programmers who went through so much undertakings to create a calculated system.

Considering that, the best advantage of a mechanical trading system is the fusion of technology and human discretion. After all, trading is both science and art; it is both logic and insight. And the one who can find the perfect balance of both is the one who can take his trading career further.

Mechanical trading system based on Renko charts

Por Raúl Canessa C.

The Renko charts are a type of price chart developed in Japan which only shows price movements; Tiempo y volumen no están incluidos. The Renko charts are constructed by placing a brick or box in the next column once the price exceeds the high or low of the previous brick by a predefined amount. The white boxes are used when the direction of the trend is up while the dark squares are used when the direction is bearish. This type of chart is quite effective for identifying support and resistance levels.

The trading signals occur when the direction of the trend changes and the bricks alternate colors. The Renko charts work similar to Point & Figure charts, however they are easier to read and follow.

One of the hardest things with respect to trading (if not the most difficult) is to control one's emotions. There are countless books written about technical analysis and study of chart patterns. and of course these issues are important, but for most traders emotions are the most difficult thing to master. Mechanical systems which have specific entry and exit rules, as the system presented in this article, take the emotions out of the game and reduce the difficulties associated with emotions in trading.

Introduction to the trading system based on Renko charts

As indicated above, the Renko charts are quite effective to clearly define support and resistance levels and also ignored much of the "noise" that normally accompanies traditional price charts. However, Renko charts can also be subject to noise, and in order to mitigate this market noise, you can use a number of indicators to generate reliable buy and sell trading signals.

A set of indicators that can be used are:

Exponential Moving Average (EMA) of 7 periods.

Stochastic oscillator with the following settings: 14, 3, 3.

Parabolic SAR with the following settings: 0.09, 0.2

A MACD histogram can also be used with a 5-period EMA to find divergences.

Reglas de sistema

The buy/sell signal occurs when there is a color change on the Renko chart signaling a possible change in the trend:

Buy signal: Bricks on Renko chart change color from dark to white (a possible change from bearish to bullish trend).

Sell signal: Bricks on Renko chart change color from white to dark (a possible change from bullish to bearish trend).

In order to confirm and ensure the signals reliability (to eliminate the signals produced by market noise) we use the following filters:

EMA (7 periods): the price (Renko chart bricks) must be above (long position) or below(short position) of this moving average. By itself this is not a buy/sell signal but rather a guide, unless combined with other indicators.

Stochastic Oscillator (14, 3, 3): This technical indicator used with this configuration works quite well through the crossings. The buy/sell signals generated with the Renko chart has to be confirmed with the stochastic oscillator as follows:

Buy signal: The stochastic has to cross the level 20 from below.

Sell ​​Signal: The stochastic has to cross the level 80 from above.

Parabolic SAR: The buy/sell signals from the Renko chart must match the Parabolic SAR signals for greater reliability.

​ Buy signal: The Parabolic SAR should be below the price, indicating that the market has an upward trend.

Sell signal: The Parabolic SAR should be above the price, indicating that the market is bearish.

An MACD histogram with a 5-period EMA can be used to find price divergences, which can also generate good buy/sell signals.

If we put all these rules together, we have that the buy/sell signals from the Renko chart are confirmed by matching signals of the Parabolic SAR, crosses of levels 20 and 80 of the stochastic oscillator and the bullish/bearish cross of the EMA 7 with the price. This combination eliminates many of the false signals.

Trading systems based on Renko charts as the one presented above are good to get most of a trend while limiting losses which are kept to a minimum. Like any system sometimes it produces false signals, but these signals are more than compensated when we capture a strong trend.

Example of the System

In the chart above we see several trading signals generated by this system, which are indicated by blue arrows. First, we see the trend change indicated by the change of color in the Renko chart bricks. These initial signs are confirmed by the Parabolic SAR, the stochastic oscillator and the EMA (7 periods), which gives them validity.

In this case, all signals generated profitable positions that produce profits for the trader. However, do not be fooled by this example, because like all trading system it can also produce false signals. In fact, in trading ranges that do not present a clear bullish or bearish trend, this strategy does not generate good profits. For this reason it is recommended to respect all the filters described above to reduce the possibility of loss.

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Why Trading Systems Stop Working?

V.4:5 (194-197): A mechanical trading system by William F. Eng

Descripción del producto

A mechanical trading system by William F. Eng

As a professional floor trader at the Chicago Board of Figure 1 Trade, I have studied many trading techniques. Some work and some don't. Most trading techniques work with the one missing element that we all need—discipline. I preface this article with this caveat because I am of the firm belief that the best system, without minimal discipline, will fail. I have derived a very good approach to trading the markets and have seen this fail when others have used it because they lacked the discipline to follow it. Independent of your approach, you must have discipline.

The approach described here is simple, and its simplicity gives it a tremendous amount of elegance. My system is based on swing charts. My first exposure to swing charts was in a technical analysis class taught by a William D. Gann technique instructor. The beauty of using swing charts lies not in the fact that you, the trader, can determine when you should position in the direction of a breakout of a price boundary, either upside or downside, but in the fact that such price boundaries can be used as stop loss limit points. Therein lies the utility of swing charts. They may not flag you as to when you should take profits, but they will definitely indicate when you should, and must, take limited losses on bad trades.

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Take Control of Your Trading.

WHAT IS A MECHANICAL TRADING SYSTEM?

Mechanical trading systems are techniques that make trading decisions for you! You input the trading data, and the system generates a response that indicates the appropriate action. You either buy, sell, or do nothing depending upon the formulas the system uses.

The latest computer versions of these mechanical systems are complete "black box" operations. Turn the computer on, start the system, and it updates your data base, and generates trading recommendations, and places your orders directly to the brokers.

Speed is of the essence in these hectic times. Cada nanosecond cuenta cuando usted está negociando con gráficos de cinco minutos.

HOW DO MECHANICAL TRADING SYSTEMS WORK?

The most basic systems rely on moving averages. The more "sophisticated" systems use combinations of moving averages of both price and volume. The most "expensive" systems incorporate stochastics, which are the mathematical techniques for a non-linear science.

These systems are reactive by design. If a stock or a commodity acts in a certain way, the system assumes that the stock or a commodity will continue to act that way. It generates this conclusion based on the formulas programmed into the system. Some" Black Boxes" also compute a large array of indicators in an attempt to increase "confidence" of an action recommendation.

Most mechanical trading systems buy or sell " breakouts ".The stock market calls these traders "momentum players".Their formulas assume a continuation of that movement. Should that movement fail to continue, the system will generate a loss, plus the commission cost.

We must also recognize that most mechanical trading systems always have you invested in the market, either long or short! Their primary assumption is that the movement that created the breakout will continue. It therefore follows that you must take each trade to increase the chance of profits.

Mechanical trading systems also require trading in many markets. This is an attempt to reduce total portfolio risk. Simultaneous long and short positions in many markets can reduce total risk, but it dramatically reduces profitability. The ultimate hedge results in no change.

Trend following is the mission of mechanical trading systems. There have been many attempts to accomplish this goal. Defining the trend is the biggest hurdle. There is no universally accepted definition of a trend . Therefore, there is little agreement on how to follow the trend.

CURVE FITTING or DATA MINING is the tech nique used to develop almost all mechanical trading systems.

Christian Schaer . of Agora Capital Services SA calls Curve Fitting a pernicious illusion!

"Curve fitting, or data mining, is the "art" of drawing conclusions based on past information. When applied to an investment scheme, or trading strategy, history shows that (too) often such conclusions do not hold true once they are implemented. The end result is an unpredictable performance, often coming short of expectations. In people’s minds, the issue of curve fitting is mostly limited to systematic traders such as commodity trading advisors - who are percieved to build models by optimizing simulated past performance based on given assumptions."

"This article argues that the trap of curve fitting occurs across a wide spectrum of investment activiites and that most investors engage in curve fitting without know it"

WHAT RESULTS DO MECHANICAL TRADING SYSTEMS ACHIEVE?

We will first look at the daily charts for the last six months. This will give us some insight as to the

actual profitability of momentum trading (acting on breakouts).

We will use Mar Soybeans as one example for this discussion. We can assume that some mechanical trading systems bought Beans at 596 or higher in August. We may safely assume that these same systems sold Beans in September, at anywhere from a small to a large loss.

Jan Crude Oil is our next example. We may assume that some systems gave a buy signal at $51 or better in Sept. They probably gave a sell signal at break even, or at a loss in Oct.

Jan OJ is interesting. We must assume that many systems gave a buy signal on 10/01. We can assume a loss on this tr ade.

Dec Cotton is revealing. Many sy stems bought at 48 or higher in August. Many sold at 47 or lower in September. Furthermore, many systems would have gone short at 47 or lower in September. This trade would have been covered, and you would have gone long at 47 or better in November.

A look at the monthly March Wheat chart is more revealing. The latest CRB factbook discusses the much heralded " breakout " to the upside after many years of consolidation. A quick look at the monthly March wheat contract ( Use March to March basis! Not nearest month continuation charts!) reveals that the "breakout" was an fake. You would have bought March Wheat at 334 or better during July 2002. By April of 2003, March Wheat was selling at 279 Ѕ. That is a loss of 54 Ѕ cents per contract, or $2700 plus commissions per contract!

Of course you were using the margins recommended by your broker ($400 to $600), so you were forced out of the market by the margin calls. This assumes that you did not encounter " limit " moves, which lock you in until the market actually trades!

Fortunately, other observers have described their experiences. Therefore, we are not dependant on any one person’s experience or biases.

Bruce Babcock offers these observations.

Mathematical analysis of commodity price data has shown that these price changes are primarily random with a small trend component. This scientific fact is extremely important to those desiring to pursue commodity trading in a rational, scientific manner. It means that any attempt to trade short-term patterns and methods not based on trend are doomed to failure.

A good example of such a doomed method is Japanese Candlestick patterns. This theoretical conclusion is consistent with my previous research. Many years ago, just as Candlesticks came into vogue, I attempted to create a profitable trading system incorporating Candlesticks. I tried many patterns and many types of systems, all without success. I have never seen anyone else demonstrate the effectiveness of Candlesticks using objective rules either. Successful traders use a method that gives them a statistical edge. This edge must come from the tendency of commodity prices to trend. In the long term you can make money only by trading in synch with these trends. Thus, when prices are trending up, you should only buy. When prices are trending down, you should only sell.

Turtletrader offers us this observation on breakouts:

If you believe Trend Following is simply buying or selling a 20 day breakout, you are dead wrong. If you focus on breakouts as a Holy Grail . you’ve missed the point and are probably already on your way to losing your capital and, ultimately, your shirt. A trader who focuses on market entry only is in big trouble. Good trading is mostly money management or risk management. Keep in mind though, once you have the money management down, trading is 100% your personal discipline and psychology.

For a discussion on the effectiveness of STOP loss orders in money management, see DO STOP LOSS ORDERS LIMIT RISK? ABSOLUTELY, POSITIVELY, MAYBE!.This article may be found at http://onlypill. tripod. com/factsthebrokersandfinancialreporterswonttellyou/id16.html

Victor Niederhoffer claims that trend following is an illusion:

Although Niederhoffer peruses the National Enquirer for insights into investor sentiment, he also uses less provocative trading methods. Niederhoffer makes money by finding small anomalies in the day-to-day ripples of markets for everything from currencies to coffee. He uses a statistical model to reveal how movement in one market might influence another, such as sugar affecting the price of soybeans.

Most important, Niederhoffer is an inveterate contrarian. He feeds off panic, making short-term bets when prices get frothy. He condemns the common strategy of trend-following, which helped make his buddy George Soros super-rich. ''A delusion,'' he declares. Trying to read the future in chart patterns doesn't work, either. ''Deception,'' he insists. And when forces outside the natural order intervene in the markets, watch out. ''I think of governments as if they're run by a professional criminal class, taking from one set of pockets and putting into another,'' he says.

The 53-year-old trader came by his unusual theories via a blue-chip education: squash champ at Harvard, finance doctorate at the University of Chicago, and an assistant professorship at the University of California at Berkeley. His transition to full-time trader is chronicled in a new autobiography, The Education of a Speculator. ''By paying attention to the little things, the nitty-gritty, the humdrum things in life,'' he says, ''you become a great speculator.''

Striker Trade Systems was candid enough to share this observatio n:

Catscan was released in 1994. It used the same rules to trade 23 different commodity markets. It was a very unique, dual nature trading system. 99% of the current commodity trading systems are Trend Following systems. There is absolutely nothing wrong with that except for the fact that 70% of the time markets are not trending. Instead, they are in a Choppy mode. Trend following systems tend to get whipsawed to death in these Choppy time periods.

Anthony W. Warren Ph. D reports:

Trend-following methods typically utilize moving averages of closing price data for buy and sell signals. Often, the signals turn out to be false due to short-term market fluctuations. Here, longtime STOCKS & COMMODITIES contributor Anthony W. Warren, correcting one of the major drawbacks of moving averages, introduces a trend-following method that smoothes the data for trend identification and measures short-term price fluctuations to establish statistical boundaries.

A final statement by Victor Niederhoffer and Laurel Kenner on trend following:

Rule No. 1, carved in stone for all technical analysts, is that the trend is your friend. If ever there were a time that we could, along with the Cabot Market Letter, report the beauty of using a simple trend-following indicator that makes it "virtually impossible to miss a major market move," this would surely be that time. No wonder that 830 aspiring chart-readers, the most ever, registered for the Market Technicians Association’s annual competency exams on April 26 in Jupiter Beach, Fla.

Granted that some users of trend following have achieved success. Doubtless their intelligence and insights are quite superior to our own. But it’s at times like this, when everything seems to be coming up roses for the trend followers’ theories and reputations, that it’s worthwhile to step back and consider some fundamental questions:

Is their central rule, "The trend is your friend," valid?

Might their reported results, good or bad, be best explained as due to chance?

But first, a warning: We do not believe in trend-following. We are not members of the Market Technicians Association, or the International Federation of Technical Analysts or the TurtleTrader Trend Followers Hall of Fame. In fact, we are on the enemies list of such organizations.

Anotherl observation by Bruce Babcock . He gives a general warning to those individuals who are searching for winning trading techniques.

One of the few real secrets in commodity trading is that most of what you read in books about how to trade does not work in the real world. Even books by respected authors are full of trading methods that lose money when put to the test. You may find this shocking, but almost no commodity authors demonstrate the effectiveness of the methods they advocate. The best you can hope for are some well-chosen examples or a few cursory tests.

Futures Truth Reports. Do the FT Rankings Constantly Change Because the Systems Tested Are Curve-Fitted? - Vern Nord

Have you ever tried to pass up a rope? I have spent the last two days trying to analyze the Feb/March issue of Futures Truth. I would like to share my conclusions with your readers to start a discussion. I know we are all looking for the perfect system which works on all commodities with similar rules and parameters, but are we really looking for the impossible. The very best systems in Futures Truth were only good on a maximum of 4 commodities, and if you throw out such things as Pork Bellies, Live Cattle, Soybeans and Eurodollars, then no system was any good on more than three commodities. The best systems all had three or less unrelated commodities at the top of their lists. I thought that a good trend following system would test well on all the Currencies because they are very good trending markets. None of the systems tested well on more than one currency. No system worked well on any two commodities in the same group with the possible exception of Gold and Copper. They both tested very well under Welles Wilder's Volatility Movement System. There was no system that tested both T-Bonds and T-Notes, but they should test similar on a system. As I expected, the few systems that tested well on the S&P 500 were very poor on all other commodities. On non-trending markets like the S&P 500, Wheat, Lumber, Silver, Gold, etc. there probably is no perfect system to handle the random nature of these markets. So what I am trying to say is that there can never be only one perfect system for all markets. You need one type of system for trending markets; one type for random walk markets and one type of system for commodities that trend for a few months and then go into a trading range. In all three systems you would need an indicator like the ADX from Wilder's Directional Movement to tell when to shift gears from trending to trading range or to random markets when you should stop trading for now. Another surprise from my analysis is that pattern recognition systems don't test well in related markets. Arnold's Pattern Probability System (PPS) tested well on the Jap Yen, Lumber & T-Bonds - all totally unrelated markets. This reminds me of something that Hulbert said about his one-year ratings on stock market newsletters and their track records. After over 10-years of tracking all the best timers, he finally realized that his six month and one year rankings were almost totally worthless. It seems last year's Guru is this year's goat. There's no consistency from one year to next, and you can't make money following last year's expert. This leads to one last conclusion - Futures Truth rankings continually change and I think this happens because all these systems are curve-fitted. If you test any one system's across 36 commodities and stock indexes, you should get the traditional bell shaped curve results which means that 10% or three commodities would test very good, and 10% would test very poorly and the balance of 80% would fall in the middle inside the bell curve. This might explain why only 3 or 4 commodities test well on any one system and why they are totally unrelated. They probably found an algorithm and then curve-fitted it until they got good results in 10% of the commodities.

These price histories will never repeat the same way and systems are doomed to fail. Look at an old Futures Truth and see how many systems are still around, or even compare the "Top 10 since Release Date" with the "Top 10 for the past 12 Months". Only 4 out of 10 in the "Top 10 since Release" are in the current list of "Top 10 for past 12 months".

Louis Mendelsohn made the following points about curve fitting while giving a speech at a Harvard Business School Alumni Club Dinner:

"Of course, the underlying assumption is that history repeats itself, that somehow by looking at past data, by doing some work on the past information, by modeling a market in that respect, you're going to be able to make money in the future. Needless to say, that's an assumption that hasn't fully proven itself in the real world. Nevertheless, that's all that analysts and traders have to go by. Unfortunately there's really not much new in the mass-marketed trading software area. Most of the technical indicators that are in software today are really rehashes of technical indicators that have existed for many years, for decades in fact, since the 70's at least, and early 80's."

"Examples are things like moving averages. While they are very good at identifying trends, they by their very nature tend to lag the market. Of course there's been a great effort over the years by technical analysts in the futures markets to try to tweak out the moving averages, to try to reduce the lag in their response to the market. They've done that with various efforts like weighted moving averages, exponential moving averages".

"There's been a tremendous effort by technical analysts trying to tweak out these various technical indicators that have been used for decades. Even displaced moving averages, which I find kind of interesting because basically it is taking like a 5 day moving average and computing it's value as of tonight's close and then just displacing it out, maybe 2 days or 4 days, into the future and making the assumption that the value 4 days from today is going to always be what today's value is".

"It is an extremely primitive forecast that's being made. But at least, I saw, there, an effort towards forecasting rather than always looking at trend following. We're at least beginning to start to look at some form of trend anticipation, or being able to look at price anticipation, looking forward rather than just backwards. I felt, of course, that there had to be better solutions to the problem than just using things like displaced moving averages".

"And, of course, there are other limitations that exist in technical analysis software today. The whole problem of curve fitting with system testing, which you may or may not be familiar with. Basically it relates to the fact that you can take a trading system, whatever that system may be, it could be as simple as a 5 day moving average crossing a 10 day moving average, and you're long when the short average is above the long, and vice-versa. You might tweak out the sizes of moving averages to optimize them to a specific market."

The CFTC has declared war on fraudulent mechanical trading systems:

Commodity Futures Trading Commission Office of External Affairs (202) 418-5080 Three Lafayette Centre 1155 21st Street, NW Washington, DC 20581 Release: 5023-04 For Release: December 2, 2004 U. S. COMMODITY FUTURES TRADING COMMISSION CHARGES NORTH CAROLINA RESIDENT ROGER OWEN AND HIS COMPANIES WITH DEFRAUDING CUSTOMERS IN SALES OF A COMMODITY TRADING SYSTEM WASHINGTON, D. C. – The U. S. Commodity Futures Trading Commission (CFTC) announced today the filing of a complaint in the U. S. District Court for the Middle District of North Carolina against Roger Owen, Longhorn Financial Advisors, LLC (Longhorn), Phoenix Financial Group (Phoenix), all of Greensboro, North Carolina, and Daniel Belbeck of Nashville, Tennessee, alleging that Owen, Longhorn, and Phoenix used fraudulent advertising and promotional materials to solicit customers to purchase their computerized commodity trading system. According to the complaint, Owen and Longhorn, as part of their estate planning services, and Phoenix fraudulently solicited customers to purchase a computerized trading system by falsely representing that their system had generated huge customer profits. The complaint charges that, in reality, no customer who purchased and used the commodity trading system ever profited from its use. In addition, the complaint alleges that customers who purchased the trading system lost funds totaling more than $200,000 trading futures, in addition to paying Longhorn and Phoenix an aggregate $120,000 for the computer trading system. The complaint further alleges that Longhorn and Phoenix held themselves out to the public as commodity trading advisors (CTAs) and should have been registered with the CFTC. Similarly, the complaint alleges that both Owen and Belbeck, the individuals who solicited customers, should have been registered as associated persons of a CTA. Finally, the complaint alleges that Longhorn and Phoenix failed to provide disclosure documents to customers, as required by CFTC regulations. In its continuing action, the CFTC seeks full restitution and disgorgement, civil monetary penalties, a permanent injunction, trading prohibitions, and such other remedial ancillary relief as the court may deem appropriate. The following CFTC Division of Enforcement staff members are responsible for this case: Frank Rangoussis, Jan Folena, and Richard Glaser. # # # Media Contacts Alan Sobba (202) 418-5080 Dennis Holden (202) 418-5088 Office of External Affairs Staff Contact Richard Glaser Associate Director CFTC Division of Enforcement (202) 418-5358 Related Documents Complaint

We are forced to stay with what we "KNOW " to succeed in business. Thankfully, we do know the following:

90 percent of all traders lose

5 percent of all traders make no money

5 percent of all traders make all the money

Markets are in a trading range 70 to 85 percent of the time (called ON THE SIDE prior to 1948)

Markets only trend 15 to 30 percent of the time

The real profits from markets come from trending markets

Trend following systems are wrong 60 to 80 percent of the time

Mechanical trading systems generate a lot of trades (Most of these trades will lose money)

Trend following traders experience "huge" equity drawdowns

More trading generates bigger commission bills.

Brokers prefer accounts that generate big commission bills

Only you can determine whether a mechanical trading system is for you! After all, it’s your money!

FORGET THE DRAMA! TRADE WITH THE TREND AND PROSPER!

Consultante

Brainstorm ideas with a coder about your custom trading methods and tools.

If you already have a trading strategy programmed, but would like to try improving it.

If you have a manual trading strategy that you would like to try improving by having it programmed.

If you have ideas about how to analyse price movement or indicators, and would like a coder to help produce a programming specification.

And anything else a coder might help with!

In a brainstorm session or a backtest, we can't guarantee any specific outcome. We can try to improve your idea, suggest new filters or analysis techniques to work in tandem with what you have already, and offer ways that programming your idea might offer other opportunities you haven't thought of. We will try to increase the profitability, lower the risk, and so on. Yet ultimately, an idea you bring to us may not be capable of producing consistent profits, thus we cannot guarantee you will be a billionaire by next week.

We will not offer general or specific investment/trading advice. The focus of the conversation in a brainstorm session will be the mathematics of price analysis and the programming capabilities of the trading platform of your choice.

We will book an appointment with you for a Skype call or a landline telephone call. Brainstorming sessions are booked in half-hour increments.

Use our Contact Page to tell us your requirements. Give as much detail as you can. We usually respond within 24 hours, with either a quote or some additional questions.

Our no-obligation quotes are free. We will sign a Non-Disclosure Agreement. We can provide a mutual Non-Disclosure Agreement on request, or you can submit an NDA of your own.

Mike Guess TradeSafe Mechanical Trading System and Course Review

20-year professional trader, Mike Guess has perfected a method of earning 2% while only risking $100 on a trade. Mike is known mostly for his work with trading all the mini-indexes, but his method works for futures and FX as well.

Join Michael Guess, founder of TradeSafe, as he reveals how YOU can average 2% to 4%+ daily ROI without risking more than $100 per contract.

You’ll learn Mike’s four easy trade entry steps and see how a true Mechanical System gives you a winning edge. Now you can confidently enter trades with less than $100 risk and always know exactly where to exit – no guesswork.

Each of our 4 automated exit strategies is tailored for current market conditions. Enjoy precision entries and exits with absolute tolerances as only a true Mechanical System can give you – Consistently.

Register now for this webinar and learn how you can finally achieve the real Holy Grail of trading: Consistency . Watch Michael Guess pull back the curtain on his cycles-based Master Chart Settings so that you can automatically select the optimum automated exit strategy to milk each trade’s potential.

Everyone who registers for Webinar will be eligible to get a no-obligation free hour of offline personal coaching.

Here is what you will learn:

Learn how YOU can achieve 2% – 4%+ daily ROI and never risk >$100 per contract

Know exactly where and when to exit, automatically and mechanically. NO guessing!

Watch how our Master Trend Indicator signals trends precisely!

¡Nuevo! Congestion Alert Indicator warns when you get breakouts or fake outs

Trade a precise, rules-based, automated Mechanical System – & # 8211; NOT your emotions

Stop losing and begin winning on a consistent basis — mecánicamente

Watch Mike trade the TradeSafe System with easy rules you can follow

Want to stop guessing where and how to enter your trades? Want to always exit your trades at the highest potential profit point? How about generating a daily ROI average of 2% to 4% or more?

Artículos Relacionados

Stock market trading systems are often touted by slick sales spruikers at expos and in the media. These spruikers are selling a dream, a "get rich quick" scheme via their stock market trading systems that are apparently so simple that anyone can make millions and sit back on a beach with their laptop trading the markets - yes, even you! (BTW - that's you in the tree.) However, the reality is that these trading systems were designed for someone else, not you. The system may not suit your personality, risk appetite (to achieve the amazing results they spruik generally requires massive levels of risk) or lifestyle (do you have the time to sit in front of a computer all day punting?) So let's get real. Stock market trading systems can be designed by anyone. Let's start at the beginning and see how it's done. Many beginners, when learning to trade, are told to create or develop a trading plan.

This plan gives them a course of action to follow throughout the life of the trade and generally includes entry criteria, the exit mechanism and some money management. A complete set of rules is termed a stock market trading system. Technical analysis is the use of price, volume and chart patterns to make trading and investment decisions. The term ‘mechanical’ is used when these trading rules are programmed into trading software that will generate the buy and sell signals for you. Being able to program your trading rules enables 5 key benefits to improve your profitability. Estos son:

The ability to test the trading rules on past data to analyze profitability and efficiency

To ensure the consistency of the approach

The elimination of emotion from the decision making process

To enable risk and money management techniques to be adhered to

To test ways to increase the overall returns

Whilst many traders or investors baulk at a mechanical stock market trading system, feeling they are not competent to do such programming, it is common practice amongst professional traders. A mechanical stock market trading system allows you to understand what will occur in the future based on what has happened in the past. This is termed ‘backtesting’ and is what gives the professional trader his or her confidence to execute trades with little effort or further thought. When designing stock market trading systems, the most important consideration is your own personality. You must be completely at ease when you participate in the market or it will be very difficult to follow the trading plan thus switching techniques, redesigning the system (the Beginner's Cycle ) and causing losses. Personal considerations to take into account include:

Time needed each day to trade

Your need for action or interaction

Stress and anxiety levels

Capital restrictions

Natural tendencies (i. e. contrarian)

The need to be right or wrong

Whilst your best friend may be a successful day trader, your emotional make up may not allow you to be a ‘fly by the seat of your pants’ trader. You may feel more at home taking your time and assessing more strategic opportunities, using technical analysis to visualize a trade. In order to assess your make-up, it’s important to know the nuances of various stock market trading systems. Most systems will fall into either the short term trading or long term trading categories and as a result similarities start to appear within each grouping. These tend to be:

Short Term Trading Systems (< 10 days)

Long Term Trading Systems (> 10 days)

High percentage win rate (60% - 80%)

Slippage is a cost

Slippage almost irrelevant

Once the length of the stock market trading system is chosen, it’s then a matter of selecting the variables that generate the signals and dictate the money management techniques. Here is a simple flow chart that may represent an example of such variables. It’s best to work backwards and define the output first. New traders should aim to simply make money as an output as opposed to attempting to make a specific amount of money or return in any year. When designing stock market trading systems there is no need to reinvent the wheel. Many books and trading forums (try The Chartist trading forum ) have creative ideas.

Once you are familar with your trading software be on the lookout for new ideas to test and run through the trading software. Most ideas don’t register any startling results but occasionally you will come across a gem. If you decide to purchase stock market trading systems from a vendor, be aware of several tricks that are used to suck you in. Firstly, are the results true or have they been ‘optimized’ to show profits that perhaps could not be achieved in real time trading. Many systems have been designed with hindsight and will not work in the future. Always ask the system seller if they themselves trade it, if not why not, if yes, ask to see their trading statements. (If their advertising includes a beach, laptop, water, sunshine, etc. ask yourself "what exactly are they selling me?")

The second issue is matching your personality to the system. Usually stock market trading systems are built around the vendors’ personality, not yours. An example would be a trend following system that, although very profitable, may leave large profits on the table. If you felt uncomfortable about this, you may be tempted to over-ride the system rules to ‘enhance’ the results. This is a recipe for disaster and is generally why such “black box” systems get a bad name. If the vendor is credible, trades the system, publishes their results and it fits your personality then it may well be worth the money.

Lastly, be cautious when stock market trading systems generate amazing results. Always try to disprove the final results and find a flaw. Do not get overly focused on great profits, look for problems. Has it only been profitable because of a recent bull market? Has it only been profitable because of one large profitable trade? Has it been optimized, that is fitted to past data with no reflection of what the future can hold? We tend to overlook various parts of our historical testing. In real time we tend to succumb to our emotions however a mechanical stock market trading system can only tell the truth. A back-tested trading system that shows robust returns can easily be traded in real time and with relative comfort, especially when it has been designed from the ground up with your own input. A small investment into systems software can make a huge difference to your future as a trader.

Once you have learnt to use your trading software (we recommend Amibroker as it is relatively cheap yet powerful and simple to use) read Unholy Grails by Nick Radge. In this book, Nick discusses 8 stock market trading systems in depth and tests the results showing you that if you tweak the system slightly you can find an edge. The trading systems that Nick tests in the book are available to purchase as turnkey systems - i. e. all the coding has been done for you and is ready to plug straight into Amibroker. Useful links: Amibroker trading software - www. amibroker. com Turnkey Trading Systems as written about and tested in Unholy Grails - A New Road to Wealth

Richard L. Weissman - Mechanical Trading Systems Wiley | ISBN: 0471654353 | 03/12/2004 | Español | 217 pages | PDF | 3 MB

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction with trader psychology. This book discusses the advantages and disadvantages of mechanical trading systems; the dangers in system development and how to avoid them; the optimal methods for back-testing trading systems; position sizing and other risk quantification tools; and methods of improving rates of return on investments without significantly increasing risk. Most importantly, through a detailed examination of various types of unsuccessful trader personality traits (e. g. fearfulness, greed, and impatience), the book recommends different types of trading systems for a diverse array of trader types. Richard L. Weissman (Port Richey, FL) has seventeen years' experience as a trader and developer of trading systems. He currently provides independent consultation an d training services to traders and risk management professionals in the areas of technical analysis, risk management, and trader psychology.

Mechanical Trading Systems

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Mechanical Trading Systems

Trading Books: вЂ˜Mechanical Trading Systems’ by Richard L. Weissman

Trading Books: 'Mechanical Trading Systems' Author: Richard L. Weissman Publisher: John Wiley & Sons, Inc Year: 2005

Book Review Rating: **** Highly recommended

Estrategia de negociación

Trading Systems

Señales comerciales

Trend Trading Systems / Trend Following Systems

Mean Reversion Trading Systems

Short term and Day Trading Systems

Psicología Comercial

Revisión:

Mechanical Trading Systems by Richard L. Weissman is an outstanding book for anyone interested or actively using trading systems. The book lays a solid groundwork by dispelling many common myths about trading and trading systems and describing the building blocks for common trading strategies.

Weissman then goes on to provide an excellent discussion on the different types of trading indicators, why they work and how they can be incorporated into your trading systems. The method used to evaluate the trading signals and indicators is useful and provides a structure to ensure indicators are not just accepted on blind faith, but evaluated objectively before employed in a trading system.

The discussion on each style of trading system is thorough and extremely helpful. Weissman uses a common format for each approach which talks about psychology, portfolio construction and some example trading systems in each category. The trading rules for each system presented are disclosed and can be readily translated into your own trading software.

The trading systems presented are compared using a number of useful performance metrics. The system performance evaluation gives the reader a good understanding of the strengths and weaknesses of each trading style and trading system.

The trading psychology section is practical and pragmatic. After studying this section the reader will have a good idea what sort of trader they are and which trading strategy is most suited to them.

The section on trading system development provides many practical considerations and again serves as a pragmatic approach to developing and optimizing a trading system. A more detailed discussion of these topics can be found in other books (especially: Pardo), however, this section is a strong primer or a useful refresher depending on your experience level.

Of particular value is the discussion on improving rates of return through diversification. This section is worth many times the cost of the book and when correctly implemented should greatly improve trading performance. This is one of few trading books that discusses trading system diversification in this manner.

Conclusión:

Mechanical Trading Systems is highly recommended for anyone interested in Trading Systems and systematic trading.

Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis

SWING TRADING WITH 2-HOUR BARS

Various market participants define swing trading in different ways. For the sake of clarity and consistency we will define swing trading as trades typically held for more than 1 and less than 10 trading days. The intermediate-term mean reversion systems highlighted in Chapter 4 had an average duration of 8 to 20 trading days. Therefore, swing trades bridge the gap between intermediate-term and day trading systems. Some market participants use the term swing trading to designate nondirectionally biased mean reversion strategies; because I define the term based on this purely time-driven criteria, we will examine trend-following, trend-following mean reversion, and nondirectionally biased mean reversion swing trading systems.

Trend-Following Swing Trading: Channel Breakout

To examine a typical trend-following swing trading system, we will modify the channel breakout system used in Chapter 3 by changing the entry criteria from 20- to 15-day highs or lows and reducing the exit condition to the violation of 8-day highs or lows. This shifts our original system from a stop and reverse to one that allows for neutrality during sideways market action. In addition, to ensure that these trades remain “short term” in duration, we have added a time-driven exit criteria that will be triggered on trades held beyond 7.5 days. (See Chapter 4. “Time-Driven Exit Filters,” for the programming code.)

Because we only trade T-bonds during their day session, whereas the euro/U. S.

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Thinking Of Mechanical Trading Systems

Emotions in trading can seriously impede the progress of a trader. Buying the highs after a big run up or selling lows after a decline are usually the hallmark of those who “can’t miss” the next trade.

Nobody wants to miss the boat and not cash in on the large moves but having a scarcity mentality is the path to ruin.

There will always be another trade but whether you take the trade or not depends on many things.

Jumping into another trade after a string of losers can be tough and yet, if the conditions are right, you must do that.

This is where mechanical systems have their strength if you adhere to the trade plans. The system will always fire of a trade setup and you must commit to taking each one the fits the plan. Let’s take a look at some variables that are worth thinking about if mechanical trading is something you have considered.

In the video above, you can see that entries, stops and targets are laid out on the chart. The trade plans and instruction will tell you exactly what has occurred that makes that a setup. You are not flying blind and if the method you are considering doesn’t explain the entries, pass on the system. You can actually download this exact trading method for free.

Click here to get access to the plans, training and indicators for the Trend Jumper free version .

What are the benefits of having the setups printed?

No guesswork is involved

Knowing at a glance if entries, targets and stops are near any concerning price structure

Allows precise trade management when price meets certain targets

Since the setups are printed, it also allows you to easily back test as far back in history that you have data for.

Why back test your trading system?

What other way is there to test the validity of the system historically than through back testing? You can certainly forward test (something you should do anyhow) but can you imagine forward testing for 5 years…the same amount of time you can back test during the course of a week? Back testing will give you an idea of the validity of the trading system.

Once you get an idea of the success of the system, it can aid you in being disciplined in following the rules.

If you are venturing out on a driving journey using a GPS, you put your trust in traveling the unknown path to a guidance system. There may be variables such as accidents or road closures that impede you however you will still probably reach your destination by following the guidance system. In trading, that guidance system is the trading plan for the method you are trading.

When trading, the outcome on each individual trade is unknown but if following a properly tested system, you will probably reach the destination of more $ wins than losses.

Discipline can be an important by-product of diligent back and forward testing. Without discipline, your chances of trading survival are almost none.

Downfalls of back testing.

You don’t have to worry about emotions taking over like you do during live trading. Emotional trading where you ignore the trading rules can take a profitable system and turn it into a losing system. It also won’t cover slippage and no-fills that can occur in real time trading. You should account for those variables when considering the results.

The most difficult part of following mechanical rules is having the ability to push the button when required. Like any habit, this can only become ingrained if you are consistently taking action according to the trade plan.

Mechanical rules are not simply “enter here, exit here”. In the system described in the video, there are mechanical adjustments around key levels and market structure. These can put you above or below any roadblocks that may impede the progress of the trade. The secret is, once again, to be disciplined in execution.

Mechanical Trading Systems Free eBook Download

Mechanical Trading Systems

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and usi.

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THE SMARTEST TRADES. THE HOTTEST MARKETS. THE ONLY BOOK YOU NEED. You don’t have to be a professional trader to win big in the stock market. That’s what Anne-Marie Baiynd learned when she changed her career from neuroscience researcher to full-ti.

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Market Neutral Trading: Combining Technical And Fundamental Analysis Into 7 Long/Short Term Trading Systems

From the bestselling “Dr. Stoxx”—the proven 7-point system traders of every level can use to reduce risk and increase returns in any kind of market This powerful guide offers traders and investo.

Market Neutral Trading: Combining Technical And Fundamental Analysis Into 7 Long/Short Term Trading Systems was added on 2014-03-18 has been download 104 which last download at 2016-02-02 11:22:01

Designing Mechanical Systems Using Autodesk Building Systems

Design a complete mechanical system for a residential, commercial, or industrial building with ease by learning how to integrate Autodesk® Building Systems functionality with your Autodesk Architectural Desktop software! New from Autodesk Press, D.

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Mechanical Engineering Systems

The authors of Mechanical Engineering Systems have taken a highly practical approach within this book, bringing the subject to life through a lively text supported by numerous activities and case studies. Little prior knowledge of mathematics is assu.

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Dynamics Of Mechanical Systems

Mechanical systems are becoming increasingly sophisticated and continually require greater precision, improved reliability, and extended life. To meet the demand for advanced mechanisms and systems, present and future engineers must understand not on.

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Mechanical & Electrical Systems

A study course for the Architect Registration Exam (ARE).

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Mechanical And Electrical Systems

A study course for the Architect Registration Exam (ARE).

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Guidelines For Mechanical Integrity Systems

In recent years, process safety management system compliance audits have revealed that organizations often have significant opportunities for improving their Mechanical Integrity programs. As part of.

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Control Software For Mechanical Systems

This book is about the design and implementation of real times software for the control of mechanical systems. The most appealing aspect of this book is the inclusion of useable C & C++ code, Matlab a.

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Mechanical And Electrical Systems In Buildings

This extensively updated text and reference illuminates the modern realities of planning and constructing buildings with efficient, sustainable mechanical and electrical systems. Throughout, the autho.

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Dynamics And Control Of Mechanical Systems

This book contains a collection of papers presented at the Fields Institute workshop, ''The Falling Cat and Related Problems,'' held in March 1992. The theme of the workshop was the application of methods from geometric mechanics and mathematical con.

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Boat Mechanical Systems Handbook

The First Ever Guide for Optimizing Boat Systems This guide is invaluable for anyone designing or installing mechanical systems on a new boat, retrofitting an existing boat, or evaluating a boat's ope.

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Design And Modeling Of Mechanical Systems

The 5th International Congress on Design and Modeling of Mechanical Systems (CMSM) was held in Djerba, Tunisia on March 25-27, 2013 and followed four previous successful editions, which brought together international experts in the fields of design a.

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The Mechanical Systems Design Handbook

With a specific focus on the needs of the designers and engineers in industrial settings, The Mechanical Systems Design Handbook: Modeling, Measurement, and Control presents a practical overview of ba.

The Mechanical Systems Design Handbook was added on 2014-03-14 has been download 201 which last download at 2016-02-29 19:05:27

Mechanical Vibrations Of Elastic Systems

This Book Presents The Topic Of Vibtations Comprehensively In Terms Of Principles Of Dynamics - Forces, Responses, Analysis, Solutions, Examples, Measurement, Interpretation, Control And Probabilistic.

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Mechanical And Electrical Systems For Construction

Good, No Highlights, No Markup, all pages are intact, Slight Shelfwear, may have the corners slightly dented, may have slight color changes/slightly damaged spine.

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Automobile Mechanical And Electrical Systems

Learn all the theory and practical skills you need to pass the national level 2 Vehicle Maintenance and Repair courses from City and Guilds, IMI and BTEC. 'Automobile Mechanical Systems' explains in d.

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Fundamentals Of Robotic Mechanical Systems

Aiming to establish the foundations on which the design, control and implementation of the underlying mechanical systems are based, this text deals with the applications of robotics that rely on mechanical systems. The treatment assumes familiarity w.

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Trading Systems

"Trading Systems" offers an insight into what a trader should know and do in order to achieve success on the markets.

Trading Systems was added on 2014-03-12 has been download 43 which last download at 2016-03-17 08:40:57

Optimal Design Of Complex Mechanical Systems

'Optimal Design of Complex Mechanical Systems' presents the foundations and practical application of multi-objective optimization methods to Vehicle Design Problems with an extensive overview of examples. The first part provides an introduction and a.

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Design Of Mechanical And Electrical Systems In Buildings

Using a concise and logical format that explains fundamentals in very simple terms—yet extensively—this book helps readers develop a working knowledge of the design decisions, equipment options, a.

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Mechanical And Electrical Systems In Construction And Architecture

Very Good, No Highlights or Markup, all pages are intact.

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Mechanical Analysis Of Electronic Packaging Systems

"Fills the niche between purely technical engineering texts and sophisticated engineering software guides-providing a pragmatic, common sense approach to analyzing and remedying electronic packaging configuration problems. Combines classical engineer.

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Mechanical Principles And Systems For Industrial Maintenance

Intended for technicians who install, troubleshoot, and service mechanical and electrical equipment and systems, this new book/reference covers operating principles and system applications. This book.

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Dynamic Response Of Linear Mechanical Systems

This book connects the theory of vibrations with the more general theory of systems. The author uses a rigorous approach to the teaching of vibration and mechanical-system analysis, and includes well-known graphical techniques for solving engineering.

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Trading Systems And Methods

The ultimate guide to trading systems, fully revised and updated For nearly thirty years, professional and individual traders have turned to Trading Systems and Methods for detailed information on ind.

Trading Systems And Methods was added on 2014-03-18 has been download 71 which last download at 2014-11-06 08:31:23

New Trading Systems And Methods

Get the bestselling guide to trading systems, now updated for the 21st century. For more than two decades, futures traders have turned to the classic Trading Systems and Methods for complete informati.

New Trading Systems And Methods was added on 2014-03-20 has been download 107 which last download at 2014-10-27 06:47:41

Advanced Sliding Mode Control For Mechanical Systems

"Advanced Sliding Mode Control for Mechanical Systems: Design, Analysis and MATLAB Simulation" takes readers through the basic concepts, covering the most recent research in sliding mode control. The book is written from the perspective of practical.

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Mechanical And Electrical Systems In Architecture, Engineering And Construction

The book provides comprehensive, easy-to-understand introductory coverage of mechanical and electrical systems in buildings. Elementary engineering concepts and step-by-step design principles are intr.

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Design Rules For Actuators In Active Mechanical Systems

"Design Rules for Actuators in Active Mechanical Systems" deals with the formulation of model-based design rules to be used in the conception of optimized mechatronic and adaptronic systems. The book addresses the comparison of different actuator cla.

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Trading Systems And Money Management

A Guide to Trading and Profiting in Any MarketThomas StridsmanWhile most trading books simply tack money management onto the end of the book as an afterthought, Trading Systems and Money Management recognizes the importance of proven money management.

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Systems Trading For Spread Betting

The first book on developing and backtesting systems trading strategies to be used while spread betting, this reference details the cycle of choosing instruments, designing strategies, backtesting, and the real-time trading of those systems and inclu.

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Building Reliable Trading Systems

An award winning system developer explains how to create, test, and implement a profitable trading system Traders have long been drawn to the idea of translating their strategies and ideas into tradin.

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A Practical Guide To ETF Trading Systems

Providing a comprehensive introduction to rule-based trading, this work reflects the author's belief that successful investing is not complex, that market timing works, and that investors should actively manage their own assets.

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Building Automated Trading Systems

Over the next few years, the proprietary trading and hedge fund industries will migrate largely to automated trade selection and execution systems. Indeed, this is already happening. While several finance books provide C++ code for pricing derivative.

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Trading Systems And Methods, + Website

Rev. ed. of: New trading systems and methods. 4ª ed. c2005.

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Building Winning Trading Systems

The updated edition of the guide to building trading systems that can keep pace with the market The stock market is constantly evolving, and coupled with the new global economic landscape, traders nee.

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Building Winning Trading Systems With TradeStation

Praise for BUILDING WINNING TRADING SYSTEMS with TradeStation (TM) "This book will prove vital to all systematic traders. Pruitt and Hill share a wealth of innovative timing patterns and fully disclosed trading strategies. For TradeStation(TM) users.

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Design, Testing, And Optimization Of Trading Systems

The title says it all. Concise, straight to the point guidance on developing a winning computer trading system. Copyright © Libri GmbH. Todos los derechos reservados.

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AlgoExchange (beta)

IMPORTANT RISK FACTORS AND PERFORMANCE DISCLOSURES

THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CAN BE SUBSTANTIAL AND MAY NOT BE SUITABLE FOR ALL INVESTORS. Prior to purchasing or leasing a trading system from this or any other system vendor or investing in a trading system with a registered commodity trading representative, investors need to carefully consider whether such trading is suitable for them in light of their own specific financial condition. In some cases, futures accounts are subject to substantial charges for commission, management, incentive or advisory fees. It may be necessary for accounts subject to these charges to make substantial trading profits to avoid depletion or exhaustion of their assets. In addition, one should carefully study the accompanying prospectus, account forms, disclosure documents and/or risk disclosure statements required by the CFTC or NFA, which are provided directly by the system vendor, CTAs and/or the broker carrying your account. El rendimiento pasado no es necesariamente indicativa de resultados futuros.

Important Information About this Trading System Analysis

Statistics, tables, charts and other information above on trading system performance are derived from a combination of simulated hypothetical trading results and actual fills using trading systems software on futures trading platforms. Actual dollar and percentage gains/losses experienced by investors would depend on many factors not accounted for in these statistics, including, but not limited to, starting account balances, market behavior, developer fees, incidence of split fills and other variations in order execution, and the duration and extent of individual investor participation in the specified system. Other expenses such as exchange fees, NFA fees, transaction fees, software or system costs are not accounted for herein, and will affect investors net results in actual trading. While the information and statistics given are believed to be complete and accurate we cannot guarantee their completeness or accuracy. THIS INFORMATION IS PROVIDED FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY . These results are not indicative of, and have no bearing on, any individual results that may be attained by the trading system in the future.

HYPOTHETICAL PERFORMANCE DISCLAIMER . RESULTADOS HIPOTÉTICOS DEL RENDIMIENTO TIENEN MUCHAS LIMITACIONES INHERENTES, ALGUNAS DE LAS QUE SE DESCRIBEN ABAJO. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O SERÁ PROBABLE A LOGRAR BENEFICIOS O PÉRDIDAS SIMILARES A LOS MOSTRADOS. DE HECHO, HAY DIFERENCIAS FRECUENTEMENTE SHARP ENTRE LOS RESULTADOS HYPOTHETICAL DEL RENDIMIENTO Y LOS RESULTADOS REALES SUBSEQUENTEMENTE LOGRADOS POR CUALQUIER PROGRAMA PARTICULAR DE TRADING.

UNA DE LAS LIMITACIONES DE LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICO ES QUE ESTÁN GENERALMENTE PREPARADOS CON EL BENEFICIO DE HINDSIGHT. ADEMÁS, LA NEGOCIACIÓN HIPOTÉTICA NO INCLUYE RIESGO FINANCIERO, Y NINGÚN REGISTRO HIPOTÉTICO DE COMERCIO PUEDE COMPLETAMENTE CONSIDERAR EL IMPACTO DEL RIESGO FINANCIERO EN LA NEGOCIACIÓN REAL. POR EJEMPLO, LA CAPACIDAD DE RESOLVER PÉRDIDAS O ADHERIR A UN PROGRAMA DE COMERCIO PARTICULAR A PESAR DE LAS PÉRDIDAS COMERCIALES SON PUNTOS MATERIALES QUE TAMBIÉN PUEDEN AFECTAR DE MANERA ADECUADA LOS RESULTADOS DE NEGOCIACIÓN REAL. EXISTE UNOS OTROS FACTORES RELACIONADOS CON LOS MERCADOS EN GENERAL O CON LA IMPLEMENTACIÓN DE CUALQUIER PROGRAMA DE COMERCIO ESPECÍFICO QUE NO PUEDA SER COMPLETAMENTE CONSIDERADO PARA LA PREPARACIÓN DE LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICO Y TODOS LOS QUE PUEDEN AFECTAR DE FORMA ADVERSA LOS RESULTADOS DE NEGOCIACIÓN ACTUAL.

The information contained in this report is provided with the objective of “standardizing” trading systems performance measurements, and it is intended for educational /informational purposes only. All information is offered with the understanding that an investor considering purchasing or leasing a system must carry out his/her own research and due diligence in deciding whether to purchase or lease any trading system noted within or without this report. This report does not constitute a solicitation to purchase or invest in any trading system which may be mentioned herein.

NO FINANCIAL ADVICE PROVIDED . BTR TRADING GROUP MAKES NO REPRESENTATIONS AS TO WHETHER AN ALGORITHMIC STRATEGY IS APPROPRIATE FOR YOU. FURTHER, BTR TRADING GROUP MAKES NO REPRESENTATIONS OR GUARANTEES AS TO THE PERFORMANCE OF ANY ALGORITHMIC TRADING SYSTEM OR STRATEGY. THROUGH YOUR OWN SELECTION, IT IS UP TO YOU TO DECIDE WHETHER A STRATEGY IN WHICH YOU PARTICIPATE IS APPROPRIATE FOR YOU. YOU ACKNOWLEDGE THAT YOU ARE CAPABLE OF INDEPENDENTLY ANALYZING SUCH CONTENT USING YOUR OWN EXPERTISE, DUE DILIGENCE AND DECISION MAKING AND THAT YOU ARE NOT RELYING ON THIS SITE AS A BASIS FOR ANY DECISIONS YOU MAY MAKE CONCERNING INVESTMENTS.

YOU SHOULD NOT CONSIDER ANY CONTENT ON THIS SITE TO BE PROFESSIONAL INVESTMENT, TAX, TRADING OR OTHER FINANCIAL ADVICE. NOTHING ON THE SITE SHOULD BE CONSTRUED AS A RECOMMENDATION OF ANY SECURITY, FUTURES CONTRACT, COMMODITY, TRANSACTION, INVESTMENT STRATEGY, OR EXCHANGE OR MARKET BY BTR TRADING GROUP, ITS AFFILIATES OR ANY THIRD PARTY. ALL CONTENT ON THIS SITE IS IMPERSONAL AND NOT TAILORED TO THE INVESTMENT NEEDS OF ANY SPECIFIC PERSON.

General Risk Disclosure for Futures Trading: Transactions in securities futures, commodity and index futures and options on futures carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract, meaning that transactions are heavily “leveraged”. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the clearing firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit.

Disclaimer: In the interest of full disclosure we can not say that these results are representative of all users. We simply share the results we personally achieved on our live updated demo accounts during our forex trading. Nuestros resultados no son indicativos del desempeño o éxito futuro. No estamos implicando que estos resultados puedan ser esperados o alcanzados generalmente por cualquier persona. Hay un riesgo considerable de pérdida asociada con la negociación de divisas. Past performances do not necessarily indicate future results!

Some of the accounts shown on this page are simulation demo accounts and backtests for the demonstration purposes. They give you impression on how the robot might work and trade but they do not necessarily indicate future results!

Mechanical Trading System Day Trade

Trading platform В» MetaTrader 4 В» Systems trading

FOREX TRADING SYSTEM "DAY TRADE" – teaches you how to get into trades early, before the amateurs! On the market is not currently available, no such system for scalping and swing trading. DAY TRADE Trading Systems using a revolutionary method for determining entries and exits of trades. Therefore, it is only DAY TRADE Trading system that protect your money.

DAY TRADE Trading Systems are the most profitable Forex trading systems of all Forex trading systems currently available on the market. Therefore, only DAY TRADE Trading Systems are ideal for building your wealth.

The Forex Marketplace is one market that has vast opportunity for growth. No matter whether you are a complete novice or experienced in currency trading, this exciting, professional, disciplined DAY TRADE, complete with Custom Forex Indicators and Templates can IMPROVE your trading performance and help you on your way to being a better Forex Trader.

DAY TRADE will help you:

Swing Trade with Confidence Short the weaker pairs Buy the stronger pairs

From the experience, most customers we know that when normal trading (2 hours per day), the return on investment to purchase DAY TRADE average one month. Therefore, investment in DAY TRADE really pays off.

Thanks to its unique features and low cost DAY TRADE occupied the throne in the category of The Best Price/Performance Ratio between Forex trading systems. Therefore, DAY TRADE are leaders between Forex trading system.

To start trading with DAY TRADE is not necessary to study a huge quantity of useless information. Thanks to automatic installer and flowchart manual is start trading virtually a matter a few hours. Therefore, is DAY TRADE well suited for beginning traders.

Is your favorite medium trading style swing? Or prefer speed scalping for five minute time-frame? Or both trading styles like to combine? Just choose. From the offer DAY TRADE selection for everyone trader.

Manual trading system is the clear choice for professional Forex traders. Why tested dysfunctional EAs? Unlike dysfunctional robots have manual trading under full control. Control is money. Therefore, professionals traders reduce the risk to a minimum and used DAY TRADE.

Building Mechanical Trading System - Teguh Pranoto Chen

1st-Nov-12 TASS at SCCCI 6.30pm - 9.30pm (about 60 attended)

About Mechanical Trading Systems Mechanical Trading Systems are precise sets of trading rules and designed to be mechanical in nature. It is to provide trading signals when prescribed conditions are fulfilled, e. g. when and at what price to enter or exit a trade. These systems are designed to be executed without taking consideration of human emotion.

About the Speaker: Teguh Pranoto Chen specializes in Mechanical Trading Systems (MTS). Using advanced programming and statistical analysis, MTS is a powerful tool to profitability. Rarely known to average trader, mechanical trading is used by most market professionals. The presentation will share an introduction of Mechanical Trading System and how to build a Portfolio of Trading Systems.

Building Portfolio Trading System

Average Trader: Maximise Profit Season Trader: Minimise Risk, Preserve Capital, Consistent Return with small Profit, once awhile make outsized return.

"There are bold traders, there are old traders, but there are no bold and old traders."

Mechanical Trading System

Precise sets of trading rules and designed to be mechanical in nature To provide trading signals when prescribed conditions are fulfilled when at what price to enter or exit

Why Mechanical System? Way to minimise risk by testing theory before risking capital Diversify portfolio to smoothen equity progression

Disadvantages Past performance is not an indication of the future Take time and effort to learn the ropes Prone to mistakes while converting good ideas into reality

Key Watch Out Curve fitting - fit data with the system and see which one works well Future leak - looking into future data to come up with past signals Snake oil - black box system with no logic or code disclosed Tradability and slippage

"If it is too good to be true, it if NOT TRUE"

3M of success Methodology Money Management Mental - manage emotion while trading own system

Holy Grail Accuracy Frequency Leverage

Building a Trading System Market Condition . High and Low Volatality High Volatility - momentum trading combine with swing trading (momentum, oscillator and short period indicators) Low Volatility - Trending following (MA cross over, channel and bands), low profit potential, options trading etc.

Time Frame: Relative to different markets Intra day - ticks to hours Short term few days to weeks Medium term - few weeks to months Long term - months to years

Instruments . Stock, ETF, Options, Futures, Commodities, Forex

Approaches: Donchian breakout Moving average crossover Volatility open range breakout Day trading Pattern recognition

Automation Manual order entry at starting point for system Broker assistant required at certain conditions Fully automation suitable for HFT (High Frequency Trading)

Optimization Walk forward using past data to develop system and run sysem into future. Nonoptimized: one set of variable throughout system life Artificial intelligence

Key statistics: K-ratio - smothenss of equity curve Win-loss ratio Average bars held Draw down Sharpe ratio - risk adjusted measure

Back test Period analysis Trade by trade analysis Monte Carlo simulation Risk of ruin

Tools of the trade Amibroker Trade station Multicharts Neuroshell Excel @Risk Datasource EOD or RT

Backteset on Donchian Breakout (Turtle system) Buy at breakout of 20-day high or Sell at break down of 10-day low. Annual return 16% over 4 years, Draw down -20% but k-ratio and sharpe ration < 1%

Fixed lot size vs leverage upside, above test based on 1 standard fix lot size.

Size of Trading System Starter 10k-30k expect 100% pa but limited to max 3 instrument and possible to blow out ac Mediium 30k - 50k Full 50k - 100k Global > 100k expect 30-40% pa

Portfolio Trading System Comprises combination of systems Covering different time frame Spread over differnt instruments Utilising different approaches

Mechanical Trading Systems

0471654353 Shared By Guest

The author of Mechanical Trading Systems is Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis Language: English | Publisher: Wiley | ISBN: 0471654353 | 2004 | PDF | 217 pages | 24,5 mb When mechanical trading systems were first introduced into the arsenal of trading tools, the trader interested in utilizing these tools would have needed programming expertise, a strong background in mathematical technical analysis, and iron-willed discipline. This title is available at BookMoving on 's eBooks, Today, trading system software developed by market-data vendors has become so user-friendly, that nonprogrammers with only a rudimentary understanding of mathematical technical analysis can successfully create and backtest simple trading systems like those offered throughout this book. Mechanical Trading Systems Textbook, course, ebook, pdf, download at bookmoving In Mechanical Trading Systems, Richard Weissman uses his experiences as a trader and trading systems expert to take this concept to a new level. Filled with in-depth insight and practical advice, this book examines the development process for choosing and using mechanical trading techniques in conjunction with trader psychology. Mechanical Trading Systems skillfully explores the dangers in system development and how to avoid them; how backtesting and forward testing of trading systems aids in quantification of price risk; and the methods of improving rates of return on investments without significantly increasing risk. It also provides a detailed examination of the personality traits common to the three basic types of trader—trend-following (long to intermediate term), mean reversion (intermediate-term), and short-term (swing and day traders)—and illustrates how a strict adherence to specific types of trading systems can foster a psychological flexibility that will allow you to succeed in all kinds of trading environments: countertrending, choppy, or trending. Some of the other issues discussed within these pages include: - Why mathematical technical analysis is anideal building block in the development of mechanical trading systems - How various flaws in trader psychology—fearfulness, impatience, greed, and lack of discipline—can be overcome - The pros and cons of various traditional price risk management methods, such as stop loss and volumetric price risk management - The psychological aspects of price risk management and how utilization of mechanical trading systems can aid in fostering confidence during drawdowns - How your knowledge and experience can be utilized within the framework of a mechanical trading system Mechanical Trading Systems offers a wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory. If you plan on improving your trading skills, this comprehensive resource can help you succeed. Filepost

MechanicalMarketTiming. com is a pure mechanical impulse system for trading the most popular Exchange Traded Funds (ETFs), which are DIA . SPY . and QQQ . Nos hemos convertido en el principal servicio financiero para inversores y comerciantes que quieren aprovechar nuestro algoritmo altamente eficaz, tanto en los mercados alcistas y bajistas. Nuestro sistema es un enfoque técnico puramente cuantitativo de la sincronización del mercado que no implica interpretación. El sistema no predice ni pronostica el movimiento del mercado. Our approach is based on reacting to price action.

Our system uses a combination of 'trend following' and 'momentum' to identify tradeable impulses. Trend followers use what we call 'reactive technical analysis'. Instead of trying to predict the market's direction, our approach is geared to react to the markets movements as soon as possible after they occur. Hence, we seek to respond to the market, not anticipate it. Nuestro enfoque es por lo tanto en la identificación de cualquier tendencia / impulso reversión en una fase relativamente temprana y para montar la nueva tendencia hasta que el peso de la evidencia muestra o demuestra que se ha invertido. This is further explained in our methodology.

As a member you will know when to Buy Long and when to Sell Short with the trading signals generated for DIA, SPY, and QQQ based on our time-proven proprietary algorithms for any market condition (bullish or bearish). Results of our Market Timing Service

Our Track Record vs. Buy-and-Hold Returns

Results of Year 2016 (close: 02/19/2016) - In Year 2016 our members have profited +9.6% ( +8.2% DIA . +8.0% SPY . and +12.5% QQQ ). The buy-and-hold strategy is down -7.0% ( -5.9% DIA . -5.8% SPY . and -9.2% QQQ ). Our trading results are outperforming the buy-and-hold strategy by +16.5% . Un número récord de nuevos miembros se están uniendo a nuestros servicios, lo que es una situación de ganar-ganar para todos.

Overall Performance - From years 2005 to 2015, we have outperformed the stock market 10 of 11 years. If you notice on the table, we never had a losing year. Our average return per year is +23.0% DIA, +21.4% SPY, and +26.7% QQQ, for an average of +23.7% . whereas the buy-and-hold is +7.7% DIA, +7.9% SPY, and +12.8% QQQ with an average of +9.5% . Overall, we are outperforming the stock market by +14.2% per year.

El hecho principal a observar de la tabla es que estamos golpeando constantemente la estrategia del buy-and-hold del mercado. If your current trading style is not making these returns, we encourage you to Join Now and become part of our growing number of happy investors who are prospering from our valuable service!

CounterStrike Trading Method. 100% mechanical.

CounterStrike Trading Method. 100% mechanical.

This is a simple trading method and it can work on any pair. However, it must be used on the Daily timeframe only. The best part of this system is that it just need a few minutes from the trader and it is 100% mechanical. You just have to do what the system is telling you to do, there is no time to think. And we are only using a few indicators just to help us with some calculation but not to derive any trading signal from them.

As the name implies, this trading system is a counter trading strategy, that is, we are buying when people would normally be selling and we are selling when people would normally be buying. We will also be using a Risk/Reward ratio of 1:1. The system is just the basis of what can be a more complex system after you tweak it and add indicators etc to fine tune the strategy. I am going to write on the rules one by one and detailing them as we go on. and you will see at the end that it is indeed a very simple mechanical method.

1. Calculate the Average height (pip height) of the last 10 Daily candles.

We first need to calculate the average height of the last 10 daily candles. To calculate the height of 1 candle, we take the High of the Candle and we minus the Low of the same candle and we get the height in pips. Each candle will have a different height or pip height. Here is a screenshot to get a clear understanding.

However, what we need to calculate is not the height of 1 candle but the AVERAGE height of the last 10 candles. We can do so by calculating the height of each candle separately, then adding them together before dividing them by 10 to get the average height we are looking for. Of course, this can be tedious and time consuming. However, there is a trick to achieve this. We just need to add 2 simple moving average to the chart. The first one with a period of 10 on the HIGH and the second one with a period of 10 on the LOW. Now to get the pip range we are looking for, we take the High moving average value and we minus the Low moving average value and we get the average pip height of the last 10 candles. If you want to look the average pip height of the last 20 or 50 candles, you just change the period of both simple moving averages to these values. Here is a screenshot of what I am talking about. Please take note that we need to use values from the SMA on the current candle which is still open.

This is all regarding step one and as you can see, it is very simple and easy to get this average pip height of the last 10 candles on your chart. You must also note that the moving average were used just to ease the calculation process and not for generating any trade signal. I hope everything is clear in your head so far. if not, then please read this part again and try to do some practice on your charts. After you are done, then you are ready to move to step 2.

2. Calculating the TriggerPip Value from the Average Pip Height

After we have calculated the Average Pip Height from step 1, we should move to the next step which teaches us how to calculate the TriggerPip Value. First of all, you might be asking yourself what a the TriggerPip value is. there is nothing to worry about and it is just a fancy name that I have come up with. The TriggerPip is very important as the Entry of the trade will be 100% based on it. As far as the calculation of the trigger pip is conncerned, it can be done by a school kid. You just calculate the 80% of the Average Pip Height you got earlier and you are done. For example, if the Average Pip Height is 100pips, the TriggerPip Value will be 80 pips. As simple as this.

Let me elaborate a little on why we choose this 80% for the TriggerPip Value. Even though the Average Pip Height is 100 pips for example, you will see that many candle will not even reach this height but however, most of the time, they should reach around 60%-90% of the Average Pip Height. So I chose this 80% as it seems to be reasonable amount the many candle will be respecting. If everything is clear so far, you can move to next step. Otherwise, make sure you read this step again. Also, the system is open and you can use another percent value if you like.

3. The real part. Entradas comerciales

This part concern the trade entries and it is very important that you understood all of the above before you can continue reading this part. Now, you should monitor the daily candle. and watch its height closely. If the height is less than the TriggerPip value we got earlier, then we do nothing. Pero. if the price is equal or greater than the TriggerPip Value, then we need to open the a trade. but in which direction? Veamos.

4. When to go Long or Short

When the height of the candle rise up and becomes equal or greater to the TriggerPip value, then we need to see on which side of the candle the TriggerPip value was met. If it happened at the bottom of the candle, that is price is at the LOW of the candle, then we should open a BUY position but if it happened when the price is at the HIGH of the candle, then we need to open a SELL position. As you can see, this is a counter trend method as when price is rising, we are selling and buying when price is falling. We are will be capitalizing on the retracing moves to make some profit. Look at this illustration below for a clear idea about the positions details.

I hope that that illustration above can help you in understanding the logics behind the buy and the sell. A point that should be noted carefully is that. we do not care about any other candles. we only need to work on the current candle and we should just focus on it alone. Do not get distracted by the other candles and follow this system mechanically. Do not under-estimate this method due to its simplicity. it has more inside. The last part of this system is the setting of the stoploss and takeprofit levels and I should be writing on it in the next part. Good luck so far.

5. Where to place the StopLoss

After we have determine a trade signal, it is time to put the Stoploss as it will help in decreasing our risk and improve the consistency of the system.

For a BUY, you place the Stoploss at 1-5 pips below the FIRST LOW WHICH IS LOWER THAN THE CURRENT LOW. If the candle before the current candle you are trading on has a higher LOW, then look at that candle just before this one and keep going like this till you find a LOW which is LOWER than you current LOW.

As for the SELL position, you will place the stoploss a few pips above the HIGH which is HIGHER than the HIGH of the current candle. We are not looking for the HIGHEST HIGH or LOWEST LOW to place the stops but we are only looking at the first candle which HIGH or LOW is HIGHER/LOWER than the current UNCLOSED candle on which you are currently trading.

6. Set the TakeProfit

Now the last thing that we need to set is the TakeProfit an it is very important as well. The TakeProfit also is not complicated at all to calculate. You just set the TakeProfit at 50% (HALF) of the current candle and it is the same for both the buy and the sell position. For example, it a candle is 100 pips long, and it we have signal to open either buy or sell position on this candle, then we will set the TakeProfit of each of them at 50% of that candle at the time you are opening these positions. So in our example, the TP will be 50 pips above the buy or 50 pips below the sell.

I have come to the end of this explanation and I hope I have covered all the main rules for the strategy. Please take note that I have come up with this trading method all by myself and it has been shared here on fxfisherman exclusively. You should also take note that I do not myself use this method as I just came up with these trading ideas recently and I am still experimenting on it. I am sure many of you will doubt this method due to its simplicity and honestly, you should not be thinking in this way. The simplest are always the best. Take some time and study this system. You are free to experiment and tweak it to your own liking as well. Suggestions and improvement ideas are welcomed. Would like to hear back from you, especially if you are practicing it on a demo. The system is not easy to backtest at all and most of the testing should be done in the real market or through a trading simulator. Buena suerte y todo lo mejor.

Last edited by bossxero; 10-10-2009 at 09:15 PM.

Originally Posted by bossxero

Sorry but you are really pathetic. Make the EA yourself and test it out. Show your test results if you are truthful! You have not even tested the system and you are already making statute comments. Are you out of your head? I do not think testing similar systems equals to testing THIS METHOD as it is.

Sorry to post my opinion on these types of systems, I made systems like these when you were in your nappies. I am not spend more time writing EAS I know won't be of any use to me afterwards.

If the price goes to high/low, sell if lagging moving averages are saying this. On dailies MAS often lag and give false signals

Just cause a price reaches a high or low. you expect it to head the other way. using Bossxerros magic carpet. It could go the other way and hit your stop.

Dynamic stops don't work when market heading towards stops.

sorry to upset u

Bossxero made a good point. Oil, you claimed the system didn't work without giving any proof at all. You even claimed you tested it as an EA. But then you contracted yourself with "not spend more time writing EAS I know won't be of any use to me afterwards." My best guess is that you haven't tested this actual setup at all.

Two similar systems don't mean they will perform the same way. You probably know than more than I do that even a minor change in parameters of the same system alone will lead to a different outcome, let alone the difference of a whole bunch of logics.

__________________ Make easy pips with the Advanced Economic Calendar for Forex Trading .

10-11-2009, 06:22 PM

Join Date: Nov 2007

Originally Posted by scorpion

& Quot; My best guess is that you haven't tested this actual setup at all.

Correct, but I know a profitable /unprofitable system when I see one.

If he uses a CCI /stochastics on a hourly t/f before entry, it will work for the manual trader .

10-11-2009, 06:37 PM

Join Date: Nov 2006

Originally Posted by oilfxpro

Correct, but I know a profitable /unprofitable system when I see one.

If he uses a CCI /stochastics on a hourly t/f before entry, it will work for the manual trader .

Ohohoho. Seems you got a crystal ball out there. Or as you say. you might be the forex grandpa. or the one behind the market moves itself.

If you took time to read the post well rather than jumping to your 'miraculous' conclusions, then you should have read that this is a trading IDEA and it is open to improvement. You are deceiving neither me or anyone here. but yourself. As many already told you, you better grow up.

Originally Posted by bossxero

Ohohoho. Seems you got a crystal ball out there. Or as you say. you might be the forex grandpa. or the one behind the market moves itself.

If you took time to read the post well rather than jumping to your 'miraculous' conclusions, then you should have read that this is a trading IDEA and it is open to improvement. You are deceiving neither me or anyone here. but yourself. As many already told you, you better grow up.

Grandpa is saying. listen carefully.

Buying at low means buying on weakness or when trend is coming against you. selling on high is opposite.

Every new high is to be bought and every new low is to be sold, trade like mercenary rather than trying to buy cheap and sell high. Buy highs sell cheap(weak)

Even the camels are

The trend is your friend.

Mechanical Trading Systems

Mechanical trading systems can be defined as methods of generating trading signals and quantifying risk that are independent of an individual trader’s discretion. Although the advantages in utilizing a mechanical trading system are manifold, almost market participants agree that their greatest benefit is the tempering of destructive trader “emotionalism”—which is considered to be the enemy of all successful market participants—from the decision-making process.

Technical analysis can be used to develop two different types of mechanical trading systems: price-driven systems or indicator-driven systems (along with a combination of the two). Both types of trigger events can be used to produce successful trading systems because they capitalize on recurring psychological conditions in the market.

Successful trading can be considered as the systematic “fading” (buying whenever the indicator would sell and vice versa) of unsuccessful traders.

Price-driven systems generate signals based on support & resistance. Indicators are mathematically calculated values that determine either the trend, or the unsustainable nature of the current move. Indicators that determine the rend are called trend following indicators, while those hat determine the unsustainable nature of the current move are called Oscillators, or mean reversion indicators. An indicator-driven trigger is an occurrence such as a price close above or below a moving average or the crossing of an oscillator above or below a significant level.

Trend-Following Indicators: Why They Work If we assume that the majority of market participants lack the psychological fortitude to allow profits to run and take losses quickly, then successful traders use trend - following indicators that necessarily reinforce their ability to actualize disciplined profit and loss goals. As a result, such trend-following technicians often find themselves on opposite sides of the market from their less successful counterparts. Contrary opinion is often the epitome of trend trading.

Mean Reversion Indicators: Why They Work

If trend following is such a successful methodology, how can indicators based on the exact opposite philosophy generate consistent profits? The simple answer is that mean reversion indicators, such as RSI and other oscillators, work because they capitalize on the market’s tendency to overextend itself.

Whether the trend has matured and is approaching climactic reversal or is still in its infancy and simply correcting a temporarily overbought or oversold condition, the market has an uncanny knack for separating the less experienced from their money by exploiting their greed, lack of patience, and complacency. Mean reversion indicators such as oscillators attempt to somehow quantify these unsustainable levels of market emotionalism.

PSYCHOLOGICAL PROFILE OF A TREND-FOLLOWING TRADER

Willingness to buy recent highs/sell recent lows. Unless traders adhere to this first premise, there is no point in reading on. Trend trading works because it is extremely difficult to buy highs and sell lows.

Willingness to exhibit patience through numerous, consecutive small losses.

Ability to be comfortable with 1 to 5 percent of trades executed generating most profits.

PSYCHOLOGICAL PROFILE OF A MEAN REVERSION TRADER

Gain the Discipline to Fade the Crowd. Without the discipline (and courage) to fade recent price action, we will forever remain paralyzed with fear, unable to initiate the trades generated by our systems.

Gain and Maintain the Discipline to Exit with Losses. It is extremely satisfying to buy low and sell high, and we all like to be right more often than we are wrong. Yet without the discipline to exit with losses when dictated by our system, one bad trade will end our career as a speculator

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Each of our 4 automated exit strategies is tailored for current market conditions. Enjoy precision entries and exits with absolute tolerances as only a true Mechanical System can give you – Consistently.

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Artículos Relacionados

Benefits of Mechanical Investing Systems

In our pursuit of converting our strategy into the best mechanical investing system available for the individual investor, we found most individuals wanted to learn more about the systems intuition and the process of how it calculates trades.

Although everyone has heard about how mechanical investing . algorithmic or automated investing is used by the top financial firms and is gaining popularity, few outside this cryptic world of PhDs and programmers understand the true fundamental advantages it provides traders.

In this series I will explain some of the major benefits of mechanical investing . and how it could practically improve your results.

Mechanical Investing Topics:

& # 8211; Many of the ways you can apply to your strategy to various securities

& # 8211; Why executing all trades within a strategy matters so much

& # 8211; Increasing investor discipline through mechanical order execution

& # 8211; Improving investing consistency

& # 8211; Less time analyzing and executing trades = more time to spending on the important things in your life.

Benefits of Mechanical Investing?

Mechanical Investing Strategies Can Outperform the Market. Mechanical investing strategies have been shown to outperform an investment in the S&P 500 benchmark over long periods of time.

Mechanical Trading Requires Less Of Your Time

Investing strategies have a very low turnover on positions. Because there are few trades each year, and trades are identified and executed automatically by the mechanical trading system. The need for you to research the market, and analyze data is eliminated and your time is freed up to do whatever you please.

Low Transaction Cost Compared to Mutual Funds etc…

Mechanical investing involves some turnover in your portfolio as you will trade a few times a year, but the cost is minimal with brokerage fees being the lowest we have ever seen them. Advisers on the other hand can take several hundred dollars a month in commissions, and mutual funds also have an “expense ratio”. The money saved on these fees greatly improves your long term investment returns.

Historical Performance Means Very Little.

Most mutual funds and advisers touts their 1, 3, 5, and ten year returns as marketing for potential investment. The past performance of mutual funds does not mean much. The famous manager Bill Miller, outperformed the S&P 500 for 15 years straight. After than strong run, he had a terrible performance sending the fund’s ten year return below the benchmark. On the other hand Fidelity Magellan, a star mutual fund guy when run by manager Peter Lynch, subsequently underperformed the S&P 500 benchmark for over 15 years after he left.

However, a mechanical investing strategy . has historical performance which is more meaningful. Because it is not based on a discretionary trading strategy, but based on objective measures of valuation and efficiency. If you understand backtesting limitations and build a mechanical investing system to work with these limitations you can predict future performance with more certainty. There is never any guarantee that historical results will bear out again in the future. But the likelihood of market behavior continuing to do what it has always done in the past is pretty high.

Reduces Emotion From Your Investing.

One of the single greatest reasons to follow a mechanical investing strategy is to remove your worst enemy from the equation – you. Emotions cause investors to buy when the market is high, and it causes them to sell when the market is low. Mechanical investing will never remove emotions from the equation but it will great reduce them. Without the risk of you investing outside your investment plan, hoping to catch the next Netflix, Apple or Telsa Motors you will save money in the long run.

Mechanical investing has many advantages. The two keys to being successful with it are to pick a good strategy and stick to it. With over 40% annual returns over a 6 year period, AlgoTrades Automated Investing Formula is clearly a great strategy. Sticking to it through strong years and tough times, should provide you with similarly excellent returns over the long run in the future.

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© Copyright 2016 - ALGOTRADES - Automated Algorithmic Trading System

CFTC REGLA 4.41 - LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICOS O SIMULADOS TIENEN CIERTAS LIMITACIONES. DESCONOCIDO UN REGISTRO DE RENDIMIENTO REAL, LOS RESULTADOS SIMULADOS NO REPRESENTAN COMERCIO REAL. TAMBIÉN, DADO QUE LOS COMERCIOS NO HAN SIDO EJECUTADOS, LOS RESULTADOS PUEDEN TENERSE COMPARTIDOS POR EL IMPACTO, EN CASO DE, DE CIERTOS FACTORES DE MERCADO, COMO LA FALTA DE LIQUIDEZ. LOS PROGRAMAS DE COMERCIO SIMULADOS EN GENERAL ESTÁN SUJETOS AL FACTOR DE QUE SEAN DISEÑADOS CON EL BENEFICIO DE HINDSIGHT. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O ES POSIBLE PARA LOGRAR GANANCIAS O PÉRDIDAS SIMILARES A LOS MOSTRADOS.

* No representation is being made nor implied that the use of the algorithmic trading system will generate income or guarantee a profit. There is a substantial risk of loss associated with futures trading and trading exchange traded funds.

**Futures trading and trading exchange traded funds involve a substantial risk of loss and is not appropriate for everyone.

***These results are based on simulated or hypothetical performance results that have certain inherent limitations. A diferencia de los resultados mostrados en un registro de desempeño real, estos resultados no representan el comercio real. Además, debido a que estas operaciones no se han ejecutado realmente, estos resultados pueden tener una o una compensación excesiva para el impacto, si alguno, de ciertos factores de mercado, como la falta de liquidez. Los programas comerciales simulados o hipotéticos en general también están sujetos al hecho de que están diseñados con el beneficio de la retrospectiva. No se hace ninguna representación de que cualquier cuenta tenga o sea probable obtener ganancias o pérdidas similares a las que se muestran. - powered by Enfold WordPress Theme

Why Systematic Mechanical Trend Following Is the Best Way to Make Money in the Markets

Over the past couple weeks, I’ve revealed how I’ve helped my clients consistently beat the S&P 500 by a wide margin: By strictly adhering to a mechanical trend following trading model.

But many of you have written in to ask how exactly that model works. Today, I’ll try to answer that question, and explain why I favor this system over other methods.

Investors vs. Trend Followers

Those who use the stock market to grow their assets have two choices. They can either be investors or trend followers. Investors generally follow a “buy and hold” strategy — they’re in it for the long term. Trend followers, on the other hand, try to use the ups and downs inherent in free markets to profit.

If you choose to go the buy and hold route, there’s a lot you’ll have to worry about. For example, are you buying too high? And when you’re ready to retire, will you be forced to sell too low?

These are not just hypothetical questions, as many investors who retired during the first decade of this century found out the hard way. Just consider the plight of aggressive buy-and-holders who invested in Nasdaq stocks during the 1990s.

By 2002, they had lost 70 to 80 percent of their capital. And if they continued to hold their shares through the recovery over the next five years, they then had to contend with the bear market of 2008-2009, which cut many stocks’ value in half again. Even cautious investors who focused on S&P 500 stocks would have emerged from the last decade in no better shape than they started.

Conversely, trend followers are not hostages to the whims of market forces. They use those forces to protect themselves against large losses, and position themselves to make big profits from long-term trends.

Two Kinds of Trend Followers

If you decide on a trend following strategy, you still have a decision to make: Whether to use a discretionary system, or a mechanical one.

Discretionary trend followers depend on the sum total of their market knowledge to make decisions. They may rely on their own market analysis, any number of technical indicators, gut feeling, current events, the anticipation of future news events, hot tips, etc.

Discretionary trend followers may change their minds, or second guess themselves. In other words, they’re subjective, so there are no guarantees that the trades they make are based on reality, and not colored by personal bias.

Mechanical trend followers . on the other hand, use timing strategies based on an objective and automated set of rules, to avoid the emotional biases that inevitably influence discretionary trading decisions.

Mechanical trading takes the emotion out of investing.

Mechanical trend followers adhere to a set of rules to get them into, and out of, the markets. They know that some trades will not be successful. But they also know that they will always be able to take advantage of the major trends. Trading on those trends, absent of any emotional bias, is what allows this type of investor to consistently outperform their competitors over time.

It should be obvious by now that I favor a mechanical trend following system to make my trading decisions. But what specific indicators is my model based on?

Mechanical Strategies Are Based on Price

The answer is simple: Mechanical trend following strategies are based on price.

That’s right. I look at one, and only one, number, because it is the only metric that is absolutely correct at all times. Other measures of a stock’s value can be misleading or manipulated. But price incorporates all the news, all the fundamental analysis, anything that may conceivably affect the company’s future.

This strategy may seem a bit boring to you. But I’m not really concerned about the fun or the emotional highs that many traders thrive on. No, I only care about one thing: Making Money.

And I’ve determined over many years of investing that the best way to make money — the best way to win — is by taking emotion and subjectivity out of the equation, and by using a simple, objective mechanical trend following strategy.

Learning to Ignore the Emotional Crowd

Stock market veterans understand that its movements aren’t based on the underlying fundamentals. They’re based on the decisions of millions of individual investors. And those investors’ decisions are usually driven by two overriding emotions: Greed and Fear. That is why volume spikes near the tops of rallies, and again near the bottoms of corrections. Greed causes investors to jump on board, and fear causes them to jump off.

The important lesson that all successful investors eventually learn is that while there may be comfort in following the emotional crowd, there is seldom profit.

And if you want to take this lesson a step further, you can employ a mechanical timing strategy to use the emotional ups and downs of the market to make money.

Yes, discretionary trend followers sometimes have big winners. Toss a coin enough times and it will come up heads eventually. But the only certain way to be successful for the long haul in the markets is to follow a non-emotional trading strategy and to always stick to the plan.

There is no second guessing. There are no worries. And the strategy is a proven winner. We know that the markets are in trends most of the time. Rallies and corrections are going to happen. It’s impossible to predict those trends with certainty, but using a mechanical trend following strategy allows us to identify them once they start, and profit along the way.

Doug Davenport, who has 33 years of investment-management experience, is the editor of Weiss’ All-Weather Investor and Inflation Survival Strategy services.

Doug uses a technical-analytical strategy developed with Sir John Templeton, the late founder of the Templeton family of mutual funds, to manage clients’ money. He is president and chief investment officer of Davenport Investment Management LLC, an investment firm that manages portfolios for high-net-worth clients in Atlanta. The minimum investment is $100,000.

The investment strategy and opinions expressed in this article are those of the author and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.

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Mechanical trading systems: a ray of light or a cavern of darkness? 2 comentarios

May 8, 2010 12:15 AM

There is a difference between happiness and wisdom: he that thinks himself the happiest man is really so; but he that thinks himself the wisest is generally the greatest fool. Francis Bacon 1561-1626, British Philosopher, Essayist, Statesman

We have been lead to believe that mechanical systems and to some point fundamental analysis are the necessary skills to master in order to prevail in the markets. In an abstract way fundamental analysis is nothing but mechanical system in disguise; the data is put forth in a standard manner and so anyone can decipher it with almost no effort. Mechanical trading systems put forth a set of rules and all one has to do is follow these rules; in essence all the players become nothing but robots following a routine. The paradox theory comes into effect now; it basically states that one will get exactly the opposite of what one chases. We all know that at any given time the masses must lose in order to be able to feed the big players. That’s why the 90/10 ratio has almost seen no variation; 90% representing the percentage of losers and 10% the percentage of winners.

I could go on into great detail about why mechanical trading systems must and will fail and in the process put almost everyone to sleep. So in the interest of keeping you all awake I will keep it short and sweet. Let’s just pause for a second here and investigate the name “Mechanical.” One of the definitions by Merriam’s Webster online dictionary is “ done as if by machine: seemingly uninfluenced by the mind or emotions ”

Notice the key words here uninfluenced by the mind or emotions. First of all the market is nothing but a composition of a million minds so using a system that’s based on the rules set forth by one man’s mind and worse still devoid of any mental influence is a recipe for disaster. Secondly the market place is nothing but a sweat pool of emotions; lust, greed, power, hate, fear etc swirling through the markets like a hurricane descending on village of huts ready to decimate everything in sight. The above definition of the word mechanical is enough to make you want to run from any such system.

It’s virtually impossible for a mechanical system to last forever, since by design anything mechanical must and will break down at some given point in time. It’s rather amusing the terms we chose to represent the things we use or to define what side of the markets we are on. It’s almost as if we have nothing but a secret programmed desire to lose syndrome ingrained deep with our psyches. Bullish and bearish, we choose two of the most stupid, dumbest, irrational and easily angered animals to represent whether we think the market will go up and down. Then if we happen to be individuals that favour just one sector we come up with the term bugs as Internet bugs or gold bugs. Why such a disgusting animal to represent ones position and views. As we all know most humans react in an adverse way to bugs, the first thought that springs to mind is to crush them .

Even examining the language we use in the market places illustrates further psychological issues; scalp, plunge, up thrust, perfect bottom, down thrust, flip, climactic sell off, etc.

The worst part of all this is that we pass nothing new to the next generation. We simply reinforce these Neanderthal views, in fact branding them into the next generations memory more aptly describes the process. Is it any wonder then that we keep repeating the previous generation’s mistakes but do so in a much more grandiose manner? Just look at the speculative phase we have entered now (credit bubble, real estate bubble and so on) it makes all the mistakes our ancestors made pale in comparison. We leverage ourselves to the our necks with debt to buy goods we don’t need and use money we don’t have to pay for them; the real estate bubble is one classic example of madness and history repeating itself on a gigantic scale. Individuals take home equity loans against the rising values of their homes and use this to finance their extravagant lifestyles. Is there anything more insane, taking credit to buy something more on credit .

Anyway getting back to the topic at hand; no one is taught to look at the markets as a game and study the mass mind and behaviour of individuals and then learn how to use a few TA tools that are open to subjective interpretation. By subjective interpretation we are referring to the statement that “beauty lies in the eye of the beholder.” Each individual should see something different when using such an indicator; this TA tool must never be allowed to become standardized. If it is, the end is near. The ones that learn to correctly master this tool will come out ahead, however since the method is not available in a standardized format this system could work almost indefinitely.

In the end mechanical trading systems are reflective of our lifestyle and the way we are as group of individuals; the 9-5 rat race and the zombie like nation where everyone thinks and acts like one. A mechanical system is also reflective of the fact that most of us do not want to think, we want everything handed down to us and when we get whacked on the head we cry like babies. It is for this reason we never seem to learn from history but only look for ways to perpetuate the same mistakes on a flamboyant style. The only way to break from this way of thinking is to actually attempt to start thinking and using your mind. There is nothing wrong with making a mistake because you might actually learn something as a result of one; perpetuating someone else’s mistakes provides no clues for improvement but only rules for self-destruction.

At the very least some customization should be attempted so that the system is adapted to ones own needs. It amazes me that the easiest and most effective system in the world is not studied or followed more widely. The system I am referring to is trend analysis ; all you do is spot a new trend and stay on board till the trend ends. Trend analysis involves the drawing of simple lines; it takes a little practice but is worth its weight in platinum.

So let’s look at what type of system can and will work in the markets. First of all one has to understand the difference between contrarian investing and investing based on Mass psychology. Contrarian investing is a very simple system as it basically involves taking a position against the masses. Mass psychology measures the frenzy periods or periods of extreme hate or disgust towards a specific sector or sectors, and then a position is taken during these extreme times. Furthermore it measures the level of euphoria in the camps of those that believe in the investment. In other words it will measure how many of the so-called contrarians are now extremely bullish and euphoric on a given sector. In most cases when a contrarian takes a position in a specific sector he is doing so as counter move to what the masses are doing. However the majority of the contrarians are still nervous and keep checking their positions rather frequently to make sure that at the very least the bottom is in. Once the sector starts to take off and produce returns they actually lose this nervousness and become very bullish; in other words they have now entered the euphoric phase. This is where mass psychology kicks in. At this point it will be time for the smart investor to bail out, you may not be selling at the top but you will be pretty close to it.

Having a basic understanding of the concept of mass psychology is really an important and integral part of a trading system.

Secondly one should master several TA tools and make sure but do not put all your faith on these tools only. Mass psychology should always be used. In other words make sure you are not always on the same side with the lemmings. When the greed hits an extreme point, its time to bail out. Thirdly you need to be patient and disciplined. You have to understand that sometimes you might have to wait for months on end before you can take a position, but you could be rewarded in weeks for your patience.

As irrigators lead water where they want, as archers make their arrows straight, as carpenters carve wood, the wise shape their minds Buddha 568-488 BC, Founder of Buddhism

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Emini Day Trading - the consistent results found on this page were generated using our 100% mechanical rule-based emini trading system. This system day trades the S&P and Russell emini futures using no indicators - only chart patterns with an edge! Each crystal clear signal is delivered in our live emini trading room .

If you're interested in emini day trading then have a look inside our live conference room where our lead traders calls live entry & exit signals on S&P and Russell E-Mini Futures. Buying and Selling E-Mini contracts is easy. The hard part is managing those contracts and this is what sets our service apart. Sign-Up for a free trial and quietly audit the broadcast for a few days, or jump in head first and interact with us. This way you'll gain instant trust in our service and you'll see exactly why this system works so well.

NUTUS 2.0 day trades the S&P and Russell eMini Futures with possible setups occurring at 8:10 AM CT and no later than 8:35 AM CT. These setups typically last 30 minutes or less. The system triggers a maximum of one setup per market per day.

You are encouraged to look inside this remarkable emini day trading system. Successfuly emini trading doesn't have to be complicated. Most day traders clutter their screens with unnecessary indicators and they find themselves chasing historical performance. Get a jump on the 'future' and literally anticipate the market's next move using absolutely NO indicators - right here with the NUTUS 2.0 System and the Absolute Daytrader!

Futures Trading is high risk and you can lose a great deal of money, maybe all, in the process. You agree and understand the risks involved and have made your own assessment of your personal risk tolerances. You agree to not hold Absolute Daytrader and/or anyone affiliated with this site liable for any losses that may result from the information provided. By submitting your membership form, you agree and fully understand that this site and its contents are not meant and were not developed to be viewed as trading advice or recommendations. You agree by viewing the contents of this site that you do so at your own discretion and that you will not hold accountable anyone affiliated with this site or ABSOLUTEDAYTRADER. COM for any losses or interpretations you may have. El rendimiento pasado no es garantía de resultados futuros.

Any and all trades actually taken are the sole responsibility of each individual trader. We cannot guarantee the accuracy of the trades & our fill prices may be different than yours. Any and all trading systems are for educational purposes only and if actual trades are taken based on the alerts of any and all trading systems they are considered the responsibility of each trader as we are not managing or recommending any actual trading.

RESULTADOS HIPOTÉTICOS DEL RENDIMIENTO TIENEN MUCHAS LIMITACIONES INHERENTES, ALGUNAS DE LAS QUE SE DESCRIBEN ABAJO. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; DE HECHO, HAY DIFERENCIAS FRECUENTEMENTE SHARP ENTRE LOS RESULTADOS HYPOTHETICAL DEL RENDIMIENTO Y LOS RESULTADOS REALES SUBSEQUENTEMENTE LOGRADOS POR CUALQUIER PROGRAMA PARTICULAR DE TRADING. UNA DE LAS LIMITACIONES DE LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICO ES QUE ESTÁN GENERALMENTE PREPARADOS CON EL BENEFICIO DE HINDSIGHT. Además, la negociación HIPOTETETICAS NO INVOLUCRA RIESGO FINANCIERO, Y SIN REGISTRO DE COMERCIO HIPOTETETICAS TOTALMENTE puede dar cuenta de EL IMPACTO DEL RIESGO FINANCIERO DE COMERCIO REAL. POR EJEMPLO, LA CAPACIDAD DE RESOLVER PÉRDIDAS O ADHERIR A UN PROGRAMA DE COMERCIO PARTICULAR A PESAR DE LAS PÉRDIDAS COMERCIALES SON PUNTOS MATERIALES QUE TAMBIÉN PUEDEN AFECTAR DE MANERA ADECUADA LOS RESULTADOS DE NEGOCIACIÓN REAL. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.

Much ink has been devoted to pinpointing the causes of mechanical trading systems failures, especially after the fact. Aunque puede parecer oxímorónico (o, para algunos comerciantes, simplemente morónico), la principal razón por la que estos sistemas de comercio no es porque se basan demasiado en la naturaleza manos libres, fuego y olvidar el comercio mecánico. Los propios algoritmos carecen de la supervisión e intervención humanas objetivas necesarias para ayudar a los sistemas a evolucionar de acuerdo con las cambiantes condiciones del mercado.

Mechanical trading systems failure, or trader failure?

Instead of bemoaning a trading-system failure, it’s more constructive to consider the ways in which traders can have the best of both worlds: That is, traders can enjoy the benefits of algorithm-managed mechanical trading systems, such as rapid-fire automatic executions and emotion-free trading decisions, while still leveraging their innate human capacity for objective thinking about failure and success.

El elemento más importante de cualquier comerciante es la capacidad humana para evolucionar. Traders can change and adapt their trading systems in order to continue winning before losses become financially or emotionally devastating.

Choose the right type and amount of market data for testing

Successful traders use a system of repetitive rules to harvest gains from short-term inefficiencies in the market. Para los pequeños comerciantes independientes en el gran mundo de los mercados de valores y derivados, donde los spreads son delgados y la competencia feroz, las mejores oportunidades para obtener ganancias provienen de detectar las ineficiencias del mercado basándose en datos simples y fáciles de cuantificar, posible.

When a trader develops and operates mechanical trading systems based on historical data, he or she is hoping for future gains based on the idea that current marketplace inefficiencies will continue. If a trader chooses the wrong data set or uses the wrong parameters to qualify the data, precious opportunities may be lost. Al mismo tiempo, una vez que la ineficiencia detectada en los datos históricos ya no existe, entonces el sistema de comercio falla. The reasons why it vanished are unimportant to the mechanical trader. Sólo los resultados importan.

Elija los conjuntos de datos más pertinentes al elegir el conjunto de datos desde el cual crear y probar sistemas de negociación mecánicos. And, in order to test a sample large enough to confirm whether a trading rule works consistently under a wide range of market conditions, a trader must use the longest practical period of test data.

Por lo tanto, parece apropiado para construir sistemas mecánicos de comercio basado en tanto el conjunto de datos históricos más largo posible, así como el conjunto más simple de parámetros de diseño. Robustness is generally considered the ability to withstand many types of market conditions. Robustness should be inherent in any system tested across a long time range of historical data and simple rules. Las pruebas largas y las reglas básicas deben reflejar la gama más amplia de condiciones de mercado potencial en el futuro.

All mechanical trading systems will eventually fail because historical data obviously does not contain all future events. Any system built on historical data will eventually encounter ahistorical conditions. El discernimiento y la intervención humana evitan que las estrategias automatizadas salgan de los rieles. The folks at Knight Capital know something about testing in the live market; to the cost of $440 Million.

Simplicity wins by its adaptability

Successful mechanical trading systems are like living, breathing organisms. The world’s geologic strata are filled with fossils of organisms which, although ideally suited for short-term success during their own historical periods, were too specialized for long-term survival and adaptation. Simple algorithmic mechanical trading systems with human guidance are best because they can undergo quick, easy evolution and adaptation to the changing conditions in the environment (read the market).

Reglas comerciales simples reducen el posible impacto del sesgo de minería de datos. Bias from data mining is problematic because it may overstate how well a historical rule will apply under future conditions, especially when mechanical trading systems are focused on short time frames. Simple and robust mechanical trading systems shouldn’t by affected by the time frames used for testing purposes. – The number of test points found within a given range of historical data should still be large enough to prove or disprove the validity of the trading rules being tested. Stated differently, simple, robust mechanical trading systems will outshine data-mining bias.

If a trader uses a system with simple design parameters, such as the QuantBar system, and tests it by using the longest appropriate historical time period, then the only other important tasks will be to stick to the discipline of trading the system and monitoring its results going forward. La observación permite la evolución.

On the other hand, traders who use mechanical trading systems built from a complex set of multiple parameters run the risk of “pre-evolving” their systems into early extinction.

Build a robust system that leverages the best of mechanical trading, without falling prey to its weaknesses

It’s important not to confuse the robustness of mechanical trading systems with their adaptability. Systems developed based on a multitude of parameters led to winning trades during historical periods – and even during current observed periods – are often described as ‘robust.’ That is no a guarantee that such systems can be successfully tweaked once they have been trade past their “honeymoon period.” That is an initial trading period during which conditions happen to coincide with a certain historical period upon which the system was based.

Simple mechanical trading systems are easily adapted to new conditions, even when the root causes of marketplace change remain unclear, and complex systems fall short. When market conditions change, as they continually do, the trading systems which are most likely to continue to win are those which are simple and most-easily adaptable to new conditions; a truly robust system is one which has longevity above all.

Simple algorithmic mechanical trading systems with human guidance are best because they can undergo quick, easy evolution and adaptation to the changing market conditions.

Desafortunadamente, después de experimentar un período inicial de ganancias al usar sistemas de negociación mecánicos excesivamente complejos, muchos comerciantes caen en la trampa de intentar ajustar esos sistemas de vuelta al éxito. The market’s unknown, yet changing, conditions may have already doomed that entire species of mechanical trading systems to extinction. Again, simplicity and adaptability to changing conditions offer the best hope for survival of any trading system.

Use an objective measurement to distinguish between success and failure

A trader’s most-common downfall is a psychological attachment to his or her trading system. When trading-system failures occur, it’s usually because traders have adopted a subjective rather than objective viewpoint, especially with regard to stop-losses during particular trades.

La naturaleza humana conduce a menudo a un comerciante para desarrollar un accesorio emocional a un sistema particular, especialmente cuando el comerciante ha invertido una cantidad significativa de tiempo y de dinero en sistemas mecánicos de comercio con muchas piezas complejas que son difíciles de entender. However, it’s critically important for a trader to step outside the system in order to consider it objectively.

En algunos casos, el comerciante se vuelve delirante sobre el éxito esperado de un sistema, incluso hasta el punto de continuar el comercio de un sistema obviamente perdedor mucho más largo de lo que un análisis subjetivo habría permitido. Or, after a period of fat wins, a trader may become “married” to a formerly-winning system even while its beauty fades under the pressure of losses. Worse, a trader may fall into the trap of selectively choosing the testing periods or statistical parameters for an already-losing system, in order to maintain false hope for the system’s continuing value.

An objective yardstick, such as using standard deviation methods to assess the probability of current failure, is the only winning method for determining whether mechanical trading systems have truly failed. Through an objective eye, it’s easy for a trader to quickly spot failure or potential failure in mechanical trading systems, and a simple system may be quickly and easily adapted to create a freshly-winning system once again.

El fracaso de los sistemas de negociación mecánica es a menudo cuantificado sobre la base de una comparación de las pérdidas actuales cuando se miden contra las pérdidas históricas o las reducciones. Tal análisis puede llevar a una conclusión subjetiva e incorrecta. La reducción máxima se utiliza a menudo como la métrica de umbral por la cual un comerciante abandonará un sistema. Sin considerar la manera en que el sistema alcanzó ese nivel de reducción, o el tiempo necesario para alcanzar ese nivel, un comerciante no debe concluir que el sistema es un perdedor basado sólo en la reducción.

Standard deviation versus drawdown as a metric of failure

In fact, the best method to avoid discarding a winning system is to use an objective measurement standard to determine the current or recent distribution of returns from the system obtained while actually trading it. Compare that measurement against the historical distribution of returns calculated from back-testing, while assigning a fixed threshold value according to the certainty that the current “losing” distribution of mechanical trading systems is indeed beyond normal, to-be-expected losses, and should therefore be discarded as failed.

Así, por ejemplo, supongamos que un comerciante ignora el nivel de reducción actual que ha señalado un problema y activado su investigación. En su lugar, comparar la actual racha de pérdidas contra las pérdidas históricas que habría ocurrido durante el comercio de ese sistema durante los períodos de prueba históricos. Depending upon how conservative a trader is, he or she may discover that the current or recent loss is beyond, say, the 95% certainty level implied by two standard deviations from the “normal” historical loss level. Este sería ciertamente un fuerte signo estadístico de que el sistema está funcionando mal, y por lo tanto ha fracasado. In contrast, a different trader with greater appetite for risk may objectively decide that three standard deviations from the norm (i. e. 99.7%) is the appropriate certainty level for judging a trading system as “failed.”

The most important factor for any trading systems’ success, whether manual or mechanical, is always the human decision-making ability. El valor de los buenos sistemas mecánicos de comercio es que, al igual que todas las buenas máquinas, minimizan las debilidades humanas y potencian los logros mucho más allá de los alcanzables mediante métodos manuales. Yet, when properly built, they still allow firm control according to the trader’s judgment and allow him or her to steer clear of obstacles and potential failures.

A pesar de que un comerciante puede utilizar las matemáticas en forma de un cálculo estadístico de la distribución estándar para evaluar si una pérdida es normal y aceptable de acuerdo con los registros históricos, él o ella sigue confiando en el juicio humano en lugar de tomar puramente mecánica, Basado únicamente en algoritmos.

Los comerciantes pueden disfrutar lo mejor de ambos mundos. The power of algorithms and mechanical trading minimizes the effects of human emotion and tardiness on order placement and execution, especially with regard to maintaining stop-loss discipline. Todavía utiliza la evaluación objetiva de la desviación estándar con el fin de mantener el control humano sobre el sistema de comercio.

Be prepared for change, and be prepared to change the trading system

Along with the objectivity to detect when mechanical trading systems change from winners into losers, a trader must also have the discipline and foresight to evolve and change the systems so they can continue to win during new market conditions. In any environment filled with change, the simpler the system, the quicker and easier its evolution will be. If a complex strategy fails, it may be easier to replace than to modify it, while some of the simplest and most-intuitive systems, such as the QuantBar system, are relatively easy to modify on-the-fly in order to adapt to future market conditions.

En resumen, se puede decir que los sistemas de negociación mecánica debidamente construidos deben ser sencillos y adaptables y probados de acuerdo con el tipo y cantidad de datos adecuados para que sean lo suficientemente robustos como para producir ganancias bajo una amplia variedad de condiciones de mercado. And, a winning system must be judged by the appropriate metric of success. Instead of merely relying on algorithmic trading rules or maximum drawdown levels, any decision about whether a system has failed should be made according to the trader’s human judgment, and based on an assessment of the number of standard deviations of the system’s current performance when measured against its historic-test losses. Si los sistemas mecánicos de comercio están fallando para realizar, el comerciante debe hacer los cambios necesarios en lugar de aferrarse a un sistema de perder.

What is your take on building and testing mechanical trading systems? What are the lessons you have learnt along the way? Háganos saber en la sección de comentarios.

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Post Tagged with: "Mechanical Trading System"

The 3 Metrics to Watch When You Build Your First Expert Advisor

When you start to design and build your first Expert Advisor – an EA that you plan on trading – it’s important to keep a close eye on these three metrics:

Total Trades . The Expert Advisor should trade often enough so that you can quickly evaluate its performance.

Entry and Exit Quality . Evaluate the quality of your Trade Entries and Exits.

Winning Percentage . The Expert Advisor should win more than it loses.

OK, I realize a bunch of you are shaking your heads and saying “uh, yeah – no kidding, of course it should win more than it loses ! "

But remember, there are plenty of good, profitable trading systems that lose more often than they win. Generally, this kind of system will take a small loss if the trade does not move in the positive direction. But if the trade does move positive, this system will allow the trade to run and take a large profit.

So, you end up with a profitable system that closes more losing trades than winning trades.

This kind of system is not ideal for your first Expert Advisor.

Here is an excerpt from my book Automatic Alpha explaining why.

The Ideal First-Time Mechanical Trading System

A trading system should be defined such that (i) its mechanical implementation is straightforward and (ii) its ultimate behavior is easy to understand and tolerate. A first-time trading system should meet both of these objectives – giving the trader that is developing their first mechanical trading system a good chance of success, both in developing and running the system.

Two of the most important characteristics of a first-time mechanical trading system are:

(1) A high winning percentage (greater than 70%), and

( 2) A high number of trades (about one to two trades per week).

These characteristics are important because a system with a high winning percentage is easy to run. It wins a lot. Also, a system with a high number of trades provides a good deal of feedback. This means a trader can quickly recognize if the system departs from its historical behavior, and make adjustments accordingly.

It’s hard to make adjustments to a system that does not trade often. One to two trades per week is a good number: high enough to provide efficient feedback, but not so high that the trading costs (commission, spread, etc.) become a significant factor.

There are a number of commercially available systems that may be generally profitable, but only trade and only win a small percentage of the time. Some of these systems do not trade often and do not win often, but when they win, they make a substantial profit. This type of system can be valuable and can be an important part of a diversified trading strategy, but it is generally not a good model for the trader developing and running their first mechanical system. These systems are difficult to run due to their prolonged losing streaks. Most traders will be overcome by the urge to stop trading the system. Of course, soon after stopping, the system will often signal a trade for a substantial profit. The best way to avoid this scenario is to start with a system with a high winning percentage.

As you become a more experience system trader, you may choose to develop and run systems that do not necessarily have a high winning percentage or a high number of trades. But for your first system – to help get started in the right direction and to build confidence – it is a good idea to choose a system with a high winning percentage and a high number of trades.

How to Increase Your Winning Percentage

Almost all Expert Advisors can be split into two logical parts.

The responsibility of your Entry is to get the trade started in the right direction. Eso es todo.

The responsibility of your Exit is to get out of a bad trade quickly – or close your profitable trade.

The exit makes all of the money.

Known fact: If you get the chance to talk with a successful trader, don’t ask her how she opens a trade, ask her how she closes a trade . Again, your exit is responsible for making your profit.

Many traders, especially when they first start out, worry too much about their trade Entry and not enough about their trade Exit.

Use the Entry Test

If the logic of your EA can be split into its entry and exit, then you can test the Entry separate – without affecting the Exit. Esta es una gran ventaja.

The Entry Test is simple. You remove your Exit logic completely, and just exit the trade after a certain period of time, for example 2 hours, or 1 day. When you look at the results of this test, you ignore the total profit. You only look at the number of winning trades .

The Entry Test shows you if your entry is getting your trade started in the right direction. Best of all, you can make changes to your entry logic and use this test to see if the change increased your number of winning trades.

Your Exit

Remember, there are a lot of ways you can exit a trade that are not based solely on a Takeprofit or Stoploss value. The exit could be based on an indicator, the time of day, etc.

Exits can be very creative. And they are usually worth the creativity.

I can’t say the same for entries. They can be very creative, but there seems to be a point of diminishing returns as you add more sophisticated criteria to the entry logic. (The Entry Test can prove this pretty quickly.)

Use the Exit Test

A great way to test the quality of your exit is to look at each closed trade, double how long the trade was open, and locate the highest profit point within the time range. This would have been the best time to exit the trade.

For example, suppose you bought the EURUSD on Monday and closed the position early Wednesday – so the trade was open for about 2 days. At the end of the week you would look at the EURUSD chart from Monday to early Friday (about 4 days) and note the highest trading point of the pair (highest because it was a long position, we’d use lowest for a short position).

Obviously, the point in time when the trade was at its highest profit value, within the 4 day period, would have been the best time to close the position.

This is only a rule-of-thumb test – you can vary the holding period – but this test gives you a quick look at how much profit you might have left on the table. And more importantly, when you are reviewing the chart, you may see something that gives you an idea to improve your exit.

One last point: I’ve found that a trailing stop often leads to a higher winning percentage and a lower overall profit. This does not sound like a good thing, but since you are trying to experience a high winning percentage with your first Expert Advisor, it might be something to consider.

I hope this information helps you in your quest to build your perfect Expert Advisor. ¡Házmelo saber!

Mechanical Market Timing System

Our trading system is very unique. We would like you to join because we :

continue to achieve profitability year after year.

MechanicalMarketTiming. com is one of the first profitable timing systems on the Internet. We have a proven track record that is available to the public. Many timing services do not provide a track record that is viewable to non-members.

Beware of the numerous market timing services out there, which practically guarantee that you will make tons of money. We have found that many of these services show results that are totally unrealistic, unproven, have compounded returns (hyped results), do not perform proper back-testing, do not have real-time trading results, do not have a live track record, and some sites are even manipulative and change their tables to reflect positive signals.

We encourage any interested investors to thoroughly research web sites that claim to have produced exuberant results. A worthy phrase to remember "if it's too good to be true, then it probably is". We stress caution with other systems, especially on the Internet.

relieve the investor of having to depend on financial analysts' recommendations and on company information, that may or may not be truthful;

eliminate the emotional turmoil and confusion that all day traders constantly experience

provide a lower risk method of investing, since you are investing in a broad market (meaning you are well diversified either long or short) as opposed to a single stock that is subject to higher risk, volatility, and many uncontrollable factors that can impact stock price

consistently beat the long-term buy-and-hold strategy, even in bearish markets. When our timing system gives a bullish signal we are buyers and profit from the rising market. When the stock market turns sour for most, we short sell the market and profit from the decline; y

provide a service that is very affordable for the amount of valuable information you will receive!

Why Trade — Reasons why it is imperative to trade the stock market using our proven mechanical impulse system as opposed to the buy-and-hold strategy can be understood in a few charts:

The trading history of the Dow Jones Industrial Average shows numerous secular bull and bear markets lasting 10-20 years each.

The current secular bear market of the S&P 500 Index has two major bull cycles and two major bear cycles.

Secular markets explained by trends in the price/earnings ratios (P/E) of the S&P 500 Index.

Using a simple price and moving average crossover technique (our method is more complex and proprietary) applied to the S&P 500 Index will 'greatly' outperform the buy-and-hold strategy of investing.

Mechanical Market Timing System vs Buy & Hold

Investors are told that their best strategy in stock investing is a simple “buy-and-hold” strategy: buy a diversified stock market index and hold it. Yet most investment literature assumes that investors will hold a security if and only if its expected return at the market price provides an adequate tradeoff with the risk exposure the security brings. In other words, investors are assumed to make their own judgment on whether a security is worth holding. Saying that investors should not “time the market” is equivalent to saying that consumers should not maximize utility when making consumption decisions. The standard reply to this criticism is that because the stock market is fairly efficient, accurate market timing is very difficult. In fact, it is said to be so difficult that investors are better off not trying.

Today's most widely recommended investment strategy is buy-and-hold. This is, buy some good stocks or mutual funds, sit back, and "let it ride". Wouldn't it be great if it were that easy! Unfortunately, the exaggerated potential of buy and hold investing is more myth than reality.

History of the stock market

The more you study the history of the stock market, the more you begin to understand the real dangers of buy-and-hold investing. A single bear market can destroy a large portion of your accumulated assets. Unfortunately, mutual fund companies, the popular financial press, and even some professional investment advisors, have convinced the majority of investors to accept the "let it ride" philosophy. Do they need to be reminded that, on average, bear markets come along every four or five years?

Nobel Laureate Paul A. Samuelson states, "The longer you own stocks, the greater risk of a devastating loss". Most investors have forgotten, or were too young to recall, the pain of the last big decline. Bear markets have slashed portfolio values an average of 37%. However, there have been declines of -86%, -54%, and -48% during this century!

In terms of real dollars, had you invested $100,000 in the stock market in January of 1973, your investment would have shrunk to $51,800 in just 21 months - a loss of -48%. Assuming you were able to continue your buy-and-hold strategy, you would have waited another seven and a half years just to break even! Sick over their losses, most buy-and-hold investors eventually give up and bail out. And who can blame them?

Successful investing in the stock market takes more than a single decision to buy a mutual fund or stock. It requires many important adjustments as market conditions change. Optimistic predictions from the so-called experts of Wall Street make interesting commentary, but do little to protect your assets when the stock market falls.

We do not pretend to know the future. But we know that buy-and-hold investing will not preserve your assets in the next market decline. The performance of our market timing system through the use of our signals is gaining popularity across the Internet. Our system is designed to help members continually beat the buy-and-hold strategy. At Mechanical Market Timing, we are committed in helping our members profit no matter what the future of the market has in store for us, whether bullish or bearish times.

Take for example another leading index in the United States, the broad market and popular S&P 500 Index. Just using a simple cross-over technique of the 50-day moving average and stock price gives much better returns then the buy-and-hold strategy. For this example, the buy-and-hold strategy lost 10% in about 4 1/2 years, whereas a technical analyst profited +120% in the same period. This isn't the strategy we are using, because our trading methodology is proprietary.

Friends Don't Let Friends Buy & Hold!

Hooya Bands Day Trading System

Love Trading ¿Comprar / vender señales de flecha? ¡Prueba esto!

This was the basis for my mechanical intra day trading systems that I used a few years ago.

The only reason why I stopped using it was that it went into a phase where it was breaking even and as I need to generate some income from my trading I had to return to discretionary trading.

The reason why it went into break even mode, in my opinion, was due to the volatility created by the recession and the banking crisis. This resulted in a lot more breakeven trades becoming losers and winning trades becoming break even trades.

The chart set up is very simple. You can either manually mark the levels on your charts or if you are using metatrader you can use the indicator below to add to your charts. It is just and edited pivot level indicator.

This was a FTSE 100 futures trading systems but I am sure one could adapt it for their own preferred market.

At the open a line is placed at the open price and several lines are place around it as follows.

So you would have lines as follows:

The Way To Trade These Bands

There are a maximum of 2 trades in a day.

1)You take the first trade in your chosen direction (we will come back to this) at (p) with a stop at -20pts and a target at +30pts.

3)If your trade goes 20pts in profit you move your stop to break even at (P).

4)Then you wait until your trade is stopped out for 0 or +30.

So, in short, your trade will either be stopped out for -20, 0 or +30 on the first trade.

The second trade is triggered if your trade has been stopped out for -20 points.

All you do is wait for it to touch the (P) line again and you enter in the opposite direction to which you were stopped out.

This time you are looking for +35 limit target. Again if you get to +20 you move your stop to evens at (P).

This is the standard second trade and combined with the first trade it was the “system” as I traded it.

However, the next two options, depending on the outcome of the first trade, could also be taken.

1)The second trade can also be taken if you have closed your first trade for +30. Again waiting for the price to cross the (P) line. Stops and limits are the same as the basic second trade.

2) If your first trade has been stopped for evens it is best to wait for the next 20pt band to be hit and then wait for the a reversal through the (P) line before taking the next trade with the limit target still being +35pts and stops moved to evens after 20 points.

It’s a very basic system that works on the simple premise that you win more when you win than lose when you lose. This means that you only require an even strike rate (or slightly less) to generate a profit.

The hardest thing about the system is deciding which direction to take the first trade at the open. The main thing with this is that you want to choose a method that is consistent and produces a 50/50 or better strike rate. For me, I created a direction indicator in excel with OHLC data that used a formula like:-

“if yesterdays high is greater than the previous days open and yesterdays close is greater than previous days low then Long; if not then short”

Although that is not exactly what I used, you get the idea. You can then back test a basket of 100 trades of the first entry method and see what strike rate you get. Most likely it will be 50:50. If :60 then just reverse the “then long” to “short”. But in my opinion, what ever the case, I think the strike rate will average out around the 50% mark anyway so don’t worry too much. If you get a strike rate around 70% you will love this method.

And that is pretty much it.

Below are a few example of the trades mentioned above.

If you were signalled long at the open you would have got your trade to break even. You would have been stopped out for 0. And you would not have been triggered into a second trade that day

Had you been short at the open you would have been stopped out for -20 on the first trade and then triggered short again at (P) and your limit would have closed your position for +35.

Short on the first trade would have you stopped out for evens and long would have you stopped out for -20 on the first trade.

Had you been long your second trade would have been 0 so you would have ended up with a loss of 20 points for the day.

Should you have been short you would have been entered short again on the second trade and closed for +35. Combined with the breakeven first trade you would have made a total of 35 points for the day.

Ultimately this system works because it is based on sound maths. Evens strike rate + a great win to loss ratio will alway result in a profit or break even over a given time.

I traded this system with 1 Futures contract per trade and managed to increase my account but 30-40% over a few months, although I was trading a large % of my trading capital.

But there is definitely plenty of ideas for you to work with. You may discover such a good entry method that you only need to take the first trade.

If you have a go a creating your own method based on this do leave a comment and let us know how you are getting on with it. I would however suggest that before you start trading live do back test (by hand) at least 100-200 trading days before you use real money on this system. It requires confidence in the numbers to walk away and not close out trades before it is time.

The hardest thing about this system is getting the open price. Sometime you do miss a trade but it often evens out that for every winner you miss you miss a loser too.

This Page and the information contained is Copyright © 2009 by Jason Kelley and www. greattradingsystems. com

If you would like to reproduce it just leave a comment that you are and where it is going and copy the whole content including the web link.

Tagged with mechanical trading systems

“Cybernetics was defined by Wiener as ‘the science of control and communication, in the animal and the machine’—in a word, as the art of steermanship .”

CYBERNETIC TRADE CONTROL SYSTEMS

Cybernetics embodies a multi-discipline theoretical framework which focuses on goal-directed systems. These systems use information, models, and control actions to steer towards and maintain a predefined objective while attempting to counteract anything which detracts from this objective.

Perhaps the most fundamental innovation of cybernetics is its explanation of purposiveness, or goal-directed behavior.

Cybernetics and Fund Management

“Goal-directed behavior” is particularly critical in the world of investment management. Continue reading →

.

“The greatest benefit of mechanical trading systems is their ability to reprogram traders away from destructive types of behavior in favor of successful trading habits.”

Perhaps W. Edwards Deming said it best: “If you can’t describe what you are doing as a process, you don’t know what you’re doing.”

I can count on one hand the number of traders I’ve met on the Philippine Stock Exchange trading floor who can describe every facet of their trading as a process. True, some veterans can kick butt trading ‘by their gut’ but they are few . I suspect the majority let their emotional state or whims of the moment play a inappropriately large role in putting on trades.

If you’re serious about your trading, you’ll systematize what you’re doing.

.

If I was forced to jettison my entire trading library and keep ONE BOOK, this would be it.

“Ninety-nine percent of the people in the business are followers. They’re not creative and they’re not willing to rely upon themselves to make decisions, so they rely upon other people.”

Covered approximately 6000 years of raw price data from the Philippine stock market

600 stock charts

Approximately 240 listed companies

10 years of monthly price data

10 years of weekly price data

10 years of daily price data

Can the skills of a successful trader be reduced to a set of rules?

“We are going to grow traders just like they grow turtles in Singapore.”

–Richard Dennis in Market Wizards

The Turtle Experiment

The story, which first appears in Jack Schwager’s Market Wizards, by now has attained almost legendary status. Continue reading →

Mensaje de navegación

"The ability to generate competitive returns is all about a sensible methodology and the systematic execution of that methodology. Credentials, so essential to academia, mean nothing.”

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-Pitbull Investor Stock Trading System - Our original long term stock trading strategy. This instruction manual teaches you the entire system for trading stocks, spending only 20 minutes a week. With this you will have everything you need to know to work this stock trading system. Includes 6 weeks access to the signals to double check your work. After the 6 weeks, you can work the system on your own using either the Newspaper or StockTables. com as your data source. or let us do the work for you by using our the Basic or Premium service.  Holding period: 1 to 3 months - Sector Fund Timing - Very long term trading strategy for Fidelity, Rydex or Invesco Sector Funds. A 100% Mechanical System For Disciplined Fund Timing & Profit Management - Works with Rydex, Fidelity, and Invesco Funds Holding period: 3 months to several years SHORT TERM TRADING: - Momentum Trading High Performance Stocks - Daily buy and short sell entry and exit signals for stocks. System for coming up with most profitable long and short signals on a daily basis. Includes 6 weeks access to the signals to double check your work. After the 6 weeks, you can work the system on your own using either the Newspaper or StockTables. com as your data source. or let us do the work for you by using our the Basic or Premium service Holding period: 1 to 8 weeks (sometimes longer) - Nightly Commentary - Insightful commentary on the day's trading as well as near term observations on market direction and market technical indicators.

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TradeSafe Mechanical Trading System Review | ¿Realmente funciona?

20-year professional trader, Mike Guess has perfected a method of earning 2% while only risking $100 on a trade. Mike is known mostly for his work with trading all the mini-indexes, but his method works for futures and FX as well.

Join Michael Guess, founder of TradeSafe, as he reveals how YOU can average 2% to 4%+ daily ROI without risking more than $100 per contract.

You’ll learn Mike’s four easy trade entry steps and see how a true Mechanical System gives you a winning edge. Now you can confidently enter trades with less than $100 risk and always know exactly where to exit – no guesswork.

Each of our 4 automated exit strategies is tailored for current market conditions. Enjoy precision entries and exits with absolute tolerances as only a true Mechanical System can give you – Consistently.

Register now for this webinar and learn how you can finally achieve the real Holy Grail of trading: Consistency . Watch Michael Guess pull back the curtain on his cycles-based Master Chart Settings so that you can automatically select the optimum automated exit strategy to milk each trade’s potential.

Everyone who registers for Webinar will be eligible to get a no-obligation free hour of offline personal coaching.

Here is what you will learn:

Learn how YOU can achieve 2% – 4%+ daily ROI and never risk >$100 per contract

Know exactly where and when to exit, automatically and mechanically. NO guessing!

Watch how our Master Trend Indicator signals trends precisely!

¡Nuevo! Congestion Alert Indicator warns when you get breakouts or fake outs

Trade a precise, rules-based, automated Mechanical System – & # 8211; NOT your emotions

Stop losing and begin winning on a consistent basis — mecánicamente

Watch Mike trade the TradeSafe System with easy rules you can follow

Want to stop guessing where and how to enter your trades? Want to always exit your trades at the highest potential profit point? How about generating a daily ROI average of 2% to 4% or more?

Artículos Relacionados

Mechanical Trading Systems

Wednesday, June 02, 2004 - 10:54 pm:

The problem with mechanical trading systems is human nature. There is no scientific or mathematical approach that can set boundaries around the way people behave either individually or en masse. If there were, trading would be easy, and you could go to trading school, hang up your diploma, and make money trading. However, human nature makes markets inefficient and moody, and one other thing as well—you don’t know what you don’t know. There are many, many surprises in the market. They come from news, speeches, government reports, natural disasters, private research reports, etc. Not knowing what you don’t know defeats the most exquisite analysis. Because of this you might wonder how anyone can hope to make money in the markets. My answer to this is to practice and learn to trade what you see, not what you think. Additionally, you need a thorough understanding of and insights into how markets work most of the time. To prosper, you need the creativity to implement a strategy to profit from your insights and understanding.

But even these are not sufficient. None of these qualities will bear fruit unless you have the discipline to stay with your strategy when the market tests your confidence, as it inevitably will.

You have to ask yourself, why should the market be any more perfect than the very human emotions and calculations that drive it? Traders overreact, and so do markets. Traders get swept up in moods, and so do markets. And this interplay creates profit opportunities. Your job as a trader is to take advantage of them.

One other thought while I'm on the subject of mechanical trading systems. I have seen them work for awhile. If they were sold with a warning that this system may fail at any time, I would not be so much against them. But most of them use far too much history to make them worthwhile. What you need to know is, is the system working now, in today's markets. There is little value in knowing that the system worked going back a year or more. Thirty to forty days is sufficient to prove a system is working today. But it is only fair to warn the purchaser that the system might stop working at any time in the future.

written and contributed by Joe Ross

Thursday, June 03, 2004 - 03:39 am:

I fully agree with you about a Holy Grail system needing to have all the variable.

What I would like you to show me is how you would go about subjecting to quantitative analysis the following items, keeping in mind that the only way to can come up with a mechanical trading system is to view price bars only after they are complete:

1. Speed of the market at the time you make your entry or exit. Fast market conditions can materially affect what happens to you in a trade. 2. Tick size at the time you make your entry or exit. Large tick size, such as when a report affects the market can affect what happens to you in a trade. 3. Liquidity at the time you make your entry or exit. 4. Volatility at the time you make your entry or exit. 5. Participants in the market at the time you make your entry or exit. 6. Your emotional comfort level at the time you enter or exit a market, i. e. your tolerance for pain. 7. Your psychological and financial comfort level at the time of entry or exit. Surely your psychological comfort level effects your trading. 8. News reports, government reports, speeches made by big-mouthed politicians, and bankers, which bring about a sudden effect on the market. 9. The spread between bid and ask at the time you enter or exit the market.

Shall I go on? ¡Sí! ¡Bueno! How about these:

10. The size of your trading account 11. Margin requirements: those set by the exchange, those set by the broker. These can change at a moment's notice. 12. The commission rate you will have to pay. 13. Your existing open positions.

The items listed above are the hidden factors in trading, most of which are missed by every system ever invented. Can you tell me how they are detectable once a price bar is complete and in place? Although they effect what happens to you in the market, some of them are impossible to quantify, so how are you going to account for them in you Holy Grail system?

If you really think deeply about the items listed, you will realize that any one of them can materially alter the outcome of all of your testing of a mechanical trading system. Ask yourself, would the fact that I cannot quantitatively measure the hidden factors have any affect on my trading? If your answer is yes, then you are a lot better off learning to trade what you see.

Thanks for your comment

Administración del dinero

An essential element to success in trading is ignored in almost all trading or market timing books or articles. It's surprising given its importance that very few writers devote any time to the discussion of money management practices and principles. This chapter will present one approach to money management that is general and could be easily supplemented by other methods if you desire. The goal here is to provide recommendations for a simple, viable approach to allocating funds and managing your portfolio. This book is not intended to include a course on money management. However, if there is one subject within the realm of trading that is vital to a trader's financial survival and at the same time totally overlooked as critical, it is the discipline of money management as it applies to trading success. If market indicators and systems were always precise in identifying tops and bottoms, the necessity for prudent money management skills would not exist. Unfortunately, such is not the case. Even if a system were 99 percent accurate, the 1 percent failure rate could conceivably wipe out a trader who did not apply money management methodology. The following techniques for your consideration in designing a prudent and viable money management program may appear simplistic upon first glance. However, making procedures complex serves only to obfuscate the obvious, easy, and straightforward approach to sound money management. These recommendations regarding the design of a money management methodology are a compilation of various techniques I have developed and employed successfully throughout the years. Before you enter any trade, you should be convinced that the trading event will prove to be profitable. Otherwise, why even attempt the trade? Obviously, no decision in life is always correct and this applies invariably to the markets. In the case of the markets, however, you are not able to undo a bad decision and recover your losses from a trade. This lesson came early in my career. Discretionary decisions or trading hunches or guesses may prove profitable on occasion, but how do you quantify and duplicate this decisionmaking process in the future? Consequently, the following suggestions are directed not only toward developing - a series of mechanical, objective approaches to trading decisions and money management but also to enable you to replicate your decision-making process regardless of the time period and the number of markets followed. The primary considerations are consistency, objectivity, and portability. Additionally, you need to be sensitive to diversification of market timing techniques, as well as markets monitored. By implementing a number of unrelated methods, you will be able to sufficiently diversify your portfolio and thereby reduce your level of risk. In other words, by applying a combination of market timing approaches, each of which uses a different trading philosophy, you will be able to operate as if you had a number of trading advisors managing your funds. Obviously, these techniques should be applied on paper before introducing them real time into your trading regimen. Once the techniques have been sufficiently tested to ensure performance results and nuances, the money management disciplines must be introduced. The other chapters of the book pertain to the methodologies, so this discussion is devoted to a basic approach of managing trades and your investment. First, you should allocate percentages of capital equally to various mechanical market timing models. Therefore, if you have developed and decided to use three noncorrelated mechanical approaches, then you should designate the same percentage participation to each. You may choose to vary this approach. For example, if one system is two times more effective than another, then you would double by position size or if the frequency of trading for one method is twice as active as another technique, you may wish to reduce portfolio commitment by 50 percent. However, for sake of discussion, assume that all systems are equally effective. Assuming a total of 100 percent, you may not wish to allocate in total more than 30 percent to these systems collectively at any one time. Also assume for purposes of simplicity that you have elected to follow 10 individual markets for each system. Consequently, your maximum exposure would be no greater than 30 percent of your beginning equity, and that is only if each model has its maximum investment exposure of 10 markets at any one time and each market is being traded simultaneously at the same time (10 markets times 3 trading methods times 1 percent apiece equals 30 percent exposure). How are you to measure your investment commitment in terms of number of futures contracts, for example? Rather than subscribe to an esoteric portfolio management methodology with numerous complicated variables connected by advanced statistical formulas, you should rely on the market itself to dictate your level of exposure at any point of time. Specifically, the various futures exchanges determine the margin requirements to trade markets. Typically, as trading activity becomes volatile, the margin requirements increase. At that time, you should reduce your exposure because you would have specifically allocated only a 1 percent commitment to that market for this particular market timing method. Conversely, when price activity becomes inactive and less volatile, you would increase your investment exposure, hopefully, awaiting a breakout and increased volatility. Consequently, margin requirements serve as a barometer for fund allocation. To clarify this process, the market itself is the best source for dictating market exposure. This measure can easily be determined through simple calculations. The various futures exchanges evaluate the volatility and volume of markets continuously. If for any reason, they believe that the potential exists for wide daily swings in the market and, concurrently, the risk of erosion of a trader's margin, then, typically, they will be inclined to raise margin requirements. Therefore, whenever margin requirements are raised, market exposure as measured by the number of contracts traded should be adjusted accordingly. In other words, say you assume a portfolio size of $1 million, the use of three trading systems, and the limitation of trading only 10 markets in each. The maximum exposure can be no greater than $300,000 dollars, since that amount accounts for 30 percent of $1 million, the maximum account size defined above. It is unrealistic to assume that positions will exist in each and every market at any one period of time, however. In any case, this allocates $100,000 to each of three markets. In turn, this would imply that for each method, each market would represent $10,000 dollars. Now suppose the margin requirement in one market is $ 1,000. Then 10 contracts could be traded at any one time. If volatility increases, the exchange may decide to raise margin requirements by an additional $1,000 to $2,000, thereby forcing you to reduce your position size to five contracts (5 x 2,000 = $10,000 and 10 x $1,000 = $10,000). What has effectively occurred is a portfolio contract-size adjustment of 50 percent due to a 100 percent increase in margin requirements. If the volatility has increased sufficiently that the exchange is compelled to raise margin requirements, and you are still positioned in the market and have not been stopped out of the trade, then it is likely that the market has moved in your favor. In that case, the money management discipline and methodology described here requires closing out profitable positions, and prudent trading would also dictate profit taking. The initial exposure was a function of margin requirements, and the change was made as a result of market volatility and potential risk as defined by the increase in margin requirements. Once in a trade, stop losses must be introduced. Generally, you should apply a standard stop loss and not risk any more than 1 percent of your portfolio on any one trade. Should you desire to increase this stop loss, you should reduce accordingly the size of the position or exposure you have in that market and at that method at that particular time. For example, you should always maintain a 1 percent risk level, but if you wanted to increase the dollar stop loss to double that amount, you should reduce your market exposure by 50 percent. All other increases in stops would be adjusted accordingly as well. As the portfolio size in one method and in one market increases, you should adjust your stop loss and profit-taking levels and make certain that your exposure does not constitute an undue weighting in the portfolio. In fact, as the profit in a position increases, you should reduce the position size to maintain a maximum portfolio exposure and, ideally, in effect you will be investing only the profits generated in the trade. The approach described here is simplistic but effective. High-tech mathematical modeling and sophisticated statistical techniques can be introduced, but experience indicates that minimal improvements will be produced. Although this approach to money management is devoted to high-margin futures, a similar approach can be easily applied to stock portfolios. In conclusion, it is critical that a trader design and implement a methodology that is capable of being measured for performance statistics historically. Once confident of the results and comfortable with the implementation, a trader should paper-trade the method and then apply it real time to the markets with funds in small lots or shares. As you gain experience and confidence with the method, the position size can increase. Discipline is a prerequisite. If you conform to the general money management guidelines discussed in this chapter and then add improvements to the schedule to fill in any blanks in procedure, a difficult and critical component of trading success will have been addressed and satisfied.

The Kelly formula

A simple case of the Kelly formula is where you either double your wager (i. e. you get back your bet plus an equal amount) with probability p or else lose it all with probability q = 1-p. The Kelly system says that in this case the optimum fraction of your capital to risk is f=p-q. For example, if you have a system in which you double your money with a 60% probability and lose it all with a 40% probability then your optimal fraction to bet is f = p - q = 60% - 40% = 20%. The mathematical reason that its true is actually quite simple. In the double or nothing case above, the log of your return per bet after W wins and L losses using this system is: (W/N) log(1+f) + (L/N) log(1-f) where N=W+L. If N is large then W/N=p and L/N=q. Maximizing this expression in f using calculus gives f=p-q, as expected.

Thus, if the assumptions are satisfied, your portfolio will grow at the highest rate if you invest the optimal f each time. One problem with the Kelly criterion is that it implies a larger maximum drawdown than most people would be comfortable with. Most people would likely want to choose a fraction to bet which is less than the Kelly fraction even at the expense of optimality. Another problem is that you often don't know what p is. For purposes of illustration, I have used the same simple double or nothing setup that Kelly uses in his original article but the entire idea generalizes substantially beyond this. Since you probably don't know what p and q are you could just pick an X% and Y% that are sufficiently small. For example, you could choose X% as 3% or 5%, say. A number of practically oriented books and articles recommend that sort of approach. William Gallacher's book, Winner Take All, is another source which mentions and critiques Optimal f in the context of futures trading.

Consejos & amp; Hints:

Should you desire to increase this stop loss (1% of cap.), you should reduce accordingly the size of the position or exposure you have in that market and at that method at that particular time. р adjust stop loss and profit-taking levels As the profit in a position increases, you should reduce the position size to maintain a maximum portfolio exposure and, ideally, in effect you will be investing only the profits generated in the trade (!).

Random Entry Strategy:

The initial strategy demands that with any trade on, right or wrong, the stop and exit system would either leave you in the good trades or get you out of the bad trades at a small loss and under certain circumstances get you on the other side. The random initial entry perspective forces you to develop a very disciplined trading strategy and trading rules to go along with it. More importantly, it gets you away from looking for all the answers in the various entry systems which were being promoted. The stop and exit rules for the system were developed with an extreme perversion to optimized values and being very careful to watch the degree of freedom which I allowed the system to have. Once you have a set of profitable stop and exit rules, you can concentrate on developing an entry system that was more intuitive than the random 'flip of the coin' method. This step in the development of a system, by definition, became much less important.

The importance of discipline in your trading regime can not be overstated, especially on exits. This discipline was a welcomed (and badly needed) side effect of developing a trading system with this methodology.

Trailing or multiple contracts:

Enter all contracts on the entry and exit half (or a portion) at the primary exit signal, stop is moved to breakeven on the remainder and we trail the remainder until the secondary target or we get stopped out. Each trade has an associated stop plus a primary and secondary exit р at the time of entry, all possible exits signals are known and quantified

I use threshold levels to increase my trading size. My formula is: 2x max historical drawdown + margin = equity needed to trade 1 S&P contract. So a 50% drawdown to me means a real 25% drop in equity. By drawdown I'm talking about my total net running drawdown. I always use stops on my individual trades which keeps my max. daily net loss around 3% to 5% depending how many systems trade that day (I use 3 systems). The recent volatility in the S&P's has forced me to almost double my stops over the last 6 months which has made the drawdowns deeper.

1. Enter a long/short when a tradable (!) exceeds its 20 day highest/lowest close. 2. Exit a long/short when a tradable (!) reverses to inside its 10 day highest/lowest close. (wenn letzter "theoretischer Trade" ein Verlust war, nur eine Position eingehen [theoretischer Trade: wenn weitere Kriterien' nicht erfьllt?]) The second part on money management describes when to increase or decrease the number of contracts traded. The hint I can give is "volatility". Focus on the volatility of each individual market. Then think of in terms of "units". Derive your starting capital into measureable "units" based on volatility.

The Turtles managed the absolute risk this way:

1. Take the average of the True Range over 10 days 2. If this is rising, trade with FEWER contracts. This allows the stop (=risk) to be wider and so you risk a constant amount of money but with fewer contracts 3. If average TR is lower, then start trading more contracts

Trailing Stop:

Let's say you buy an S&P at 900 and it rises to 902. If the S&P stays above 902 for a week and then falls below 900, say to 898.40 then you get stopped out at that point, 898.40, assuming no slippage. A Trailing $400.00 trailing stop would get you out at 900.40 assuming that the S&P did not get any higher than 902.

10% risk per trade: you may think, that if you have 100000 you could risk/invest no more than 10000 in one stock (e. g. 50 stocks б 200). But consider buying a stock priced at 200 with a 2$ stop loss: risking 10% means, one could buy 5000 stocks. So risk must be thought of as the percent of equity you are willing to lose on a trade if you are wrong. Risking more than 3% is extremly risky, especially if you have 10-15 positions on at one time.

Limit Orders: A big advantage to limit orders is maintaining a predetermined Risk-Reward-Ratio for a specific trade. In other words, if you enter a trade with a stop-loss and a target price and you like to maintain a certain ratio, say 3 to 1, then you must pass if you can't enter the trade within the Risk-Reward parameters. For this reason, I like to use stop with limit orders.

Adaptive Moving Average & "Efficiency Ratio": An exponential moving average in which the smoothing factor varies with the "Efficiency Ratio". Efficiency ratio is the ratio of total price excursion divided by the sum of all individual excursions of each bar. It equals 1 if all moves are in one direction over the lookback period.

Buy & Hold : Take your system and gauge it against a Jan through Dec against simply buying and holding. This will let you know how much was really your system and how much was just the market.

100000 Account + Stop-Loss: $1500 13 Markets a) simultaneously active in all markets and stopped out in all markets: 19500 Loss р 19,5% Drawdown b) 13 consecutive losses: 19500 Loss р 19,5% Drawdown c) simultaneously active in all markets and stopped out in all markets + 5 consecutive losses: 97500 Loss р 97,5% Drawdown (. ) d) 5 consecutive losses in all 13 markets (65 consecutive losses): 97500 Loss р 97,5% Drawdown (. ) р check 50% Drawdown (shutdown point).

5 Systems: sum all positions up to arrive at the final trade: get a net position of 3 contracts long (5 long - 2 short)

Bring the two files into Excel, and add the NetProfit columns together to get the combined equity curve. weight the equities: for example, if I have equities for BP, DM, JY and SF I may create an equity curve of 2*BP + 1*DM + 1*JY * 1*SF where the coefficients 2,1,1,1 are inputs

15% in margin: 2-5% DM, 2-4% DAX, 2-4% Gold, 1-2% Euro-$ р so increase number of contracts within these limits

accept a 50% reduction in Return if it comes together with a 30% reduction in Drawdown

Portfolio-Stop: -7-8% monthly: Stop ! Return p. a. = 3 * Drawdown Drawdown + Regression-Analysis: 45° + deleverage at a parallel line ABOVE the 45° line (to let room for further losses)

Drawdown 40% Recovery 100% Net Return 20,0% =(1-40%)*(1+100%)-1 when using a proportional Trading System, the ratio of recovery should be a constant: X 2,50 (1-Drawdown)*(1+2X)-1 = 0 D = (X-1) / (2*X) 30,0% optimal Drawdown р trade 1/4 less (from 40% to 30%) 22,5% new Net Return

Third Of A Series On The Successful Use of Money Manage-ment To Improve Your Trading Results - Tom D'Angelo

This is the third in a series of articles which describe how to construct a professional and disciplined money management plan, designed to allow the trade to manage his trading in the same manner as a successful business. Refer back to my previous articles in Vol 4-1 and Vol 3 8 for a detailed discussion of the Profit Center methodology and calculation of the required money management statistics.

In this article I will discuss the Performance Report. The Performance report is a summary of all the significant money management statistics for each individual Profit Center. Each Profit Center is a business and the Performance Report is a management report which reveals your success or failure in managing that business.

The Trading Plan is the trader's strategy for the next trade based on the information provided by the Performance Report. The Trade Journal is an "after the fact" critique of the Trading Plan after the trade is closed out with a profit or loss. I will discuss the Trading Plan and Trade Journal in my next article.

There appears to be lots of interest in the Real Success trading methodology. I have not purchased this course but I will try to describe a sample Performance Report for Real Success methodology traders.

First, if I was trading the Real Success method, I would set up the following Profit Centers:

RS(M)- All trades taken from the Real Success Methodology

RSDAY - All Real Success day trades. Overnight Real Success trades can be entered into a Center named RSONITE

RSSP500 - Real Success trades segregated by the future traded (RSSWISS, RSBEANS etc)

RS3MIN - All Real Success trades taken off of 3-minute bars RS5MIN - All Real Success trades taken off of 5-minute bars

RS3MINSP500 - All SP500 trades taken off of 3-minute bars (RS3MINSWISS for all Real Success trades taken off of 3-minute bars for Swiss Franc, etc)

Substitute 5MIN for 3MIN to segregate trades taken off of 5-minute bars. Example, RS5MINSP50O for all SP500 trades taken off of 5-minute bars.

Helpful hint - If you are planning to paper trade the Real Success methodology first, simply add a P to the end of all the Profit Center names. The P signifies a paper trading Profit Center. For example, paper trading the Real Success method with 5-minute SP500 bars, you would enter the trades into a Center named RS5MINSP500P. After you have about 20 paper trades in each Center, calculate the statistics I described in Vol 4-1 of CTCN and you will have excellent information as to your performance paper trading the Real Success methodology for each Profit Center.

Results of the paper trades can then be compared with real time results by using the Performance Report.

When you begin real-time trading, create The Profit Centers I have described above (without the P at the end of the name) and enter the real-time trades into those Centers.

After 20 real-time trades have been entered into a Profit Center, you will have a good data base of trading information and can complete your first Performance Report.

The following is a brief description of the items contained in the Performance Report.

Profit Center Name - Name of Profit Center analyzed.

Example, RS5MINSP500 for all trades taken from Real Success methodology trading 5 minute SP5OO bars.

Profit Center Type and Goals - Description of the Profit Center and the financial goals the trader is attempting to achieve. For Example, Profit Center RS5MINSP500 will contain only SP500 trades taken from the Real Success methodology based on 5-minute bar charts.

After 100 paper trades, the trader has achieved 60 profitable trades (6O%) and 40 unprofitable trades (40%). Average Profitable trade was $600, average unprofitable trade was $400 for a ratio of 1.50. The Profit Factor was calculated to be 1.23. Net profits after 100 hypothetical paper trades are $2000.

Worst drawdown was $1800. Best series of winners was 6 with $1600 in profits. Worst series of losers was 4 with $1550 in losses. The trader will try not to lose more than 3% of capital on any one trade. These statistics of hypothetical paper trades can then be used as goals to be achieved with real-time trades.

The remainder of the Performance Report lists statistics from real-time trading.

Initial Capital - $30,000. This serves as the funding requirement for the business to cover margin requirements and trading losses.

Drawdown - Current drawdown in progress = $1050. Largest actual real-time drawdown = $2300

Series - Worst series of consecutive losers = 4 with a loss of $1300 in the series of 4 trades. Best series of winners = 6 with a profit of $1700 in the series of 6 trades.

Current series in effect - 2 consecutive profitable trades with a profit of $600 in the series of 2 trades.

Largest profitable trade - $ 950 on 3/11/96

Largest unprofitable trade - $1020 on 2/ 5/96

Optimum number of contracts to trade = 3, based on Ralph Vince's formula.

Trading efficiency - 57% winners and 43% losers.

Average profitable trade = $500. Average unprofitable trade = $300. Ratio of profitable to unprofitable = 1.67.

Range of losing trade as % of capital = 2.1% to 4.3%

Profitability - Profit Factor = 1.14. Profit Center is profitable with profitability trending upwards. I use graphs to determine the trend of profitability with the Pro-Graphics module of my MANAGER money management software. I will describe in my next article how I use the trend of profitability to determine how many contracts to trade.

Current net profit after 60 real-time trades $1100. Current Capital = $31,100 which equals $30,000 Initial Capital plus $1100 net profit.

Thus, the trader has established a business named RS5MINSP500 which is producing revenues (profitable trades) and expenses (losing trades + commissions). The Performance Report informs him of his trading performance in the RS5MINSP500 business as well as enabling him to compare actual real-time results with goals derived from hypothetical paper trades.

The Performance Report takes the trader out of the dark and into the light. He knows exactly his trading performance for each of his businesses and can instantly explain to anyone his profitability and efficiency as a speculator.

Most traders experience psychological problems due to the fact that they attempt to manage a business (i. e. trade) without any type of organizational structure which can provide them with the information necessary to execute disciplined, informed and educated trading decisions.

Nearly all traders manage their trading using monthly broker's statements which provide a "macro" view of their trading. These statements only inform you as to your overall profit or loss for all your trading. This type of data is totally inadequate for the professional trader who requires more detailed information such as provided by the Profit Center methodology.

Hopefully, the reader has begun to see why many aspiring traders experience the same psychological problems. fear, greed, anxiety, inability to "pull the trigger" etc. The average trader operates in a fog. He has no money management methodology to provide the structure for successfully managing his trading business. Since he operates in the dark, he inevitably becomes uncertain and anxious. Continually floundering around in the dark makes the situation worse and worse, like a snowball rolling downhill.

You cannot successfully manage any type of business without first organizing your trading performance into a meaningful structure which reveals trading strengths which can be exploited and weak areas which must be eliminated or reduced.

The Performance Report provides the basis for formulating the Trading Plan. The Trading Plan is the strategy for the next trade based on the trader's trading performance as revealed by the Performance Report. I will also explain how the Performance Report is used to formulate the Trading Plan as regards to how many contracts to trade.

After the Trading Plan has been executed and the trade closed out with a profit or loss, the trader completes the Trade Journal. The Trade Journal is the "after the fact" critique of the Trading Plan. These three reports are specifically designed to eliminate the psychological problems which plague most traders and create an environment conducive to executing rapid, informed and educated trading decisions.

The Trading Plan and Trade Journal will be described in my next article as well as how this type of methodology promotes psychological stability and significantly reduces stress.

I will also describe how to file all the reports so that the trader will now be operating in a professional, disciplined and informed trading environment. similar to a successful business and structured to engender confident trading decisions. This type of environment is specifically designed to advance the trader up the learning curves of the three disciplines necessary to achieve successful long-term successful speculation: Trading methodology; psychological discipline and; money management.

For a free booklet describing the reports I use and information on a newly completed book I wrote on money management, feel free to contact me at 800-MONEY30.

System Testing Observation Adam White

Here is an interesting observation I made while system testing.

Say you run a system test over 10,000 bars of data, then print out a chart of the system's equity line. Then repeat the test, but start 100 bars later. Let's say two trades were included in those 100 bars, so they've been dropped. Now print the second equity line and compare it to the first. You'd get exactly the same equity line, but 100 bars shorter. ¿Derecha? - Wrong!

When I do this I get a radically different equity line on the second test, i. e. they are not near mirror images of each other. My hunch is that a form of the chaotician's "butterfly-effect" has arisen: changing any given trade's market position (long, short, flat) will effect in a chain reaction all the subsequent trades in complex and unexpected ways. Here dropping the first two trades could very well change the system's market position when the third trade is calculated, and so on.

I believe this observation has profound and unfortunate implications for the robustness of system testing. It's a second and more subtle problem that lies behind the mere curve fitting/optimization problem.

If dropping a couple of early trades will always effect later trades, then there's no truly "neutral" starting point with any test data. Where your test data starts determines the final test results just as much as your system does.

Editor's Note: Not too many CTCN members are aware of this but I have known about this for some time. The success or failure of many different mechanical systems is predicated to a surprising and varying degree on the sequence of events just prior to the first actual trade generated by the system.

The trade setup and timing of the first trade can have a profound effect on the subsequent trading results. The circumstances and timing of entry into the first trade can sometimes make a huge difference in the overall trading performance.

Max Robinson Has A Unique Way To Use Closing Price To Mimic A Moving Average

Sigan con el buen trabajo. Anyone that is trying to do something good will be criticized or disliked by someone. But remember, you are helping many, while only a few are unhappy.

I have the System 2000. It does help identify turning points and congestion areas in the market. But then one needs an entry method.

The secret of all financial success is money management. How much can you risk on this trade, and still be financially able to take some losses and still be able to trade when the profitable trade finally comes by. Study Vol 4-1 of CTCN, articles are really enlightening (D'Angelo &. ). Can't read name?

I have two Ken Roberts courses. They have some good ideas in them and one of them convinced me to let go of some old anger.

Every one needs to understand that the constitution may guarantee equality under the law, but we are not born with the same abilities. Some of us just will never become a winning trader, but we might become a successful painter.

Larry Williams latest video had lots of information in it.

I have a mathematical way of using the close of today's market to compute an average that is similar to the 9-day and 40-day average.

My method is much easier and quicker to compute than most averages, since you only deal with today's close. This method picks turning points and acceleration points like any system that I have seen. But like all of the other systems, one has to apply his own entry and money management plan to it.

The big problem I believe we all have is fear and greed. Most of us are so greedy that we can't stand to be wrong 5 or 6 times out of every 10 trades. So we keep searching for the Holy Grail. In order to get over the fear of losing, one has to find a system and run it on old data until you realize that it may work okay! Call anytime 308-775-3140.

All about Stops Donald Turnbull

Here are some thoughts that might prove useful to neophyte traders like me. They may duplicate many that you have already published, but I have not had the pleasure of reading.

I do not trade the S&P index because the margin requirements are so high it would take too big a proportion of my account to cover them. I would then have one position with, perhaps a 50% chance of success (and a 50% chance of failure).

Editor's Note: The S&P 500 margin is indeed very high for overnight position trades. The last time I checked it was $12,500 at my brokerage firm. This is one of the main reasons the S&P is not recommended for overnight trades. However, like most brokers, my broker reduces the margin sharply for daytraders, where it's only $3,500.

In fact, I have heard it said by some of our members that certain brokers do not require any margin providing no trades are carried overnight. I am not sure if that's correct information and have not verified it to be correct, but have heard it said many times.

For similar reasons, I do not trade Japanese Yen, where one full point is worth $1,250. The difference between the high and low in one day can be $6,000. This is too rich for my trading style. Instead I trade low margin trades like pork bellies, live meats and beans, and have a number of trades going at one time.

Just suppose I have 5 trades going, each with a 50% chance of success (and a 50% chance of failure). The statistical probability of all five failing is .5 x.5 x .5 x .5 x .5 which in .03125 or only 3%.

Editor's Note: Are Don's figures correct? Is it true that five trades involving 50% odds results in only a 3% chance of having five straight losers? If so, why does your editor frequently hear about certain systems or trading advisors having far more than five consecutive losers. Many of those systems are in fact ranked much better than a 50% success ratio by either the developer or Futures Truth Ltd.

In fact, I have heard of some systems or trading advisors that claim perhaps a 60 or 70% (or even better) success rate yet sometimes will have say ten, or even 20 (or more) straight losing trades. How is this possible, if Don's failure possibility is only 3%, or even less than 3% based on profitable trade percentages considerably higher than 50%?

I recall some years ago I read in one of the major trading publications(I believe it was Barrons Newspaper) that Jake Bernstein had (if I remember correctly), 23 straight losing trades. I know Jake and he is perhaps the most respected and most knowledgeable commodity expert there is. Jake has also written 23 books on trading commodities and is incredibly knowledgeable on trading. Jake is also a psychiatrist (or a psychologist. I always get the two confused) and no doubt has great discipline and trading skill. I am sure Jake will normally have at least 50% winning trades. So how is it possible someone like Jake could have over 20 consecutive losers? I am not picking on Jake as many other famous traders and experts have also had 20 or more straight losing trades over the years.

What is the chance of this happening, if in fact the profitable trade percentage is 50%, or even higher? If the chance is extremely small, why has your editor heard about this happening numerous times over the years, involving a vast number of popular systems, methods, and well known trading advisors or respected advisory services?

The probability of at least one or more successes is 1-(.5x.5x.5x.5) which is 93.755%. That's a lot better than the 50% mentioned above.

With tight stops, the losses are limited to an average of $300. With 4 losses, this amounts to $1,200. Profits are allowed to run and usually average $2,000. This results in small but virtually certain profits.

In actual practice, by limiting my trades to the recommendations of an advisory service, like Steve Myers on Futures (Summerfield, FL, 1 800-835-0096), probability of success is much higher.

I have heard it is bad practice to order a position "at the market." Before placing an order, I phone my broker's quoteline and get the high, low and last figures. Then I place a limit order at the "last" figura. Is there a better way of doing it?

Editor's Note: I do not necessarily agree it's a "bad practice" to trade with market orders. In fact, our Real Success Methodology uses market orders more frequently than limit orders, especially when entering into a new position. We also use market orders extensively on exits involving targets and stops.

Market orders have several major advantages over limit orders. One major advantage is you occasionally have difficulty verifying you are actually in a trade or out of a trade due to uncertainty involving a limit order being filled. On the contrary, with a market order you always know you are filled and in the trade or out of the trade. Another advantage is a market order will normally have less slippage than a limit order. In fact, as witnessed in CTC's Real Success Videos, sometimes we actually have positive slippage with market orders, rather than the usual negative slippage involving limit orders.

When profits accumulate and my account grows above my target figure, I have my broker send me a check for the difference. That way, I am not tempted to get into larger and larger trades. This may not be the way to become a millionaire, but it suits my risk tolerance level.

Moore Research Center publishes a list of "optimum" stop values, beyond which a commodity rarely recovers, and within which it often recovers. Their "optimum" stops seem to me to be too high. They are all in the range of $1,200 to $1,500. To go along with my philosophy of having a number of trades going at a time, I think that tight stops are appropriate. This may stop you out of some trades that eventually recover and make a huge profit. But even in these cases, if you have confidence that the market will eventually rise, and you watch the market closely, you can get back in again and lose only one round-turn commission. However, if the commodity doesn't recover, you've saved yourself a lot of money.

Money Management, Optimal f

BALANCING ACT By Mike DeAmicis-Roberts

Comparing optimal f and probability of ruin can give you better insight into the risk-reward parameters of your trading.

As many traders know, success depends as much on money management strategy as it does on a particular trading system. Optimal f and probability of ruin (POR) are two key money management concepts that help you determine how to best allocate capital for maximum growth and minimal risk to your account.

In some cases, however, these formulas conflict. We will overview the meaning and application of optimal f and POR and discuss a method (and offer some free Windows software) for evaluating systems by comparing these two formulas.

See Futures' downloads page for a copy of this software and "Profiling Optimal f And POR" for directions on using it.

Optimal growth Optimal f, popularized by Ralph Vince in his book Portfolio Management Formulas (Wiley 1989), is the ideal percentage of capital to allocate for any particular trade - the amount of equity that will result in the greatest gain to the account (see "Without money management, you don't have a system," Futures, Building a Trading System special issue, October 1994). This amount, which determines how many contracts you can trade, is based on the profit and loss profile of a trading system, rather than a percent of account equity.

Optimal f allows the trader to maximize the profitability of a system. If you trade with a higher or lower percentage of equity, you run the risk of not capitalizing enough on your winning trades or getting hit too hard on your losing trades.

The POR is the likelihood your system will reach a point of success or failure, that is, the chance that you will blow out your account before hitting your financial goal. Ruin is defined as the account level at which a trader stops trading. The POR is calculated using the percentage win, the average win, the average loss, the account size, the account size at ruin and the account size at success.

Because the probability of ruin increases with the amount risked, it's important to limit the amount of capital you commit to each trade. By trading smaller portions of the account equity, there is a greater chance a well-tested system will perform closer to its historical results. Traders who risk a larger percentage of account equity are more susceptible to variation from the expected results because of the small trade sample size.

Unfortunately, finding the optimal f and POR for a system is a computationally intensive process, (although the math involved is not difficult). As a result, few traders know the optimal f or POR for their systems. In most cases, this leads to diminished returns and increased risk.

Optimal f and POR calculations do not always suggest the same risk parameters. By comparing optimal f and POR, you can determine if the amount of capital risked at the optimal f value results in an unacceptably high POR. On the other hand, a trader may wish to increase the POR for the chance of exponentially higher returns. Ultimately this is a decision every trader must make. The optimal f amount suggests how much to risk; the POR value gives you an idea of the relative risk associated with trading this amount.

Application When evaluating a system for the optimal f, you find that the total returns lie on a curve, with the optimal f value at the apex. Moving the same amount to the left or right of the apex curbs the potential returns of a system by approximately the same amount. For example, if the optimal f for a system is 25%, then a trader can expect about the same amount of returns while trading at either 20% or 30% of the account.

The same cannot be said about the POR. In short, the more a trader risks, the greater the POR: It always will be higher when trading more than the optimal f and lower when trading less. Generally, if you don't want to trade at the optimal f value, it's wise to trade at a lower value to decrease your risk of ruin.

In some instances, it might not even be possible to trade a system at optimal f. For example, a trader with a $15,000 account and an optimal f of 5% can only risk $750 on any trade. This may not be an adequate amount in markets like the bonds and S&Ps.

Another problem is when the optimal f amount does not translate evenly into whole contracts. Using the example above, the trader should risk only $750 on each signal. If a single contract position implies a $500 risk to the account, the trader must decide if it is better to trade one or two contracts, which in turn influences the POR for the account.

There are no strict rules - "you should always trade y percent of optimal f" or "x is an acceptable POR." Optimal f and POR analysis does not give a trader any specific guidelines on how to trade. Rather, it shows the risk and reward associated with using a certain money management strategy for a trading system. You can then use this information to better evaluate the prudence of your trading approach.

Mike DeAmicis-Roberts is a researcher-programmer specializing in risk management and neural network technology with Comet Management in Hollister, Calif. His internet address is: mike@chipx. com

MONEY MANAGEMENT INTRODUCTION http://www. bhld. com/brochure/money. html

Money management is a part of an over-all investment system. Most people never have a formal money management strategy, yet every investment must address the two basic money management questions "What should I invest in?" and "How much should I invest?"

Your over-all investment system includes your money management strategy and several trading and investment models. You may have a number of investment models which you have never formalized, such as accumulation of savings, purchase of long term bonds and so forth.

The money management information you develop with Behold! cannot utilize information about those parts of your investment system which are not formalized within Behold! yet those other parts will affect the degree of risk which your are willing to accept for the trading and investment models you develop with Behold!

The money management features in Behold! address two main questions:

(A) What is the best way to allocate my money among my formalized trading models and potential markets?

(B) With the capital on hand how many contracts (shares) should I buy?

This second question is particularly important to commodity traders as the leverage available to them allows carrying more contracts than is wise.

The question concerning capital allocation is vital to any trader who has sufficient capital to allow trading more than one stock or commodity.

Definition of Terms: The Performance Summary for a single file or for a set of files for a single commodity (a roll-over report) shows two pieces of information at the bottom of the "All Trades" section, Optimal Capital and TWR.

Optimal Capital can be defined as: The amount of capital which you "should" have used to back up each commodity position, in order to achieve the highest rate of gain.

TWR is an acronym for terminal wealth relative. It is the ratio of final capital to initial capital which you would have achieved had you backed each position with the optimal capital.

Both of the above definitions assume that all profits/losses are to be plowed back into trading, and that you have the ability to carry fractional positions. Note that TWR in Behold! is an annualized number to allow comparisons between tests of different lengths.

"q" If you test a portfolio (with more than one stock or commodity) and check the box Calc Optimum Allocation then you will get two other types of data. One is simply labeled as "q" and the other is a list of numbers showing the optimal fraction of capital which should have been allocated to each security. Use of the capital allocation numbers and "q" will allow a commodity trader to obtain a Geometric Optimal Portfolio: that portfolio of the commodities tested which will give the highest growth rate.

For a better description of the terms and an in depth understanding of their derivation you should read the book Portfolio Management Formulas by Ralph Vince. For those with a mathematical bent it would be good to read his second book The Mathematics of Money Management.

Optimal Capital, TWR, the optimal capital allocation in a portfolio and the "q" value are all computed using data taken for trading with a fixed number of positions. They are not effected by the manner in which you vary the number of positions you are trading.

Trade Testing Options in Behold!

There are many ways to do portfolio performance testing, and in order to allow you to get what you want (which is not necessarily what we expect) the money management features in Behold! have been placed under your direct command. Thus we do not determine exactly what is "optimum" and then force you to live with it.

The Test Options dialog is use to set many testing options, of which the following are of interest now.

#Positions: Single. This selection will require Behold! to always open a single position. This is the way that you should do your initial system development.

by Rules This selection allows you to write rules which control the number of positions opened. Your rules can access trade information such as the amount won or lost on the previous trade, current working capital and Worksheet data such as RSI, ADX and so forth.

Auto Behold! will calculate the number of positions to open as current working capital divided by the capital per position ($Posn) which is set in the same dialog. The initial working capital is set in this dialog in the Capital, Single file test item.

The next items determine how your working capital is changed by your trading results.

None Means no reallocation. All of your wins accrue to your working capital, and all losses are subtracted from working capital.

Percentage A certain percentage of each win will be taken away, to simulate re-capitalizing losses in other markets. A certain percentage of each loss will be replaced, to simulate re-capitalization using profits from other markets.

Dynamic This choice is only applicable to tests on portfolios.

The last item of interest is Monthly Withdrawal. This item allows you to determine how withdrawing a portion of your working capital, to cover expenses and so forth, will effect trading results.

The information in this section is mainly of interest to commodity traders, however stock traders should always assure themselves that the Optimal Capital value shown in the main Trade Test report is well above the cost of the stocks they are trading.

Portfolio Capital Allocation

Proper diversification of your investment capital would recognize all of your investments and allocate capital among them in order to obtain the maximum rate of return with the minimum relative risk. Capital Allocation in Behold! can only determine the best way to allocate your capital among the trading models and securities which you have formalized with Behold!

IF you run a Portfolio trade test and check the Calc Optimum Allocation box you will get three new items at the top of the full portfolio report. These are "Q" and the optimal % Capital allocation as determined for the securities tested in your portfolio. See Vince's book for a discussion of "Q."

As an example of the allocation information, see the example below.

Financial. PTF Initial Capital = 100000 "Q"(E/V) = 2.29 IMMEUD Actual %Capital = 100.00 Optimal % 62.55 TBOND Actual %Capital = 100.00 Optimal % 37.45

Money Management 9

Modus Trading Trade Like the Professionals

Mechanical systems generate buy and sell signals. Systems traders employ mechanical trading methods. You will hear all these statements made and see them printed in books about trading – but what do they really mean?

Everybody uses computers these days, so what is the difference between mechanical systems and other systems? What is the difference between systems traders and other traders?

We are still in the age of believing that machines are magical and do the work for us. How come computers have now learned how to fly big aeroplanes? We all know it is not really the computer flying the plane, it is the computer program.

The computer program is not a machine, it is software containing detailed instructions. In this case it is instructions on how to fly a big aeroplane. Not just on the straight, but taking off and landing in all weather conditions.

The program contains the essence of a great deal of human experience in flying aeroplanes, a great deal of physics and of course a great deal of technology too. The computer itself has no idea what it is doing.

What is the point of using the machine if it is so ignorant? Machines are outstandingly good at repetition work – you can rely on them to do the same things the same way every time when conditions are the same. Human beings are not good at this. They easily become bored with routine.

It’s horses for courses then – get the computers to do the repetition work and let the human beings do what they do well.

That’s how it is with mechanical trading. Those machines are not generating the buy and sell signals any more than your cat.

We can now view the mechanical systems employed by systems traders in its true light. The mechanical system is fed with all the information on what to do. (Incidentally, this is very much more than just how to generate buy and sell signals.)

When a systems trader has thoroughly tested his mechanized system he can leave it to get on with the routine job of applying his methods reliably.

You are now wondering what the other traders do – the ones who are not systems traders? These are called discretionary traders. They do not have fixed rules or else if they do, they choose not to apply them automatically. The problem with discretionary methods is that they are not always applied – for one reason and another.

Stick to your system is the first piece of advice given by all successful commodity traders. This is much more likely to happen if you are a systems trader with a ‘mechanical system’.

Copyright David Bromley 2006 All Rights Reserved.

Richard L. Weissman - Mechanical Trading Systems Wiley | ISBN: 0471654353 | 03/12/2004 | Español | 217 pages | PDF | 3 MB

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction with trader psychology. This book discusses the advantages and disadvantages of mechanical trading systems; the dangers in system development and how to avoid them; the optimal methods for back-testing trading systems; position sizing and other risk quantification tools; and methods of improving rates of return on investments without significantly increasing risk. Most importantly, through a detailed examination of various types of unsuccessful trader personality traits (e. g. fearfulness, greed, and impatience), the book recommends different types of trading systems for a diverse array of trader types. Richard L. Weissman (Port Richey, FL) has seventeen years' experience as a trader and developer of trading systems. He currently provides independent consultation an d training services to traders and risk management professionals in the areas of technical analysis, risk management, and trader psychology.

Mechanical Trading Systems

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Mechanical Trading Systems

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Mechanical stock trading systems articles

Trading or investing in stocks or any other underlying is easy, but you need to follow some good methods and strategies to be profitable. Technical analysis plays a major role in a trader’s life.

Most of the traders use technical analysis tools and pave their way to profits. There are many mechanical stock trading systems articles available on the internet.

Mechanical stock trading systems are nothing but the strategies and plans used by a technical trader using technical analysis to be alive in the markets.

Many stock trading systems are present and many are to follow. There is no end to strategies and so, trading systems.

There are two ways by which you could build mechanical stock trading systems . The first one is building or developing a computer application or program according to the system that you have generated.

This can be done by yourself or you could hire a professional for doing this. The mechanical stock trading system will then generate the stocks and the buying, selling points.

There are many softwares where you could use mechanical stock trading systems. Microsoft Excel is one of the best in which you could use these systems to generate buy and sell signals.

The second one is semi-mechanical stock trading system. Here, you would be testing the paper system with virtual money. You would start or prepare a strategy and allocate some time in testing the strategy.

Up to this stage, it is a semi-mechanical system. After some good successful trades, then start building an application or program, so that the computer itself takes care of all the different set of rules and plans in your trading strategy and will be generating buying and selling signals.

So, these are the methods by which you could prepare mechanical stock trading systems. Make sure to test the system and if it is successful, implement it in your trading method.

There are many strategies available on the internet. Some are free and some are commercial. Starting to build a strategy is a little bit complicated process. You must follow certain rules for framing a strategy.

Start using a basic principle of technical analysis. Watch the principle play in the markets for some good number of times. After you get a perfect understanding of the principle, then start to make rules for the strategy.

First, note down the strategy on a paper. Then, define some rules for the strategy, so that, the losses could be minimized. After that, manage the money used for that strategy, which in a better way, called, money management.

After completing all the paper work, test the system with virtual money. So, you are not actually gaining or losing money here. You are trading with virtual money.

After all these steps, if the trading method or strategy is successful, start building the program for the particular strategy. In this way, mechanical stock trading systems are built.

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Disclaimer Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. Past performance is no guarantee or reliable indication of future results. All advice and education content is of the nature of general information only and must not in any way be construed or relied upon as legal, financial or personal advice. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. officialjohnhowell related entities will not accept any liability for loss or damage however caused be it accidental, consequential, direct or indirect, as a result of the misuse of the information contained herein. Please ensure you understand that you understand that there is not guarantees in investing and all risk should be full understood by the investor themselves before placing any trades.

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Join The Atlanta Area Forex / Currency Traders Meetup Group

FOREX CURRENCY TRADING (4). Introduction of 3rd Mechanical System MT (My Trade)

Welcome. Forex and Currency Traders.

This Meetup is about Trading Currency by using Mechanical Trading Systems.

This very simple system is based on ABC Breakout also known as 1,2,3 Breakout or Price Action. This approach is used worldwide very successfully in every aspect of trading including Forex. The Breakout Lines are drawn on Forex chart automatically as Blue and Red lines. When they are broken (Price Action) and Confirmed by simple one Purple line which represents RSI, MACD and Stochastic, the trade entry is confirmed. This system has been used successfully by this group for more than 9 years.

The above example is for Sell Trade entry. Buy trade entry will be completely opposite to it.

This Meetup agenda will be as under.

Social hour to get to know other traders and welcome new traders.

Reviews of last two mechanical systems known as Rx3060 and MoMo and check Home work.

Introduction of Third Complete Mechanical System known as MT ( My Trade ).

Trade entry and exit. Back testing of system.

Todos los sistemas son modificados y ajustados por TenPipsClub. All content is provided in good faith and believed to be accurate. No hay garantía implícita de la exactitud. Historical data, Systems and Processes provided are for information purposes only and must not be construed as an indication or guarantee of any kind. No se puede predecir el desempeño futuro de los mercados e instrumentos financieros referenciados. Everyone is required to do back testing for all Systems and established their own historical data reference point. Los resultados comerciales reales pueden variar. The reader accepts that by using this information, he or she will not hold the author responsible for decisions based on the information provided. Currency trading is risky; involves substantial risks of capital loss; and is not appropriate for everyone. Only risk capital must be used for trading.(Risk Capital: Money that a person can afford to lose!). No soy un Asesor de Inversiones con Licencia y no ofrezco servicios a usted ni a nadie más. You may want to contact your Licensed Accountant, Lawyer, Tax adviser or Licenced Investment Adviser before putting money at risk.

Únete a este Meetup para participar en la conversación.

Fx Trading Systems Make Online Trading Also fast as well as reliable

The mechanical trading system is sensibly extremely simple making usage of contemplating that an automated treatment makes all career selections for you. Capitalists call it mechanical trading considering that they apply computer system systems to get trading signals.

At the reverse of the array, the discretionary trading system uses digestive system impulses. It is based after an investor’s knowledge, impulse, in addition to experience. Some plutocrats choose making usage of mechanical systems to understand existing market issues, and even after that check out the info on their own before trading.

Mechanical Trading System Certainly, most FOREX financiers make use of the mechanical trading system, simply as a result of that it automates the treatment in addition to you might develop it up with mote of effort. Given that it requires a lot less training as well as education and learning and even discovering as compared to discretionary trading, it is one of the most practical ways ahead to be a FOREX capitalist. Mechanical trading systems are generally conveniently offered online along with some software program application is easily offered readily available.

Mechanical trading systems take the human part from FOREX trading. Via such a system, you have no opportunity making trading options based after greed, digestion system sensation, or bad judgment. Mechanical trading could possibly aid those investors that normally base his/her options on sensations contemplating that a clever capitalist continuously invests with his head in addition to not with his heart.

In present years, the internet has really made FOREX trading a great deal much less made complex by providing on the internet trading systems. The broker representative business you apply will absolutely provide one for you. Some brokers have really furthermore produced mechanical trading systems that their consumers might execute to trade.

Discretionary Trading Systems When you pick to make usage of the FOREX mechanical trading system, you have to still understand the basics of the FOREX market to finish up being a well-informed investor. There are various programs as well as magazines at a time up being a FOREX financier in addition to you have to optimize them.

The trading software application might comfortably reveal you terms, simply the best ways to evaluate graphes, and some essential trading principles. An informed capitalist might consequently take advantage of both additionally discretionary as well as mechanical trading systems to achieve ideal incomes.

Maybe most excellent to start off by using mechanical trading systems before deciding of your own. You could possibly start developing up the discretionary system of trading when you are accustomed and even additionally found.

Capitalists call it mechanical trading thinking about that they use computer system systems to acquire trading signals.

Mechanical trading systems take the human part out of FOREX trading. In present years, the web has in fact made FOREX trading substantially easier by supplying on the web trading systems.

Some plutocrats choose to make usage of mechanical systems to understand existing market troubles, and also after that check out the info by themselves prior to trading.

Mechanical trading systems take the human element from FOREX trading. Mechanical trading systems take the human element out of FOREX trading. In present years, the web has really made FOREX trading substantially easier by providing on the net trading systems. The trading software application program can easily advise you terms, simply exactly how to examine out graphes, as well as additionally some essential trading ideas.

Compártelo:

Mechanical Trading Systems

Spotting the Ones That Make Money!.

Mechanical trading systems are, as you would expect, systems that make trading decisions for you.

The thought of having mechanical trading systems you can simply use to generate automatic profits, is obviously very attractive to many traders.

Most traders however, end up disappointed with mechanical trading systems, as they never seem to live up to the sales hype, and the performance figures used to sell the system never seem to be repeated in real life.

Why do most mechanical Trading Systems fail to live up to the Hype? There are two main reasons for this:

Black Box Systems These are systems where the vendor does not reveal the logic of the system. Of course, for a trading system to be successful it needs following rigidly with discipline.

If however, you don't know the logic of a mechanical trading system, you will probably not have the discipline to follow it when a losing period occurs. If you don't have the confidence to follow a mechanical trading system, you don't have a system at all!

Curve Fitting and Optimization Another problem is curve fitting or optimization of mechanical trading systems. These systems yield extraordinary performance in back testing because of the tweaking of the system rules to make them fit the data. A trader once likened this to shooting holes in a barn door, and then drawing circles around every hole to make each shot a bull's eye!

Of course, anyone can make a mechanical system make money if it is already know what happened in the past.

You will never see a hypothetical performance that fails! Most vendors achieve this by making the system fit the data, which of course will lead to disappointment in the brutal world of trading.

The fact is that most mechanical trading systems don't deliver the results they promise and traders end up disappointed. This is not to say that there are not good mechanical trading systems to buy, but you need to do your research first, and the following checklist will give you the salient points to look for.

Mechanical systems - What Makes a Good System? The rules and logic are fully explained, so you have confidence in the system when it suffers a string of consecutive losses:

Some evidence of a real time track record i. e. the system has made money in the real world of trading and not just hypothetically.

Look for simple systems, as these tend to work best and will tend to be more robust in the real world of trading.

Avoid any optimised system. Clues to an optimized trading system are ones that use unique rules or different parameters to trade specific financial markets. If the system has sound principles, then it should work on a broad spectrum of financial instruments.

Make sure that the drawdown figures are compatible with the equity you have to trade.

Not all mechanical trading systems are doomed to failure, but if you want to get one that works, be realistic and do your homework first.

Building Your Own System Most traders like the concept of a mechanical trading system, but like to have some input to customize the system to their specific personality.

If you have some human input, it is easier to implement the trading system with rigid discipline, which is the key to building consistent profits.

GML ARTICLES INDEX

Guillermo. D. Gann Workshop Gann Analysis - Key Tools, What, Where & ¿Por qué? Tuesday, 12th August 2014 Starting at 1.00pm, finishing at 3.30pm (UK - BST)

Evaluating A Stock Trading System

WhatВ’s The Best Stock Trading System For You?

Once youВ’ve decided your trading objective, and what market youВ’ll focus on, youВ’ll need to develop a stock trading system. Hundreds of different stock trading systems already exist, and you can certainly learn about or purchase one. Or you can develop your own. WhatВ’s important is that you can objectively evaluate the stock trading system to ensure it meets your needs and that it performs well. HereВ’s how you can objectively evaluate a stock trading system:

Does It Preserve My Capital? Capital preservation is absolutely critical. If you donВ’t have money to trade, you canВ’t make profits. ItВ’s as simple as that. Your stock trading system must preserve your capital or youВ’ll fail.

Historical Performance Is Critical. ¿Por qué? Because your goal is to make profits over the long-term and evaluating past performance is the only way to determine if a stock trading system, or if your stock trading system. is successful. ItВ’s not important how successful a stock trading system might be; whatВ’s important is how successful it is.

Success Is Determined By Real Profits, Not By Percentages Alone. Of course, your percentage of gain is important, but only if it measures your true profits or losses. Money in your pocket is the only real measurement of success. HereВ’s how you should calculate success: at the end of the day, week, month, or year, do you have more actual money than you started with? By В“actual, В” we mean money that is liquid and can be accessed immediately. And if you do have more, what is your percentage gain? ThatВ’s the only true measure of success. The only way to truly show profit or loss is if percentage gains (or losses) are based on the amount of money invested.

The Stock Trading System Should Be Mechanical In Nature. Qué significa eso? A good stock trading system must be automatic in nature, and should allow you to make decisions based on rules and parameters, not on emotion. A mechanical stock trading system is not one thatВ’s based on buying every IPO. A mechanical stock trading system could be to buy stocks with a maximum price earnings ratio two weeks before the ex-dividend date, with a 5% stop loss set - if youВ’ve determined that historical performance makes that an overall winning strategy.

The Trading Should Always Take Place In Liquid Markets. An effective stock trading system should be aimed at liquid markets where sufficient daily volume exists to easily and consistently execute orders.

A Good Stock Trading System Will Work In Up Or Down Markets. (If it doesnВ’t, you may be sitting on the sidelines during market run-ups if your stock trading system only works during a bear market.) It should have the potential to generate successful trading performance in all market conditions; bull, bear, and sideways trading range.

The Maximum Drawdown Should Fit Your Personal Requirements & Situation. An inherent characteristic of investing in general - and of stock trading system in particular - is the maximum drawdown potential in account value from the most recent peak. No stock trading system is perfect; youВ’ll make some trades that are great, and some that will be bad. If the potential loss on bad trades in your stock trading system exceeds your tolerance for risk, and puts your capital in jeopardy, then itВ’s not the right stock trading system for you.

The Stock Trading System Fits The Capital You Have Available To Invest. You have to be able to feel comfortable with your stock trading system, and if most of your capital is at risk, or the risk levels are too high for your comfort, youВ’ll make emotional decisions instead of logical ones.

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How to design a winning system from scratch and exactly what to do to supercharge your current stock trading system!

The one ingredient you literally "Drop" into your stock trading system that can triple your profit!

How to use “secret” money management techniques to minimize your risk.

The tools the professionals use and how you can get huge discounts (charting software, data, etc).

And you'll also get a FREE copy of David Jenyns’ complete Ultimate Trading Systems Course…

Just enter your name & email - then click the “Click Here For Free Instant Download!” botón. (All information kept 100% confidential). The download details will be emailed to you immediately.

Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Wiley Trading) [Repost]

Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Wiley Trading) Wiley; 1 edition | ISBN: 0471654353 | 217 pages | PDF | December 3, 2004 | Español | 3.10 Mb

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction with trader psychology. This book discusses the advantages and disadvantages of mechanical trading systems; the dangers in system development and how to avoid them; the optimal methods for back-testing trading systems; position sizing and other risk quantification tools; and methods of improving rates of return on investments without significantly increasing risk. Most importantly, through a detailed examination of various types of unsuccessful trader personality traits (e. g. fearfulness, greed, and impatience), the book recommends different types of trading systems for a diverse array of trader types. Richard L. Weissman (Port Richey, FL) has seventeen years' experience as a trader and developer of trading systems. He currently provides independent consultation an d training services to traders and risk management professionals in the areas of technical analysis, risk management, and trader psychology.

¡DESCARGAR AHORA! 14 días de acceso gratuito a USENET Free 300 GB con plena DSL-velocidad de banda ancha!

TradeSafe Mechanical Trading System | Is It Any Good?

20-year professional trader, Mike Guess has perfected a method of earning 2% while only risking $100 on a trade. Mike is known mostly for his work with trading all the mini-indexes, but his method works for futures and FX as well.

Join Michael Guess, founder of TradeSafe, as he reveals how YOU can average 2% to 4%+ daily ROI without risking more than $100 per contract.

You’ll learn Mike’s four easy trade entry steps and see how a true Mechanical System gives you a winning edge. Now you can confidently enter trades with less than $100 risk and always know exactly where to exit – no guesswork.

Each of our 4 automated exit strategies is tailored for current market conditions. Enjoy precision entries and exits with absolute tolerances as only a true Mechanical System can give you – Consistently.

Register now for this webinar and learn how you can finally achieve the real Holy Grail of trading: Consistency . Watch Michael Guess pull back the curtain on his cycles-based Master Chart Settings so that you can automatically select the optimum automated exit strategy to milk each trade’s potential.

Everyone who registers for Webinar will be eligible to get a no-obligation free hour of offline personal coaching.

Here is what you will learn:

Learn how YOU can achieve 2% – 4%+ daily ROI and never risk >$100 per contract

Know exactly where and when to exit, automatically and mechanically. NO guessing!

Watch how our Master Trend Indicator signals trends precisely!

¡Nuevo! Congestion Alert Indicator warns when you get breakouts or fake outs

Trade a precise, rules-based, automated Mechanical System – & # 8211; NOT your emotions

Stop losing and begin winning on a consistent basis — mecánicamente

Watch Mike trade the TradeSafe System with easy rules you can follow

Want to stop guessing where and how to enter your trades? Want to always exit your trades at the highest potential profit point? How about generating a daily ROI average of 2% to 4% or more?

Artículos Relacionados

Steps in making a mechanical forex system

Mechanical forex trading systems have been growing in number and popularity, mostly because of the ease and convenience it offers. Before you can come up with a profitable one though, you need to follow certain steps in constructing a proper mechanical system.

First and foremost, you should identify if you would like a trend-following or mean reverting system. The former takes advantage of large price moves in a single direction while the latter aims to catch market tops or bottoms, under the assumption that price will eventually bounce back to the mean.

After that, you can narrow down the list of technical indicators you plan on using. This depends on which one you are more comfortable with using, but it is generally recommended to have one leading indicator and one lagging indicator. The former should be able to give an early signal if a new trade setup is about to form while the latter could confirm if the trade signal is valid.

Next, you can decide on which time frame and currency pair you will be using for your trades. As discussed in the previous article, this can depend mostly on your trading schedule and what kind of market moves you are hoping to catch. This also depends on your level of comfort with additional volatility and potential slippage.

After this, you should lay down the specific rules for entering and exiting trades. This should include stop loss placement and profit targets, which should also have expectancy and reward-to-risk incorporated. By putting an effort into planning these in advance, you will have an easier time following your risk management rules.

Of course, it goes without saying that you should have a solid risk management plan in place, which specifies how much you will risk in each trade. Having a plan for scaling in or out can also come in handy, especially if the market presents opportunities for you to press your advantage or minimize your losses.

Now that you have the basic components down, you can start conducting back tests on your mechanical trading system. Traders typically test their system at least a year back in order to have a better idea of how much the system can generate over a span of twelve months. This could depend on the time frame of your system though and how much historical data you have on hand.

From there, you can also run forward tests on your system, preferably on a demo account. This should give you a better feel of how the system performs in live market conditions and allows you to take notes and figure out if any adjustments need to be made in order to adapt the system to current market conditions.

Through all this, it is crucial to maintain a trade journal, on top of the profit and loss statement generated from forward testing. This will help you pinpoint if any components of the system are also affecting your trade psychology.

International Capital Markets Pty Ltd

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Risk Warning: Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Los derivados de negociación pueden no ser adecuados para todos los inversores, así que asegúrese de que entiende completamente los riesgos involucrados y busque asesoramiento independiente si es necesario. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. True ECN accounts offer spreads from 0.0 pips with a commission charge of AUD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. International Capital Markets holds an Australian financial services licence (AFSL) to carry on a financial services business in Australia, limited to the financial services covered by its AFSL. International Capital Markets Pty Ltd. ACN 123 289 109. AFSL No. 335692.

© 2015 International Capital Markets Pty Ltd | Todos los derechos reservados.

Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Wiley Trading) [Repost]

Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Wiley Trading) Wiley; 1 edition | ISBN: 0471654353 | 217 pages | PDF | December 3, 2004 | Español | 3.10 Mb

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction with trader psychology. This book discusses the advantages and disadvantages of mechanical trading systems; the dangers in system development and how to avoid them; the optimal methods for back-testing trading systems; position sizing and other risk quantification tools; and methods of improving rates of return on investments without significantly increasing risk. Most importantly, through a detailed examination of various types of unsuccessful trader personality traits (e. g. fearfulness, greed, and impatience), the book recommends different types of trading systems for a diverse array of trader types. Richard L. Weissman (Port Richey, FL) has seventeen years' experience as a trader and developer of trading systems. He currently provides independent consultation an d training services to traders and risk management professionals in the areas of technical analysis, risk management, and trader psychology.

¡DESCARGAR AHORA! 14 días de acceso gratuito a USENET Free 300 GB con plena DSL-velocidad de banda ancha!

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Do you want to quit your day job? Do you want to earn an income while you learn to trade? Are you looking for a higher payoff for your investment risk capital?

By harnessing the power of the MagicDots Visual signals, MagicDots Mechanical system takes the next major step and turns visual signals into profitable trades.

Profit in up, down, and sideways markets; in both trends and trading ranges, and in both small - and large-range days.

Trading intraday markets, particularly the S&P E-mini, can be challenging. What looks like a trend at the open may quickly turn into a trading range by noon and a breakout by end of day. But this is where MagicDots Mechanical shines.

Using simple but elegant mathematical modeling of price action and price patterns, MagicDots Mechanical is able to sense the shifts in market direction and/or momentum and enter early when shifts are about to occur. Once in a trade, MagicDots Mechanical scales out of trades at price targets which vary from trade to trade based on items such as market strength, volatility and range expansions, to name a few. The result is a dynamic system that adjusts instantly to the market - taking from the market all that it's willing to give.

Here's an example of how MagicDots Mechanical adjusts to the market.

Example 1: Narrow Trading Range In this example the market is has been trading for days in smaller than eight point ranges. MagicDots Mechanical determines the trading range nature of the market and scales out with three to four point targets.

Example 2: Wide Trading Range In this example the market is has been being whipped around in wide trading range days. MagicDots Mechanical adjusts for this change and scales out in a combination of both small and lager targets.

Example 3: Trending Markets In this example the market, which has been quickly switching from one market type to another, suddenly breaks out from a trading range. MagicDots Mechanical adjusts for this change and quickly abandons a trading range trade and catches the market as it heads lower for a nice trend trade.

Why trade the S&P E-mini?

More than any other market, the S&P E-mini has two absolutely key essentials: Liquidity and volatility. The E-mini market now trades in excess of 800,000 contracts daily, virtually assuring ease of trade entry and, more importantly, trade exit. The volatility of the market is driven by the leverage of the players. Leverage feeds greed for the winners and sheer panic for the losers. It is greed that makes the winners press their positions. And panic makes the losers quickly reverse their positions, which further causes the market to move in the direction of the winners.

This is why MagicDots Mechanical works so well in the S&P E-mini market. MagicDots Mechanical system: a) determines when a battle is raging in the market, b) makes a determination of who is likely to win, c) gets on the side of the likely prospective winners, d) when it's wrong it gets out quickly, and e) rides the winning trades all the way to the next battleground.

Why trade the 5-minute chart?

Picking the right timeframe to trade intraday is a balancing act. On the one hand you want a timeframe that is big enough to provide for meaning trade profits. On the other hand you want a timeframe that is short enough to quickly signal apparent changes in market strength and direction. In our opinion, the 5-minute timeframe provides the best balance of both needs. For this reason, MagicDots Mechanical has been fine tuned to work best on a 5-minute S&P chart.

MagicDots Mechanical system will help your trading.

Follow every trade on-screen and in TradeStation's TradeManager widow.

Exact entries, stops and automatically adjusting scaled exits.

Fácil de instalar. All you need is TradeStation version 8.0 or later and real-time S&P data. Note: you need real-time data for both S&P and S&P E-mini.

MagicDots Mechanical can be traded hands-free using TradeStation's strategy automation.

Trades an average of two to three times a day for maximum profits and minimum commissions.

Reduce your market exposure because MagicDots Mechanical never carries a position overnight.

Take advantage of low intraday margins. As low as $500 per round turn at preferred brokers.

MagicDots Mechanical is updated regularly to take advantage of new trade setups and advances in TradeStation EasyLanguage programming code.

What does MagicDots Mechanical system cost?

Software lease: $200/mth, $500/qtr or $1,500/yr software lease

What if I want to trade MagicDots Mechanical but don't have time?

The MagicDots Team now offers you 100% automatic trading with new MagicDots Automation - direct from us to your broker through a partnership between MagicDots . Strategy Runner and its participating brokers.

Now you can profit from the power of the MagicDots Mechanical system without ever having to enter an order. If you have a time-consuming job, live in a different time zone, travel a lot, or just don't have the time or desire to sit in front of the computer and trade, MagicDots Automation is just what the doctor ordered. Click here for more information .

Signing up for MagicDots Mechanical system is simple and quick.

Subscribe to MagicDots Mechanical system with the MagicDots Team

Install MagicDots Mechanical system on your computer

Start trading

One of the inherit limitations of any day-trading system is the total number of contracts that can be executed in the market at any given price level before significantly degrading system performance.

To combat this, the MagicDots Team will limit total MagicDots trading volume. We will close off new client participation when total contract size exceeds the maximum desirable size for market liquidity. This is the best and fairest way to insure that all system clients receive both the best possible trade fills and peak system performance.

We currently view the maximum number of contracts that can reasonably be placed on the market at any one time to be 500. Therefore, when the total number of contracts traded by our clients reaches 500, we will close the system to new clients. For this reason we are only accepting 10 new MagicDots Mechanical clients per month and will continually monitor market participation to guard against unreasonable fills.

This is not marketing hype, just the facts. So if you want to participate, be sure and sign up early.

Sign up or questions:

To sign up or to get more information, please contact us:

September 15, 2014 5:00 am 5 comments

A lot of the best traders (at least the ones I know) use some kind of mechanical rules in their trading. “Mechanical” implies that the rules are based on some kind of objective rules, usually quantified data. The trader should follow these rules exactly without hesitation or emotion. In this respect mechanical trading is the complete opposite of discretionary trading. When trading there are a lot of decisions to make: when to buy, when to sell, when to take profit, when to take a loss, etc. If using your own judgment this might be tiresome and sometimes very difficult to execute. And for most traders highly unlikely to bring any success. ¿Por qué? With so much decision making it requires a […]

September 17, 2012 5:00 am 1 comment

By Georg Vrba, P. E. of Advisor Perspectives In an earlier article, Beyond the Ultimate Death Cross, I showed how an investment strategy for the stock market based on signals from a simple moving-average crossover system – the MAC-system – can produce significantly better returns than buy-and-hold. This system’s returns can be further improved by linking it to my bond market model. The Improved Investment and Asset Allocation Strategy My improved MAC-system works as follows, with a buy signal and a sell signal triggering shifts from investment in the stock market to the bond market, and vice versa. Buy signal for the S&P 500 A buy signal occurs when the 34-day exponential moving average (EMA) of the S&P 500 becomes greater than […]

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The Advantages and Drawbacks of Mechanical Trading Systems

Binary options Auto Trading is all about putting mechanical trading systems to work, freeing up the trader to cook up other systems and strategies, to manage the process in a hands-off way, or simply to enjoy the fruits of his trading.

Mechanical trading systems also eliminate human elements like emotions and greed from the equation: undeniably another major advantage. The way most traders use mechanical trading systems isn’t a setup for success though.

It is safe to say that most traders who use auto trading do not actually understand what’s under the hood of the given system.

They just hope they’ll strike it rich using someone else’s work and efforts, and that is after all one of the major selling points of auto trading, but one should never take success for granted. One can indeed make a lot of money trading binary options, but the possibility of equally massive losses is there as well, so taking a closer look at exactly what goes on in a supposedly successful trading system is something everyone should endeavor to do.

Mechanical trading systems can be tricky even though they are usually quite simple at the core. Such systems use various statistical tools to make trades. These tools usually include the concept of support and resistance levels, trend lines, and Fibonacci analysis and they’re used with past historical data: after all, no system/trader has anything more at its/his disposal. This is where the problems begin, namely, in how past data is used, because realistically, past data simply cannot predict future price movements. Mechanical systems built on oscillator-type indicators like the Commodity Channel Index and the stochastic oscillator are also doomed to fail because of how the free market works. To make a long story short, identifying overbought and oversold market situations is quite impossible because the market automatically eliminates all such situations. The explanation behind this is simple: with the exception of initial public offerings, the market is a zero sum one, which essentially means that one trader’s profits always represent another trader’s losses.

Mechanical trading systems offer a win rate as a sort of assessment of their capabilities. The problem with these win rates is that they offer a prediction of a series of future trades, based on the probability of past data movements being repeated. The win rate means nothing as far as the prediction of the outcome of an individual trade is concerned. A 70% win rate doesn’t mean one can’t end up losing 30 trades in a row…the actual win rate only comes to the surface over the long-run.

The answer to the above listed issues is walk-forward analysis. Walk-forward analysis is based on giving more recent data in back-testing more weight, so the predictions reflect recent market conditions better than those in the more distant past. At the end of the day, the success of a trading system does hinge on as good a synchronization of the used strategy to the current market conditions as possible, and that’s exactly what walk-forward analysis is about.

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El análisis técnico es ideal para el comercio de opciones binarias basadas en ciertas categorías de activos subyacentes. Obviamente, hay activos por ahí que se negocian mejor con análisis fundamental sólido.

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El oscilador estocástico es un componente importante de todas las opciones adecuadas de comercio del sistema por ahí. Empleo personalmente el oscilador estocástico en una serie de sistemas diferentes que he desarrollado para optio binario.

Debido a la naturaleza misma de los mercados, independientemente de la fortaleza de una tendencia dada en un precio de activo, los retracements son siempre partes de la ecuación. Retracciones ocurren por una razón muy lógica: no importa lo rápido que sea.

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Para tener éxito en el comercio de divisas, debe elegir un corredor que sea transparente, fiable y seguro. Encontrar un corredor con todas las tres cualidades no es tan fácil. Para ayudarle a tomar decisiones correctas e imparciales, lo revisamos.

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Risk Disclosure: Valforex. com cannot be held liable for any damages incurred due to the usage of any information displayed on this website. The information and trading guides found on the website constitute the authors' opinion only. Both Forex and Binary options involve high-risk and are not suitable for all investors. Either Forex or Binary options may not be legal in your jurisdiction. It's visitors' responsibility to make sure these entities are legal in their jurisdiction before engaging in trading activity. Read More Copyright © 2016 · Valforex. com | Política de Privacidad | Earnings Disclaimer | Design by Cheap Site Design

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FOREX CURRENCY TRADING (4). Introduction of 3rd Mechanical System MT (My Trade)

Welcome. Forex and Currency Traders.

This Meetup is about Trading Currency by using Mechanical Trading Systems.

This very simple system is based on ABC Breakout also known as 1,2,3 Breakout or Price Action. This approach is used worldwide very successfully in every aspect of trading including Forex. The Breakout Lines are drawn on Forex chart automatically as Blue and Red lines. When they are broken (Price Action) and Confirmed by simple one Purple line which represents RSI, MACD and Stochastic, the trade entry is confirmed. This system has been used successfully by this group for more than 9 years.

The above example is for Sell Trade entry. Buy trade entry will be completely opposite to it.

This Meetup agenda will be as under.

Social hour to get to know other traders and welcome new traders.

Reviews of last two mechanical systems known as Rx3060 and MoMo and check Home work.

Introduction of Third Complete Mechanical System known as MT ( My Trade ).

Trade entry and exit. Back testing of system.

Todos los sistemas son modificados y ajustados por TenPipsClub. All content is provided in good faith and believed to be accurate. No hay garantía implícita de la exactitud. Historical data, Systems and Processes provided are for information purposes only and must not be construed as an indication or guarantee of any kind. No se puede predecir el desempeño futuro de los mercados e instrumentos financieros referenciados. Everyone is required to do back testing for all Systems and established their own historical data reference point. Los resultados comerciales reales pueden variar. The reader accepts that by using this information, he or she will not hold the author responsible for decisions based on the information provided. Currency trading is risky; involves substantial risks of capital loss; and is not appropriate for everyone. Only risk capital must be used for trading.(Risk Capital: Money that a person can afford to lose!). No soy un Asesor de Inversiones con Licencia y no ofrezco servicios a usted ni a nadie más. You may want to contact your Licensed Accountant, Lawyer, Tax adviser or Licenced Investment Adviser before putting money at risk.

Únete a este Meetup para participar en la conversación.

Passion ES

The Passion ES system is a Mechanical Day Trading system that trades between the hours of 8:30 AM and 3:00 PM Central Standard Time. It holds no overnight positions and does not scale into or out of trades. Once a trade is made, the system calculates a stop-loss and a target price based on a proprietary algorithm. The system always trades with a stop loss. The system exits a trade either because a stop price was hit, a target price was reached, a reversal was triggered and the system reversed positions, or an exit due to the end of the trading day.

The Passion ES system attempts to identify the start of a potential trend using a proprietary algorithm. Rigorous walk-forward testing has been applied to this system to identify appropriate parameters for the algorithm to use. The system is updated on a scheduled basis to attempt to synchronize with the market at hand.

The Passion ES system may trade several times a day. It may also not trade at all on a given day depending on whether the algorithm calculates a detectable trend.

U. S. Government Required Disclaimer - Commodity Futures Trading Commission states: Futures and Options trading has large potential rewards, but also large potential risk. Debe ser consciente de los riesgos y estar dispuesto a aceptarlos para invertir en los mercados de futuros y opciones. No negocie con dinero que no puede permitirse perder. Esto no es ni una solicitud ni una oferta para comprar / vender futuros, acciones u opciones sobre el mismo. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. El desempeño pasado de cualquier sistema o metodología comercial no es necesariamente indicativo de resultados futuros.

CFTC REGLA 4.41 - LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICOS O SIMULADOS TIENEN CIERTAS LIMITACIONES. DESCONOCIDO UN REGISTRO DE RENDIMIENTO REAL, LOS RESULTADOS SIMULADOS NO REPRESENTAN COMERCIO REAL. TAMBIÉN, DADO QUE LOS COMERCIOS NO HAN SIDO EJECUTADOS, LOS RESULTADOS PUEDEN TENERSE COMPARTIDOS POR EL IMPACTO, EN CASO DE, DE CIERTOS FACTORES DE MERCADO, COMO LA FALTA DE LIQUIDEZ. LOS PROGRAMAS DE COMERCIO SIMULADOS EN GENERAL ESTÁN SUJETOS AL FACTOR DE QUE SEAN DISEÑADOS CON EL BENEFICIO DE HINDSIGHT. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O ES POSIBLE PARA LOGRAR GANANCIAS O PÉRDIDAS SIMILARES A LOS MOSTRADOS.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE. SI USTED DECIDE INVERSAR DINERO REAL, TODAS LAS DECISIONES COMERCIALES DEBEN SER SU PROPIO. Copyright Corestar Technlogies, Inc.

Passion ES

Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Wiley Trading)

Descripción

"The book is highly recommended for almost anyone involved in trading, forecasting, or studying the markets." ( Technical Analyst . July/August 2005)

From the Inside Flap

When mechanical trading systems were first introduced into the arsenal of trading tools, the trader interested in utilizing these tools would have needed programming expertise, a strong background in mathematical technical analysis, and iron–willed discipline. Today, trading system software developed by market–data vendors has become so user–friendly, that nonprogrammers with only a rudimentary understanding of mathematical technical analysis can successfully create and backtest simple trading systems like those offered throughout this book.

In Mechanical Trading Systems, Richard Weissman uses his experiences as a trader and trading systems expert to take this concept to a new level. Filled with in–depth insight and practical advice, this book examines the development process for choosing and using mechanical trading techniques in conjunction with trader psychology. Mechanical Trading Systems skillfully explores the dangers in system development and how to avoid them; how backtesting and forward testing of trading systems aids in quantification of price risk; and the methods of improving rates of return on investments without significantly increasing risk. It also provides a detailed examination of the personality traits common to the three basic types of trader trend–following (long to intermediate term), mean reversion (intermediate–term), and short–term (swing and day traders) and illustrates how a strict adherence to specific types of trading systems can foster a psychological flexibility that will allow you to succeed in all kinds of trading environments: countertrending, choppy, or trending.

Some of the other issues discussed within these pages include:

Why mathematical technical analysis is anideal building block in the development of mechanical trading systems

How various flaws in trader psychology fearfulness, impatience, greed, and lack of discipline can be overcome

The pros and cons of various traditional price risk management methods, such as stop loss and volumetric price risk management

The psychological aspects of price risk management and how utilization of mechanical trading systems can aid in fostering confidence during drawdowns

How your knowledge and experience can be utilized within the framework of a mechanical trading system

Mechanical Trading Systems offers a wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory. If you plan on improving your trading skills, this comprehensive resource can help you succeed.

From the Back Cover

Praise for MECHANICAL TRADING SYSTEMS

"Mr. Weissman′s work is a metaphysical journey through the art of war. One need only read his preface to gain the true wisdom of market trading. What follows is a clearly marked guide to trading discipline and market mathematics. a stand out in a forest of technical works." Timothy Kelly, Founder and CEO, FOREX Television

"Mechanical Trading 101. The most complete, concise, and thorough analysis of every aspect of mechanical trading, from detailed case studies to enlightening reviews of psychological trading profiles. A real systematic approach to mechanical trading that will certainly improve your trading at any stage of your career." Frédéric Bettan, Business Development Manager, Institutional Clientele, Montréal Exchange

"A serious and sophisticated book for the advanced technical trader. Mr. Weissman emphasizes exactly the right aspect of designing and using a trading system it has to match your character and personality to be of practical day–to–day use." Barbara Rockefeller, author of The Global Trader and Technical Analysis for Dummies

"A great contribution from a brilliant thought leader. Mr. Weissman offers intriguing insight into trading by traveling across many disciplines in the process. His analysis of transformational psychology within the context of a mechanical trading system is a must–read for everyone involved in investment management. I am sure that institutional investors will benefit a great deal from his intuitive and innovative style." Kurtay Ogunc, PhD, MBA, CMFC, Managing Partner and CIO, Alpha Dynamics Group, LLC

"Mr. Weissman synthesizes a wealth of research and observations about human behavior and the use of mechanical trading systems in order to reprogram the trader. No other book so splendidly lays out the task of mental system creation, system construction, and system testing. The tools in this book go beyond system development in aiding to defuse erroneous human behavior in trading. I recommend this book to anyone who intends to trade utilizing systematic or discretionary programs in today′s financial markets." Jesse M. Van Luvan, Managing Partner, Ambidex Fund and CEO, South Paw Strategic Investment, LLC

Sobre el Autor

Richard L. Weissman has seventeen years′ experience as a trader and developer of trading systems. Formerly, he was president of R. Lloyd Associates Ltd. where he focused on the development and implementation of mechanical trading systems that were applicable to all trading vehicles. Mr. Weissman has written articles on technical analysis and mechanical trading system development for various industry publications, acted as a lecturer at industry conferences, and is recognized globally by industry leaders and the financial media as a leading authority in the field. He currently provides independent consultation and training services to traders and risk management professionals on technical analysis, derivatives, mechanical trading system development, risk management, and trader psychology.

Acerca de este artículo

Disclaimer: In the interest of full disclosure we can not say that these results are representative of all users. We simply share the results we personally achieved on our live updated demo accounts during our forex trading. Nuestros resultados no son indicativos del desempeño o éxito futuro. No estamos implicando que estos resultados puedan ser esperados o alcanzados generalmente por cualquier persona. Hay un riesgo considerable de pérdida asociada con la negociación de divisas. Past performances do not necessarily indicate future results!

Some of the accounts shown on this page are simulation demo accounts and backtests for the demonstration purposes. They give you impression on how the robot might work and trade but they do not necessarily indicate future results!

Mechanical Trading System TREND PLUS в – NEW 2015.

Trading platform В» MetaTrader 4 В» Systems trading

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And did we mention that the TREND PLUS is going to change your life? Well, it's going to! It has been designed to do just that, and the proven results have shown to do it for others, and it will for you, too.

Forex market is one of the most lucrative methods that can make you boost your earnings. Así como usted tiene la oportunidad de hacer buen dinero, también hay un montón de riesgo en el comercio de Forex. Tener las habilidades necesarias o algunos conocimientos básicos de Forex es una necesidad. If you want to effectively trade, TREND PLUS will successfully help you enjoy the benefits of this kind of trade.

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This is a ground-breaking manual trading system that is so simple, you could teach your child or grandmother how to do it. Learn how to trade any market without the need for special charts or indicators.

We have developed a new trading system that can be used by the most experienced fund manager to the forex newbie looking to place their first trade.

We avoided the complexities of lagging chart indicators in favor of simple math. These simple algorithms are used to trade any market intraday with only 5 minutes of work.

You can place market orders if you want to stay at your pc, or you can enter pending trades if you need to go somewhere.

You don't need a degree in world affairs or finance in order to succeed at Forex investing. What you need is a tool, like the TREND PLUS . that has been designed to give you the information, guidance, and tips you need in order to succeed.

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Please keep in mind that communication is the key to solving any problems that may arise during the transaction, please do not hesitate to contact us either by email so that together we can complete the transaction as smoothly and as flawlessly as possible.

Mechanical stock trading systems are typically the best type of system for a noob. For one thing, since mechanical systems tend to have predefined entry and exit points, it’s simple for a new trader to appraise their risk before they really get into the market. This way, they can more easily manage their expectations before hopping into the water.

Pero. a mechanical stock trading programme doesn’t definitely mean an automated trading technique which just spits out sell and buy orders. I used to think that this was the case. However I revealed that I get better results by implementing a mechanical system that allowed me to implement my own judgment and gave basic guidelines for performing my very own research. Wizard trading systems that are usually hunted down by beginners are not typically the ones that are used by professionals. However, they also have something else going for them.

If you are only starting, it is sometimes best to search for a mechanical stock trading methodology that covers all the bases. Sometimes, this indicates that the system has a defined technique for entering and exiting the markets.

It also helps if the programmer of the system gives a little history on the strategy for the trading system. They don’t have to. Pero. they deserve to be in a position to at least give an generalunderstanding for the kind of market the systems works best in. This should help you determine whether this is the kind of system you need to trade as well as give you an amount of comfort with the developers appreciation of the markets. Elliott waves and Fibonacci ratios are two such trading secrets that have been well revealed.

While, understanding these complex and important concepts can take a little bit of time, some seem to think that these subjects are important.

Top Reasons Why You Should Use QuantShare:

Works with US and international markets (stock, forex, options, futures, ETF. )

Offers you the tools that will help you become a profitable trader

Allows you to implement any trading ideas

Exchange items and ideas with other QuantShare users

Our support team is very responsive and will answer any of your questions

We will implement any features you suggest

Very low price and much more features than the majority of other trading software

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Top Reasons Why You Should Use QuantShare:

Advanced Charting

Download EOD, intraday, fundamental, news and sentiment data for every market

Powerful Quantitative analysis tools

Backtest any strategy and generate daily buy and sell signals

Create composites and market indicators

Download indicators, trading systems, downloaders, screens. shared by other users

If you’re currently at a crossroad on whether discretionary trading is your cup of tea, or a mechanical trading system suits you better; it’s best to do your due diligence and see the advantages of mechanical trading systems as opposed to discretionary trading. Créame; choosing one over the other makes all the difference in the success – or dismal failure of your trading career.

What is a mechanical trading system?

Succinctly defined, a mechanical trading system is a method of timing the entry and exit points of a trade. There is a defined and rigid set of criteria, parameters and signals that triggers the execution of any given trade.

What are the Benefits of a Mechanical Trading System?

If you’ve spent considerable time in discussions, forums and the trenches of the trading world; you’ve probably heard of traders raving on the advantages of mechanical trading systems and how it has generated much profit for them. Here, in this article, we dwell on the real score why this trading system works for many traders.

A solid trading strategy that lets you know when you’re supposed to enter a trade and close the position has been devised. Everything is all planned. But then one glance at the P&L and the trader begin to feel that gut-wrenching, all too familiar emotions swarm in. Ever been in this situation?

Let’s be real. Even the best traders still have to struggle with all those nerve-wracking emotions. And that’s to be expected because traders are first and foremost, humans. Experience will probably tone down emotions but it will not completely eliminate it.

Having said that, we’re also well aware of the fact that an ounce of fear or greed is enough to make the best laid plans and strategies go awry. And that’s why taking emotions out of trading is one of the major advantages of a mechanical trading system. It doesn’t care about anything else save for the defined rules that’s set in the system.

Market movements are uncertain – that’s one thing that you can be sure of. However, you need to have system in place that remains consistent to in the face of all the uncertainties. To achieve this, you need to do some back-testing on a large number of trades by using historical data. Mechanical trading system is perfect for this purpose.

You can use historical market movements to crunch numbers and probabilities; test the criteria; and basically, pound the whole strategy on the anvil. With an automated system in place, you’re in a much better position to devise a very solid trading strategy that will stack the odds in your favor.

In trading, you won’t only have to struggle with your emotions; you can also get waylaid from your goals. Some trading decisions are done in split seconds; and there are times those tempting opportunities that are irrelevant to your goals present itself at a moment’s notice. That’s well and good if it’s bringing in the profit. But the problem is; trading decisions that are done on a whim is a sure recipe for disaster in the long run. The best traders think of probabilities as opposed to thinking in terms of single market movement. That’s why mechanical trading system is set to ensure long-term success.

Framework for Effective Trading

Life is so much easier when everything runs the way it should be; when plans are executed without hesitations; and when results are objectively assessed. Every successful business is run on planning, implementation, feedback and improvement. Trading is no different; and to effectively go through the process seamlessly, a mechanical trading system is pretty nifty.

Technology has made major advancements in the last couple of years and the world of trading is keeping pace. Some traders would argue that a mechanical system takes the human factor out of trading. That’s not a completely valid sentiment; every system is dictated by well-formulated inputs, behind which are traders and programmers who went through so much undertakings to create a calculated system.

Considering that, the best advantage of a mechanical trading system is the fusion of technology and human discretion. After all, trading is both science and art; it is both logic and insight. And the one who can find the perfect balance of both is the one who can take his trading career further.

TigerSharkTrading. com is a community of traders and those who want to learn trading. The website was created in 2004, and has over 30,000 articles. Most commentary and educational lessons are now written by the publisher, Dave Mecklenburg.

Additional commentary and lessons are provided by professional traders at regularly scheduled live webinars. Topics of discussion include commentary and lessons on stocks, ETFs, futures, E-minis, currency, Forex, and options.

TigerSharkTrading. com is owned by Tiger Shark Publishing LLC to protect against liability issues that may arise from publishing information on securities. Tiger Shark Publishing LLC is entirely owned by the Editor-in-Chief Dave Mecklenburg. Members of TigerSharkTrading. com are strongly encouraged to read the Terms & Conditions for using this site.

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It should not be assumed that the methods, techniques, or indicators presented on these websites will be profitable or that they will not result in losses. Los resultados anteriores no son necesariamente indicativos de resultados futuros. Examples presented on these websites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, Tiger Shark Publishing LLC, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

Mike Guess TradeSafe Mechanical Trading System Unbiased Review

20-year professional trader, Mike Guess has perfected a method of earning 2% while only risking $100 on a trade. Mike is known mostly for his work with trading all the mini-indexes, but his method works for futures and FX as well.

Join Michael Guess, founder of TradeSafe, as he reveals how YOU can average 2% to 4%+ daily ROI without risking more than $100 per contract.

You’ll learn Mike’s four easy trade entry steps and see how a true Mechanical System gives you a winning edge. Now you can confidently enter trades with less than $100 risk and always know exactly where to exit – no guesswork.

Each of our 4 automated exit strategies is tailored for current market conditions. Enjoy precision entries and exits with absolute tolerances as only a true Mechanical System can give you – Consistently.

Register now for this webinar and learn how you can finally achieve the real Holy Grail of trading: Consistency . Watch Michael Guess pull back the curtain on his cycles-based Master Chart Settings so that you can automatically select the optimum automated exit strategy to milk each trade’s potential.

Everyone who registers for Webinar will be eligible to get a no-obligation free hour of offline personal coaching.

Here is what you will learn:

Learn how YOU can achieve 2% – 4%+ daily ROI and never risk >$100 per contract

Know exactly where and when to exit, automatically and mechanically. NO guessing!

Watch how our Master Trend Indicator signals trends precisely!

¡Nuevo! Congestion Alert Indicator warns when you get breakouts or fake outs

Trade a precise, rules-based, automated Mechanical System – & # 8211; NOT your emotions

Stop losing and begin winning on a consistent basis — mecánicamente

Watch Mike trade the TradeSafe System with easy rules you can follow

Want to stop guessing where and how to enter your trades? Want to always exit your trades at the highest potential profit point? How about generating a daily ROI average of 2% to 4% or more?

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discretionary vs mechanical trading systems

discretionary vs mechanical trading systems

Hey guys plz debate over discretionary trading systens and mechanical systems. i personally use discretionary sys, but it is like having more chances of analysis paralysis as i always have to do all the manual analysis e. g finding supp and resis analysing the signals frm candles and to confirm that etc etc iam using it frm couple of months and im got used to it so wat u think shd i make it mechanical or shd i continue old school method r. i.p english

Originally Posted by bunti_k23

Hey guys plz debate over discretionary trading systens and mechanical systems. i personally use discretionary sys, but it is like having more chances of analysis paralysis as i always have to do all the manual analysis e. g finding supp and resis analysing the signals frm candles and to confirm that etc etc iam using it frm couple of months and im got used to it so wat u think shd i make it mechanical or shd i continue old school method r. i.p english

u want to code ur discretionary system rules or wanna use an entirely new mechanical system. mechanical system also needs regular adapting, in both case you need to know about markets and master psychology.

Originally Posted by Vertigo_1985

u want to code ur discretionary system rules or wanna use an entirely new mechanical system. mechanical system also needs regular adapting, in both case you need to know about markets and master psychology.

No i dont want new mechanical system. But is tht possible to code discretionary method. i dont think so coz there is no fixed crossover of ema or any trendline break etc. thts just my intution always whether to sit back or take a trade

Re: discretionary vs mechanical trading systems

If one can stay unemotional, then a mechanical system should be a better option for the average trader. There are traders who consistently get over 175% returns following a mechanical trading system. Not that, I have already designed one and reaping the benefits. But I am working on it.

Since you asked for an opinion, my intention in adding to your thread is purely based on what I believe in, myself.

Mechanical system traders have to follow a preconceived plan without any changes or variations, control/minimize losses and take profits. The rules could be few but are constant. Advantages are that you can trade more markets compared to a discretionary trader.

A discretionary system trader on the other hand can vary his position size, rules as per the current news or events, meaning they can make better use of market information. Personally, I feel that a discretionary trader is more advanced but like I said in the beginning if a person can cut off all emotions and be disciplined to the dot while trading your plan, a mechanical trading system should be the best bet for the average Joe.

Finally, it all boils down to each trader's attitude. Guess, we all pay the tuition fees until we learn to improvise, keep learning and fine tune ourselves with whatever trading plan devised. It had to be exactly what we believe in, very personal.

Originally Posted by doublebull

If one can stay unemotional, then a mechanical system should be a better option for the average trader. There are traders who consistently get over 175% returns following a mechanical trading system. Not that, I have already designed one and reaping the benefits. But I am working on it.

Since you asked for an opinion, my intention in adding to your thread is purely based on what I believe in, myself.

Mechanical system traders have to follow a preconceived plan without any changes or variations, control/minimize losses and take profits. The rules could be few but are constant. Advantages are that you can trade more markets compared to a discretionary trader.

A discretionary system trader on the other hand can vary his position size, rules as per the current news or events, meaning they can make better use of market information. Personally, I feel that a discretionary trader is more advanced but like I said in the beginning if a person can cut off all emotions and be disciplined to the dot while trading your plan, a mechanical trading system should be the best bet for the average Joe.

Finally, it all boils down to each trader's attitude. Guess, we all pay the tuition fees until we learn to improvise, keep learning and fine tune ourselves with whatever trading plan devised. It had to be exactly what we believe in, very personal.

tnx for the brief explanation, later i got a mechanical system based on bollinger bands simple and easy to use the concept which i understand. I made the rules for it now learning to trade the systemdisciplinee with all discipline

Re: discretionary vs mechanical trading systems

Just for the heck of it and for sake of debate, I'd say that all mechanical systems must have a discretionary system embedded within.

Conversely, all discretionary system run manually by a trader is just another mechanical system in which the trader is just a mechanical system's component.

In a well designed mechanical version, trader's ability to think/see/interfere is severely limited. In latter, most important thing that impacts profitability, the most essential trait of the trader's is to "act without thinking".

If I was going to ultimately build a mechanical system, I'd much rather have a Gigahertz computer than me doing the grunt work!!

I have developed fully automated mechanical system that is based on Gann/Fibonacci system and all I have to do was turn machine ON at 9AM and walk away. This worked nicely for 2 months but in 3 days, market asserted itself and ruthlessly trapped the system wiping out fair chunk of profits.

Last edited by mastermind007; 11th February 2014 at 03:38 PM.

Mechanical Trading Systems

If you look in any commodity or forex publication you will see advertisements for mechanical trading systems. This is an area in which commodity traders as well as forex traders seek to find their holy grail. Well in reality this will not happen with any mechanical trading system on the market. However mechanical trading systems have some very distinct advantages.

When a commodity trader uses a systematic mechanical trading approach they greatly increase their odds of success if they can truly follow the signals. Mechanical trading systems remove ones opinions & ego from the daily decision process that must be made. As well mechanical trading systems should reduce the emotional attachments and fears of losing money.

Really what is great about these mechanical trading systems..they automatically generate buy and sell signals based on preprogrammed algorithims. The signals do not take into account if Bernake is speaking or if there was a report in Bloomberg that Jim Rogers thinks corn is under valued. The fact is the mechanical system runs like a robot. The problem comes into play with the commodity trader does not following the signals. I have seen countless times commodity traders start to question their systems at the first sign of a draw down. The reason for this is they have not tested their mechanical trading system or they do not understand how exactly the system works. Another common cause of concern …is that I have seen repeatedly …is the commodity trader or the investor in a commodity trading advisor has not truly accepted the risks inherent in commodity trading. To be more clear….

I have heard all too many times. Yes I can go through a 20% draw down. Yes..I know it is part of trading. HOWEVER at a 10% draw down the commodity trader or investor in the commodity trading advisor becomes very uncomfortable. It is very clear to me …they really did not accept the risk. This is one of the keys of successful investing.

As much as well all like consistent and reasonable returns with reasonable risk, the fact is the markets are volatile. The fact is your greatest draw down is always ahead of you. This is the reason one needs to fully understand how their mechanical trading system works or what exactly is the methodology and risk management of the commodity trading advisor they would consider investing with.

Mechanical trading systems are a start… but not for the professional commodity trading advisor. They need the platform offered by Mechanica or trading blox. I will discuss these products in another of my posts.

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

&dupdo; 2009 Copyright Andrew Abraham - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. La información y análisis anteriores se derivan de fuentes y utilizan métodos que se creen confiables, pero no podemos aceptar la responsabilidad por las pérdidas que pueda incurrir como resultado de este análisis. Las personas deben consultar con sus asesores financieros personales.

&dupdo; 2005-2016 http://www. MarketOracle. co. uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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preguntas frecuentes

We have posted the most frequently asked questions "FAQs" from our members. If you have a question, please scan through our list. You may find other questions that you may not have thought about. If you are not clear about an answer or your question is not on the list, we invite your response and additional questions. ¡Gracias!

The American Stock Exchange lists Exchange Traded Funds (ETFs) on a number of broad-based indexes – each designed to provide a single value for the aggregate performance of a number of companies representing a broad group of industry and market sectors. Investors can buy or sell (i. e. trade just like stocks) any of the broad-market or benchmark indexes (ETFs). The most popular ETFs arevDIA, SPY, and QQQ.

Can you tell me more about buying and and selling ETFs?

ETFs can be flexible and easy to trade. Investors buy and sell them like shares, through a broker. Using ETFs, investors can also employ traditional share trading techniques, including stop orders, limit orders and margin purchases (if available).

I have never invested before, where do I start?

There are numerous resources on the Internet designed to educate new investors. We strongly suggest you visit the Learn About Investing page on the Yahoo Finance web site. This page is a great place to start!

What is the difference between fundamental and technical analysis?

Fundamental analysis endeavours to predict the overall direction of the share market by focusing on the economic outlook, sentiment surveys, individual industry circumstances and political events. Those who monitor вЂ˜fundamentals’ hope to predict the next change in market direction before that change is reflected in share prices.

Technical analysis focuses on analysis of daily share price action. There are essentially two forms of technical analysis however. One form is based on the belief that it is possible to вЂ˜read’ chart formations to predict market direction. Those who use this predictive approach to technical analysis embrace pattern recognition systems based on Fibonacci waves, Dow Theory, Elliott waves, head and shoulder, neckline, double and triple top, wedge, triangle and other formations.

Regarding the Wash Sale Rule, is this still true that selling one exchange-traded index security at a loss and buying another within 30 days will NOT trigger the wash sale rule? And if so, do you know the rationale for this exception to the wash sale rule requirement?

Selling one exchange-traded fund at a loss and buying another exchange-traded fund within 31 days will not trigger the wash sale rule, provided they're different exchange-traded funds. Selling 100 shares of the QQQ, which tracks the Nasdaq 100 index, at a loss and then repurchasing another 100 shares of the QQQ within 30 days will trigger the wash sale rule, meaning the loss would be disallowed. (You can adjust the basis in the new shares to reflect the loss, though, effectively letting you claim it when you sell the replacement batch.)

As to your second question: It's not so much a "rationale" as it is a lack of formal opinion on the part of the Internal Revenue Service. The wash sale rule disallows the loss when "substantially identical" securities are purchased within 31 days of when the loss was incurred. (That means you can't buy new shares 30 days before you sell the stock, either.) Since the IRS has never issued a concrete definition of "substantially identical," many tax planners argue that selling a Vanguard S&P 500 index fund at a loss and purchasing a Fidelity S&P 500 index fund within 31 days will not violate the wash sale rule. And until the IRS rules otherwise, they're right. The nature of how ETFs are created precludes them from holding truly identical underlying securities, so there's even less reason to fear the wash sale rule – again, as long as you don't buy the same exact ETF.

How does the Wash Sale Rule differ for Canadian investors?

The was sale rule is a U. S. tax provision and applies only to persons paying U. S. taxes. In Canada, the Canadian Customs and Revenue Agency has a like rule, it is called "superficial loss", and works in a similar manner, except that it applies for 30 days, not 31 as in the U. S.

I would love to use your system; however, I am not sure that I completely understand how to use it. Can you please explain this with an example?

In brief, after you join and you are on the Members page, you will see three live charts (DIA, SPY, QQQ). These charts are color coded based on the trading signal. If the line is green, you should go long. When red, you short sell. If the line is blue, you do not do anything. For example, if you are in a long position, you are to wait until the line turns red, and then you sell your long position and go short. If you do not want to place a short sell, then just wait for the line to turn green once again. It's pretty simple to use.

Can I use your system with my current strategy?

Sí. The system can be used by itself, or as an additional confirmation to your current trend following strategies. We have a few market timers using our system as well as a check to their own interpretation. Note that our archives and track record are based solely on our system.

Which online broker should I use to buy or sell a stock?

You can visit a search engine of your choice (i. e. www. google. com), and type in the key phrase "online brokers". Do a little research to find which firm is best suited for you. Commissions are reasonably low for most online brokers.

What is short selling?

Short selling means to sell shares you've borrowed in hopes the price will fall. Here's how it works: you borrow the shares from your broker and sell them. Now you're paying interest on the borrowed shares, but you're also earning interest on the proceeds from the sale. Sooner or later, you have to replace what you've borrowed, but the hope is that the stock price will fall. Then you can buy back the shares for less than you sold them for, replacing what you borrowed and pocketing the difference. When you buy back the shares, this is called "buy-to-cover".

Should we use a market or limit order to buy or short a stock?

This is your choice. We suggest and encourage you to ask this same question to your financial professional. In general, you should always try to get the best price. But then again, you may not want to miss out on the trade. A small price differential between a limit or market order is really insignificant for the broad moves of the market. If you disagree with our timing or price, you may feel more comfortable in placing a limit order.

Which ETF should I trade and how much to trade?

We personally believe in diversification. An investor should always attempt to minimize risk, meaning never put all of your eggs in the same basket! We can not advise anyone as to how much capital they should trade. Everyone has their own financial objectives and risk tolerances. We strongly encourage you to consult with your financial professional.

Would trading options in the QQQ's be a good idea?

We suggest not to trade options on any of the ETFs we cover. There are many traders who are dreamers and hope to make lots of money by leveraging as in options. Potentially one could make much more money using the system if they did trade options, but one can also lose a lot more. We do not believe in options, because it is simply gambling and carries a LOT of risk. We compare option trading to horse racing or penny stocks. In the long run if you traded options, you will lose money. It is only for those who love risk and have thousands of dollars to lay on the table, and don't mind losing it. Our system is intended to be as low risk as possible, and we do not recommend option trading for our members. We believe in slow steady gains over time.

What is the purpose and objective of your timing system?

Our system is designed to consistently outperform the buy-and-hold strategy of investing on a yearly basis. Please visit our track record – we feel it speaks for itself. We encourage you to thoroughly research any web site that claims to have produced exuberant results. A worthy phrase to remember "if it's too good to be true, then it probably isn't" . We stress caution with other systems, especially on the Internet. Bottom line: Our primary goal is to help our members move their money forward.

How are your timing signals produced?

MechanicalMarketTiming. com adopts a purely quantitative technical approach that tries neither to predict nor to forecast. Our approach is based on reacting to price action. As such, ours is a combination of 'trend following' and 'momentum' to identify tradable impulses. Trend followers use what we call вЂ˜reactive technical analysis'. Instead of trying to predict the market’s direction, this approach is geared to react to the market’s movements as soon as possible after they occur.

Hence, we seek to respond to the market, not anticipate it. Nuestro enfoque es por lo tanto en la identificación de cualquier tendencia / impulso reversión en una fase relativamente temprana y para montar la nueva tendencia hasta que el peso de la evidencia muestra o demuestra que se ha invertido.

What does your trading strategies offer for the investor and trader?

We feel our trading strategies:

relieve the investor of having to depend on financial analysts' recommendations and on company information, that may or may not be truthful.

eliminate the emotional turmoil and confusion that all day traders (and option and future traders) constantly experience.

provide a lower risk method of investing, since you are investing in a broad market (either long or short) as opposed to a single stock that is subject to higher risk, volatility, and many uncontrollable factors that can negatively impact stock price.

consistently beat the long-term buy-and-hold strategy, even in bearish markets. When our timing system gives a bullish signal we are buyers and profit from the rising market. When the stock market turns sour for most, we short sell the market and profit from the decline.

How are we to trade using your system?

As shown on the members page, a buy signal occurs when the impulse system turns green, meaning a potential bullish trend may be developing. Whereas a short signal occurs when the impulse system turns red, meaning a potential bearish trend may be developing. And when the line turns blue, it is suggested to not act upon this change in character. It is recommended to paper trade for a couple of weeks until you become comfortable with our system.

In what trading environment does your system perform well, and are there any flaws?

Our system performs very well when the markets are trending — either up or down, and on all time horizons (i. e. short, intermediate, and long). Our mechanical system will produce small negative losses, sometimes back-to-back. The reason for this is because the system is trying to get on the right side of the market prior to a large move (either up or down). Once trending with the market, the system will capture that return. If you follow each trade, members will do very well and overall better than the buy-and-hold strategy of investing. Also, the system is designed to never miss a large gain with the market trends. If you look at our trading statistics page, you will see the drawdowns are quite small as compared to the large gains. This is the beauty of the system.

Once I have become a member, how will I know if the signal has changed?

When you visit the charts on the members page, if the market is comfortably trending in a certain direction, there is no reason to look at the page every day. We do suggest you visit the members page often when the stock price seems to be on the verge of changing. Meaning there is a higher potential of a new signal being produced when the line is blue as opposed to when it is green or red.

As soon as I become a member and visit the timing signals page, do I enter the trade immediately even if the current stock price has already moved in a specific direction?

This is entirely up to you and your professional advisor for a final decision. If you like, it is sometimes best to sit out (hold cash) and wait until the next signal, especially if the market has moved significantly since our last signal.

Is investment news and other research data taken into consideration?

The mathematical algorithms we use to produce the charts factor in all data.

Can I trade Rydex or ProFund index funds using your market timing system?

Yes, we have many members who have successfully traded Rydex or ProFund index funds using our system, especially dynamic Rydex funds. In fact, there are many Mutual Funds to choose from when trading indexes. For the most part, our signals are exceptional to use for trading any Mutual Fund that contains stocks that compliment the broad market indexes we cover.

Who are your members?

Our members come from many countries in the world. We believe our members are professional investors, stockbrokers, money managers, financial planners and investment advisors, and individual investors. We also believe our members are those who have tried other investing strategies (i. e. day trading, buy-and-hold stocks and stock mutual funds, etc..) and have lost money through those strategies. Investors and traders alike are now looking for "and have found" an honest and lower risk method of investing through our system. For those who truly follow our methodology will notice a gradual increase in their portfolio as time progresses.

What is the difference between a long and short signal?

When the signal is "long," this means place a trade to buy the stock. A "short" signal means short sell the stock. If you do not wish to use margin as with short selling (i. e. borrowing stock from your broker in order to buy-to-cover at a lower price — meaning betting that the price of the security will decrease), you can simply remain in a cash position until the next buy signal is generated.

Could you please e-mail me a complete list of your signals for previous years so I may evaluate how effective your signals are? I do not need current data. Older data would be fine. Gracias.

All of our tables are available to the public. Please go to the left-hand menu on any page and click on "Track Record." Once you are on the page, you can view our individual trades in either PDF or Excel format.

When was the back-testing of your system, and when did your system become available to the public with live data?

The system has been back-tested using data from years 2005 through September 2012. We went live in September 2012. The system has done quite well ever since we went live and continues to outperform the market.

For more details of our signals and trading performance, refer to our comprehensive trading statistics for the indexes.

Can I join for a 6-month period instead of a year?

We currently do not offer a 6-month period. If we get numerous requests for this option, then we may consider this option in the future.

What is your privacy policy?

Our company is committed to protecting your privacy while using our site. This is explained in detail in our Private Policy page.

Does your company offer any free trial periods?

We do not offer any free trials. What we do provide to site visitors and non-members is proof that our system works. Unlike many other trading systems which lack proof, we provide free to the public all of our individual performance tables and charts of the ETFs we cover. These pages are up-to-date, but only our members will have access to the latest signal updates prior to the last 30 days. Once you review our track record, you will see that our system has performed quite well. Another reason we do not offer free trials is because there are times when the system may not produce winning returns in the first 30 days, especially when the market is trading laterally and/or topping formations. Our system is designed to consistently outperform the index funds over time. We do not want to give the impression that this a get rich quick scheme. Our system requires patience. There are a lot of other web sites that virtually promise quick returns. Please be cautious of those systems.

Will your company manage my account?

At this time, we do not manage any personal accounts for our members, and probably will not in the future. However, we can direct you to a broker whom we respect or you can maintain your account with an online broker.

After I become a member is there confirmation of this?

Once authorization is approved, you will receive our confirmation response e-mail. You will then be able to log into the system and will be automatically directed to our exclusive timing signals page with the latest updates!

In short, the site is co-operated by David Adams and Robert W. Dillon, Ph. D. David is a physics major and is interested in algorithmic trading and particle physics. Robert is a Technical Chart Analyst with a doctorate in Geology & Geophysics. He has a vast amount of experience in interpretation of highly complex charts, and trading stocks using technical analysis. Together, they designed one of the most credible and successful trading systems in the world today.

How can I contact the editor/technical analyst if I have a question?

All correspondences are done through e-mail. You can contact David or Robert at info@mechanicalmarkettiming. com.

Once I become a member, can I change my email address in the future?

Yes, just send an e-mail to info@mechanicalmarkettiming. com and include your old and new e-mail addresses.

Commentaries by Bruce Babcock for New and Experienced Traders

People who come to commodity trading invariably have already had success in some other field. Most of the time they have been extremely successful. Without that success they would not have accumulated the capital necessary to trade. They expect to apply the same rational approach to commodity trading which led to their previous successes. Unfortunately, it is precisely this seemingly intelligent methodology which steers them to disaster.

The markets are designed to take money from the many and distribute it to the few. They could not exist otherwise. It should be obvious under those circumstances that what appeals to common sense and feels comfortable will not work. Otherwise, everyone would be rich.

The amateur assumes that he can conquer the markets through superior analysis. He spends nearly all his time looking for effective ways to predict where the markets are likely to go next. I have been trading since 1975 and spent many years myself on this fruitless quest. Believe me when I say that the markets are not predictable in the sense most traders use the term. Luckily, it is not necessary to predict the markets to make money from them.

The professional has had enough experience to learn the limitations of analysis. While there is a repetitive similarity to market behavior, there is just enough uncertainty to make predicting the future an impossible task. The professional knows the importance of a consistent approach to the markets. He has a concrete plan of attack. He seeks to follow existing trends rather than predict future trends.

The amateur assumes the pros have a good idea where the best opportunities are. Actually, however, professionals consistently admit they have no idea in advance which trades will work. Most often the ones which look the least promising turn out to be the big winners.

There is no favorite time frame for professional traders. Each finds the perspective which matches his or her trading personality. Some become floor traders who seldom hold trades for more than a few minutes. There are some floor traders, however, who hold positions much longer. Professionals trading off the floor may be day traders, intermediate-term traders or long-term traders. What is consistent is that each tends to stick with only one time frame, the one which works best for him.

Each professional has his own unique way to identify potential trades. He enters the market when his plan dictates. He follows the direction of the market in his time frame rather than anticipate a change in trend.

The pros are all ruthless in getting rid of losing positions. You have little to lose and a great deal to gain by exiting losers as quickly as possible. The problem is that this approach results in many small losses. The amateur wants as few losses as possible because to him, they are a sign of failure.

The professional has learned to handle the inevitability of losses. He knows he can never avoid them. He pays almost no attention to losses unless they become bigger than permitted under his overall trading plan. There is little ego involvement for the professional in his next trade. He will seldom let his ego interfere with abandoning losing positions.

For all traders there is a continuum between 0 percent mechanical trading and 100 percent mechanical trading. (You can also think of the continuum as going from 100 percent to 0 percent judgmental trading.) Someone who trades 100 percent mechanically never has to make any trading decision. He has a plan which tells him precisely what to do in any situation. All he has to do is monitor market activity, determine what actions his plan requires and then place the required orders with his broker. Most often, these plans are computerized. The trader inputs market data and the computer program tells him what to do.

At the other end of the spectrum, someone who trades 0 percent mechanically has no fixed rules whatever. He makes every trading decision on the spur of the moment without any particular guidelines except his own idea of what will work best. Although he attempts to learn from previous mistakes, he will be unsuccessful at doing so because correct decisions do not always result in profits and incorrect decisions do not always result in losses.

The emotionalism of trading can only be truly appreciated by those who have tried it. The effects of fear and greed are remarkable. Human nature is such that left to your own devices, these twin villains will invariably cause you to make the wrong decisions in the speculative arena. The most outstanding trait of professional speculators is that they have learned to control their fear and greed. They do this through self-discipline, which of necessity means their decision-making has a certain structure.

I believe that successful traders all have a relatively mechanical approach even if they do not know it themselves. Therefore, all professional traders are grouped in the top half of the mechanical trading continuum. Most amateurs, on the other hand, will be found in the bottom half. Many professional money managers have a system which is 100 percent mechanical. Those who do not operate 100 percent mechanically usually allow only a small amount of personal judgment to override their system.

The average person has the best chance to be a profitable trader if he or she adopts a 100 percent mechanical approach. If profit is your goal rather than massaging your ego or having fun, I recommend that you find one or more good mathematical systems and trade them in a diversified group of markets. You will also need sufficient capital and courage to withstand the inevitable equity drawdowns which occur regardless of trading approach.

Here is what I mean by a strictly mechanical approach. You will have a predetermined group of markets which you will follow. You will have mathematical formulas to apply to previous prices which will tell you when to buy and when to sell. There will be entry rules, exit rules for losing trades and exit rules for profitable trades. There will be rules for when to start trading and stop trading each system. Your only tasks will be to choose initially the systems and markets to trade, to apply the system rules to market price action and to decide how to spend the (hopefully) resulting profits.

If your system is computerized, you will have to provide data to the computer, run the system software and place the orders the system dictates. This should not take very much of your time. You can hire someone else to do it for you if you want. My broker has my computerized systems and places the orders for me. I run the systems myself every day to keep track of what is going on. However, I do not have the responsibility to place the orders. I can travel or take a vacation without worrying about missing something.

Not only have I been successful, but I believe I have been more successful than I would have been choosing my trades with more of my own judgment. If you are truly trading commodities to make money rather than have fun, give my 100 percent mechanical approach some consideration.

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"You are one of the best companies I have ever dealt with. Your products and services are great. God bless you and your family, and although a bit further out, have a very happy Thanks Giving. Best personal regards."

Medhat I. Giza, Egypt

"Hello Bennett, my name is Keith M. I wanted to thank you for everything you do to truly help traders trying to make it. Without you and your team, I do not think I would be as close as I am to my goal of making it as a trader. I was a Production Manager for 15 years at GM assembly plants and left in 2008 right before the bottom dropped out. I spent one year reading everything about markets and trading that I could get my hands on before I even placed a trade. I read everything from Jesse Livermore, Martin Pring, Elliott, Edwards/Magee, Steve Nison, and all the others. I developed my own trading "bible”, chose an instrument (ES) and a time frame I was comfortable with (intraday), and began paper trading. I developed rules and entered into real money. I paid my tuition to "Mr. Market" as I tweaked my rules and struggled with managing emotions. Then I came across Traderscoach. com. You helped put it all together for me. I have read all of your books, guides, watched all of your videos and webcasts, and have traded with ART® for about a year now. As part of my ES trading system, ART® (including using the trade size calculator), has helped me achieve 5-10% of capital consistently each month. I risk 5% on each trade verified by risk of ruin tables. I wish I knew of Traderscoach. com sooner - it would have saved me a lot of time, money, and frustration most of all! Thanks again Bennett for all you do. I only hope I can give back some day like you are doing, helping people who I know all too well what they are going through."

Keith M. Waretown, New Jersey

"In the past 2 weeks that I have traded I have made a killing - like this week I made 3 months salary. I don't trade every week, but in the last two trading sessions I have made at least a months salary - the systems that I am creating around ART have been great and getting better and finally I am doing what I dreamed of doing years ago. Thanks for writing ART - it is the key stone to my trading and it is almost too easy it seems some days. Thanks and Regards. "

"I purchased your software yesterday. I just want to say this software rocks. I had an excellent day. I want to thank you for an excellent product and for the help you give to traders."

"THANKS! I almost paid for the system [ART ® ]with my trades today. Awesome."“I've been trading for five years and I've used lots of software: VectorVest, AmiBroker, eSignal, WizeTrade, PremiereTrade AI, TeleChart, Vantage Point, eASCTrend, etc. I still hold onto most of these because I'm a trading software junkie.

But, I find A. R.T. to really be the most specific and profitable. It tailors the entry, stop, and targets without too much subjective interpretation. This is the most I've been impressed with any software package in the first month of using any of them. I love the software and it's made me $8,800 since I started using it on 7/21/08.” [In Just One week!]

"Bennett, I am currently trading the USDJPY with the ART® System and is working great. So far I am a huge believer. & Quot; Ron F. Cockeysville, MD

"I have invested in many software and I must admit that ART is the best I have come across. This software works standalone without the use of any indicators and yet its so accurate. Currently I am using it with Advanced GET eSignal and it blends like magic. Try it for yourself the one month trial offer and I am sure you will not regret.

The price tag is reasonable and the support is excellent. I will never take another trade without ART software. Thank you Bennett for your contribution to the financial market."

& Quot; great software. thanks"

"Hi, I want to express my sincerest thank you for my copy of your amazing software. It comes at an important time in my trading career. On the download page there are many free help files for download, among them is a recorded advanced class webcast. Once again thank you to all at TradersCoach. com. Best regards."

Bruce W. La Mesa, California USA

"I've downloaded and installed the software. You guys are truly one-of-a-kind and penultimate professionals! Thanks again!"

"Thanks for your excellent customer service."

ART - Applied Realty Trading SOFTWARE and COURSE:

"Hello, The reason of this post is to let you know about a good software, which is part of my trading tools.

ART [ART® Software] is an add-on for TradeStation, eSignal, NinjaTrader, QuoteTracker.

How I decided to use ART? Based on quality: 1) At a TradersExpo I was looking how the developer of ART - Bennett McDowell - is trading with real money in front of a few hundreds of people. 2) After that, I spoke with Bennett McDowell and I found out he is a serious trader, developing the software based on interesting principle and paying a lot of attention to money management.

His ART course [ART® Online Home-Study Course] is great too.

And something to keep in mind - he is very honest and helpful.

If you are interested, see for yourself at TradersCoach. com I hope this post will help you in your trading All the best, Gavroche."

"Every serious especially new (but as well intermediate or even advanced trader) should have the book [The ART® of Trading]. A must to get the necessary knowledge and understanding of how any stock market works (stocks, ETFs, commodities, FOREX etc.), to find good prospects, then to set up entries and exits, to use techniques for minimizing risk and to make money in that environment which is a zero-sum game where market pros are waiting to catch the amateurs without merci. Yes money can be made but this business is not a casino or you are borne to fail. First, one must have the technical education Bennett A. McDowell is giving in his book and like a musician to become a star, one must practice and practice to constantly improve his or her skills based on that education.

After decades of lousy returns in my investments through professional stock brokers I decided to manage myself my own portfolio. My research led me 6 months ago to McDowell's book The ART of Trading on which his proprietary ART software is built. I only regret not to have found it before. But better late than never. I see now the light at the end of the tunnel of stock market investing: after losses or virtually no returns for years, I made 15% return in those past 6 months thanks to the technical knowledge acquired and to the ART software. And I feel less stressed than before in my every day trading because I know what I am doing instead of guessing and hoping for the best in my investment decisions."

I would highly recommend the serious investor to buy the ART of Trading book which includes a DVD and a free 30-day trial offer of the ART software. There is no risk and it opens your door to a wealth of indispensable technical knowledge of stock market investing."

Bernard C. Montreal, Canada November, 2012

Works on all markets and all time frames (from 350 tick & minute intraday charts to yearly charts)

Welcome and thank you for your interest in Applied Reality Trading®. The ART® Trading Software is a sophisticated and fun trading and investment tool designed to enhance, educate, and deliver results. The Applied Reality Trading system is now being used in over 40 countries worldwide.

The ART® Trading Software generates exact trade entries and exits based on market realities taking into account key levels of support and resistance, as well as, price patterns and volume analysis. Knowing your trade entries and exits before taking your trade allows you to carefully calculate your "Trade Size" to control your "Trade Risk" based on the "Risk of Ruin (RoR) tables and guidelines. The ART® Trading System was purposely designed to accommodate many different trading styles so it is not a 100% mechanical trading system, also known in the industry as a "Black Box" trading system. Using the ART® Trading Software successfully requires a trader who will be willing to study the course materials (ART ® Home-Study Course) to learn how to use it. You will need to be disciplined and need to practice in a simulated environment while you learn.

Successful trading requires that you have the ability, aptitude, and psychological make-up to be successful. Because of these factors, we never know in advance who will be successful and who will not. Therefore, there are no guarantees you will be successful. We give you the best tools and materials, the rest it up to you. Learning to trade well can take from months to years. We have designed a comprehensive Home-Study Course that accompanies the ART® Trading Software for an additional price to help you towards your goal of trading success.

Buy Bottoms & Sell Tops With Low Risk Using Our Proprietary ART® Signals! High Probability Trading Signals Based On The Realities Of The Market

Adaptive Logic Adjusts To Changing Market Conditions

Dynamic "Pyramid Trading Point®" Trend Indicator*

Trade With Volatility Instead Of Against It

Always Trade With A Stop

Click on the headings below to learn more about the ART ®:

Featured on the MoneyShow

Fourteen Major Reasons Why You Need The ART® 2012 Software! 1) Trade the REALITIES of the market!

2) The Pyramid Trading Point® and ART® Reversal signals work on all markets and all time frames because they determine key support and key resistance levels in the market based on proprietary market analysis.

3) Proprietary "ART® Reversal Bars™" Indicators are automatically drawn on charts

4) Proprietary "Pyramid Trading Point"® trend Indicator are automatically drawn on charts

5) Proprietary trend and scalping, counter-trend, and scaling signals delivering high probability trades

6) Identifies exact trade entries based on proprietary market based price action methods

7) Identifies exact stop placement based on proprietary market based price action methods

8) Developed for novice or professional traders

9) Analyze Charts In Just Minutes, not hours

10) Never Outdated - dynamic trading principles change as markets change

11) Trade With Lower Stress & Anxiety

12) Unlimited Technical Support

13) Developed for use with professional data charting platforms providers eSignal, TradeStation, NinjaTrader, Market Analyst, Trade Navigator, or QuoteTracker for TD AMERITRADE Clients

14) Add Structure To Your Trading That Helps To Reduce Stress!

Deal with reality and get a better result

Buy Bottoms & Sell Tops With Low Risk Using Our Proprietary "ART® Reversal Bars" High Probability Trading Signals Based On The Realities Of The Market

Dynamic "Pyramid Trading Point®" Trend Indicator

Always Trade With A Stop

The ART® trading program is a sophisticated proprietary trading system with complex calculations that are built into our software. "ART® Reversal Bars", "ART® Two-Bar Reversal Patterns", and the "Pyramid Trading Point®" are all derived from proprietary calculations based on market data requiring numerous technical calculations based on market certain conditions. While the software is a fantastic trading "tool," you need the ART® methodology to understand how to best interpret and use the software to fully implement the ART® trading program. This is why the software is only sold with the "APPLIED REALITY TRADING®" home study course.

"Pyramid Trading Points®" are a unique non lagging trading indicator that does not distort market reality but instead helps us see market reality!

The "Pyramid Trading Points®" identifies key levels of market support and resistance based on the velocity of price. "Pyramid Trading Points®" are represented on your chart as triangles pointing inn the direction of the potential trend. Measuring the slops of the sides of the triangle determine momentum and volatility and are used to identify key trading entries and exits.

ART® Trading Software

The ART® Trading Software consists of one license per data service username. We can switch your ART® Software at anytime from either TradeStation, eSignal, Market Analyst, Trade Navigator, or NinjaTrader for a small fee. See the price list for all fees.

The ART® Trading Software can be installed on multiple computer PC's.

If you purchase the ART® Software it is a one-time purchase and includes basic course materials you need to use the ART® Trading Software.

Multiple Software licenses are available upon Special Request For Fund Managers or Trading Firms The ART® Trading Software is a great trading "tool" that can help automate your trading making it less stressful. We offer specially priced packages of this new "Cutting-Edge" voice technology software that identifies the ART® Señales. For markets that do not report volume, our software still identifies the ART® signals based on key market information.

Easily identify trade entries and exits using our proprietary software!

Unique Proprietary "Pyramid Trading Point ®" Indicador

Not available anywhere else! Bennett McDowell developed the "Pyramid Trading Point®" based not only on his trading skills and experience, but also on his ability to transform market information into meaningful visual representations. In fact, this ability was again illustrated when Bennett scored in the 100th percentile on the "visual-spatial" IQ intelligence exam scale which means his abilities in this area are exceptional exceeding 90% to 100% of the people who took the test! Bennett feels that the "Pyramid Trading Point ®" transforms the concept of trading "pivot points" and "fractals" into the next generation. Both the size and base of the "Pyramid Trading Point®" have great meaning. This concept is not available on any other charting software program. In "APPLIED REALITY TRADING®" you will learn the rule-base on how to draw and spot the "Pyramid Trading Point®" on any market and time-frame you trade.

Why the "Pyramid Trading Point ®" is so powerful!

"Pyramid Trading Points ®" are a unique non lagging trading indicator that does not distort market reality but instead helps us see market reality! "Pyramid Trading Point®" indicates:

Market Trend Direction

Long & Short Trade Entries

Helps reduce and sometimes avoid harmful "whip-saws"

Market Trend Trade Entry Points

Market Trend Exit Trade Points

Trend Exhaustion Levels

Strength of Market Trend Entry Trade Points

Corrections In Dominate Trends

First, thanks for such a great product. ART ® and the Trade Size Calculator ™ work great on the Russell 2000 3min chart, even on rollover days like yesterday. Anyway, I wish to continue my subscription to the ART ® software for TradeStation and in addition purchase the software [ART ®] for eSignal.

The reason for this is that I trade the DAX 30 and the data feed for that contract is not available from TradeStation.

If this is ok, please let me know and I’ll go ahead and order online. Cheers,"

Fuad A. Malaysia

"Hi Bennett, after 8 months of live real time intra day trading I think it is time for a very big

¡MUCHAS GRACIAS!

for all your great work and for sharing ART® conmigo.

We both love charts and so here is my performance as a chart (look at the attached PDF). Isn't that a nice curve. & Quot;

Tobias K. Germany

ART® Home-Study Course & ART® Trading Software Trader

The Article is in adobe PDF format. if you do not already have it, click below for free Adobe reader:

"Ben, The software offers me more confidence and guidance in my trading. I think you have a credible product which is a mouthful considering the industry you're in. "

Abraham F. New York

"Bennett. I absolutely love this system. I have created a trading plan that fits my personality. I wanted you to take a look at the attached chart. & Quot;

Regards, Ken P. Las Vegas, NV

& Quot ;. Take a look at the attached chart. I'm still in this trade with a couple of contracts. all I can say is WOW. & Quot;

Regards, Ken P. Las Vegas, NV

"Dear Jean, Just to let you know I think software [ART® Charting Software] is excellent. Thanks, Gary"

Gary S. United Kingdom

ART ® Charting Software Disclaimer In Addition To The Overall Website Disclaimer:

Some charts illustrated above using the ART® Software show "explanations." The ART® Software does not indicate or draw in any "explanations." All "explanations" are taught in our home study course "Applied Reality Trading." The home-study course pictured on this page shows the DVD case which may not be included in your order.

Some charts illustrated above using the ART® Charting Software show "explanations." The ART® Charting Software does not indicate or draw in any "explanations." All "explanations" are taught in our home study course "Applied Reality Trading ®".

LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICOS O SIMULADOS TIENEN DETERMINADAS LIMITACIONES INHERENTES. DESCONOCIDO UN REGISTRO DE RENDIMIENTO REAL, LOS RESULTADOS SIMULADOS NO REPRESENTAN COMERCIO REAL. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. LOS PROGRAMAS DE COMERCIO SIMULADOS EN GENERAL ESTÁN SUJETOS AL FACTOR DE QUE SEAN DISEÑADOS CON EL BENEFICIO DE HINDSIGHT. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O SERÁ PROBABLE A LOGRAR BENEFICIOS O PÉRDIDAS SIMILARES A LOS MOSTRADOS.

THE MATERIAL CONTAINED WITHIN THIS SITE IS FOR INSTRUCTIONAL AND ILLUSTRATIVE PURPOSES ONLY. RESULTS CAN AND WILL VARY FROM STUDENT TO STUDENT. NO GUARANTEES, PROMISES OR WARRANTIES HAVE BEEN MADE THAT SUGGEST ANY TRADING WILL RESULT IN A PROFIT OR NOT RESULT IN A LOSS. ALL TRADING INVOLVES RISK.

Exención de responsabilidad del Gobierno de los Estados Unidos - Commodity Futures Trading Commission. Futures and options trading has large potential rewards, but also large potential risk. Debe ser consciente de los riesgos y estar dispuesto a aceptarlos para invertir en los mercados de futuros y opciones. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to buy or sell futures or options. No se ha hecho ninguna representación de que cualquier cuenta tenga o sea probable obtener ganancias o pérdidas similares a las discutidas en este sitio web. El desempeño pasado de cualquier sistema o metodología comercial no es necesariamente indicativo de resultados futuros.

CFTC REGLA 4.41 - LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICOS O SIMULADOS TIENEN CIERTAS LIMITACIONES. DESCONOCIDO UN REGISTRO DE RENDIMIENTO REAL, LOS RESULTADOS SIMULADOS NO REPRESENTAN COMERCIO REAL. TAMBIÉN, DADO QUE LOS COMERCIOS NO HAN SIDO EJECUTADOS, LOS RESULTADOS PUEDEN TENERSE COMPARTIDOS POR EL IMPACTO, EN CASO DE, DE CIERTOS FACTORES DE MERCADO, COMO LA FALTA DE LIQUIDEZ. LOS PROGRAMAS DE COMERCIO SIMULADOS EN GENERAL ESTÁN SUJETOS AL FACTOR DE QUE SEAN DISEÑADOS CON EL BENEFICIO DE HINDSIGHT. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O ES POSIBLE PARA LOGRAR GANANCIAS O PÉRDIDAS SIMILARES A LOS MOSTRADOS.

"Applied Reality Trading™," "Pyramid Trading Point™," "The Trader's Assistant™," "The Survival Guide For Traders," and the entire "TradersCoach. com" website and all products offered through TradersCoach. com are all copyrighted under United States Law.

Copyright © 1998 - 2013 TradersCoach. com, Inc. All rights reserved. COPYING AND OR ELECTRONIC TRANSMISSION OF THIS DOCUMENT WITHOUT THE WRITTEN CONSENT OF TRADERSCOACH. COM IS A VIOLATION OF THE COPYRIGHT LAW. Any reproduction or retransmission of the contents of this website is prohibited without the prior written consent of TradersCoach. com. The host server for the website is located in the U. S.A.

Copyright 1998 - 2015 TradersCoach. com, Inc. All Rights Reserved.

Exención de responsabilidad del Gobierno de los Estados Unidos - Commodity Futures Trading Commission. Futures and options trading has large potential rewards, but also large potential risk. Debe ser consciente de los riesgos y estar dispuesto a aceptarlos para invertir en los mercados de futuros y opciones. No negocie con dinero que no puede permitirse perder. This website is neither a solicitation nor an offer to buy or sell futures or options. No se ha hecho ninguna representación de que cualquier cuenta tenga o sea probable obtener ganancias o pérdidas similares a las discutidas en este sitio web. El desempeño pasado de cualquier sistema o metodología comercial no es necesariamente indicativo de resultados futuros.

CFTC REGLA 4.41 - LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICOS O SIMULADOS TIENEN CIERTAS LIMITACIONES. DESCONOCIDO UN REGISTRO DE RENDIMIENTO REAL, LOS RESULTADOS SIMULADOS NO REPRESENTAN COMERCIO REAL. TAMBIÉN, DADO QUE LOS COMERCIOS NO HAN SIDO EJECUTADOS, LOS RESULTADOS PUEDEN TENERSE COMPARTIDOS POR EL IMPACTO, EN CASO DE, DE CIERTOS FACTORES DE MERCADO, COMO LA FALTA DE LIQUIDEZ. LOS PROGRAMAS DE COMERCIO SIMULADOS EN GENERAL ESTÁN SUJETOS AL FACTOR DE QUE SEAN DISEÑADOS CON EL BENEFICIO DE HINDSIGHT. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O ES POSIBLE PARA LOGRAR GANANCIAS O PÉRDIDAS SIMILARES A LOS MOSTRADOS.

TradersCoach. com, Inc. known as TradersCoach. com assumes no responsibility for your trading results. Past performance does not guarantee future performance and TradersCoach. com does not make any performance representations or guarantees. Any chart or trading demonstration produced by TradersCoach. com representing trades and using the Applied Reality Trading methods also known as ART or the ART Charting Software on the TradersCoach. com website or in any advertisement, seminar, brochure, CD-ROM and online demonstration, magazine, etc. are to be considered hypothetical trades for educational purposes only. No trading system can guarantee profits. Hypothetical trading results can be unreliable.

The ART Trading Software is a sophisticated proprietary trading software developed by TradersCoach. com that works on all markets and time frames (1 minute charts and up). However, it is important to realize that the ART Software alone is NOT what makes YOU a great trader! You will need to learn the entire ART methodology and master it before you will ever be successful with the ART Trading Software. We never know in advance who will have the ability to be successful and who will not. So, we cannot guarantee that you will be successful! But you will never know until you try! Furthermore, please note that all our sales are final with NO refunds for ANY REASON! This means if you buy the ART Trading Software and do not like it, there are NO refunds. We want to make this perfectly clear so that you understand this before you buy. If you do not agree with or like our policy then please move on.

ART, Applied Reality Trading, TradersCoach. com, Pyramid Trading Point, and The Long & Short Of It are all registered trademarks of TradersCoach. com, Inc.

Copying and or electronic transmission of this document without the written consent of TradersCoach. com is a violation of international copyright law.

Any reproduction or retransmission of the contents of this website is prohibited without the prior written consent of TradersCoach. com. The host server for the website is located in the U. S.A.

If You Need Help Now, Try Our Online Live Help Service:

Thread: Generating a Mechanical Trading System

Generating a Mechanical Trading System

Mechanical trading has become increasingly popular among forex traders as the ability to trade forex online electronically has blossomed in recent years along with the advent of online currency brokers.

The computer code used to implement a typical mechanical forex trading system will be based on the sort of market analysis and decision making process that the best currency traders go through when considering taking a position.

About Mechanical Trading

The essence of mechanical or algorithmic trading, as it is sometimes known, involves programming a computer to first look for signals that would ordinarily indicate a significant future move in a particular direction and to then act accordingly by executing an appropriate transaction in the market.

Furthermore, the majority of mechanical trading systems are based on technical analysis of some sort, which usually includes the generation of objective and relatively reliable technical trade signals like moving average crossovers, for example.

Basically, in true mechanical trading, the entire trade decision and execution process is fully automated and occurs without actual trader involvement. Some traders prefer to retain some discretion by having their market monitoring systems generate a trade suggestion that they can then choose to act on. This is often called trade signal generation and falls just short of an actual mechanical trading system.

Implementing a Mechanical Trading System

The first stage in putting together a successful mechanical trading system is to come up with a forex trading strategy that works consistently to generate trading profits. Most commercially promoted automated trading systems incorporate complex technical analysis based algorithms and money management principles, although you can choose a relatively simple trade decision process to implement initially.

You will then need to choose a trading platform and learn a suitable programming language to actually program your new system yourself. Alternatively, you can hire an experienced programmer to do this for you, although you might then risk exposing your proprietary system to another party. Also, changes are harder and more costly to make if you cannot do them yourself.

You will then need to choose a trading platform and learn a suitable programming language to actually program your new system yourself. Alternatively, you can hire an experienced programmer to do this for you, although you might then risk exposing your proprietary system to another party. Also, changes are harder and more costly to make if you cannot do them yourself.

Testing a Mechanical Trading System

Once you have put together and automated a currency trading strategy that you think will work well, you can back-test it over historical exchange rate data in a variety of market conditions in order to see how the trading system would have performed in the past.

Of course optimizing past performance does not always assure future success with a trading system, but this sort of historical analysis can at least give you a sense of what to expect with the system in terms of its average performance and drawdown risk when it is placed into a live trading environment.

The next step in testing a new mechanical trading system is to open a demo account with an online forex broker that you are considering using that supports the system you have written the algorithm for. Once you are comfortable with the demo account results of your mechanical system, you can then fund the account and set the system running.

Passion TF

The Passion TF system is a Mechanical Day Trading system that daytrades the Russell 2000 futures contract. The system trades between the hours of 8:30 AM and 3:00 PM Central Standard Time. It is very similar to the Passion ES system as It holds no overnight positions and does not scale into or out of trades. Once a trade is made, the system calculates a stop-loss and a target price based on a proprietary algorithm. The system always trades with a stop loss. The system exits a trade either because a stop price was hit, a target price was reached, a reversal was triggered and the system reversed positions, or an exit due to the end of the trading day.

Like the Passion ES system, the Passion TF system attempts to identify the start of a potential trend using a proprietary algorithm. Rigorous walk-forward testing has been applied to this system to identify appropriate parameters for the algorithm to use. The system is updated on a scheduled basis to attempt to synchronize with the market at hand.

The Passion TF system may trade several times a day. It may also not trade at all on a given day depending on whether the algorithm calculates a detectable trend. Although the Passion ES and Passion TF systems are similar in design, trades made by the system are made independent of one another. The systems may or may not have open positions at the same time and even so, the open position of one system may not match the open position of the other (i. e. one system could be short the other long, etc.)

U. S. Government Required Disclaimer - Commodity Futures Trading Commission states: Futures and Options trading has large potential rewards, but also large potential risk. Debe ser consciente de los riesgos y estar dispuesto a aceptarlos para invertir en los mercados de futuros y opciones. No negocie con dinero que no puede permitirse perder. Esto no es ni una solicitud ni una oferta para comprar / vender futuros, acciones u opciones sobre el mismo. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. El desempeño pasado de cualquier sistema o metodología comercial no es necesariamente indicativo de resultados futuros.

CFTC REGLA 4.41 - LOS RESULTADOS DE RENDIMIENTO HIPOTÉTICOS O SIMULADOS TIENEN CIERTAS LIMITACIONES. DESCONOCIDO UN REGISTRO DE RENDIMIENTO REAL, LOS RESULTADOS SIMULADOS NO REPRESENTAN COMERCIO REAL. TAMBIÉN, DADO QUE LOS COMERCIOS NO HAN SIDO EJECUTADOS, LOS RESULTADOS PUEDEN TENERSE COMPARTIDOS POR EL IMPACTO, EN CASO DE, DE CIERTOS FACTORES DE MERCADO, COMO LA FALTA DE LIQUIDEZ. LOS PROGRAMAS DE COMERCIO SIMULADOS EN GENERAL ESTÁN SUJETOS AL FACTOR DE QUE SEAN DISEÑADOS CON EL BENEFICIO DE HINDSIGHT. NO SE HACE NINGUNA REPRESENTACIÓN QUE CUALQUIER CUENTA TENDRÁ O ES POSIBLE PARA LOGRAR GANANCIAS O PÉRDIDAS SIMILARES A LOS MOSTRADOS.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE. SI USTED DECIDE INVERSAR DINERO REAL, TODAS LAS DECISIONES COMERCIALES DEBEN SER SU PROPIO. Copyright Corestar Technlogies, Inc.

Passion TF

An Exploration of the Mechanical Trading Lesson on U. S. Steel

By Timothy Walker

STATEMENT OF INTENT

The intent of this course is to present a detailed analysis of the entire sequence of 322 trades from 1915-1931 presented in WD Gann’s US Steel trading course. The specifics of these trades and of Gann’s Mechanical Method provide profound insights into the mind of one of the greatest traders of history. With detailed charts accompanying the analysis, the reader will discover great insights in reading market action and learn to understand the specific rules and trigers that Gann used to manage an account through every phase of market activity.

This course demonstrates how Gann could turn a $3000 account into over $6 million in 15 years. But it also shows extraordinary returns in shorter trading periods. For instance, from his initial investment of $3000 in February 1915 until October 21 of the same year, Gann produced a 1,337% return increasing the account to $40,123. This course will teach you how to do the same, by trading like W. D. Gann!

WD Gann is one of the most prolific traders and authors in the history of Wall Street. In a career that spanned over 50 years from 1902 to 1955 he wrote numerous courses and books, gave personal instruction on his methods, published forecasts and managed subscription services for investors.

Today many traders have heard of his name and many have read at least one of his books. And yet there is very little written material which actually goes through what he wrote. Most modern writers have taken a technique or two and woven it in with their own methods. But for those who wish to study Gann’s original writings there is not much to go on. Very few charts are available to cover the examples he gave, making many of his statements obscure at best.

After searching for some years for a book that addressed his courses, I determined that if I wanted to read one I would have to write it myself. But where to start? I picked one of Gann’s ‘beginner’ lessons, called Method for Trading the Overnight Chart . La razón era simple. When new students came to Gann for instruction, he first sold them his swing trading system. Only when a person had learned how to trade would he teach them how to forecast.

This lesson, which is today published as part of the Stock Market Course . consists of 9 Rules followed by 15 years of trading examples on US Steel. At the time US Steel was the largest company in the world and therefore an obvious candidate to demonstrate the method. But I wondered why Gann covered a period of over 15 years in his examples. Surely a few months would have been sufficient to illustrate his mechanical rules.

The first obstacle I encounterd was that neither the data nor the charts for this period of US Steel were available from any source I could find. I eventually realzied that I would have to copy the data off of microfilm from old newspapers in order to be able to make the needed charts. It took me about half an hour to copy every month of data, so for the 16 years of the lesson that took about 100 hours. In actual fact I extracted 36 years’ worth, from 1901 to the end of 1936, so the total was well over 200 hours. I also hand-charted a daily and monthly chart, as originally I didn’t have the ability to put the data into software, and that took about the same amount of time again.

After this slow process of acquiring the daily price data from old newspaper records and loading it into software, I was finally in a position to begin my analysis. It was only when I sat down with the charts that I discovered a wealth of hidden information that I hadn’t expected. I kept asking. ‘Why did he do that here?’ and I saw that, while the system is described as mechanical, the application gives many subtle indications of how Gann would read a price chart. I also understood that the reason he covered so many years of trading was to demonstrate the performance of his system in all possible market conditions in order to better prove its value.

Throughout the series of trades Gann takes the student on a progressive journey of difficulty. In the earlier trades he gives more explanation and allows more latitude with placement of stops and reversals of position. As time progresses he adds more tools into the Matrix and appears to be leading the reader along a path towards the way he would trade. Even though he states that he has rules that he is not applying, it is possible to get a sense of how he was thinking at times, and to see hints of where he might have had other rules to use. But even without these further rules, we can get a fantastic insight into the mind of a master trader.

The last part of the lesson, covering the Crash of 1929 and the first part of the Great Depression, occurred during the time he was writing it, and his trades would have reflected what he was seeing in the market at the time. The original text, however, is almost impossibly dry. In 1930 it was not possible to produce daily charts covering 15 years of market action, and so instead he had to list the highs and lows in the text so that students could construct a basic chart as they read through. But even here much information is lost, as you can’t see the actual bars.

This brings me to the actual book itself. I have divided up Gann’s text into the individual trades, of which there are over 300, spanning 16 years from 1915 to 1931, all in the one stock, US Steel. I have gone through these trades one at a time, offering a commentary and observations on what Gann is doing – how he enters a trade, how he manages the stops, when and why he pyramids, and suggestions on factors that he may have been acting upon.

These trades are broken up arbitrarily into different phases of the market – bull markets, bear markets, corrections and so on. This enables us to see the moves in the bigger context. From time to time I also give summaries of what is happening and the lessons that can be learned. The commentary is accompanied by about 90 charts which show every trade in detail.

In addition to the charts in the text, enlarged copies of each chart are included in a separate volume so that you don’t have to turn pages back and forth to follow what is happening. They are large enough that you can make your own notes on the charts. I have also included a copy of Gann’s original lesson, so that this will be a one-stop purchase, and have provided a tabulation of Gann’s trades and profits tracking the development of his account from the starting capital of $3000 to the final total 300 trades later of over 6 million dollars!

This is really a complete course in itself. It presents an entire trading system with a complete explanation by Gann. It is about as close as we can get to sitting in a classroom with him and watching him trade. I believe that it is through lessons like this one that we come closest to seeing how he actually thought when he was trading. Your job is to internalize this methodology and integrate it into your own trading strategy.

GANN’S MECHANICAL SYSTEM APPLIED TO THE CURRENT S&P 500

(Excerpt from Spring 2014 Trader’s World Article) As an example of how his method would apply today, let us consider a chart of the e-mini S&P 500 futures contract and demonstrate exactly what the trades from Gann’s Mechanical Method would be in the current market.

Gann wrote his lesson for stocks trading around 50-200, so we have to make some assumptions to adjust for a stock index trading at 1800. You would have to test these to work out the optimum numbers, but for this exercise, I am going to place stops 5 points above swing tops or below swing bottoms. Gann’s pyramiding rule was to add half the position size every so many points. I will use 50 points here. We will take an initial trade size of 2 contracts, based on Gann’s risk management rules of only risking 10% of one’s capital on any one trade, which would require a capital of $50,000.

We will assume that we have been trading the S&P for some time and simply pick up the trades from the beginning of 2014. As the New Year dawned, we would be long at around 1788 from 18 December. This trade was stopped out around 1812 on 13 January. Profit 24 points x 2 contracts = 48 points. As the system requires us to reverse positions we will be short 2 contracts at 1812 with the new stop placed above the 31 December high.

The market continued sideways for several days more. Gann was careful in such situations not to bring stops too close, so he would have left them above the 31 December high. An additional contract was sold at 1762 on 29 January.

On 3 February a special rule was triggered. Gann didn’t even mention this rule at the beginning of his lesson and it is only in the trade examples that it becomes apparent. We would exit all short contracts at 1736 (total profit 178 points) and go long 2 contracts at that price.

Although the market went a fraction lower on 5 February, Gann’s rule for stops would have kept the long trade intact, and we are placed to take the full benefit of the strong rally that followed. An extra contract is bought at 1786 and another again at 1836. All 4 contracts were stopped out at 1860 on 12 March. Total profit 346 points.

Total profit on 3 trades is 572 points or $28,600. Thus the return on our $50,000 capital over the first 3 months of the year, without deductions for commissions, was 57%. But don’t forget that we are only trading with 10% of our capital in this example, so the returns on the actual “at risk” investment are much higher. If we consider that our initial investment was approximately $5,000, and we generated a $28,000 return, we actually produced 570% on our initial investment in only 3 months! Not bad for a relatively simple mechanical system…

Thank you for another update on the fabulous book - I love it. If my house was on fire the book would be my first to be saved (after the wife and kids). PC (NSW)

Walking through Gann's US Steel trades, using your book as a guide, has taught me more about how Gann actually traded than any of my own attempts to learn by reading Gann's own books over several years. DM (VIC)

I have certainly had some better success with my trading since implementing the methodology that you have made very clear in your book. While I have still not completed the testing of all the trades, I have gone to great depth to fully understand everything I have done so far, and this effort has been reflected in my account balance. Thank you so much for being the conduit to unlocking some of Gann’s secrets for me. EL (WA)

I am finding it an amazing course really, more so than a book as such. GS (NSW)

I'll sum up my support in one word. Awesome…Your book and the charts you provide make it soooo much easier to follow and read. I do hope the next book you are working on is the lesson from the New Stock Trend Detector. GJ (NSW)

Will keep reading the book till I drop. Again, thanks for taking the time to write all this, it will be very resourceful and great additional knowledge for any traders in the world. HW (Indonesia)

I've had an epiphany whilst studying US Steel Lesson and now I'm bursting with energy and enthusiasm! I'm not even half way through - at chapter 10. I can't begin to imagine what other ideas will continue to flow up on studying the remainder of the lesson, and then second reading, then third. MP (QLD)

I am really enjoying the book. It's so good to be able to get this close to Gann's thinking and his trading style. All thanks to your efforts in presenting the material in a more understandable and fluid format. AM (NSW)

I am putting your (Gann's) teachings to good use, I have been applying the principles to ANZ for quite some time and at this stage I'm delighted, especially that I'm so time poor. RT (NSW)

Finally, a trading guide on Gann's methods containing detailed instructional charts allowing the reader to follow and observe what Gann observed as he traded. SM (VIC)

I love the book; you really did do a superb job. You take us through it as if it is happening right now. It’s more than I ever imagined. I’m going through it slowly and I’m loving it more and more. Gracias. MA (WA)

The author came across the name W. D. Gann about 10 years ago and has been studying his writings and trading since 2006. A background in law and communication helped with the analytical task of pulling Gann’s work apart piece by piece. From 2007 to 2013 he worked with Safety in the Market . a trading education company teaching Gann analysis in Australia, first as a Trading Tutor helping other students and then as a seminar presenter.

Owners of this course will also be given access to an Online Discussion Forum, where they can ask questions from the author, and discuss trades and ideas with other owners of the course. This give the opportunity for the idea to be furhter developed and studied amongst the group, and for new insights or discoveries to be shared between the community of readers.

CONTENTS & SAMPLE SECTIONS

The following link presents several sample sections from the actual course, including the Contents, Prefact, and Epilogue. For a sense of the layout and style as well as for some more detail about the course, just follow this link:

PRICE & PEDIDO

How to Trade Like W. D. Gann

An Exploration of the Mechanical Trading Lesson on U. S. Steel

Volume 1 – Text, Volume 2 – Supplementary Material & gráficos

By Timothy Walker black suede hardcover. 2 VOLUMES Vol. 1 216 pages, Vol. 2 136 pages. cat#555 Retail Price $595.00

DISCLAIMER: The Institute of Cosmological Economics & Sacred Science Institute are economic research and educational companies. The information contained herein is for general education purposes and is not intended as specific advice or recommendations to any person or entity. Any reference to a transaction, trade, position, holding, security, market, or level is purely meant to educate readers about possible risks and opportunities in the marketplace and are not meant to imply that any person or entity should take any action whatsoever without first evaluating such action(s) in light of their own situation either on their own or through a professional advisor. The methods presented are not solicitations of any order to buy or sell. If a person or entity does not believe they are qualified to make such decisions, they should seek professional advice. The prices listed are for reference only and are in no way intended to represent an actual trade, entry price or exit price conducted by the Institute of Cosmological Economics, portfolios managed by any entity affiliated with the Institute of Cosmological Economics, or any principal or employee of the Institute of Cosmological Economics, or any of its affiliates. This information is not a substitute for professional advice of any nature, including tax, legal, and financial. While we believe the information contained herein to be accurate, all numbers should be verified by the reader through independent sources. No se debe asumir que los métodos, técnicas o indicadores presentados en estos productos serán rentables o que no darán lugar a pérdidas. There is no assurance that the strategies and methods presented in this book will be successful for you. Los resultados pasados ​​no son necesariamente indicativos del desempeño futuro. Trading securities, options, futures, or any other security involves risk and can result in the immediate and substantial loss of the capital invested. The author, publisher, distributors and all affiliates assume no responsibility for your trading or investment results, and will not be liable for any loss, damage or liability directly or indirectly caused by the usage of this material. There is considerable risk of loss in Futures, Stock and Options trading. You should only use risk capital in all such endeavors. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Every reader/recipient is responsible for his or her own investment decisions. The information contained in this report or in any update does not necessarily mean that the Institute of Cosmological Economics, or any portfolio managed by any affiliates of the Institute of Cosmological Economics, or that any employees of the Institute of Cosmological Economics, or its affiliates holds the positions or has conducted the actual trade. At various times the Institute of Cosmological Economics, portfolios managed by affiliates of the Institute of Cosmological Economics, or any other principal or employee of the Institute of Cosmological Economics may own, buy or sell the securities discussed for the purposes of investment or trading.

All Contents © Sacred Science Institute

I just did a podcast with Matt Frailey. In it we discuss a mechanical trading system that he has developed and a new type of chart we are discovering - Japanese Renko charts. In the interview we discuss an article he wrote about his trading system. I think you'll find both the interview and his article full of solid educational material.

For those interested Matt has a special free trial membership package for his website available at this link.

Now that the Stock Market Mastery Course is complete I plan on publishing podcasts on a more regular weekly basis.

We usually delay posting the podcasts on the website until at least a day later and sometimes even longer. You can listen to future podcasts as soon as they are recorded, instead of later when I post them on the website, by subscribing directly to the podcast's RSS feed by clicking here .

An RSS subscription allows you to receive the podcast through your Ipod or RSS feed reader. I'd like to encourage you to subscribe to the podcast because the more subscriptions to the RSS feed we have, the higher the podcast will be ranked in feed directories, thereby attracting more listeners to the program. We pay the costs for this podcast which keeps it free for you, so your subscription to the podcast would be a great way to help us out. And if you use podcast directories yourself, please don't hesitate to recommend us.

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