equtrader

Good suggestion. It is important to always be alert to prevent failure by constantly analyzing and upgrading systems. It is a horrible mistake to assume that a system should not be changed after it is deployed. This is another good one by Harris where he argues that certain types of exits, like trailing stops, may produce curve-fitted systems: Trailing Stops and Curve-Fitting in Trading System Development | Price Action Lab Blog

Everything you do can be considered optimization one way or the other. The important question is whether the optimization process results in different system dynamics when it varies the parameters. Different dynamics can be assessed by different trade distributions. In that case the system is data-mining and it is subject to data-mining bias, i.e. the uncovering of spurious hypotheses. So this should be a criterion. If this criterion holds then you should take the final system and see if it performs well in several unrelated markets. If it does not, you have wasted you time and possibly money. The following posts in price action blog provide some good initial background but I think one must go even further than that: Curve-fitting and Optimization | Price Action Lab Blog Fooled by Randomness Through Selection Bias | Price Action Lab Blog

I know of plenty. Any system you design with a high win rate that is curve-fitted or a statistical fluke may serve as a good candidate for a mean reversion strategy. Take any tool that designs trading systems, for example Price Action Lab. Set parameters so that the systems it finds have high win rate but low statistical significance. The win rate of such systems will have to drop towards 50%. Take the opposite side. Risky but magnificent.

Probably less than 0.1%. Of that 0.1%, IMO less than 10% know how to code properly. As a result the platform is just b&w for most.

IMO money management methods do not constitute an edge but only part of an edge. One fundamental problem with strategies is that they can be selections from a random process: http://www.traderslaboratory.com/forums/technical-analysis/12081-close-bar-meaningless-22.html#post154053 How to deal with that?

I think everyone who is system trading or planning to develop systems should read this blog and try the simulation in the link that is provided in it: Fooled by Randomness Through Selection Bias | Price Action Lab Blog When I tried it I screamed "Noooooooo...":)

Now means: bid price/ask price, bid size/ask size, etc. You can't trade based on now only IMO unless you are a market maker and you look only at bid/ask. Anyaway, any method that relies on the analysis of price, volume and open interest is part of technical analysis IMO.

Pattern identification is extremely hard and algorithms that do that efficiently are at the core of some commercial systems. In general, TA patterns are difficult to identify because of the imbedded randomness in the main pattern. Thomas Bulkowski has developed a program that does this and he offers it for free. You may want to contact him for general guidelines if he is available: http://thepatternsite.com/patternz.html Another guy who has developed an identification algorithm but for price patterns is Michael Harris. Although his program doesn't do what you are looking for his ideas have broader application: The Most Advanced Tool for Analyzing Price Action and Discovering Trading Systems I have seen some other programs but their identification ability is very poor. Check this website for an example of a screener where you can include TA patterns and indicators. Maybe you can contact them and get some direction: Stock Screener - Overview To summarize, what you are looking for is not very easy. A professional programmer of trading systems may charge up to $5,000 for the code. I paid much more for much simpler things 10 years ago.

The cult of technical analysis and day trading seems to grow and grow. The Web is crawling with technical analysis (TA). Tax changes have created a boom in spread betting, and hundreds of courses have sprung up to teach traders to read short term 'technical' chart set ups. All of this - coupled with the ongoing use of the terminology by market commentators and practitioners - may make you wonder whether technical trading rules are profitable and worth using in your own investing? Given its popularity, is there something to all this TA, basically? Rest at: http://www.stockopedia.co.uk/content/technical-analysis-debunked-5-reasons-why-we-dont-believe-in-charting-63806/

Ask some to produce daily charts of both and tell him to remove all labels, prices, etc. Then take a arbitrary period of six months from each chart and give it to you. Would you be able to assign the right chart to the right product?

Good try...they will all jump in to prove themselves;)

Xiao si, are you talking about EOD or intraday systems? I know that most use 30% of the data for development and the remaining 30% for out of sample testing. Some argue that the in sample should be long enough to include a variety of market conditions. I agree. At least 10 years for EOD and 5 years for intraday is what I use. Other do not agree. This is trading. As far as the roadmap you outlined, in my opinion it is a time consumig and inefficient process. It can be compared to trying to divide decimal numbers by hand instead of using a calculator. More and more traders turn to machine generated strategies. If you like indicators and evolutionary algorithms then Adaptrade is a popular program. If you like price patterns only then Price Action Lab is another popular program. The use of such programs automates development and testing with significant advantages. Good luck to you!

+ Also, is this 32 trades, seconds, minutes, years, etc? The first thing you learn in high school is to label the axes.

Maybe you should say that it is meaningless to you. But many famous traders have used it and believe in it. So do we take your word for it or that of some famous traders like LBR, L. Williams, Michael Harris and so many others? This is well-documented evidence by one of the above famous price action traders that S&P 500 patterns included in a book he published in 1999 worked well for a period of 10 years after their public disclosure.

Amibroker EOD is only $199 and it can download free data. You can also do portfolio level backtesting and walk-forward testing. Very powerful, maybe a little harder to learn than EL but you do not need an account to get it.

I agree with this too.

Yes, the catch is that this study relied on data in a period that TA worked much better and candlestick formations were not fully exploited. I have given links to more recent papers that find no edge in using candlesticks http://www.traderslaboratory.com/forums/candlestick-corner/3492-trading-pa-no-indicators-9.html#post121101 As I have said before there are hundreds, even thousands, of profitable price patterns that do not resemble to any known candlestick formations and they may provide some edge. An example is the price pattern in this blog SPY Found a Crutch and is Thinking of Making a Move | Price Action Lab Blog

Candlesticks= hype of the last decade. Market Timing with Candlestick Technical Analysis by Ben Marshall, Martin Young, Lawrence (Larry) Rose :: SSRN

Win rate less than 50% is a sure way to total ruin regardless of your money management. Haven't you heard that?

Amibroker is a great tool. Why even compare to other bulky, overloaded expensive programs?

Walk-forward analysis is good but the problem is finding an edge. It's like someone offering you a fancy car audio system as a present but you have no car. I would like TS to incorporate some data mining capability (not NNs or anything else along that line that fits to the data). The concept behind Price Action Lab for example would be a good addition and walk-forward testing can complement that to screen patterns for robust behavior. What good is it giving a fancy tool to people when their main problem is that they have hard time finding any good strategies manually?

Ami has portfolio level backtesting Ami has very easy trade management For just backtesting I think Ami is better.

You don't need to buy any books to read about position sizing. There is around a lot of free material that is even better and more practica, without the hype. Some examples: Position Sizing http://www.priceactionlab.com/Literature/PositionSizing.pdf http://www.priceactionlab.com/Literature/Kelly.pdf

Possibly the condition entryprice+X points stop is not met because the market falls after your first buy and the order never executes. Is that maybe?

Just risk no more than 0.5% of your capital on each and every trade and be well capitalized to execete a trading system with positive expectancy and all this talk is not really necessary.