Do Or Die

Hi, I don't know about wolfe patterns. Could you also mark expected targets/bias?

That guy showed me results from rolling backtests. Rolling backtests are a good way to validate a system. What you actually do is use 'rolling window' of historical data to backtest your strategy. If you are statistically inclined, see here: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=9&ved=0CGMQFjAI&url=http%3A%2F%2Fwww.springer.com%2Fcda%2Fcontent%2Fdocument%2Fcda_downloaddocument%2F9780387279657-c1.pdf%3FSGWID%3D0-0-45-169676-p59330694&ei=VUa5TvD3Dor5rQfu8NS3Bg&usg=AFQjCNHuLVAqKa47aNk-uZpjcwfXYqUd2w&sig2=p_wn8IGABohigtxEnswenQ I think he is pretty sharp in machine learning, he won some contests in college.

Rafaba, It isn't just about a matching algorithm. From your post it sounds like you want to create an exchange from scratch. Refer to the book: Trading and Exchanges, Market Microstructure for Practitioners by prof Larry. The book will give you a lot of ideas as well as insight.

For the third step, I will recommending skimming through these books to pick up information relevant to your strategy: New Trading Systems and Methods by Perry J. Kaufman Trading Systems- A new approach to system development by Emilio Tomasini Evaluation and Optimization of Trading Strategies by Robert Pardo

Hi, My trading is yet mostly discretionary. I have been trying to automate my strategies since several years. I tried a lot of 'system design' books and tools but was never really able to code a satisfactory system. Recently I had success in automating one of my intraday strategies and it is trading live profitably. It has shifted my perception that system design may not necessarily be a complicated process. On the higher level it can be broken down into three steps. Step 1: Start with a set of premise A premise is just an observation about market behavior, for example: http://www.traderslaboratory.com/forums/technical-analysis/10620-technical-trading-axioms-candidates-approval.html It can be very hard to discover a premise through backtesting. People who have been trading long enough will have set of premise as a 'just know' thing, without requiring any proof whatsoever. Any profitable trader is likely to have more than 10 premise. There is no recipe for discovering a profitable premise, however, a lot of real time observations and interaction with experienced traders can help. Step 2: Take your premise to market This is the step in which backtesting will be useful. - Turn your (set of) premise into an indicator/model. Define it mathematically. - Test exception market conditions in which the premise will not work. - Frame entry and exit rules around the (set of) premise. - Be careful not to rely on backtest results on data history where there have been regime shifts Step 3: Create a Trading System with the strategy - Analyze performance metrics such as Losers vs Winners, Exposure %, Drawdowns.. - Validate for implementation errors. This will be a tedious process to manually go through a lot of trades to assure that the system is trading as expected. - Modify, but do not optimize. Improve your strategy by finding more stable parameters, scaling in/out, positions sizing, diversifying. Improving a system is always an on-going process. - Perform sensitivity analysis with the set of conditions. For example, a change in exit strategy by scaling out may generate totally different set of results. Play around with system code and parameters but 'respect' the original set of premise; finding a new system by hit and trial will likely not as robust as the 'original' code. - Validate again using your common sense and trading acumen. For example, a particular modification which significantly reduces the no. of losing trades while keeping the Avg Proft/ Avg Loss the same may not be robust. I know a guy who was doing a PhD in quantitative finance. He developed a system using neural nets and support vector machines (SVM). What the program actually did was backtest all possible combinations of over a 100 technical indicators, again with all possible parameters and trade using the ones which are most stable. He showed me rolling backtests results and they looked very impressive. However, when he executed the system live it kept losing consistently. I do not have the technical know-how to comment on what was lacking in his system, but I did not like that he had no previous experience in trading, and hence no observations about market functioning prior to trading system development. Good luck!

Commonsense says IF there is money lying on the table, pick it up. IF you have (or can research) a method which makes significant money after trading costs, why would you not trade? And IF you don't have such method, why would you trade?

Hahaha... Verbal Diarrhea influence of reading another chat board where people were giving their opinions. To get back to the stock, its RS has peaked out.

AAPL bounced back from 360s hysterically upto 420... AAPL's rally on daily charts is over. Until there is significant rally (100+ points) in SnP itself, it will not see new highs.

I totally agree - there are no absolutes - generalizations do not work On similar lines beginners tend to typecast their trading as either trend following or mean-reverting but I have never seen a good trader who will lean to any one side. For example a good trend following trader will add to positions on internal retracements within that trend.

Your First Strategy The NT help manual basic strategy example is too rudimentary (sigh) so you can follow this example. A basic strategy may have following components (long side): -Conditions for Buy EMA crossover AND RSI is above 40 level. -Initial stop loss Low of the bar on which trade is entered -Conditions for exit EMA Crossover Launch the Strategy Wizard with Tools-> New NinjaScript-> Strategy Set the important global variables which usually will be parameters for your indicators. Click Next button to set the conditions for long. Here on left side select an indicator (RSI), from right side chose its alert criteria. Once you have set up conditions for long, in the lower part chose 'action', which will be 'Exit on Long'. Remember to give this action a name, you can use anything (say BUY). Once you're done, you can copy the crossover condition for convenience to Set2 which you will use for Sell. Here you just need to edit the previous condition with CrossBelow instead of CrossAbove. Similarly you can also set conditions for Short and Cover. When you're done, click Next and strategy will be done on a higher level. Click 'Unlock Code' for editing. Once you can see the code, save and compile for satisfaction. This has been generated by strategy wizard which can now be customized for stoploss etc. In the code you see some sections 'regions' when you expand using + sign. Most of the work has already been done by the strategy wizard. The first region to deal with is the Variables, where we need to initialize for stop. Below the comments line which says user-defined variables, add private double initialStopPrice = 0; The next block, Initialize(), runs part of code which is executed only once with the script. Here add the following lines: EntryHandling = EntryHandling.UniqueEntries; EntriesPerDirection = 1; ExitOnClose = true; As you can guess from their names, it is just for smoother functioning. The next block of code is tested with every bar, hence the name OnBarUpdate() Add if (Position.MarketPosition == MarketPosition.Flat) initialStopPrice = 0; This makes sure that if the position is flat, the stop is reeset to zero. Then, if (CrossAbove(EMA(MAFAST), EMA(MASLOW), 1) && RSI(RSIPER, 3)[0] > 40) { EnterLong(DefaultQuantity, "BUY"); modify to if (CrossAbove(EMA(MAFAST), EMA(MASLOW), 1) && RSI(RSIPER, 3)[0] > 40) { EnterLong(DefaultQuantity, "BUY"); initialStopPrice = Low[1]-1*TickSize; //Captures the Initial Stop upon the Entry SetStopLoss("BUY", CalculationMode.Price, initialStopPrice, false); //Place the Stop on Entry } With this the strategy will be ready for back testing. I will play around more and update tomorrow.

Value investing is all about the asset itself. Active trading is about direct forces of supply/demand which are effective in short-term. They are complimentary to each other, why compare them at all.

The simple answer is limit losses by placing stoploss orders. For the long answer, it involves managing the Profit/Loss ratio, not just the losses. There are two layers of trade management- 1. Trailing stops and targets 2. Scaling in and out Whether to use a trialing stop OR a target level OR a combination of both depends upon the type of strategy. Its good to use a trailing stop when your no. of winning trades is low (typical of trend following systems); vice-versa for using targets. A combination of using both a trailing stop and profit target is usually more profitable. This does not have to be complicated. An example is have a profit target say 100 points and use tight trailing stop loss when the market reaches near your target (+80 points). Another example is use a trailing stop but exit if there is spike in your favor (say more than x point move in last 5 bars) Scaling in & out depends on the trading style, an example is the combination approach here: http://www.traderslaboratory.com/forums/psychology/10512-sin-predicting-anticipatory-trading.html Also, adding on a losing trade may always not be a bad idea, given that your second add-in increases the expectancy of trade. If you hold for more than 80 bars (say) on average continuity trades (adding at cheaper prices) can smoothen the equity curve. You can also set a trailing stop for half your position and a profit target for other half. IF you want the important numbers- exactly how close you should trail your stops or where to set stops- there is no easy way other than extensive backtesting.

WFO is available in Amibroker since early 2008: Walk-forward testing and optimization

Which algo does Tradestation uses for optimization? Amibroker has a WFO engine since quite some time. It's CMAE engine is blazing fast: Amibroker- How to optimize trading system I checked a year back and the same strategy took 30-40% less time in Amibroker for optimization when compare with tradestation. Would also like to hear how fast is Tradestation's optimization algo.

Amibroker is my favorite exploration tools. But my trade management style involves custom scaling as well as custom stops and it can be done far more easier in NT. For explorations (say validating a pattern, premise or rule through simple backtest) I will stick to Ami. For system backtesting & automation I'm looking forward to move to NT. I have talked to a lot 'techie' trader friends and even explored a bit of R (many hedge funds using it), but NT looks better option.

So I am moving (or say trying to move) to NT- it will be good to maintain a 'log' of observations as a beginner. This will save others time who want to get started and I may also get insights from other users. After installation you can possibly get charts within couple of minutes. Here’s how to: Setting Up Data Connection NT supports some data vendors. To check if your data service is supported see here: http://www.ninjatrader.com/LP/dataProviders/dataProviders.html If you can find your provider, good, click on File->Connect ->(select). If you cannot find your provider in this menu, click on Tools->Account Connections->Add->(follow instructions). If NT does not support your data vendor, an alternate way to integrate is using a DDE connection: http://volumedigger.com/NinjaTrader/Miscellaneous/NinjaTrader_DDE.aspx Attention Beginners: You can get started with FREE Daily data from google of yahoo finance. Just follow the steps mentioned above to add data connection from the Tools menu. After setting up a data connection you need to click on File->Connect->(select) and you should see a green notification in bottom left corner. For FREE intraday data, I think they provide a 15 day trial for futures from Kinetic. You can also sign up for a demo account with one of their partner brokers to feed delayed intraday data. Lastly, you can also feed live data from google or yahoo via a excel spreadsheet (DDE Connection). Importing Data: Importing your existing database may take a little time because NT requires custom format. See here: http://www.ninjatrader.com/support/helpGuides/nt7/index.html?importing.htm Setting Up Watchlists: Use Instrument Manager from Tools menu; on the left side you will see some predefined lists. You can add your custom watchlist (say Moving Stocks) by clicking the New button. For adding instruments to a watchlist, select it, then select the instrument from right side, and click ‘<’ button. You may like a quote sheet for your watchlist; to add it click File->New->Market Analyzer then add the instrument list by right clicking on a row. Your First Chart Once done with data, click on File->New->Chart-> and select a ticker by double clicking it. On the right side of window you can change chart settings, though the default ones are pretty good. Once you load the default chart (which is candlestick) you may like to add volumes. To add volumes, click on the small Indicator button and select VOL. For convenience, you may like to link the chart with your watchlist in Market Analyzer by using the ‘L’ button towards top right. This will help you to quickly browse through charts by hitting enter in the market analyzer ticker list. Getting Started with Ninjascript (C#) To see how a NT code looks like go to File->Tools-> Edit Ninjascript->(select a familiar indicator) This will look intimidating at first, but NT makes the scripting process easier through its interface. You may like to look at basic programming and scripting concepts: http://www.ninjatrader.com/support/helpGuides/nt7/index.html?educational_resources.htm So far so good

I'm thinking about switching from Amibroker to Ninjatrader. Ami is a very good exploration tool, but when it comes to autotrading, it is no match for NT. The primary differences I see are: - NT has a extensive COM library and easier to integrate with other applications by harnessing the potential of .NET - NT offers much easier trade management; using custom stops and scaling techniques in AMI can be really hard - In Ami it is very hard to incorporate machine learning based strategies - NT has more powerful backtesting engine - AMI is no match with NT for handling level 2 data any thoughts?

Can we have thread prefixes in the Indicators section- Trading Indicators - Traders Laboratory Forums Prefixes like EL/EA/NT/AB can help identify which platform a particular indicator belongs to.

Amibroker is cheap and great exploration tool- its scripting language is very easy. Ninjatrader is free and great automated trading tool, and comes with extensive COM libraries. Both have lot of support groups on internet.

I'll rate it on 2nd, the first one being Friends.

Will be reading regularly... goodluck!

http://en.wikipedia.org/wiki/Breaking_Bad I watch TV only seldom but was totally enthralled by this series when a friend gifted DVD of past episodes. I'll recommend it as a 'must watch' for anyone who at any point of time in his life was tempted/curious about drugs. Season 1 is particularly great. In recent last two episodes it has become very interesting all of a sudden. Anyone else who watches regularly?

You can also argue on similar lines- "would you rather make $$$$ from 100 sales or from two sales" on the number of trades a system makes (everything else remaining same.) Your take, I'm over with this post

For now I'm going with Tam's idea... brought the treadmill close enough to desk. Just by having it close gives motivation to take regular breaks, I'll wait for a month to see how it works.