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Celticaces

Recommendation for Trading Systems for Use in My Thesis Paper

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Good evening,

 

I am in the process of developing my honors thesis paper and have decided on the topic of automated trading (aka system trading, algorithm trading, etc). While I have been actively involved in the discressionary side of trading for a few years now (stocks, options, futures and forex), I am relatively new to the system trading side.

 

I have found some simple systems out there in books/web sites (MACD cross, 3 moving average crosses, etc), but what I am really trying to do with this is to provide irrefutable evidence for those who believe system trading is a fools game that falls apart. For example, in Trading for a Living, Dr. Elder says black box trading is similar to letting a computer drive your car for you. He's not alone, there are many experienced traders that don't believe it is possible. Yet, I am convinced that given the right information, system trading can be consistently profitable over a long period of time with little to no supervision. And that's what I intend to prove.

 

Please let me know the best sources (books, websites, journals) out there for system trading. Some sites I have found are:

- Woodshedder on ibc

- bzb trader

- Marketsci blog

 

Also, if you have a system that you have backtested and found to be profitable, I humbly request that you share it. I know this can be a touchy subject for some people, but hopefully being credited as a part of a financial journal that proves the legitimacy of what they do will be something worthwhile.

 

Thanks and take care,

 

- Brian Leip

Edited by Soultrader
email removed

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just as something to think about re your thesis if you have not already done so....

- distinguish between day trading, and longer term position trading. Some things a re profitable but not scalable.

- a lot of money is made by some mechanical systems as its the portfolio approach that is required to be profitable.

- position sizing and portfolio analysis may be the key to these bigger systems.

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Art Collins wrote a book on trading systems "Beating the Financial Futures Market"

 

While the ideas in there are marginal in my opinion, the use of an 'indexed approach' is a powerful framework from which to launch, imo....

 

good luck

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You might look up John Hill (Future Truth) as his first book gives a number of simple but profitable systems that he says are the basis for most of the good systems he has tested.

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Maybe you should not forget this one:

 

Flip a coin, for long or short.

 

On the open of the next bar you enter depending on the coin.

 

If the next bar makes a close in your direction, stay in,

otherwise go out.

 

LL (short) or HH (long) on the next bar might be similar?!

 

 

Its not my idea, but it might be a good benchmark in comparison with any strategy.

 

Regards,

 

Hal.

 

 

P .S.: Well, and if its really your Thesis you ask for, just be careful,

you know, a Thesis should contain something new,

otherwise, ... :helloooo:

Edited by HAL9000
;-)

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Rule number one in black box trading: nobody shares a really successful black box system.

 

That said, I went down the same road as you regarding writing a master thesis on automated trading so I have a couple of quick comments on this in case you did already not consider it

 

- How do you intend to "prove" that systematic trading works? By proving the EMH is false? Does your potential inability to develop a profitable automated system proves that it is not possible?

 

- What happens if you actually manage to develop a highly profitable system (build on something which is not known to the masses). Will you publish it?

 

Anyway, this may have your interest: THE PENN-LEHMAN AUTOMATED TRADING PROJECT: 2004-05

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In terms of an idea to explore --- I would suggest defining and studying days where there is an 'imablance' in the pre-market (globex) session. The thesis could be that when the 24-hour market is imbalanced, it leads to some kind of tendency in the cash market.

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