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For those who wrote asking about how to find market inefficiencies and for
those who read TASC, the Nov. and Dec. articles by Stephane Reveere on
"Trading the Opening Gap" and "Trade Against the Gap" show how to use
Metastock and Excel to explore the market inefficiencies surrounding the
market event known as the "opening gap".
The article provides an excellent model for traders. His closing sentences
in the November article "... making it suitable for those with adequate
capital and low trading costs." leads the trader to investigate structural
and other inefficiencies that will impact on the success of trading the
market event.
In 1996 Futures Mag ran a year long series of articles on developing an
indicator based, rather than event based trading system and in 1998 they ran
another year long series of articles about adjusting the trading system and
examining a full range of inefficiencies.
Enclosed is a chronological list of the monthly articles from that 2 year
cycle.
Best regards
Walter
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1996 - Monthly Issues of Futures Mag
System design and testing
By Mark Etzkorn. In our first of a year-long series, Futures outlines a plan
for developing a system and trading it. Follow along as we build a system
from scratch, giving step-by-step instructions to system design.
Laying the foundation
By Mark Etzkorn. In this second installment of our series, we take another
step toward building a trading system by making a few decisions: contracts
to trade, trade allocations, account size and trading style. We talk to
system trading experts about how to make these choices and how they may
affect the final product -- our system.
Tools of the trade
By Mark Etzkorn. A beginner choosing too many parameters can quickly develop
a garbled system. In this installment of our "Building a trading system"
series, we narrow down our choices of technical indicators for entry based
on our risk tolerance, trading goals and financial resources, and program
our entries.
Managing your trade
By Mark Etzkorn. In this installment of "Building a Trading System," we set
money management parameters for our system. In addition, we outline the stop
techniques we'll test and exit methods that may best fit our system.
History lesson
By Mark Etzkorn. It's time to test the system we've built in our series, but
we have more decisions to make regarding our testing data and structure.
After we analyze drawdown, number of trades per year, trade length and
profitability, we'll try to optimize without curve fitting.
Back to the drawing board
By Mark Etzkorn. After testing our system last month, we have some decisions
to make on ways to improve it. Giving curve-fitting a wide berth, we
experiment with account size, initial stop levels and a breakout qualifier
to chart our system's course for the future.
Taking it to the streets
By Mark Etzkorn. We've designed our system from the ground up: choosing its
markets, parameters and trading methodology, and testing performance. Now
it's time for our "baby" to make its first trades in real time with a
simulated brokerage service.
As the market turns
By Mark Etzkorn. The saga continues: Will the Dynamic Breakout System turn a
profit? Will we need to roll over contracts? Can we stick with our system?
Will we be stopped out? Find out in this installment of "Building a Trading
System."
Nobody's perfect
By Mark Etzkorn. Even Futures' staff doesn't know it all when it comes to
system design and testing. As some experts point out, there are a few basic
rules even we violated when creating our trading system. We find out what we
did right and what we need to fix after these experts critique our Dynamic
Breakout System.
The weak link
By Mark Etzkorn. Recognizing human error as one of the biggest
problems in our system, we talk to expert system designers to learn how to
improve our parameters, contract selection and trade execution.
Be flexible
By Mark Etzkorn. Market volatility easily can distort an otherwise quality
trading system. Adding adaptive capabilities to a system can counter that.
But by how much, and are they worth it?
The never-ending system
By Mark Etzkorn. Building a system is a long and educational process. We
learned much developing our Dynamic Breakout System. Here we list our
resources and summarize the experience.
1998 - Monthly Issues of Futures Mag
The bigger picture
By Thomas Stridsman. Throughout 1996, we demonstrated the steps of system
development with the Dynamic Breakout System. This year, we'll address the
larger trading plan.
Revelational trading
By Thomas Stridsman. One way you can improve your trading system is by
examining your results and altering your stops appropriately.
Trade, and trade again
By Thomas Stridsman. Last month, we looked at statistical measures that can
guide your money management. Here, we outline the benefits this strategy
offers to an entire portfolio.
Scoring high and low
By Thomas Stridsman. Whether you win or lose on your next trade should be
independent of your previous success if your system is efficient. If not,
here's how to search for dependency and exploit it.
If it's broke, don't fix it
By Thomas Stridsman. While managing trade size with the z-score should
improve a system of sound analysis, results can be disastrous if market
conditions change
Prowling the marketplace
By Thomas Stridsman. Intelligent optimization isn't only important with your
entry and exit rules. You also should hone your filters. Here's one way to
identify robust clusters for a simple trend switch.
Bill the winners
By Thomas Stridsman. Good filters and good entry and exit methods can make
great systems. Here we see how well the filter we optimized last month works
with our DBS model.
Shelly Long and Martin Short
By Thomas Stridsman. Often, our long and short trades seem to take on whole
different personalities. By examining the ins and outs of your system, you
can position yourself to exploit this.
Volatility confusion
By Thomas Stridsman. Not all methods of calculating volatility focus on the
same price attributes. By comparing readings, we can get a better idea of
the market's security
Great expectations
By Thomas Stridsman. Here's how to keep your actual equity curve as pretty
as those generated through backtesting.
The good, the bad and the ugly
By Thomas Stridsman. In the shoot-'em-out business of futures trading, it's
all about tracking your trades. Here's one way to follow the path of your
profits while avoiding an ambush.
Play it again, Sam
By Thomas Stridsman. Just knowing your trading rules is not nearly enough.
Through 1998, we've taking you through the steps of turning a basic model
into a full-fledged trading system. Here's a recap.
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