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Don't forget slippage too.
No point having a systems that returns an average of 4 ticks per trade when
slippage can take 1 or 2 ticks either side.
Even if the winning trades are 8 ticks and the losing trades are 4 ticks and
you have more winners than losers your
average will be 4 ticks after you add on commission and slippage.
-------Original Message-------
From: Peter Zwag
Date: 09/14/04 18:33:30
To: Justin Fanning
Cc: omega-list@xxxxxxxxxx
Subject: Re: system trader
This is a massive topic...
Why do you guys want to re-invent the wheel?
There are people who are systems designers by profession.
While I admit much of what's out there is not good, there's also
a number of good things with broker statements to match system trades.
Good luck to you designing systems. While the end system might be simple,
the task of thinking it up is not easy at all. Believe me, cause I've been
at it for many years.
Personally, if your going to spend your hard earnt money, spend some more of
it and lease or buy something that works. Better to do this and give it to
"the market"
I think that's stats if 90% of people loose most of their initial capital in
6 months trading futures.
In short, this is what I feel you should be looking for in system trading
1) large sample of trades. At lease 1000 trades in sample size.
the more the better
2) Long period of time in sample size. Preferably the full length of
whatever contract you trade
3) Have sufficient capital. 2 or 3 times the max drawdown
4) A profit factor of at least 1.5, preferable 2 or more ($win / $loss)
5) A $return / max $drawdown of at least 10
Happy trading
----- Original Message -----
From: "Justin Fanning" <Justin@xxxxxxxxxxxxxxxx>
To: "Riley Robertson" <rileyrobertson@xxxxxxxxxxx>
Cc: <omega-list@xxxxxxxxxx>
Sent: Tuesday, September 14, 2004 10:44 AM
Subject: Re: system trader
>
> Riley Robertson wrote:
>
> > Hi List & Justin:
>
> > When you suggest it is the System trader that can make a living,
> > do you mean a trader who knows computer programming so well
> > that he can write his own systems and use it?
> > or a trader who is very disciplined and his attitude+trading habit is
> very systematic?
>
> I consider anyone who operates by a set of *written* mechanical rules,
> to be a
> system trader. Some I have seen employ teams of guys working around the
> clock,
> more commonly now people are using computers.
>
> > If it is the former, does it mean all the discretionary traders are
> losers?
>
> The consistent big winners (in my observations) were all mechanical
> system traders,
> discretionary traders can hit the odd big win, but (in my opinion) lack
> consistency
> and are long term losers.
>
> > If so, how can the discretionary traders pay someone to write the
> programming for him
> > without that programmer using the formula himself and trade with it?
>
> The standard legal framework of Non Disclosure Agreements (NDA's) plus
> someone's
> professional reputation is usually enough to keep most things secret.
> Not to mention the
> average man on the street known nothing of data feeds, brokers, exchange
> rules, contract
> specifications etc. Trading isn't exactly something you can get your
> head around in 5 mins.
>
> The use of external programmers is something I would like to do more of
> myself,
> in fact I would like to sub-out my whole IT operation and concentrate
> more on the
> core trading.
>
> Often I find myself modifying my trading ideas to fit in with
TradeStation,
> I have explored the path of professional programmers before and no doubt
> will again.
> The freedom to dictate exactly how you want the code to run, knowing it
> won't be you
> writing it is quite liberating for the mind!
>
> Having said all of this... I am constantly stunned by the simplicity of
> trading systems
> used by banks & other institutions, often as simple as a single moving
> average.
>
>
> > RR
>
> Justin
>
>
>
>
>
>
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