Analytics

After emerging from the rigours of optimization and robustness testing, it is time to verify our strategy’s performance using tick data. Tick data records every price movement over the historical period, helping maximize our backtest precision. The table below shows an example of AUDUSD tick data obtained from Tickstory, with numerous prices per second. We […]

Give yourself a pat on the back if you manage to make it to live trading. To get here, you probably had to develop a better understanding of your markets, backtest countless trading ideas, and finally create a diverse portfolio of strategies. It’s finally time to put real money on the line. If this is […]

Filters impose additional constraints upon your entry signals. They typically benefit the strategy by improving its win rate, or by preventing entry during periods of elevated market risk. Adding filters will invariably reduce the number of trades in your backtest, possibly making its results less reliable. The performance improvement must thus be significant enough to […]

If you know the enemy and know yourself, you need not fear the result of a hundred battles. -Sun Tzu We’ll talk about knowing the ‘enemy’ in a subsequent section on Market Research. For now, let’s focus on understanding yourself as a trader. There are three general areas that you should address: Trading Style Trading […]

Robustness is the measure of a strategy’s insensitivity to variations in price behaviour. A robust strategy will continue to perform well when market conditions change, or when it is traded on a different market. Robustness is thus a central theme in the development of any trading strategy, automated or manual. Why do so many strategies […]

The ability to efficiently trade a portfolio of multiple strategies and/or markets is one of the biggest advantages of algorithmic trading. Portfolio composition does not seem to have received much attention in the trading literature, possibly due to its open-ended and complex nature. You could be trading a single strategy on multiple markets, multiple strategies […]

It’s finally here! My first trading e-book, Trend Following Hacks, is now selling on Amazon! Tired of missing another market trend? Sick of reading “secrets” and “ultimate” guides that don’t deliver? This no-frills trend following guide slices through the marketing fluff and explains the tools and concepts you need to start beating the markets. In […]

After out-of-sample testing and walk-forward optimization, we can be reasonably confident that our GBPJPY trend following strategy is robust. For this final article on robustness testing, we will learn more about this strategy’s risk profile using StrategyQuant’s Monte Carlo simulator. In this instance, Monte Carlo simulation will be used for informational purposes only; there will […]

Software forms the backbone of your strategy development process. The following is my list of recommended software for automated strategy development and trading. I use the ubiquitous Metatrader 4 (MT4) platform, which predominantly focuses on the forex markets. Most brokers offer MT4 as a free download. Its proprietary programming language (MQL4) allows traders to develop trading algorithms […]

Here you can edit your profile information and manage your lists. Subscription management form is only available to mailing lists subscribers. Want to develop a portfolio of automated trading strategies? Supercharge your strategy development with StrategyQuant Access 14-day FREE trial here! Get up to USD 300 discount! Strategies need improvement? Use QuantAnalyzer’s powerful analysis tools […]

Forward testing, or incubation, is the process of demo trading your strategy. It is essentially a real-time out-of-sample test, and often provides a good estimate of your strategy’s live trading performance. This article will help you decide whether your strategy needs to be forward tested, and discuss a few simple methods of evaluating your test […]

Having shortlisted a basket of markets to trade, the next step is to determine your trading strategy entry. Your strategy’s entry is arguably the most important element of your strategy. The exit has a significant impact on your bottom line, but it is the entry that determines your ability to accrue floating profits. Like the […]

No entry is foolproof, and many successful traders are wrong over half the time. Good exits aid capital preservation when you are wrong, and maximize profits when you are right. The nature of your trading strategy should always be considered when thinking of exits; there are no universally successful exits. Small profit targets tend to […]

A temporary trading pause can improve your win rate if you’re trend following a volatile market. Here I’ll program a trading pause into a simple breakout strategy, and test its effectiveness on the Widow Maker – the GBPJPY. If you’re a trend follower, there’s no better feeling than riding a massive trend. Regardless of your […]