Quantitative Trading Systems http://www.blueowlpress.com/WordPress Howard Bandy's discussion of technical analysis Thu, 17 May 2012 19:28:49 +0000 en hourly 1 http://wordpress.org/?v=3.3.2 New paper available — Developing Robust Trading Systems, with Implications for Position Sizing and System Health http://www.blueowlpress.com/WordPress/2012/04/new-paper-available-developing-robust-trading-systems-with-implications-for-position-sizing-and-system-health/ http://www.blueowlpress.com/WordPress/2012/04/new-paper-available-developing-robust-trading-systems-with-implications-for-position-sizing-and-system-health/#comments Wed, 25 Apr 2012 22:15:12 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=773 I have written a paper describing an original approach to evaluating the health of a trading system, and an original approach to determining position size based on system health.
The technique described:
• Is of practical significance to practitioners of active investing.
• Produces both faster account growth and lower risk when compared with a passive buy-and-hold strategy.
• Is illustrated using a fully disclosed trading system.

It can be found on the Resources page, in the Books category:
or use this link

Comments are welcome.

]]> http://www.blueowlpress.com/WordPress/2012/04/new-paper-available-developing-robust-trading-systems-with-implications-for-position-sizing-and-system-health/feed/ 1 I have an article in the April 2012 issue of Active Trader magazine http://www.blueowlpress.com/WordPress/2012/03/i-have-an-article-in-the-april-2012-issue-of-active-trader-magazine/ http://www.blueowlpress.com/WordPress/2012/03/i-have-an-article-in-the-april-2012-issue-of-active-trader-magazine/#comments Mon, 05 Mar 2012 02:11:45 +0000 HowardBandy http://www.blueowlpress.com/WordPress/?p=763 A nine page article by me, entitled “System Health and Position Sizing” and beginning on page 16, appears in the April 2012 issue of Active Trader.

]]> http://www.blueowlpress.com/WordPress/2012/03/i-have-an-article-in-the-april-2012-issue-of-active-trader-magazine/feed/ 0 The Model Thinking course is starting http://www.blueowlpress.com/WordPress/2012/02/the-model-thinking-course-is-starting/ http://www.blueowlpress.com/WordPress/2012/02/the-model-thinking-course-is-starting/#comments Tue, 21 Feb 2012 02:59:58 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=755 The on-line course, “Model Thinking,” is beginning. The first 15 or so video lectures have been posted.

University of Michigan Professor Scott E Page is teaching. I have watched some of the first lectures and highly recommend them.

http://www.modelthinker-class.org

Regards,
Howard

]]> http://www.blueowlpress.com/WordPress/2012/02/the-model-thinking-course-is-starting/feed/ 0 Testing Stops http://www.blueowlpress.com/WordPress/2012/01/testing-stops/ http://www.blueowlpress.com/WordPress/2012/01/testing-stops/#comments Wed, 18 Jan 2012 22:24:37 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=747 A new article that discusses testing the effectiveness of maximum loss stops has been added to the website.

]]> http://www.blueowlpress.com/WordPress/2012/01/testing-stops/feed/ 0 Managing subjectivity with Objective Functions http://www.blueowlpress.com/WordPress/2011/12/managing-subjectivity-with-objective-functions/ http://www.blueowlpress.com/WordPress/2011/12/managing-subjectivity-with-objective-functions/#comments Fri, 23 Dec 2011 23:43:26 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=706 A new article, Managing Subjectivity with Objective Functions, was posted today. It gives some background about objective functions and discusses two applications:

  • Ranking alternative systems (during system development).
  • Deciding the size of the next position (during analysis of system performance).
]]> http://www.blueowlpress.com/WordPress/2011/12/managing-subjectivity-with-objective-functions/feed/ 0 Free (and low cost) online education http://www.blueowlpress.com/WordPress/2011/12/free-and-low-cost-online-education/ http://www.blueowlpress.com/WordPress/2011/12/free-and-low-cost-online-education/#comments Fri, 09 Dec 2011 19:09:36 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=674 I am excited by the amount of high quality, inexpensive education available online.
This posting lists some of the websites that trading system developers might find interesting and helpful.

Many universities offer accredited courses online, and charge university tuition for them.
With a few exceptions, I have not included links to these programs.

There are some great courses and fantastic bargains. For example, Stanford University offers Machine Learning, CS229,
as an accredited course for a fee of $5,280.
Or as a free course.

Since many of these sites are compendia, there is duplication. Use the website’s search capabilities and drill down to find the content you want.

These links are being added to the Resources page.

Please let us all know of other sites you have found valuable.

]]> http://www.blueowlpress.com/WordPress/2011/12/free-and-low-cost-online-education/feed/ 0 Why Traders Stop Trading http://www.blueowlpress.com/WordPress/2011/12/why-traders-stop-trading/ http://www.blueowlpress.com/WordPress/2011/12/why-traders-stop-trading/#comments Fri, 09 Dec 2011 01:19:59 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=667 There is a new article in which I explain my thoughts on why traders stop trading systems. Among the points I make are:

  • It is important to monitor system health.
  • Drawdown is probably the most common reason traders stop trading a system.
  • Position size must be adjusted as system performance changes.
  • The correct position size of a system that is broken is zero.
]]> http://www.blueowlpress.com/WordPress/2011/12/why-traders-stop-trading/feed/ 0 System Quality http://www.blueowlpress.com/WordPress/2011/12/system-quality-2/ http://www.blueowlpress.com/WordPress/2011/12/system-quality-2/#comments Fri, 02 Dec 2011 23:36:43 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=646 There is a new article that discusses measurements of system quality, and risk assessment and profit potential as related to system quality.

]]> http://www.blueowlpress.com/WordPress/2011/12/system-quality-2/feed/ 0 Distributions http://www.blueowlpress.com/WordPress/2011/11/distributions/ http://www.blueowlpress.com/WordPress/2011/11/distributions/#comments Tue, 29 Nov 2011 23:55:30 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=564 There is a new article discussing the advantages of using distributions of data, rather than just a few scalar values such as mean and standard deviation.

]]> http://www.blueowlpress.com/WordPress/2011/11/distributions/feed/ 0 Replicating results http://www.blueowlpress.com/WordPress/2011/11/replicating-results/ http://www.blueowlpress.com/WordPress/2011/11/replicating-results/#comments Mon, 28 Nov 2011 18:47:00 +0000 BlogMaster http://www.blueowlpress.com/WordPress/?p=524 As I discuss in each of my books and speeches, I strongly believe that readers should be able to replicate the results of the author.

I have received several emails from readers in response to the analysis of the Mean Reversion System based on RSI with questions about replication.

There was an inconsistency in my original post. When I posted the original article the Initial Equity in the AmiBroker code had been set to $200,000. That was a leftover from an earlier test run. It should have been $100,000 to agree with the analysis that followed and has been corrected.

Many people wrote to say that they had successfully replicated my results. Several continued on to say that they were surprised by the relatively high probability of a long period of losing trades and underwater equity, even though the system appears to be reasonable. That is the point I hoped to make — that the decision whether or not to trade a system should be based on more information than simple metrics such as the mean return per trade. It is important to evaluate the distribution of profit potential and the distribution of risk.

Some people were concerned that they were not able to replicate my results exactly. It is unreasonable to expect your results to be an Exact replication of those published.

If your results are widely different, consider:

  • The results I published were based on trading only SPY, not a portfolio or watchlist.
  • I assumed that the trades were made at the close of the bar that generated the signal and at the closing price. Delaying the execution will cause different results.
  • Each trade is a basic unit of $10,000. No compounding or leverage is used.

If your results are close, but not exact, the difference is probably due to use of a different data stream or a small change in settings.

  • I set the commission to $5 per trade.
  • I used Norgate Premium Data.
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