System Trading Blog

Make Your Money Work Harder

Archive for March 2009

System Trading: Changes Made

leave a comment »

As at the end of business day, I made changes in the account.

“hehehe” seems to turn into a drawdown mode and has been removed from the system portfolio. “Abuls” added to the account and systems settings adjusted.

When doing system trading, this should be regular practice to update system mix, if any system shows signs of weakness, i.e. enters into a drawdown mode.

20090331

Written by A.S.

March 31, 2009 at 7:43 pm

Posted in Uncategorized

How the System Trading Works: Part 1 (set-up)

leave a comment »

I choose zulutrade.com as the platform.

Step 1: Open account. In this case, it is demo account with $50’000 initial equity.

Step2: Choose systems to trade in your portfolio.

I choose systems identified as  “Prob-B5”, “hehehe” and “dagger”. The common denominator for all the systems is that they have about the double profits, if compared to max drawdown.

Step 3: Adjust max total open trades for each system, lots and maximum open lots.

I set max total open trades for each system a 3. It means that the results in the account will differ from hypothetical account due to the fact that some systems trade more than 3 lots at the same time. Nevertherless, this is a necessary measure for risk-management purposes.

sys_risk1

 

Step 4: Backtest your signals. This is optional.

backtest

Hypothetically, the system has turned $50’000 into $250’000 in less than 5 months.  This is a rough guide what to expect. The actual results will be different due to the fact that past performance will be not be replicated exactly and we have reduced max allowed open trade to less than the system vendor trades.  Nevertherless, the probability of positive investment return is very high.

Step 5:  Save account settings.

In fact, now you can switch off your computer. You’ve authorised to place trades into your account automatically.

acc_bal1

We start on Monday, March 30, 2009 and will continue the experiment till end of April, 2009.  It should be noted, that the current setup is highly leveraged due to constraints in  parameters for demo accounts. For live trading account I would suggest leverage exactly 10 times lower than we have in the demo account. Currently we’ve set up the account to trade up to 18 time leverage. To treat the account for investment purposes, I would suggest no more than 2 times leverage.

Please note, that from more than a thousand systems posted on zulutrade.com, less than 5% can be considered as good ones.

As we go, we’ll monitor the system performance. As long as the system remains within its historic risk/return parameters, we keep trading it. As soon as drawdown exceeds the historic max, we’ll discontinue the system in our portfolio.

Written by A.S.

March 28, 2009 at 5:41 pm

System Trading: Real-Time Experiment

leave a comment »

I’ve been a proponent of system trading for a long time. To profit, you have to go long and short —  whatever the trend in any particular market warrants. If anybody had some lingering doubts about it, the chances are that after sitting on long-only stock positions for the last decade and not seeing a penny of profit delivers the message in a straightforward way.

Trading systems have been marketed by various vendors very aggressively for many years and the field generally has still a bit of stigma to it. More often than not, the results from trading systems were mediocre and didn’t justtify the cost.

However, in the recent years, the rules of game have changed profoundly. Today you don’t have to rely on system vendor’s promise about the profit potential of his trading system. You don’t have even take his ask price. A whole new marketplace of trading systems has evolved. Everyone can go to the marketplace and both buy and sell trading system signals. This new marketplace offers opportunities which, in my opinion, are far superior to traditional style of investing in stocks, bonds and funds. A simple, common-sense cost and benefit analysis  suggests that the future of investing evolves around those trading system marketplaces. All seems like a no-brainer — the return potential is much higher and much less risk than traditional investments … besides, the investor doesn’t have to hand his money over to anybody — so there are no transparency and liquidy issues.

Nevertherless, it seems that so far only probably less than 2000 investors worldwide have adapted this new investment approach.

If the investment approach is so good as the theory suggests, every investor should adapt it. I’ll do a real-time experiment to demonstrate the return potential from such approach.

Written by A.S.

March 28, 2009 at 3:41 pm