System Trading Blog

Make Your Money Work Harder

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.

Advertisements

Written by A.S.

March 28, 2009 at 5:41 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: