Download Building Winning Algorithmic Trading Systems: A Trader's by Kevin Davey PDF

By Kevin Davey

"Award-winning dealer Kevin Davey explains how he developed from a discretionary to a platforms dealer and started producing triple-digit annual returns. An inveterate platforms developer, Davey explains the method of producing a buying and selling concept, validating the assumption via statistical research, environment access and go out issues, trying out, and implementation out there. alongside the best way, Davey offers insightful suggestions culled  Read more...

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Additional resources for Building Winning Algorithmic Trading Systems: A Trader's Journey from Data Mining to Monte Carlo Simulation to Live Trading

Sample text

Later in the book, you’ll learn one correct way to test and evaluate systems, but for now just realize that the standard accepted way of testing is wrong. This faulty testing leads to overoptimistic results and trading systems that are sure to disappoint the end user. Of course, experienced traders know how to test systems. The question is: when looking at historical results, how do you know what to believe? 2 depicts what I call a “BS” meter for performance results. It gives you an idea of who, if anyone, you can trust with providing you trading results.

Tested thousands of systems—results too good to be true, never traded. ■ Scale trading—lost money. ■ Averaging down—lost money. ■ Wild man approach—lost money. Almost no matter what I did, I lost money at it. The deceiving part was that for a while many of these methods would work, giving me an extra boost of irrational confidence before the inevitable fall. The extra confidence really just made the resulting crash tougher, both emotionally and financially. Yet when I looked at my history, I saw the one bright spot: I did have success developing, but not live trading, mechanical trading algorithms.

I’ll answer these questions and more in this chapter. ” As a general rule, future performance of a trading system is almost never as good as its historical performance. In fact, the better a trading system tests historically, the less likely it is to perform that well in the future. Of course, there are exceptions to this rule, and after developing trading strategies for a while, these exceptions become easier to find. Equity Curve Line - @ES 5 min(06/02/09 16:35 – 06/09/09 11:20) 30000 Equity($) 20000 Legend 10000 Trades Peaks 0 –10000 100 200 300 400 500 Trade Number 600 700 800 900 Created with TradeStation.

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