Archive for October, 2009

Long R, Short Excel

October 29, 2009

R is very speedy statistical package that’s like an F-18A Hornet, versus Excel which is like a paper airplane. R is professional sports, Excel is Pop Warner. R is Mona Lisa, Excel is stick figures. R is … okay, you get the idea. I’m long R, and short Excel. For traders that are analyzing vasts amount of data, it’s time you made the switch to the trader’s statistical package of choice. You have to work a little at understanding the scripting language, but it’s nothing that you can’t wrap your mind around in a few nights after the kids go to bed. I’m just getting acquainted with R, and I’m already putting my copy of Excel on eBay. (more…)

System Trading is Quicksand without the Quick

October 28, 2009

Perhaps the best way to describe the path to system trading is slogging. It’s like one of those dreams where you’re trying to run in the sand, and it keeps sinking. And then it starts to rain and the wind starts blowing you backwards. Like many things related to trading, system trading sounds simple on its face, but becomes increasingly elusive as one pursues it. (more…)

Is your equity curve underwater this year?

October 9, 2009

Is your equity curve underwater so far this year? Okay, you may be a loser, but you can still sing a very fine tune. It’s not the same as singing joyfully and proudly about your ability to follow a trend, but it’s close.

Are you related to Perfect Profit?

October 9, 2009

Okay, by now you’ve probably discovered you are not the perfect trader. You are but a fraction (if that) of the money-banking machine. He is no longer your friend, this creature known as Perfect Profit is your competition. Now that you’ve formally met your competition, what is the family resemblance between your equity curve and Perfect Profit’s equity curve? Are you brother and sister, second cousins or do you need to go all the way back to Tiktaalik roseae to find a common gene? On the practical level, what is the correlation between your equity curve and Perfect Profit’s equity curve? (more…)

How close are you to perfect?

October 8, 2009

Becoming the perfect trader is no easy task, and I daresay that nobody has been able to achieve this great feat. The perfect trader buys at the absolute low of the day and sells at the absolute high. And depending on whether the high happens first or the low happens first determines if he is long or short for the day. It’s really easy to calculate this metric. It is simply the absolute value of the daily range or the high minus the low. (more…)

Rusty Apple

October 2, 2009

The main objective of system trading is to create a trade system that has predictive value and can make money for years to come. If a system historically doesn’t make money, it’s not worth pursuing. Or is it? In the curious world of trade system development, some have stumbled upon good trading systems by fading their original idea, which performed so abysmally that you couldn’t lose that much money unless you started throwing it out the window as fast as you can. System trading can also provide other insights into market behavior that, if not yielding a tradeable system, can at least give you some ideas about developing one. From the twitter world, I got the following idea from AshRust: How about each time the VIX spikes X% buy AAPL, then sell after 5/15/30 days w/ 10% stop loss? It’s an interesting idea that’s contrarian and uses intermarket analysis to trigger a long trade. Does it work? Can you trade it? Or is it nothing more than a curious data-mined notion? (more…)