21 November 2009, 4:07 PM
Tempus Fugit
The investment market moves continuously. Opportunities for profit appear regularly. If you’re spending time developing a trading system, you are missing these prospects. What is your development time costing you?
Take Advantage of the Available Tools
Modern techniques such as the algorithms employed in Genetic System Search for Technical Analysis shorten the path to active trading. Take advantage of the tools available. You don’t even have to use the fastest machine with four monitors arrayed in front of you. Leverage the power of the computer.
Minimize Paper Trading
Nothing crystallizes the mind like money at risk. Once you are competent with the mechanics of trading and your software tools, the continuation of artificial paper trading may even be detrimental. Put real money on the line even if it’s just a token amount. The unique mental processes involved in a real trade will strengthen your abilities.
Trading is a Solitary Activity
Investing is primarily a solitary enterprise, even if you are part of a trading group or in a corporate environment. In an effort to stay on an even keel and to gain exposure to novel ideas, participate in the online community. Monitor investment forums and blogs. Keep a log or diary of your thoughts and trading activities.
Pull the Trigger
Each opportunity for financial gain bypasses you if you do not act on your trading signals. The market doesn’t know you exist and will not wait for you. If you act on each trading signal without fail, it will be easier to eliminate the human tendency of procrastination.
18 November 2009, 4:08 PM
Many investors study the movement of and the statistical properties of market prices and volumes and base their decisions upon such technical analysis.
A Typical Technical Analysis Investment System
- Enter a long order when the closing price of the stock is greater than the 30-day simple moving average of the closing price.
- Close a long order when the closing price of the stock falls below the 10-day
12 November 2009, 3:23 PM
The genetic programming engine inside the Genetic System Search for Technical Analysis program uses several operations to arrive at a set of technical analysis trading rules.
Crossover
In one area of the program it selects two population members with good fitness and therefore, the potential to be even better. As an example, the following two signals might be selected to participate in a crossover:
- The MACD is
3 November 2009, 1:03 PM
Exhaustive Search Method
In the construction of technical analysis trading systems one might use a brute-force or exhaustive search for the optimized set of rules. You select a list of indicators and, for each indicator, the range of possible values. As an example, one indicator would be the simple moving average. There are versions of that average for the open, high, low, close and volume values at each trading bar… Continue reading
2 November 2009, 12:43 PM
Some charting programs use a value for margin rates that may differ from your broker’s specification. For instance, your broker may require a 50% margin to enter a short position. In the Genetic System Search for Technical Analysis program Brokerage Configuration window and in older versions of Equis MetaStock, use the same value. In the Equis MetaStock Enhanced System Tester, you would enter 150%.
See the full explanation… Continue reading
31 October 2009, 2:30 PM
It’s important to construct a set of investment rules that generate signals in which you are confident. Imagine that you’re using a system in live trading and the last five trades have been losers. Your trading capital is depleted and your confidence shaken. Are you going to make the next trade without question?
Consider the case of a huge drawdown during an open trade. Your profit has turned into… Continue reading
27 October 2009, 7:06 PM
If you use the MetaStock Enhanced System Tester (EST) in the development of your trading system, it is important to verify the results. Some configurations, for instance, may result in simulated trades that you would never execute. The EST may both buy and sell a stock at the same time. That results in two additional brokerage fees with no possibility of profit.
The pitfalls in the use of the… Continue reading
27 October 2009, 6:53 PM
Often a set of investment rules will generate conflicting signals. For instance, it might call for an Enter Long trade on the same bar as an Enter Short trade. What is to be done in those cases? The governing directives are often called the Order of Execution.
The Genetic System Search for Technical Analysis program, Equis MetaStock and others use the following rules to resolve any signal conflicts… Continue reading