Every trader that looks at more than one market throughout the day will recognize that there is a certain symmetrical relationship between certain markets at certain times. The confounding thing about these intermarket relationships is that they are fleeting. Sometimes the Euro dances with the S&P 500, and sometimes Gold butts in. Standing in line [...]
Observing the ruckus in Greece about what they plan to do with a maxed out credit card, I cannot help but feel a vicarious empathy. The state unions and pensioners are protesting planned austerity measures, but wouldn’t you if your government-sponsored welfare was being threatened? Think back to when you we just a young child [...]
The marriage metaphor is getting a little stale for me when it comes to trading. You don’t want to get married to your trade, but you are committed to your trading plan (in a married sort of way). When you deviate from your trade plan, your infidelity is a burden for you to bear alone [...]
I just started reading Inefficient Markets: An Introduction to Behavior Finance by Andrei Shleifer where he pretty much dispatches the notion that markets are efficient, as envisioned by the great minds who postulated the Efficient Market Hypothesis (EMH). One argument that EMH uses to promote this notion of efficient markets is that arbitrageurs will clean [...]
While the backtest gives us a historical perspective on the viability of a trade system, the optimization process illumines how stout, sturdy, strapping and hardy (yes, I know how to research synonyms for robust) our trade system is across a variation of parameter sets. What does this all mean? Well, if a 10/30 moving average [...]
One of the many issues with systems trading is trying to make sense of the vast amounts of data you accumulate with the backtest of a system. Historical backtesting is the first step in testing your trading idea. If it is a trading idea that ought to work across many different markets, then you need [...]
Going over-budget on the Christmas shopping, eating too much food and participating in the the annual ritual of goal-setting for the next year. Ah, I love this time of year. But why fight it? Sometimes you need to acknowledge your membership in your current culture and simply participate in its collective practices. Today, I’m setting [...]
Traders oftentimes will look at different markets from the one they are trading to get a gauge on what may be looming ahead. The US Dollar is oftentimes cited as a leading indicator to the US Equities market. The price of Gold is sometimes looked at as a market consensus on inflation. Besides intermarket relationships, [...]
Yes, I’m talking about the professional golfer. And no I’m not comparing my ability to drive 300 yards. What I have in common with Tiger is my weakness to certain indiscretions. In my case, though, the cocktail waitress is discretionary trading. I’ve committed myself to system trading, but over the past few months I’ve participated [...]
The walk-forward process of system development is the final test of a system before real capital gets allocated. It validates the system on out-sample data, or data that hasn’t been peeked at during development. It’s not very complicated, really. You optimize your system on a range of data and then choose the best parameter set [...]
