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Table Of Contents

1.1 An easy example of a trading system
1.2 Why you need a trading system
1.3 The science of trading systems
Getting started
The programming task
Which timeframe to trade?
The importance of the market data
The length of your back-testing period
Rule complexity and degrees of freedom
Robustness
2.4 Evaluation of a trading system
What to look for in an indicator
Average trade
Percentage of profitable trades
Profit factor
Drawdown
Time averages
RINA Index
2.5 Conclusion
Introduction
3.1 The birth of a trading system
The free LUXOR system code
The entry logic
3.2 First evaluation of the trading system
Calculation without slippage and commissions
Calculation after adding slippage and commissions
Result with optimised input values
3.4 Inserting an intraday time filter
Finding the best entry time
Result with added time filter
3.5 Determination of appropriate exits – risk management
The concept of Maximum Adverse Excursion (MAE)
Inserting a risk stop loss
Adding a trailing stop
How exits are affected by money management
3.6 Summary: Step-by-step development of a trading system
4.1 Timescale analysis
Changing the compression of the price data
LUXOR tested on different bar compressions
Explanation for the time dependency of the system
4.2 Monte Carlo analysis
The principle of Monte Carlo analysis
Exchanging the order of the performed trades
Probabilities and confidence levels
Limitations of the Monte Carlo method
5.1 The market’s long/short bias
The trend is your friend?
Consequences for system development
5.2 Out-of-sample deterioration
A Bollinger Band system with logic and code
Optimising the Bollinger Band system
Out-of-sample result
Reasons for the out-of-sample deterioration
5.3 The market data bias
Expanding the training period
Conclusion: How to choose your training data
5.4 Optimisation and over-fitting
Step-by-step optimisation of the LUXOR system
Results depending on the number of optimised parameters
The meaning of the trading system’s complexity
5.5 Rule complexity explained with polynomial curve fitting
Interpolating data points with polynomial functions
Predictive power of the different polynomials
Conclusions for trading system development
6.1 Short repetition: “normal”, static optimisation
6.2 Anchored vs. rolling walk forward analysis (WFA)
6.3 Rolling WFA on the LUXOR system
Periodic optimisation of the two main system parameters
Out-of-sample test result
6.4 The meaning of sample size and market structure
7.1 Definitions: money management vs. risk management
Risk management (RM)
Money management (MM)
7.2 Application of different MM schemes
Reference: The system traded with one lot
Maximum drawdown MM
Fixed fractional MM
Fixed ratio MM
7.3 Monte Carlo analysis of the position sized system
7.4 Conclusion
8.1 Introduction to portfolio construction
A list of the main available software
The role of correlations
Publications and theoretical tools
Portfolio trading in practice
Total vs. partial equity contribution
8.2 Correlation among equity lines
8.3 A dynamic approach: equity line crossover
8.4 Dynamic portfolio composition: the walk forward analysis activator
8.5 Largest losing trade/largest losing streak/largest drawdown
Conclusion
Appendix 1: Bollinger Band system
1.2 Entry logic and Easy Language code
1.4 Results and conclusions
Appendix 2: The triangle system
2.2 Programming and coding
2.4 Advantages in building a portfolio
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Trading

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Published by Willy V Lafleur
Trading
Trading

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Published by: Willy V Lafleur on Mar 31, 2013
Copyright:Attribution Non-commercial

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07/07/2014

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