“You need many trials to expose biases the same way Vegas needs many bets to exemplify the fact that their long-term edges are ultimately insurmountable”. Art Collins in In Beating the Financial Futures Market (Wiley, 2006) makes a powerful case for systems trading over discretionary trading. The following thought provoking extract was posted by Brenda Jubin in…
Here’s a question for you. If trend traders talk about following price rather than predicting it, then why do they feel that backtests are important? Well, as counter-intuitive as it might seem, a trend follower does not backtest to estimate their future profitability but rather conducts backtests to determine risk management thresholds before stepping into…
….and they say you don’t learn much at the casino. Richmond Quantitative Advisors expound on the power of a small edge.
This is perhaps the most important consideration to assess in testing the long term performance of your strategies. It is very easy these days to generate wicked equity curves that ascend in a linear way to the stars….however fall off the cliff as soon as you take them to the live trading environment. What you…
For Price Following Systems that operate off the philosophy of market divergence, your success is attributed to a handful of trades. The edge lies in the ‘Positive Skew’. Keep to the right hand side of the market distribution by letting profits run with a trailing stop and no profit target and make sure the left hand side is managed by cutting losses short.