It is not important, you are right or wrong. Importantly, only how much money you earn, where the rights, and how much money you lose when wrong.
Traders who sold without using mechanical trading systems, are at risk of becoming victims of their emotions. The system, which tells the author, largely avoids emotional decisions when trading.
Great expectations
Vposlednee attitude of traders to tehanalizu has changed. If three years ago, the technical (statistical) analysis and the signals of mechanical trading systems enjoyed a fairly small number of professionals over the past year - a significant portion of market participants. In the comment Soros, in my opinion, most accurately describes the principles of mechanical trading systems using the methods of money management.
Success in trading depends primarily on three components:
- Mechanical trading system with a positive expectation;
- The application of capital management (very well described in the book, Ralph Vince «Mathematics money management»);
- Strict compliance with the trading system signals.
The last rule is easy done with the help of vending machines, as described in the journal «Currency speculator» in 2003 [1, 2], and use money management techniques in some cases, allows a loss-making system to create profitable.
Statistical analysis
In a real application to trade any mechanical trading system is thoroughly tested bektesting (testing mechanical trading system at a previous history of prices). If a trader knows that the system provides a gain of 80% of cases, we can assume that the results will be repeated in future. Wide range of technical analysis, neural networks with genetic algorithms to create and tested trading systems of any complexity, define and apply to trade in a lot of money management.
However, excellent results bektestinga conducted on historical data over the past few years, sometimes leading to disastrous results in real trading. The reasons may be several.
The first - the careful fitting optimiziruemyh options trading system. Check and optimize the efficiency of the system can be read: historical data are divided into equal segments, for example, for years, and test them separately, then compare the results.
The second reason - if bektestinge were not taken into account commissions and slippage (slippage in the performance of the application). Dynamic slippage can use volatility. For reference: the volume of requests up to $ 100 thousand for the RAO UES of sufficient magnitude slip 0.005 (tested experimentally).
The most important parameters to be disregarded in assessing the results of the trading system are:
- The average winning percentage of wins deal õ> Average losing trade x Percentage losses.
- Maximum Drawdown (decrease in accounts on the maximum value for the preceding period). In a large Drawdown, typically over 10%, to avoid the entire amount, but with a relatively small, you can use the «arm».
- Ratio Sharpe Ratio, which is used to assess the ratio of return and risk. The higher the index value, the better the performance of the system on its variability, and the smoother yield curve.
Some of the estimated parameters, given the program OmegaResearch Prosuite 2000I:
Net profit - total revenue produced by the system.
Gross profit - the total accumulated revenue of all the profitable deals for the period.
Gross loss - the total accumulated losses of all loss-making transactions for the period.
Open position - the gain or loss of all current open positions in the portfolio.
Ratio avg. win / loss - the average gain divided by the average loss.
Adjusted Gross Profit - total revenue minus all the profitable deals the square root of the total income of profitable transactions multiplied by the average of the winning transaction.
Adjusted Gross Loss - total loss of unprofitable transactions minus the square root of the total loss of unprofitable transactions multiplied by the average unprofitable transaction.
Adjusted Net Profit - Adjusted Gross Profit Less Adjusted Gross Loss.
Select Gross Profit - total profit of all the profitable deals minus profit «a popup» transactions.
Select Gross Loss - total loss of unprofitable transactions minuc loss «a popup» transactions.
Select Net Profit - total income (loss) produced by the system during the period of trade, net of all positive and negative «a popup» transactions.
Maximum Drawdown - the biggest intraday drop test system on a single outstanding transaction.
Average Drawdown - Maximum Drawdown average value for all transactions.
When building the trading system, it is important to be able to identify (formalize) fletovye trend and market movements, as well as use his volatility. One way to determine the trend could be an indicator ADX, or regression ADX. When zero or negative regression ADX system automatically switches to the Flat, and movements working against the market because of its volatility. Preferably, the ADX was raised from low values of 15-20. You can also use an approach reminiscent of the delta-neutral strategy in options when fletovom motion is calculated by the number of contracts / shares. The result of each transaction and, accordingly, the trading system depends largely on the outputs. The easiest way and most common way on the basis of money management - stop-loss, which protects the trade by preventing the catastrophic losses. Work without stop-loss - a recipe for waste. Stop-loss can be static (constant), dynamic (changing values, for example of volatility, ie, when volatility increases the size of stop-loss is increased) or the trailing stop.
Methods of money management
What are methods of money management? To cite a simple example: the initial amount in the account 1000 rubles, in the full amount of the account, the two transactions come one after another with the result of 20% - the first profitable, and the second loss. First, list the main methods of money management:
1. Operating a fixed amount.
2. Operation of fixed-interest account.
3. Serial inputs.
The method of successive inputs is used to build profitable positions. With each new signal system trading position build up the value of n, and when the signal at the output - is fully liquidated. Reducing the risk occurs due to the accumulated profits of the original entrances.
Method of operating a fixed amount is used to limit the risks on all accounts. When you log on to the deal the trader takes a fixed risk. This method is useful if the system has a long series of unprofitable transactions. After a successful logon to the transaction after the method of loss-making series of consecutive inputs. This combination of two methods of money management most suitable for conservative investors.
The essence of the method of operation of fixed-interest accounts is that the trader runs the risk of fixed-interest accounts, in the case of profit пo account position size increases with the increase in the account. Conversely, in the case of reducing the size of the account is reduced accordingly. To check and test methods for money management program for technical analysis OmegaResearch Prosuite 2000I developed applications Rina Systems, having all of the money management techniques, and portfolio testing systems.
References:
1. Reshetnikov Yu Exchange Technology: Integration with Netinvestor / / Currency speculator, 2003, № 3, pp. 58-60.
2. Reshetnikov Yu Backstage automated trading / / Currency speculator, 2003, № 6, pp. 99-101.
G. Soros
Traders who sold without using mechanical trading systems, are at risk of becoming victims of their emotions. The system, which tells the author, largely avoids emotional decisions when trading.
Great expectations
Vposlednee attitude of traders to tehanalizu has changed. If three years ago, the technical (statistical) analysis and the signals of mechanical trading systems enjoyed a fairly small number of professionals over the past year - a significant portion of market participants. In the comment Soros, in my opinion, most accurately describes the principles of mechanical trading systems using the methods of money management.
Success in trading depends primarily on three components:
- Mechanical trading system with a positive expectation;
- The application of capital management (very well described in the book, Ralph Vince «Mathematics money management»);
- Strict compliance with the trading system signals.
The last rule is easy done with the help of vending machines, as described in the journal «Currency speculator» in 2003 [1, 2], and use money management techniques in some cases, allows a loss-making system to create profitable.
Statistical analysis
In a real application to trade any mechanical trading system is thoroughly tested bektesting (testing mechanical trading system at a previous history of prices). If a trader knows that the system provides a gain of 80% of cases, we can assume that the results will be repeated in future. Wide range of technical analysis, neural networks with genetic algorithms to create and tested trading systems of any complexity, define and apply to trade in a lot of money management.
However, excellent results bektestinga conducted on historical data over the past few years, sometimes leading to disastrous results in real trading. The reasons may be several.
The first - the careful fitting optimiziruemyh options trading system. Check and optimize the efficiency of the system can be read: historical data are divided into equal segments, for example, for years, and test them separately, then compare the results.
The second reason - if bektestinge were not taken into account commissions and slippage (slippage in the performance of the application). Dynamic slippage can use volatility. For reference: the volume of requests up to $ 100 thousand for the RAO UES of sufficient magnitude slip 0.005 (tested experimentally).
The most important parameters to be disregarded in assessing the results of the trading system are:
- The average winning percentage of wins deal õ> Average losing trade x Percentage losses.
- Maximum Drawdown (decrease in accounts on the maximum value for the preceding period). In a large Drawdown, typically over 10%, to avoid the entire amount, but with a relatively small, you can use the «arm».
- Ratio Sharpe Ratio, which is used to assess the ratio of return and risk. The higher the index value, the better the performance of the system on its variability, and the smoother yield curve.
Some of the estimated parameters, given the program OmegaResearch Prosuite 2000I:
Net profit - total revenue produced by the system.
Gross profit - the total accumulated revenue of all the profitable deals for the period.
Gross loss - the total accumulated losses of all loss-making transactions for the period.
Open position - the gain or loss of all current open positions in the portfolio.
Ratio avg. win / loss - the average gain divided by the average loss.
Adjusted Gross Profit - total revenue minus all the profitable deals the square root of the total income of profitable transactions multiplied by the average of the winning transaction.
Adjusted Gross Loss - total loss of unprofitable transactions minus the square root of the total loss of unprofitable transactions multiplied by the average unprofitable transaction.
Adjusted Net Profit - Adjusted Gross Profit Less Adjusted Gross Loss.
Select Gross Profit - total profit of all the profitable deals minus profit «a popup» transactions.
Select Gross Loss - total loss of unprofitable transactions minuc loss «a popup» transactions.
Select Net Profit - total income (loss) produced by the system during the period of trade, net of all positive and negative «a popup» transactions.
Maximum Drawdown - the biggest intraday drop test system on a single outstanding transaction.
Average Drawdown - Maximum Drawdown average value for all transactions.
When building the trading system, it is important to be able to identify (formalize) fletovye trend and market movements, as well as use his volatility. One way to determine the trend could be an indicator ADX, or regression ADX. When zero or negative regression ADX system automatically switches to the Flat, and movements working against the market because of its volatility. Preferably, the ADX was raised from low values of 15-20. You can also use an approach reminiscent of the delta-neutral strategy in options when fletovom motion is calculated by the number of contracts / shares. The result of each transaction and, accordingly, the trading system depends largely on the outputs. The easiest way and most common way on the basis of money management - stop-loss, which protects the trade by preventing the catastrophic losses. Work without stop-loss - a recipe for waste. Stop-loss can be static (constant), dynamic (changing values, for example of volatility, ie, when volatility increases the size of stop-loss is increased) or the trailing stop.
Methods of money management
What are methods of money management? To cite a simple example: the initial amount in the account 1000 rubles, in the full amount of the account, the two transactions come one after another with the result of 20% - the first profitable, and the second loss. First, list the main methods of money management:
1. Operating a fixed amount.
2. Operation of fixed-interest account.
3. Serial inputs.
The method of successive inputs is used to build profitable positions. With each new signal system trading position build up the value of n, and when the signal at the output - is fully liquidated. Reducing the risk occurs due to the accumulated profits of the original entrances.
Method of operating a fixed amount is used to limit the risks on all accounts. When you log on to the deal the trader takes a fixed risk. This method is useful if the system has a long series of unprofitable transactions. After a successful logon to the transaction after the method of loss-making series of consecutive inputs. This combination of two methods of money management most suitable for conservative investors.
The essence of the method of operation of fixed-interest accounts is that the trader runs the risk of fixed-interest accounts, in the case of profit пo account position size increases with the increase in the account. Conversely, in the case of reducing the size of the account is reduced accordingly. To check and test methods for money management program for technical analysis OmegaResearch Prosuite 2000I developed applications Rina Systems, having all of the money management techniques, and portfolio testing systems.
Yuri Reshetnikov
References:
1. Reshetnikov Yu Exchange Technology: Integration with Netinvestor / / Currency speculator, 2003, № 3, pp. 58-60.
2. Reshetnikov Yu Backstage automated trading / / Currency speculator, 2003, № 6, pp. 99-101.
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