Saturday, November 29, 2008
Friday, November 28, 2008
The second major step Aronson talks about is a bootstrap or Monte Carlo test in order to verify if the setup was obtained by luck. Aronson offers code for a variation of the Monte Carlo test on his website here. I think he makes an excellent argument for the importance of this kind of testing, and I plan to do that too.
The question is where does all this leave my existing setups. Until I've done all this testing, I don't think I have much choice but to include a bit of discretionary technical analysis in the picture when I'm trading these signals. I might, for example, consider trading some signals with a tight stop - for example, a two-percent drawdown stop. Trading the system until now the way I've done has been an important education on the value and challenges of mechanical trading - more so than any paper trading could have been. And I think the signals still have great value in guiding trading decisions. But until I go through the important processes above, I feel like I'm taking on too much risk. On the other hand, the tests above will hopefully lead me to a super-robust trading system. Until then, I will still post the signals weekly and give my take on what the data is saying, as well as give updates on my system development progress. See you later today or sometime this weekend with an update on this afternoon's COT data.
Friday, November 21, 2008
Thursday, November 20, 2008
Monday, November 17, 2008
Friday, November 14, 2008
TAGS: Nikkei, gold, BKX, Bank Index, copper, S&P 500, SPX, COT, Commitments of Traders, derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission, COTs Timer, out-of-sample testing, walk-around testing
Monday, November 10, 2008
Hope you had a good weekend. Just noticed this morning that natural gas jumped right up to resistance at the earlier highs of Oct. 20, Nov. 4 and Nov. 5 and at the Tom DeMark sell line on the 15-minute chart. Now it's selling off again. Wow - nice patch of resistance around $31.25. If it breaks out, I'll consider a short-term trade.
Friday, November 7, 2008
TAGS: natural gas, COT, Commitments of Traders, derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission, COTs Timer, out-of-sample testing, walk-around testing