Hours spent developing a trading system

[pavilion103]

Just an update on my progress. I work full time 8:30-5:30 Monday-Friday
I spend 4 hours per night on Monday, Tuesday and Wednesday learning and developing my system.
Then I usually spend a few of hours on a weekend, bringing it up to 15 hours per week. I'm thinking maybe I should spend more time on the weekend.

Can I please get some advice on things I should be spending my time on.

I've read: Trade Your Way to Financial Freedom, Way of the Turtle, The Universal Principles of Successful Trading, How I made $2,000,000 in the stock market, Reminescence of a Stock Operator, The New Market Wizards, The Trading Athlete and about 6 or 7 other books. (any other recommended reading would be appreciated).

I've also downloaded the trial version of AmiBroker and spent a number of hours becoming familiar with that and learning the basics of coding and backtesting.

I'm currently also paper trading a couple of systems and update this every night. I'm also studying charts and price action to get a "feel" for the markets.

I'm spending a fair bit of time on here too recently looking up different topics.

I've probably only spent between 150-200 hours in total learning about trading.

Is there anything else I could be doing? Does anyone have any advice?

 

[Julia]

What are the results of your paper trading? You should care less about what people on a forum think compared to whether you are - at least on paper - achieving the results that you personally need to get.

Imo a bit of real life experience is worth a dozen books and 100 hours of reading.

 

[Wysiwyg]

Can I please get some advice on things I should be spending my time on.

My belief that it isn't all defined on a chart and a little company knowledge goes some way.


Here are the thoughts of an experienced system developer.

System design should follow some logic: evaluate your "signal strength" first.

I do things "my way" and try to ignore tradition. The only things I have learned from "other systems" are coding techniques.
You won't find the perfect system or the HG anywhere. Sorry to burst your bubble
In trading you have to do your own work or work in a group.
Whichever way, to attain above average results takes hard and innovative work. The following is jmo.

Since you may end up testing hundreds or even thousands (yes!) of ideas you need to be efficient.
Getting drawn into advanced system concepts, fancy stops, money management and creating fancy charts before you have a validated the basic signals is a waste of time.

By fiddling with all the above you increase the chance of 1) curve fitting and 2) drawing profits from what are essentially random signals. It is actually possible to take random signals and add so many "shock-breakers" to it that it becomes profitable (Tharp?). This, to me, is a totally "non-fun" way of developing systems, all you are doing is increasing your statistical odds to draw a little money out of the market.

The Popularization and Commercial Exploitation of TA encourages this approach.
Looking at fancy and colorful chart gives us ( I've been there! ) a feeling of accomplishing something important.
But are we really? Just go to your local bookstore and browse through some books or browse the web for TA software and you'll see what i mean. Tons of stuff out there that looks impressive but won't make you any money.
I have developed some standard code modules and placed them in my indicator space so that i can drag them onto my code under test and to plot trade prices, signals and equity. With this setup you can test hundreds of ideas a day.

Always look at the equity curve and try to get as many trades as possible - thousands if possible.
Numerical Stats don't mean a lot since they can be distorted by a single big loss or profit.
If this happens and the equity curve is good otherwise you can study the single event and add code to exploit, or protect against, it.

Best regards,
herman

 

[pavilion103]

Coming back to this was interesting for me.

I can see how time and practice adds up.

I'm curious as to how other people began their trading journey? Did you spend a period of time learning/testing? How long did it take you to become profitable? How many years did it take for you to truly feel confident in the markets?
Just how much difference is there between most successful traders of say, 3 years and 10 years +? How long did it take before being able to generate returns of around 25-30% p.a. ?

I know everyone's journey is different but interested to hear thoughts.

 

[tech/a]

18 mths the first one.
But now I know why a system is likely to be profitable it only takes a few weeks to knock one up.
Haven't done one for ages.

Id like to comment on the above (First time Ive seen it).

System design should follow some logic: evaluate your "signal strength" first.

I do things "my way" and try to ignore tradition. The only things I have learned from "other systems" are coding techniques.
You won't find the perfect system or the HG anywhere. Sorry to burst your bubble
In trading you have to do your own work or work in a group.
Whichever way, to attain above average results takes hard and innovative work. The following is jmo.

A lot of this can be avoided if you know why your coding is likely to give you a statistical edge---if you don't then yes you'll test 1000s of ideas and code variations---needlessly.

Since you may end up testing hundreds or even thousands (yes!) of ideas you need to be efficient.
Getting drawn into advanced system concepts, fancy stops, money management and creating fancy charts before you have a validated the basic signals is a waste of time.

The last bit is part of basic design knowledge.

By fiddling with all the above you increase the chance of 1) curve fitting and 2) drawing profits from what are essentially random signals. It is actually possible to take random signals and add so many "shock-breakers" to it that it becomes profitable (Tharp?). This, to me, is a totally "non-fun" way of developing systems, all you are doing is increasing your statistical odds to draw a little money out of the market.

So don't fiddle. Learn why you'll have an edge and code to that.

The Popularization and Commercial Exploitation of TA encourages this approach.
Looking at fancy and colorful chart gives us ( I've been there! ) a feeling of accomplishing something important.
But are we really? Just go to your local bookstore and browse through some books or browse the web for TA software and you'll see what i mean. Tons of stuff out there that looks impressive but won't make you any money.

Agree and thats why people keep buying books.

I have developed some standard code modules and placed them in my indicator space so that i can drag them onto my code under test and to plot trade prices, signals and equity. With this setup you can test hundreds of ideas a day.

Good idea but don't think you need to test 100s of ideas.
There are basically 3 ways to make up a system then you just need to code up a design that takes advantage of or places you in a position to gain the edge.

Always look at the equity curve and try to get as many trades as possible - thousands if possible.
Numerical Stats don't mean a lot since they can be distorted by a single big loss or profit.
If this happens and the equity curve is good otherwise you can study the single event and add code to exploit, or protect against, it.

Well thats what you want to catch that big out lier---in your direction!
But simply remove the top and bottom 3 or so trades from the test and see what you have left.

 

[Wysiwyg]

But now I know why a system is likely to be profitable

A lot of this can be avoided if you know why your coding is likely to give you a statistical edge

Tech/a I see you post this business about "why". I have never seen nor heard this suggestion before and wonder what it means?

 

[tech/a]

Tech/a I see you post this business about "why". I have never seen nor heard this suggestion before and wonder what it means?

Why does a system work?
Why will a system fail.

There are only 3 why's I know off.( other than arbitrage ).
Surely if you've played with systems they are clear to you?
I'll post them up later but others surely know.

 

[Wysiwyg]

Why does a system work?

The circumstances allowed it. The time period that it 'worked' is quantified.

 

[tech/a]

(1) it wins more often than it loses and total wins exceed total loss
IE 90% wins of .5R and 10% losses of 2R
Or
(2) it wins far more than it's aggregate losses.
IE 30% wins of 10 R and 70 % losses of 2R
Or
(3) a combination of (1) and (2)

If they fail to do any of these you will have failure of the system
If you know how ( in other words you know why) your trying to skew your system you won't spend hrs punching in stuff which has no hope of doing any of the above.

 

[Wysiwyg]

(1) it wins more often than it loses and total wins exceed total loss
IE 90% wins of .5R and 10% losses of 2R
Or
(2) it wins far more than it's aggregate losses.
IE 30% wins of 10 R and 70 % losses of 2R
Or
(3) a combination of (1) and (2)

To me, these are the end results of why a system is working or used to work. The system works because it is making a profit is not the reason 'why' it works.

 

[tech/a]

To me, these are the end results of why a system is working or used to work. The system works because it is making a profit is not the reason 'why' it works.

Well I'm not going to attempt to convince you.

 

[Spongle]

I have only paper traded thus far. (As I have no money)

The system I 'developed' used 3 things:

* Support and resistance
* Volume (applied as correctly as possible for a novice)
* Price (OLHC bars)

I have avoided indicators as a) I won't until I understand what they are telling me
b) many can be useless if not used in cunjunction with other information and so will not be of any use... they are not magical mathematical systems that s**t money for you.

I Picked 100 stocks from 10 very diffferent areas... 10 from each which I then culled down to 1 per area. I looked for the best PEG ratio and did some research on the companys themselves and picked out 'best one's which I further researched.

I then charted them and any that showed potential and probable results I 'invested' with my magical paper money...

I did this with 4 stocks at the end of all this the mean profit per annum was %27 profit.

I was pretty happy with that and I as sson as I have $10000 Ill's start again with real dosh.

So, so ,so, so ,so much to learn but so awesomely interesting.

So to answer you original query many, many, many hours will be going into developing a trading system for myself.

 

[pavilion103]

Wow, what a journey it's been so far. Almost 12 months working on trading and loving it.

I've commited just over 800 hours and am finally starting to get a grasp of things. I'm no where near where I need to be but I feel the base had been laid and I can build upon it.

The last month or so has been the best and it feels like the revelations are coming more and more.

I don't know if this is a guide for anyone else starting out but definitely persistence is required. So many days I haven't felt like working on this, and then days like today where I've spent more than 11 hours studying it and time flies.

Loving the journey.

 

[tech/a]

I have only paper traded thus far. (As I have no money)

The system I 'developed' used 3 things:

* Support and resistance
* Volume (applied as correctly as possible for a novice)
* Price (OLHC bars)

I have avoided indicators as a) I won't until I understand what they are telling me
b) many can be useless if not used in cunjunction with other information and so will not be of any use... they are not magical mathematical systems that s**t money for you.

I Picked 100 stocks from 10 very diffferent areas... 10 from each which I then culled down to 1 per area. I looked for the best PEG ratio and did some research on the companys themselves and picked out 'best one's which I further researched.

I then charted them and any that showed potential and probable results I 'invested' with my magical paper money...

I did this with 4 stocks at the end of all this the mean profit per annum was %27 profit.

I was pretty happy with that and I as sson as I have $10000 Ill's start again with real dosh.

So, so ,so, so ,so much to learn but so awesomely interesting.

So to answer you original query many, many, many hours will be going into developing a trading system for myself.

Spongle---you dont actually need a great deal more!

Wow, what a journey it's been so far. Almost 12 months working on trading and loving it.

I've commited just over 800 hours and am finally starting to get a grasp of things. I'm no where near where I need to be but I feel the base had been laid and I can build upon it.

The last month or so has been the best and it feels like the revelations are coming more and more.

I don't know if this is a guide for anyone else starting out but definitely persistence is required. So many days I haven't felt like working on this, and then days like today where I've spent more than 11 hours studying it and time flies.

Loving the journey.

I remember a Young Duck who was very similar to yourself.