#032: AROUND THE WORLD WITH AUTOMATED TRADING
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DISCLAIMER:  Futures trading systems and commodity trading bear a high degree of risk. People can and do lose money.
Hypothetical results have many inherent limitations. Past performance does not guarantee future results. 

 

ACTUAL RESULTS SHOULD BE VIEWED WITH CAUTION, BECAUSE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

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#032: AROUND THE WORLD WITH AUTOMATED TRADING

Trading is one of the few professions that gives you the freedom to set your own hours, make unlimited income, and live on a diet of rice and beans. But if you play your cards right, you may be able to replace the rice and beans with something more lavish. I am talking more than food.

 

During the last 6 years, I have been fortunate enough to travel to more than 60 countries, fully financed from my automated trading earnings. I have learned how to manage my trading business from anywhere in the world and what steps I need to take to keep making money in automated trading. I´ve also learned what it takes to develop really good, viable strategies. In this article, I will explain five of the most important and the most challenging hurdles, and how I learned to overcome them.

 

 

1. Finding a Good Trading Strategy

 

This is about as difficult as nailing jelly to your whiteboard.

 

Over the years, I have learned that creativity and experimentation are the keys to finding if I want a viable strategy. I don't look for “popular” systems anymore. I find that widely available strategies seem to fail quickly because they become public knowledge. I always look for new ideas through heavy experimentation and by staying in my "high-creativity" mode.

 

I love experimenting with any crazy idea that I can come up with, and sometimes am surprised by the interesting strategies such crazy experimentation can bring.

 

In my case, I realized that traveling usually brings me into a highly creative state (as well as meditation that I practice daily). I get most of my great ideas during my travels, when I am forced to act out of my daily routine. That's when a lot of “out-of-the-box” ideas come to my mind.

 

My general advice is this: Don't be afraid to experiment. Try anything you can come up with - sooner or later it will pay off. Don't be afraid to combine indicators, use different time frames, or see what happens when you use an indicator in a way other than how it's supposed to be used.

 

For example, I like to use two time frames (a higher time frame helps to filter out noise) and my best experiences have been with breakout strategies. I like dividing a breakout strategy concept into several components and then think about how I can bring some new idea into each component. You can always give a component an interesting “twist” that could lead to a great strategy. This makes strategy development an exciting process.

 

2. Do Away With the Crud

 

Using someone else's trading strategy may not work so well for you. That's the reason I develop a thorough methodology for testing robustness to find out what could be a viable strategy in the future. I advise any trader to spend at least as much time testing for robustness as with strategy development, if not more.

 

I prefer spending time on walk-forward testing, regular optimization, and validation of strategy in other markets within the same market group. I also always develop a strategy on only a small part of the available historical data.

 

My methodology generally looks like this:

 

  1. I have an idea.

  2. I test it on a small part of my data history.

  3. If it's promising, I perform extensive walk-forward testing on 80% of all my data.

  4. If all looks okay, I validate the strategy on the remaining data (20%).

  5. If it still looks okay, I verify whether the strategy shows some reasonable results in another similar market or other time frames.

  6. I paper-trade the strategy for several months before I start live trading

 

You can download the rest of the article for free here, or read in June 2016 issue of Technical Analysis of Stocks and Commodities (traders.com).

 

Happy Trading!

 

Tomas

 

 

 

 

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What others are saying

"Tomas is one of the most creative traders I know. He is able to generate unique trading ideas and elegant solutions to system development challenges."

Andrew Swanscott, BetterSystemTrader.com

"Tomas has been a professional trader for more than a decade and I have had the privilege of monitoring his accounts in action since 2006. His systems are performing as some of the best I have ever monitored and executed. I have been in the trading industry since 2002 and worked with many developers from all over the world. Tomas is definitely the one to consider."

Martin Lembak,

Systems Trading Expert,

MFRM, CAIA 

"Tomas is a professional trader, who for the last 10 years has specialized in developing trading systems. We have been tracking his trading systems for about 5 years and they generally show very robust, stable and above average performance. Striker is pleased to work with someone like him - a real professional with enthusiasm and deep knowledge of trading."

William Galwas, President Of Striker Securities, Inc 

"Personal consultation with Tom helped me to re-evaluate the complexity of my robustness testing and optimization processes. Plus, it has helped me with a specific plan on how to take things forward. It has given me some great ideas on how to avoid overfitting and make my testing more robust and provided tips on low hanging fruit in terms of the best markets to trade for intraday/short-term breakouts."

Craig Peters,

semi-advanced trader,

United Kingdom 

"Tom's approach to Automated Trading Strategies design, tests of robustness and portfolio diversification is really unique. He has been a professional trader for many years and the depth of his understanding of Breakout strategies and Market Internals is hard to find elsewhere."

Antonin Fisher,

Hedge Fund Manager,

Czech Republic 

"Tom´s systems and trading approach do really work and can bring good, stable and reasonable returns. I can highly recommend him as a teacher."

David Hruby,

Trader, Czech Republic 

"Tomas is truly an inspiring mentor and great trader with a positive life attitude. He has got very deep understanding of markets, breakout strategies, robustness testing procedures, and Market Internals."

Jan Lesanovsky,

Client, United Kingdom 

"As an experienced trader, I used Tomas´s consultation to get more clarity on best-practise robustness testing procedures, risk management, and portfolio management. He was quickly able to help me refine my current trading and system development approaches, and pointed me to really practical measures that I could implement immediately. I found Tomas to be not only extremely knowledgeable but very helpful and a great teacher. This has given me more confidence in developing robust strategies that work, and I would recommend his mentoring as extremely valuable for any systems trader."

Trevor West,

advanced trader, Australia 

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