Category Archives: Trading System Analysis

Analysis of the Timing Ability of a Machine Designed Trading System

The timing ability of a machine designed trading system for SPY is analyzed using random data.  The performance of a system designed on random data is compared to that of a system designed using actual data. The hypothesis that the system that … Continue reading

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PAL v6.0 is Coming

Version 6.0 of Price Action Lab will be the most comprehensive update to the program ever released. It will include several new and useful functions for both discretionary traders and mechanical system developers. More details and a special offer follow. Share

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Quant Trading Software For Systematic and Discretionary Traders

Price Action Lab (PAL) is a software program that is used by quantitative traders and hedge funds around the world for algo discovery and discretionary trading. In this article the main features of PAL are presented. Some links to useful articles about trading are also included. Share

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The Passive Indexing Buy and Hold Crowd Should Reconsider

They should reconsider their unreasonable stand against active management after taking a closer look at the enclosed chart. In my opinion, 15 trades in 13.5 years are not such a big deal for the type of dramatic improvement in returns. … Continue reading

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Fooled by Random Backtesting

Backtesting trading systems on historical data is again becoming popular almost 30 years after it started being used by individual traders due to recent advances in web technology and server speed that allows its online implementation. If one knows what … Continue reading

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Significance of a System For Trading SPY

The SPY2p5 system was machined designed on April 4, 2012 by Price Action Lab using an in-sample from SPY inception (01/29/1993) to December 31, 2008. Then the system was validated on unseen data, called the the out-of-sample,  from January 2, 2009 … Continue reading

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Fooled by Randomness and Monte Carlo Simulations

Random trading can produce high positive returns as well as very low negative returns. In a post a week ago with the title Random Trading Versus Trading Randomly I included distributions from random SPY trading and I showed how they impose limits … Continue reading

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Random Trading Versus Trading Randomly

Suppose a trader has purposely used a random system to trade SPY since its inception. What was the probability to make annually more than the buy and hold return? Or suppose a trader has worked hard to develop a trading system that generated a positive … Continue reading

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