Category Archives: Trading System Design

Chart Analysis is Not a Trading Method

Posted on May 16, 2012 by Michael Harris

Chart analysis can provide a context for experienced discretionary traders for coming up with subjective probabilities, which are then updated by proven, high expectation methods. Chart analysis alone is a negative expectation trading method because charts nowadays are available to everyone with access to the Internet.

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New Metrics that Make Sense are Rare

Posted on May 4, 2012 by Michael Harris

There are many metrics one can use in a search for trading systems. However, just a handful of the metrics are useful and the rest are either derivatives of them or lead to excessive curve-fitting to specific series. Some new metrics that are proposed constantly even collapse … Continue reading →

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Technical Trading: The Winners and Losers

Posted on March 24, 2012 by Michael Harris

Technical trading is not as easy to define nowadays as it was in the 1980s when it become popular. It is no longer limited to technical analysis and indicators but encompasses a wide variety of methods. Most of the methods are well-known, … Continue reading →

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The Secret to Profitable Trading

Posted on March 20, 2012 by Michael Harris

Regardless of your market and timeframe, profitable trading requires that the profit expectation is greater than zero. However, this is a requirement of profitable trading and not the secret as some book authors and academic types argue. The secret is finding … Continue reading →

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Automated Discovery of Trading Strategies

Posted on March 17, 2012 by Price Action Lab

There are many ways of accomplishing automated trading strategy discovery. The idea is simple in principle: historical data is used to discover strategies that fulfill certain performance criteria. Implementing the idea is not a simple task, as certain approaches for solutions … Continue reading →

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The Most Important Performance Measure of Trading Strategies

Posted on March 16, 2012 by Michael Harris

Shortly after my post on Kelly maximization I received a number of emails from traders who are developing systems but are, understandably so in my opinion, a bit confused about which performance criterion or criteria to use when evaluating them. I understand why those … Continue reading →

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Maximizing Kelly is Equivalent to Maximizing Win Rate

Posted on March 12, 2012 by Michael Harris

My recent post on optimal trading using the Kelly formula has generated a lot of responses, questions and even challenges. A few readers have asked questions that, as they think, hide the key to the “holy grail” of investing and trading. However, as I … Continue reading →

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Some Interesting Statistics and How to Play an Overbought Market

Posted on February 9, 2012 by Michael Harris

Overbought readings of current magnitude in NASDAQ 100 and QQQ have also occurred since the beginning of 2010 during three different time periods. It is however very interesting that nothing of this sort has taken place for a period of 10 years before that. Is this … Continue reading →

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I Need Two Losing Investment Strategies to Win – The Paradox

Posted on January 18, 2012 by Michael Harris

If you analyze the joint dynamics of two losing investments or trading strategies properly you could end up with a winner. It is hard but possible. This is related to Parrondo’s paradox.

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Identifying High Reward-Risk Opportunities for Short-Term Trading

Posted on November 17, 2011 by Michael Harris

Last month I presented examples in two posts (first and second) of high reward-risk patterns discovered with the help of Price Action Lab in the popular ETFs SPY and QQQ. In this post I will show that such patterns may be found in S&P 500 E-mini … Continue reading →

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