Show Notes
In this week's episode of Line Your Own Pockets, we discuss a question submitted by long-time list member, Matt H., about signal strength. How strong should your signal be when creating a trading strategy? It depends... Topics include: Stronger signals make strategy development easier A weaker signal can be viable, but in this case the filters do more of the work The more filters contribute towards the edge, the more curve-fitting risk My favorite strategies are those where the signal is "hiding in plain sight" And much more... No matter where you are in your strategy creation process, you'll get something out of this episode.
--- Before you go! The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course. I hope to see you there!
More from Line Your Own Pockets
In this week's episode of Line Your Own Pockets, we discuss which metrics to use to evaluate trading strategies. There's no shortage of these - just look at the default report in an Amibroker backtest - there are dozens! Topics covered: Why it makes no sense to optimize on just one metric If you had to choose one "metric," make it the equity curve. There is no perfect set of metrics, just like there's no perfect trading strategy Which metric gets our vote as the most overrated (hint: it's not win rate) Optimize for an easier trading life rather than maximum return And much more... There's something for everyone in this one.
In this week's episode of Line Your Own Pockets, we answer a multi-part question from long-time list member Chip D.S. (name used with permission). The first part of his excellent question: Do you typically optimize longs and shorts separately. assuming there are enough trades after the split. You have a couple newsletter articles that mention "directional" columns...so there must be situations where you think optimizing them together is best?We discuss: Why optimizing separately is a good default, but not a set-in-stone rule Look for commonalities when optimizing the long versus the short trade sets How "directional" columns are useful when combining long and short trade sets When going live with an Amibroker strategy, how to strip down the code to make it run fast And much more...
We interview Steve Bravo from Massive (formerly known as Polygon.io). I passed along several questions from MabeKit Mastermind members, who brought up some good ones. We discuss: Why there are so many data providers and what makes Massive unique Why the name change? (They changed from Polygon to Massive several months ago) How AI has changed the data business - dramatically Discrepancies between data vendors and what causes them What's coming next from Massive? (L2, fundamentals, etc) And much more... Thanks to Steve for joining us!
In this week's episode of Line Your Own Pockets, we discuss a question I received from a reader named Sridhar. He recently went live with 8 automated trading strategies - and none of them are performing well. In his words (used with permission, excerpted for clarity): Sridhar: Hi Dave, I'm struggling at the moment, and you're the person whose judgement I trust most on this. In less than 2 months, I found up to 8 intraday strategies, each with >1.5 PF, each researched to a locked backtest. The results don't match the effort. I'm down about $16.8k net of commissions since mid-July, and I've been red on 22 of 35 trading days. I hope things can turn around, but honestly, I'm losing spirit a bit. The process and the engineering are strong, and I'm still losing money. I'd really value your perspective. We discuss this in detail in this episode, with concrete steps to improve and identify the mistakes. Topics include: Start with 1-2 strategies rather than 8 Trade tiny at first - you can learn a lot with minuscule size, so you can avoid "paying tuition" to the market How to plan for drawdowns before they happen Don't "build the pedestal" - use established backtesting software and focus on the important thing: the strategies Only scale after the market has given you concrete feedback that your process is sound And much more...
In this week's episode of Line Your Own Pockets, Michael and I have a heated discussion on swing trading versus day trading. It starts innocently enough with a question about how to backtest a swing trading strategy with a "trail forever" component. But then it quickly turns into a swing trading versus day trading cage match. We do finally end up agreeing on the fundamental approach to backtesting a swing trading strategy - barely.