Friday, July 31, 2015

On-Going Research: Meta-Systems with Customized Trading

As one observes these chaos systems especially the Tick systems, it becomes apparent that their performance curves are actually showing something about market structures.   If a performance curve of these systems is dipping, then that says something about real market states and if the performance curve is doing well then that shows something too.  

Because there is a correlation between the algorithm performance curve and market states, what if one were to try and take the performance curve itself as an input for a "meta" trading system?   In its simplest form one could literally plot a moving average lines of the performance curve and trade only when there are positive crossovers!   Or graph a channel taking trades with a system only when its performance curve is inside a channel    Technical analysis not on the market but on the performance curves of systems trading the market is the idea.  

There is actually one technical indicators vendor, Customized Trading www.customizedtrading.com  that provides Tradestation OOEL strategies to precisely this sort of technical analysis on existing system performance curves and trade them only when things are looking good    This can significantly reduce drawdowns and enhance a nice system into a really nice system

The OOEL Equity Switcher Strategy available here: http://www.customizedtrading.com/ooel/trade-equity-curve     And the process of experimenting with it to improve Chaos Tick systems is in progress.  

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