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trading strategy optimization using genetic algorithms

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michal.kreslik
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Postby michal.kreslik » Sun Dec 03, 2006 8:19 pm

traxino wrote:Hi Michal,

I´m using TSGO. Could you give me some tips how to build a
consistantly profitable system?!

Regards

Peter


I'm trading consistently profitable systems for my clients. How to build one? It takes blood, sweat and toil :)

Now seriously: there are many ways to build a consistently profitable trading system. Yet the most frequent trouble most traders run into is that one has to go step by step. It's futile to think you read the first book on trading systems and you automagically become a trading system development guru. The issue is quite complex.

Michal

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eudamonia
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Postby eudamonia » Mon Dec 04, 2006 7:25 pm

Good points Michal.

My suggestion for anyone posing this question is to ask themselves what "profitable" really means. Many traders scoff at systems that trade less frequently but this is actually the best place to start. For example I have several excellent systems that trade Forex that only issue about 10 trades per month - however, they are extremely simple (a few lines of core code) and they are indeed profitable (although they can experience fairly modest drawdowns).

On the other hand I have several daytrading systems that trade the ER2 and ES. These systems are also fairly simple, however, they either have to be reoptimized (intelligently) at fairly frequent intervals, or they decay. The smaller the time frame and the more frequently the system trades, the faster it will become obsolete. You are fighting commissions and slippage that threaten to eat your meager profits and attempting to fend off thousands of other hungry (and very intelligent) traders who want to have your profits for breakfast.

So which trader do you wish to be?
Eudaimonia (pron.: you-die-moan-e-a) (Greek: εὐδαιμονία) is a classical Greek word commonly translated as 'happiness'. The less subjective "human flourishing" is often preferred as a translation.

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michal.kreslik
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Postby michal.kreslik » Mon Dec 04, 2006 10:20 pm

Ed, great to hear from you again :)

My best "production-level" system generates about 12 trades a month and only gets several pips every time. But it takes those several pips with a 95% probability, so it pays off. Indeed, I was looking for a system that would make 50 pips a day, too, but I have yet to find such a system.

Anyway, I don't care about the number of pips made by individual trades. Provided the system has positive expectancy, I do care about the linearity of the equity curve only.

The more linear the equity curve, the more aggresive position sizing one can implement and the less time it takes to get Bentley Continental Flying Spur :)


Michal

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eudamonia
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Postby eudamonia » Tue Dec 05, 2006 5:11 am

Michal,

Sorry I've not been keeping up too much at the forum lately. I've been pretty busy just trading and developing systems.

Yes, linear regression is as close to a holy grail as one is likely to find. It is important to focus on the consistency of your returns more than overall returns.

BTW, I'm still slowly learning C# and NT. Eventually I will make my way over to that corner. For now I'm happy to learn and trade progressively better each day.

Edward

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