When backtesting and optimizing your trading system using Amibroker, or any other trading software, you need to be careful how you deal with outlier trades. If you include all outlier trades when you optimize you run a very high risk of curve-fitting your trading system to a small number of the biggest winning trades.
Stocks that go on trading halt for an extended period of time really drive me bonkers. This happened to me 12 months ago and the stock is still on trading halt – I can’t get my money out!
The lesson is to make sure every trade is only a small percentage of your capital because if trading in a stock is halted there is nothing you can do but wait, and you don’t want to be stuck with a large position that you can’t get out of!
If you have ever asked “What stock should I buy?” or “What is the best trading system?” then you really need to watch this video. These questions are extremely common, BUT it is a HUGE trading mistake.
I was visiting the Guinness Book of Records museum with my family in Los Angeles today (my kids love that stuff…) and it got me thinking about all the people who spent their lives trying to break a record. So few actually break world records, even in obscure activities, but people still try!
If you want to succeed as a profitable stock trader for the next 10 years or more then you need to NOT be like people trying to break a record… you need a higher probability approach.
In trading this means having a high probability of profit over many trades over many years. Too many traders act like they want to get rich by next week, but that only guarantees their failure in the long run because they end up blowing up and losing everything!
Some plants are highly Specialised and can only survive in very narrow conditions… some are robust and can live almost anywhere. You need your trading system to be like the plants that survive everywhere. It doesnt have to make money in every market, but it does have to keep your account alive no matter what happens in the stock market!
You wont believe what happened – I had to have a rant about it! This is why Backtesting EVERYTHING for yourself is so important. Learning how to backtest correctly is the number 1 skill for technical traders.
Are you at risk because you havent backtested your stock trading systems?
Some trading systems are very finely tuned to a particular set of market conditions. The result is they work well for a short period of time and then as soon as the market state changes they lose money rapidly… will your trading system survive a change in market conditions?
Some trading systems are very finely tuned to a particular set of market conditions. The result is they work well for a short period of time and then as soon as the market state changes they lose money rapidly… will your trading system survive a change in market conditions?
I am sitting around bored out of my mind while the removalists pack my house so we can rent it out while we travel for 9 months as a family… I am making a nuisance of myself and getting in the way while I wait for them to clear out the house.
Annoying in the real world, but the same thing happens in the markets when you get bored too… but it is much more dangerous!
In this first episode of "The Great Trading Debate", Adrian Reid from Enlightened Stock Trading debates with Brian McAboy from Inside Out Trading about which is more important, Your Trading System OR your Trading Psychology. Comment below and let us know what YOU...