Tuesday, November 16, 2004

Trading System Ditties

  • Market orders only. I do not use limit or stop orders in my trading systems. In fact, to avoid slippage issues, I only enter orders for the market's opening print. This allows my backtest results to better fit real world conditions. Or is it, real world results better fit backtest conditions? Ha!

  • There is a stock picture and an overall market picture. Making sure the market and stock picture match your idea can improve the performance of your system. But, keep it simple. Try to use just one filter to determine the strength or trend of the overall market. Then drill down to your stock ideas. This approach is even useful in trading ETF's.

  • All of my long-term and most of my mid-term systems contain a trailing ATR exit system. I usually avoid a predefined profit exit system. I find it best to let the stock or ETF run where it may and let the trailing ATR do its work. This might not be the most efficient way to capture profit from a trend...but works for me.

  • I will also add a timed exit system to some systems. This helps avoid and/or limit the dreaded "dead money" trades.

  • It is okay to break the market into exchanges for your systems. I find that extremely useful in my stock trading systems. The New York Stock Exchange trades differently than the Nasdaq. Surprisingly, the American Stock Exchange is closer to the Nasdaq's behavior than the NYSE.. Maybe one day someone will tell me why.

  • The Nasdaq is my preferred choice in trading systems. The Nasdaq stocks as a whole tend to trend much better and tighter than the other exchanges.

  • I do not have access to foreign stock exchange data. It would be interesting to see how those stocks behave in accordance with my system rules and logic.
A quick little ditty on my background. I have been developing and trading systems for 4 years now. Before that? I was a chart reading swing trader. Before that? A tape reading daytrader. Before that? Someone who believed you bought stocks and kept them forever. My how times have changed.

Good Night.

Daily System Updates
Current open system positions:
  • CVT long with current profit of 0.98%.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

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