Publication number: ELQ-25847-1
View all versions & Certificate
Creating a Mechanical Trading Model
Shortcut to Discovery. Learn to create a Mechanical Trading Model
Detailed and outlined below are the primary building blocks one can use to construct a successful, fully mechanical trading model. Establishing and utilizing core techniques, ideas and strategies that have been rigorously tested, a firm foundation is established on which many mechanical trading systems can be created and built upon for trading a broad range of markets.
Foundational Components for the System Trader Modeling Mechanics
Understated, would be the use of the word "complex," to describe the process required to develop a robust and fully mechanical trading model or system. Only with the advent of the computer have we been able to analyze and test theories and ideas which would have been previously impossible to calculate in a practical, thorough and timely manner.
Psychological attitude is a key element to any endeavor and trading is not an exception. The researcher’s mind must be open and free from misconceptions. Throughout the development
process, an open mind and the attitude that anything is possible must be preserved as well as
actively pursued. A tenacious commitment and a passion for the process of discovery are also good
traits to acquire and cultivate.
If we are to have any success trading the markets, we must rely upon a well−planned mechanical strategy. A mechanical system is nothing more than an idea, which has been tested and then, automated. Mechanical research allows a trader to discern a good idea from a bad idea. Being able
to examine facts and not rely upon human emotions will provide the trader a much more solid foundation for a successful trading system. Modeling a system produces a significant benefit in that
capital is preserved through the process of being able to reject many ideas when subjected to
computerized back testing. Mechanical trading will not, by itself, overcome the emotional side and
aspects of trading. However, after a period of testing, time and real−time trading experience, you
will be able to gain confidence if you have a sound method and system.
Long−term commitment to mechanically trading the markets requires proper capitalization coupled
with a total commitment to following the system. The capitalization and investment that is required
to endure the inevitable system drawdowns is not to be taken lightly. It is highly recommended that capital allocated to trading the markets or a respective system be only the "risk capital" portion of a person's total available investment portfolio. Typically, it would not be unreasonable to expect a
perfectly sound/robust trading methodology to exceed its tested maximum historical drawdown
percentage by a factor of two (2). This unforeseen and statistically more valid drawdown calculation
will, more often than not, happen sometime in the future. A serious and also very common detriment
to capitalization is the desire to over trade.
This business tool includes
MarkBrown.com offers you this business tool for free!
read for free
Add to bookmarks
- No review yet!
People using this tool also downloaded
How to Make Your Financial Model Look ProfessionalThis tool provides Before and After examples to show you how you can make your models look professional.modelinginvestorsfundraisingfinancial modelingexcelspreadsheetprofessionalcredibilityappearanceappearance matters110 remove_red_eye
2017 Finals: Castles in the AirExcel training/competition model from the 2017 Financial Modeling World Championshipscompetitionpropertymodelingportfolio48 remove_red_eye
Black-Scholes Excel Pricing ModelA mini Black-Scholes Excel model, just hit and go!financeoption pricingblack-scholesstockputcalloption valuefinancial marketsalgorithmspricing modelsmathematics283 remove_red_eye
2017 Finals: Data DivingExcel training/competition model from the 2017 Financial Modeling World Championshipsmapcompetitionanalysismodelingdatalocation70 remove_red_eye
Private Equity Fund/ Venture Capital Financial ModelFinancial Model illustrating the basic economics of a VC or Private Equity Fund.financeequitymodelingventure capitaleconomicsspreadsheettoolkitprivate equity fund492 remove_red_eye
Monte Carlo Simulation Excel ModelMonte Carlo Model generated in excel with explanatory article included to guide you block-by-block through the code.modelingexcelsimulationmonte carlo229 remove_red_eyefreeby Frank Gary
Stock Analysis Excel Model (Ver. 3.0) - Safal NiveshakA 16 tab Stock Analysis Excel Model Template to analyse the past performance of a company and determine its valuation.analysisvaluationinvestingstock analysisperformance analysisfinancial marketsexpected returns2,250 remove_red_eye
Freemium Business ModelCustomize a ready-made financial model for your Freemium Web Services Businessfinancemodelingfinancial modelstartupsventure capitalraising capitalfreemiumuser acquisitionuser activationentrepreneur2,428 remove_red_eye
How to Calculate Volatility in ExcelA simple methodology and excel file to learn how to compute stock volatilityfinancehistoricalfinancial marketsvolatilitystocksrealisedstatistical678 remove_red_eye
Startup Viral Growth Excel ModelModeling viral growth at your startup: excel model and explanatory article to walk you through the spreadsheet.modelingexcelviral growthspreadsheetsviral207 remove_red_eye
Any questions on Creating A Mechanical Trading Model?
The user community and author are here to help. Go ahead!