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 Best Practice includes
MarkBrown.com offers you this Best Practice for free!
read for free
Add to bookmarks
- Be the first to review this PDF File Format
Write a review
People using this Best Practice also downloaded
2017 Finals: Funding FunExcel training/competition model from the 2017 Financial Modeling World Championshipscompetitioninvestmentequitydebtmodeling277add_shopping_cart
OneClick Australian Stock Prediction Using Monte Carlo and Brownian Motion in PythonMonte Carlo and Brownian Motion Models Python script to predict future stock movements.investmentsfinanceaustraliafinancial modellingfinancial markets64add_shopping_cart
2016 Round 2, Section 2: Fund the FutureExcel training/competition model from the 2016 Financial Modeling World Championshipsinvestmentfinancemodelingforecastreturn90add_shopping_cart
How to Apply The Central Limit TheoremLearn how to apply the Central Limit Theorem in Statistics.datastatisticsdata science365 data sciencecentral limit theorem36add_shopping_cart
How to Boost your SEO (Search Engine Optimization) for your published Eloquens Best Practices💎SEO stands for Search Engine Optimization.🤓 The successful process of naturally obtaining traffic from Search Engines.✅strategiesoptimizationtrafficseosearch engine optimization40add_shopping_cartfreeby Eloquens Team
2016 Round 2, Section 4: Maximize the BenefitExcel training/competition model from the 2017 Financial Modeling World Championshipscompetitionassetsmodelingmanufacturingtax98add_shopping_cart
How to Model a Multi-sided Business (Facebook Lean Canvas)How to put together a multi-faceted business model.modelingbusiness modelstartupentrepreneurshiplean canvas285add_shopping_cartfreeby Ash Maurya
How to Use Student's T DistributionLearn everything you need to know about Student's T Distribution.datastatisticsdistributiondata science365 data science32add_shopping_cart
Real Estate Excel Financial Model TemplateA detailed Real Estate Financial Model brought to you by CFI to help you successfully model your development project.investmentprojectreal estatemodelingfinancial model1,370add_shopping_cart$100.00by CFI
Descriptive statistics for grouped (weighted) dataCalculating key statistics measures (average, median, standard deviation, skewness etc.) for grouped or weighted datastandard deviationexcelcorrelationstatisticsmedian968add_shopping_cartfreeby Andrei Okhlopkov
Any questions on Creating A Mechanical Trading Model?
The user community and author are here to help. Go ahead!