Saturday, 6 August 2011

A week of testing new ideas

While on holiday, I have been pondering on a major trading theme that we wish to develop, that of a collection of "slow" systems to add to what we do now. "Slow" is, of course, relative. These systems would trade each market 3 or 4 times a day, rather than the 10-12 times we get at present. They would hold out for larger gains per trade, and would be more tolerant of adverse swings, and so on.

I came back from holiday with a rough spec. Jerome was on holiday this week and so I faced a choice between doing the new research work or trading the current systems all day on my own. I have chosen the former and have made huge progress over the week. But this has meant that we haven't traded through one of the most extraordinary weeks I have seen in the markets for some while.

Monday opened with relief that the US debt ceiling would be raised, the FTSE responded by opening strongly higher and hitting a peak of about 5950. But it has been down hill all the way since then with a close on Friday of 5250, a loss of close to 12% from its high. The sovereign debt crisis in Euro-land is to blame.

And as I have processed the test of the new systems, it is apparent that they would have done very well this week. Indeed absurdly well. For instance, the US equity trading system (which trades the Dow Jones Industrial Average), would have been up 400 pts on Friday alone - that's a return of 3.5% unleveraged for one day. Incredible stuff.

However, before we get upset that we have missed out, it should be noted that one of the key features of the new approach was only devised and programmed on Thursday and it is this adjustment, that is the main reason for the fine performance on Friday. So overall I am not that bothered about missing out on a great week. What matters is the next 200 weeks.

I am dying to discuss this more with Jerome this weekend and get cracking on implimentation from Monday.

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