Rule-Based Trading Systems

[capt_jmj]

As a full time trader/market analyst doing my own trading in addition to supporting a hedge fund, I have become convinced that having multiple trading strategies is the way to go. A daily trade system with an historical signal success rate in the 60 - 65% range will make you good money over the long term if you have the patience and discipline to allow it to work for you, but in highly volatile markets with frequent tradable reversals, it will also miss a lot of intraday opportunities (the Nyquist-Shannon problem) that can be effectively captured with an adaptive, dynamic, automated intraday strategy. Maybe you are better, but I have found in spades time after time that unless you have the "gift", seat-of-the-pants approaches driven by emotion will ultimately fail. You hit a hot streak and think you are golden, but then the market smokes a few fast ones by you to stun you back to reality.

Here's a relatively simple dual indicator (RSI and SS) strategy implemented on the TradeStation desktop (this is not an advertisement for TS; they are just who I use). This strategy is used to trade the NQ futures intraday and produces ~ $2K - $3K trading one or two contracts in a pyramiding scheme over ~ 10 market sessions, which should be on the order of ~ 40%/month for a $10K account. At $3.5K/contract initial margin requirements, a minimum account balance of $10K - $15K would be more than sufficient captial to cover the worst case drawdowns. One caveat is that these settings are a snapshot in time and will need to be frequently reoptimized to stay "in tune" as the live trading performance unfolds.