Articles

Advances in technology have been the driving force behind the change and growth in the world of market speculation. One of the many recipients of faster and stronger technology is system trading as high speed computers now help retail and institutional traders develop systems, crunch numbers, and back test hypothetical results in seconds. In the world of professional money management, I have seen plenty of trading systems. Ironically, most don't seem to work and of the ones that do, they typically work for a bit and then fail. Being on the education side of the industry as well, I have seen hundreds of automated systems yet, I can only say that I have seen less than a hand full actually produce a consistent profit year after year. I...

At Rockwell Trading we develop and test up to 25 trading systems a month. The 10 Power Principles for Successful Trading Systems is a set of rules we established and refined to help us effectively evaluate a trading system. Using these Power Principles you too can find solid trading systems - whether they be those you develop yourself or those you obtain from other sources. You can be assured of a high probability of success by applying these simple principles. Principle #1: Few rules - easy to understand It may surprise you that the best trading systems have less than 10 rules. The more rules you have, the more likely you "curve-fitted" your trading system to the past, and such an over-optimized system is very unlikely to produce...

Mechanical systems do not work. Let me rephrase that. Backtested over several years of data, mechanical systems do not show a sufficiently consistent profit and an acceptably low drawdown for the small trader to trade consistently, comfortably, effectively and economically. To expand on that further, the results of a coded mechanical system might well show periods of excellent profits but, virtually without exception, they will also have draw-downs that most small traders would not be able to tolerate. In addition, most systems tested over several years invariably have considerable periods of losses, usually running over months if not years, plus long runs of losing trades. If you start trading a mechanical system at the wrong time...