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Index
Cover
Series
Titlepage
Copyright
Dedication
Acknowledgments
About the Author
Introduction
Who Can Benefit from This Book?
PART I A TRADER’S JOURNEY
CHAPTER 1 The Birth of a Trader
My Moving Average Debacle
CHAPTER 2 Enough Is Enough
Research
You Can’t Lose—Or Can You?
Averaging Down—Adding to Losers
The Wild Man Emerges
Time to Evaluate
CHAPTER 3 World Cup Championship of Futures Trading® Triumph
2005
2006
2007
Reflections on the Contest
CHAPTER 4 Making the Leap—Transitioning to Full Time
Confidence
Capital
Living Expenses
Family Support
Home Office Setup
Trading Strategies
Brokers
Free Time
Taking the Plunge
PART II YOUR TRADING SYSTEM
CHAPTER 5 Testing and Evaluating a Trading System
Historical Back Testing
Out-of-Sample Testing
Walk-Forward Analysis
Real-Time Analysis
CHAPTER 6 Preliminary Analysis
CHAPTER 7 Detailed Analysis
What Is Monte Carlo Analysis?
Inputs to Monte Carlo Simulator
Limitations of the Simulator
Simulator Output
Summary
CHAPTER 8 Designing and Developing Systems
Isn’t It All Just Optimizing?
PART III DEVELOPING A STRATEGY
CHAPTER 9 Strategy Development–Goals and Objectives
CHAPTER 10 Trading Idea
How Will You Enter a Market?
How Will You Exit a Market?
What Markets Will You Trade?
What Type of System Do You Want?
What Time Frame/Bar Size Will You Trade?
How Will You Program the Strategy?
CHAPTER 11 Let’s Talk about Data
How Much?
Pit or Electronic Data?
Continuous Contracts
The Impact of Electronic Markets
Testing with Forex Data
Summary
CHAPTER 12 Limited Testing
Entry Testing
Exit Testing
Exit Evaluation Criteria
Core System Testing
Monkey See, Monkey Do
CHAPTER 13 In-Depth Testing/Walk-Forward Analysis
No Parameters
A Walk-Forward Primer
Walk-Forward Inputs
Fitness Function
Anchored/Unanchored
Running the Analysis
Put the Walk-Forward Strategy Together
CHAPTER 14 Monte Carlo Analysis and Incubation
Incubation
Evaluating Incubation
CHAPTER 15 Diversification
Designing with Diversification in Mind
Measuring Diversification
CHAPTER 16 Position Sizing and Money Management
No Optimum Position Sizing
Risk and Reward Are a Team
Position Sizing Can Be Optimized
Losing Systems Cannot Become Winners
Winning Systems Can Become Losers
The Fantasy of Size
Short Term—Go for Broke
No Position Sizing = No Good!
Strategy, Then Position Size, or Strategy and Position Size Together?
Positioning Size—Single System
Positioning Size—Multiple Systems
CHAPTER 17 Documenting the Process
Trading Goals
Trading Idea
Limited Testing
Walk-Forward Testing
Monte Carlo Testing
Incubation Testing
Diversification Check
Position-Sizing Check
Final Notes
One Final List
PART IV CREATING A SYSTEM
CHAPTER 18 Goals, Initial and Walk-Forward Testing
Developing a New Strategy
Limited Testing
Walk-Forward Testing
CHAPTER 19 Monte Carlo Testing and Incubation
Euro Day Strategy
Euro Night Strategy
Euro Day and Night Strategy
Incubation
Are Results Similar?
Final Information
Position Sizing
Correlation with Other Strategies
Monte Carlo—Consistency
Eliminating Big Days
Outlier Days
PART V CONSIDERATIONS BEFORE GOING LIVE
CHAPTER 20 Account and Position Sizing
When to Quit
Minimum Funding Size
Position Sizing
Unequal Position Sizing
CHAPTER 21 Trading Psychology
When to Begin Trading
When to Quit
CHAPTER 22 Other Considerations before Going Live
Accounting, Trading Brokers
Automation, Unattended, VPS, Where Are Orders Kept?
Rollover Considerations
PART VI MONITORING A LIVE STRATEGY
CHAPTER 23 The Ins and Outs of Monitoring a Live Strategy
How to Build an Equity Curve (and a Drawdown Curve, Too!)
Monthly Summary Chart
How to Use This Graph
Tracking Expected and Actual Performance
CHAPTER 24 Real Time
Four-Week Review—September 13, 2013, End Date
Update after Week 7
Week 8 Review
Week 9—Automated Trading Issues
Week 9—Limit Order Fills (October 28, 2013)
Week 12 Review
Week 13—Time Limit Review
Week 15 Review
Future Reviews
PART VII CAUTIONARY TALES
CHAPTER 25 Delusions of Grandeur
Don Demo
Gus the Guru
Paul the Predictor
Cal the Complication King
Pay Me Peter
Frank Five Hundred
Billy the Boaster
Connie the Compounder
Ian versus the Illuminati
Suki the Spinner
Paolo the Plagiarizer
Slick Sam
The Delusion Conclusion
Conclusion
APPENDIX A Monkey Trading Example, TradeStation Easy Language Code
Strategy 1: Baseline Strategy (No Randomness)
Strategy 2: Random Entry, Baseline Exit Strategy
Strategy 3: Baseline Entry, Random Exit Strategy
Strategy 4: Random Entry, Random Exit Strategy
APPENDIX B Euro Night Strategy, TradeStation Easy Language Format
APPENDIX C Euro Day Strategy, TradeStation Easy Language Format
About the Companion Web Site
Index
End User License Agreement
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