185: How to avoid creating trading strategies that degrade quickly - Timothy Masters

Numerical Computing specialist and author Timothy Masters joins us (in his only ever interview) to discuss trading strategy development and validation techniques, including:

• Why trading strategies fall apart in live trading,
• How luck impacts trading strategy results and the impact of selecting the 'best' trading system,
• Why trades in an out of sample dataset are NOT representative of future trades,
• 3 ways to use Monte Carlo Permutation tests in trading strategy development to avoid overfitting, evaluate strategy robustness and assess the quality of your strategy development process,
• The danger of using out of sample trades to compute the probability of drawdowns,
• Entropy and information of indicators and why it's important to strategy development,
• How stationarity really impacts trading strategies and what strategy developers can do about it,
• Using Walk Forward to determine how robust a strategy is in the market,
• Incomplete Beta Distribution to track strategy deterioration,
• Bootstrapping, granular Profit Factor, the predictive ability of technical indicators, counter-trend trading and much more.

 

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Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.