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Loss Aversion

Trading Consistency, Intellectual property and Investor considerations

Trading consistency is another subject that is often not given the attention it deserves. Too often, traders focus on things like risk, return, and optimising parameters. Whilst these components are essential, trading in a consistent manner is important too. 

From an investors perspective, trading consistency can help to smooth the emotional rollercoaster. Traders will often want to protect their intellectual property and with good reason.

It may be easy to identify the trading strategy variables if there aren’t many of them—for instance, a time-based strategy with no filters. Investors may then be able to operate the strategy themselves, circumventing the need to pay the creator any performance fees. 

The ability to provide various levels of intellectual property protection is yet another benefit of the Darwinex platform. It allows the trader to implement privacy features preventing anyone from taking their intellectual property.

A downside of doing this is that the investor can lose valuable details about how the trading strategy operates. Investors like to know what is going on. By not having relevant information it can lead the investor to invest less than initially intended.

Another possibility is that the investor may make rash decisions whilst investing, leading to unnecessary losses. It is clear that the trader must strike a balance between informing investors and protecting their ideas. 

However, if when reviewing a traders history, the investor can see a consistent manner in the operation of trades; this can provide the investor with confidence that the trader isn’t making rash decisions.

As a trader, when designing a strategy, taking trading consistency into account can make it easier to highlight rogue trades and thus increase the robustness of your system. 

In trading, surprises are not a good thing.  

Darwinex created the Investable Attributes to measure different aspects of a trading strategy. This ability is of benefit to both traders and investors.

The Positive and Negative return consistency Investible attributes (R+/R-) offer valuable insight into the consistency of a traders trading decisions. A high score in these investible attributes is a good indication of the trading consistency of a trading strategy. 

The accompanying video goes into great detail using this valuable metric both as an investor and a trader. 

Brought to you by Darwinex: UK FCA Regulated Broker, Asset Manager & Trader Exchange where Traders can legally attract Investor Capital and charge Performance Fees.

Risk disclosure:

 https://www.darwinex.com/legal/risk-disclaimer

 Content Disclaimer: The contents of this video (and all other videos by the presenter) are for educational purposes only, and are not to be construed as financial and/or investment advice.

Market Regimes | Algorithmic Trading

Market Regimes | Advanced Trading Techniques To Categorize Them

Why is it important to be able to categorize Market Regimes?

And what benefits can we hope to see from doing so?

Price action exhibits different characteristics in different market regimes.

Being able to classify the current market regime, allows us to adjust our trading rules to best suit the regime we’re in.

Thus allowing us to keep our trading edge, regardless of whether the market is trending or ranging.

It also allows us to filter our trades based on the current market volatility. Another important consideration when optimizing your trading rules for each market regime

If we use identical trading rules in each regime, we risk our algorithm losing its valuable edge, with the probabilities moving against us.

However, this technique does require careful consideration of statistical significance to avoid over-fitting, which is also explained in the video.

 

Brought to you by Darwinex: UK FCA Regulated Broker, Asset Manager & Trader Exchange where Traders can legally attract Investor Capital and charge Performance Fees:

Risk disclosure:
https://www.darwinex.com/legal/risk-disclaimer


Content Disclaimer: The contents of this video (and all other videos by the presenter) are for educational purposes only, and are not to be construed as financial and/or investment advice.