System Design  |  JUN 1998

On System Development Part 1 by Mark Vakkur, M.D.

On System Development Part 1 by Mark Vakkur, M.D. Here's one for the first-time developer of a trading system, or someone who's thinking about developing a system. Here are the basic steps this author took to develop a system for the stock market. Successful trading is nothing more than systematically putting the odds in your favor. Our only guide to the future is the past; the trader must hunt down historical associations and hope they continue to hold true. These associations can be as simple as the idea that a close above a rising moving average tends to be followed by higher prices or as complex as a DeMark countdown. Moving from an observation to a viable trading system, however, requires a rigorous process of system development. I will illustrate the development of a simple system for the stock market based on a combination of three variables that have been shown to be highly profitable when used alone — seasonality; the Presidential election year cycle; and the relationship between the yield on the 30-year Treasury bond and its six-month moving average.

by Mark Vakkur, M.D.