Trading Systems  |  FEB 2007

Tuning Intraday Strategies by Lee Leibfarth

Stocks & Commodities V. 25:2 (64-67): Tuning Intraday Strategies by Lee Leibfarth Developing a daytrading strategy that is consistent across all markets is impossible. But here are some things to keep in mind when assessing your daytrading strategy. The growing availability of trading platforms that can build, backtest, and automate intraday trading strategies is allowing more and more traders to develop and test their own unique daytrading ideas. Constructing a rulebased daytrading system using historical data can help traders develop sound, statistical logic and create a higher level of confidence in their strategies. While most traders are familiar with the reminder that “past performance is not indicative of future results,” there is an amazing amount of confidence that can be generated from positive past results. That said, correlating the results of historical testing versus real trading for the same system is as important as the trading logic itself. Unfortunately, this aspect of system development is often overlooked as many traders look for incredible historical results instead of tuning their systems to actually fit their intended markets. This article will discuss some ideas for getting better correlation between system testing and actual market trading. Developing daytrading strategies often requires a unique approach to the markets that may be contrary to popular conventions in trading system development. Daytrading strategies are often specific to their intended markets and are not necessarily profitable across an entire portfolio. A system designed for the e-mini Russell 2000 does not need to show a similar expectancy on the QQQQs (or rice, crude oil, or Treasury bonds, for that matter). These markets trade at much different volumes and with much different volatility. Developing a daytrading strategy that works on everything is almost impossible and can greatly compromise the profitability of the target market.

by Lee Leibfarth