ARTICLE SYNOPSIS ...Do Equations Tell The Whole Story? by Gordon Gustafson Success in systems trading depends on having good trading systems and good money management practices. Optimal f can help you. Once you have a good trading system, wouldn't it be wonderful if you had an equation you could plug into a system to discover the perfect amount to risk on each trade? All you'd have to do would be to plug the results into a risk calculation and relax, knowing that the chances of ever losing again were practically nil. It's a nice idea. But the fact of the matter? Such equations could easily lead you astray....
ARTICLE SYNOPSIS ...Price Persistency by Gordon Gustafson Interested in measuring a short-term trend? Here's an indicator you can use. For years, academics have made the case that price movement is random: future price changes are unrelated to past price changes. Although they are random, runs occur in any series of data. Knowing something about these runs can add valuable information to any trading program. WHAT IS IT? Price persistency is the number of days that a market continues to close either up or down. It's another term for a market run. As an indicator, price persistency is a measure of a very short-...
ARTICLE SYNOPSIS ...Which Volatility Measure? by Gordon Gustafson Is it true? Is average true range, an approximation, superior to standard deviation, the most beloved of quants, as a measure of volatility? Many traders use some measure of volatility to generate signals in their trading. For instance, one common entry technique is to buy when the price breaks outside a certain range of the volatility of the recent price action, either to the upside for trend following or below for countertrend systems. Another common use for volatility is in the construction of trailing stops. An exit signal might be generated ...