Trading System Design

AFL 2015
Amibroker AFL Programming Workshop
Bangalore
© Copyright 2015 Marketcalls Financial Services Pvt Ltd ·
All Rights Reserved www.marketcalls.in

Day 1 - Agenda
• Introduction to Trading System Design and Design Concepts
• Basics of Amibroker AFL Programming and Advance Looping Concepts
• Backtesting, Optimization and Key Backtesting Metrics
• Custom Backtesting, Walk Forward Testing, Monte Carlo Simulation
© Copyright 2015 Marketcalls Financial Services Pvt Ltd · All
Rights Reserved www.marketcalls.in

Day 2 - Agenda
• Symphony Fintech on Algo Trading
• Creating Intraday Trading Strategies and Dynamic Trading Strategies
• Designing Trading System Dashboard and Alerts
• Position Sizing, Scale In and Scale Out
• Timing Models and Rotational Trading System

What I do?
• Running a Financial Services Start-up
• Financial Blogger and Author of www.marketcalls.in since Sep 2007
• Passionate About Trading Analytics and Systems.
• System Trader.
• More www.marketcalls.in/about

INTRODUCTION
Introduction to Trading System Design
And Design Concepts

COMPONENTS OF TRADING SYSTEM
Trade
Data
Volatility
Trading
Software
Trading
Rules
Emotions
Testing &
Validation
Risk
Control
Market
Participants
Position
Sizing

What Kind of Trader You are?
• Intraday Trader
• Positional Trader
• Short Term
• Medium Term
• Long Term

What Matters
• Emotional Quotient
• Your Belief about your Trading System
• Quality Data feed
• Stable Trading Solution
• Low Cost Brokerage
• Lower Impact Cost
• Better Money Management

Trading Software
• Amibroker
• Ninjatrader
• Multicharts, Multicharts.Net
• Esignal
• Metastock
• Metatrader
• Wealth-Lab Pro

Free Data Providers for Amibroker
Google Finance
(EOD, Intraday)
Yahoo Finance
(EOD, Intraday,
Fundamental)
ASCII
(csv, txt)
MSN Money
(EOD)
Quandl
(EOD)

Authorized Data Vendors for Amibroker
Globaldatafeeds Neotradeanalytics
Esignal
(Platform + Data
feed)
True Data
Interactive Brokers
(Brokerage + Data
feed )

Type of Trading System
• Mechanical Trading System – Absolutely No Human Decision Making
- Trend Following
- Mean Reversion
- Statistical Arbitrage
• Discretionary Trading System – Human Decision Making Involved

Disadvantages of Trend Following
• Always Lagging the trend
• Whipsaws even in Trending Market
• Loss Making in Sideways Market
• Extreme Volatility is Dangerous for Trend Following

Disadvantages of Mean Reversion
• Extreme Volatility
• Unlimited Downside

Stages in Trading System Design
Analysis
Design
ImplementTesting
Evaluate

SYSTEM HEALTH
Time
Drawdown
Confidence

Equity Curve

Drawdown

Why Not to Loose More Money

SYSTEM EXPECTANCY
Helps to understand how winners, losers, gains and losses relate to
each other over the long term.
Expectancy = (Win Ratio * Average Win) - (Loss Ratio * Average Loss)

LISTEN TO VOLATILITY

Listen To Market Dynamics (Discretionary)
• Volatility
• Market Participants
• Macro Economics
• Currency
• Commodities
• Global Market Sentiments

Trading System Adoption

Trading System Once Broken is
Broken
Don’t Try to Fix it!

Aware About Unseen Risk
Try to Avoid!

Beware of Stop Hunting
A strategy that attempts to force some market participants out of their positions by
driving the price of an asset to a level where many individuals have chosen to set their
stop-loss orders. - investopedia

Mid Day Stop Hunting
• Most of the Days 50% of Volume Happens in first or last 30min
• Liquidity Dry Up during mid of the day
• Very less volume is required to move the stock during mid-day
• Weak Longs/Short Removed from the Market

A trader always has too much
size on when wrong, too little
on when right.
Avoid Too Much of Leveraged
Positions

Trading System Design

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