【系统开发】how one should approach it？

一朵祥云

Quote from sunnyskies:

ok, in that case, maybe you could start the discussion on building a profitable system in general? like how one should approach it, etc.
--------------------------------------------------------------------------------



Well, if you want to work here is the basics.
For every system I develop I use DUM.

D - Define

All systems are based on finding and pulling a fundamental truth about the market. Define what fundamental truth you'll be going after. Ex. All markets have a tendency to trend beyond random. Now you've got the definition that most technical-based hedge funds are derived from.

U - Understand

Determine the conditions under which the defined truth tends to occur. In the case of a trend tendency it could be when does the trend tendency begin beyond random? This will lead you to how do I measure a trend? Since trends can occur randomly, how do I determine if a trend is beyond a confidence level of randomness? Does the trending tendency beyond random exhibit the same degree of persistence beyond one year? two years? 5 years? If not, is there some point at which the persistence beyond random occurs every year? If so, does it also persist at the same frequency for 5, 10, 50 different markets? If so, you've discovered a fundamental truth and you now understand what you need to know about the behavior.

M - Mine

Once you understand the conditions under which the behavior occurs, you write the code necessary to map the understanding of the behavior. Is the code going to be all inclusive of many markets? or try to just go after the best of the best? Once mapped it's a mechanical process to determine how well it maps against the behavior. After you're satisfied you've developed a satisfactory method for mining the behavior, you can do an edge test to see if it happens beyond random. If not, use Monte Carlo sims to determine confidence levels for trading the method. Determine at what confidence level you'll stop trading. Examine the drawdown versus the profit. Is it worth risking any money on this? If so, allocate money using a money management scheme.

After you're done with this, you'll have your first system. Next, develop a complimentary system (non-correlated). Go through the same process for say a range bound system. Once you've gone through the mining stage, use the correlation test to weight the two systems. Apply the weights to the money management scheme and move on to your third system.

There you have it. The entire system development process. If any of you want to work, you now have the structure to make it happen. If not, I hope you've had a few minutes of amusement.
Everything else I would discuss would merely be adding detail to some aspect of the development. So I guess I'm done with the journal. No need to dive into details when a 30 sec. overview is all that is necessary (lol).

Alan