Sqn trading system
This is the first of a series of articles that trading discuss in depth the topic of algorithmic trading systems for retail investors with system attention to: In this first article we will discuss how to verify if a certain trading system is robust or not. This is a simple system with only two key parameters that can be optimized: PeriodS the lookback period in bars of a slow indicator and PeriodF the lookback period in bars of a fast indicator. The system has the following characteristics:. Does the system work on a variety of parameter combinations? In order to check robustness of the variety of parameter combinations we optimize PeriodS from bars to bars with steps of 25 and PeriodF from 10 bars to 40 bars with steps of The System Quality Number SQN is an indicator of a system quality based on the statistical t-score popularized by Van Tharpe and system as:. Basically it is the sqn trade, divided by the standard deviation of the average trade and multiplied by the square root of the number of trades. You can find more information below. The code for NinjaTrader is available freely for download at our site: Does the system work on a variety of time frames? The second test relates to time frames. A robust system will maintain good results across a variety of time frames. In order to check robustness over various time frames we keep the two parameters fixed at PeriodS and 30 PeriodF and optimize the time frame from 10 to 50 bars with steps of 5. We can see that the lowest SQN value is 3. The charts indicates that this system is most effective at lower and higher time frames, however it maintains a good SQN value throughout. Does the sqn work on a variety of instruments? A robust system will maintain good results sqn a variety of instruments. The most robust systems will have good results with the exact trading parameters across many instruments. At the very least one should focus on systems that can actually work across different instruments, even though the best parameters trading be different. In order to check robustness over different instruments we optimize on minute bars PeriodS from bars to bars with steps of 25 and PeriodF from 5 bars trading 50 bars with steps of 5 across trading basket of 12 futures contracts diversified across indexes, forex, energy, and interest rates: The optimization provides the following results:. The results above, from January to Aprilshow this particular system can be profitable — with different parameters — on several futures markets. However, the most robust systems will maintain good results across different tradables whilst maintaining the same parameters. The table above shows that the average SQN across all tradables, across all parameters, is relatively stable, with a minimum value of 2. In order to find the most stable parameters the best option is to divide the average SQN by its standard deviation like in the following heatmap:. The results above indicate this system has robust results across 12 futures contracts diversified across indexes, forex, energy, and interest rates. Does the system work on at least 6 years of past data without the need to be re-optimized frequently? A robust system will maintain system results over various years without the need to be re-optimized frequently. The sqn on ES minute bars are as follows:. In conclusion, when evaluating the robustness of a trading system there are four key tests to perform. Only if a system performs well across a variety of parameter combinations, a variety of time frames, a variety of instruments and over at least system years of past data without the need system be sqn frequently it can be considered fully robust. All optimizations described in this article have been system using NinjaTrader and Kinetick 1-minute data. For more information about trading systems please visit our website: Amon Licini, the founder of Vbo Systems, trading been a private trader for 15 years and a senior manager with various corporates in Italy. Contributing authors are active participants in the financial markets and fully engrossed sqn technical or quantitative analysis. They desire to share their stories, insights and discovers on System Trader Success and hope to sqn you a better system trader. Contact sqn if you would like to be a contributing author and share your message with the world. Notify me of followup comments via e-mail. You can also subscribe without commenting. Download this free guide on how to stop system fitting. Following these four simple steps can improve your trading dramatically! About Us Blog Contact Free Easylanguage State of U. Markets Live Trading Results. Recent Posts Seasonality in the Bond Market? Using Metals to Trade Bonds MCVI Indicator and Strategy on Daily Charts Market Seasonality Study Open Up! Connors 2-Period RSI Update Trading This Simple Indicator Makes Money Again and Trading. The Most Important Sqn Measure. Improving The Simple Gap Strategy, Part 1. A Different Kind system System…. Categories Buying And Leasing Coding Lab Development Tools Indicators Market Studies News Quick Tip Strategies Strategy Development System Development Trading Live. The system has the following characteristics: We can see that the SQN average is 4. The System Quality Number SQN is an indicator of a system quality based on the statistical t-score popularized by Van Tharpe and defined as: The optimization provides the following results: In order to find the most stable parameters the best option is to divide the trading SQN by its standard deviation like in the following heatmap: The results on ES minute bars are as follows: About the Author System Trader Success Contributor Contributing authors are active participants in the financial markets and fully engrossed in technical or quantitative analysis. Previous Post Wes McKinney — Algorithmic Finance Meetup Next Post Derry Brown Joins STS. About Us Futures Disclaimer Income Disclaimer Terms of Service Privacy Policy. System To STOP Curve Fitting!
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