A mechanical trading strategy (continued...)

To be honest, I have not yet built a mechanical strategy that I think is robust enough. Like the strategy that I built in my last post. It looked like that it had some trading edge but it cannot hold up when put into real trading a few months. A robust strategy should be able to hold up its trading edge for an extensive period of trades historically and in future trades also.

Knowing what a robust strategy is, we can now start to design our strategy. There are a lot of ways to trade the market: fundamental trading, momentum trading, trend trading etc. You can pick your own favorite method and formulate it into a quantitative strategy. If you are an experience trader, it should not be difficult.

The difficult part for most of the people is to test their strategy against historical data if they do not have tools like MetaStock, TradeStation. Some people would suggest to visually back test your strategy tick by tick using historical charts. But I think it is too time consuming and you won’t have the patience to do so. If are really interested in the context of mechanical trading, I recommend you to learn how to do it programmatically. You don’t need to know advanced programming techniques in order to do so. The aim of these software tools is to help you simplify the process of building your own strategy. All you need is to start to look into it seriously (google it now).

Once you know how to test your strategy programmatically, there are more things you need to take care of like money management, strategy optimization etc. before you can come up with a robust strategy.