Next Step for the Auto Trader
It’s been a while since I’ve written about the auto trader. I got complacent with running the same system since last September, so that’s good and bad. Through the holiday period I decided to just simulate the trades in the lower liquidity conditions, and it seemed to hold up fine (just with reduced activity). The expectancy seems to be somewhat consistent now, but there are always room for improvements.
In all my eagerness to build the perfect trading system I’ve applied the machine learning to the selection of stocks and timing of trades, however, I skipped over some of the basic trading principles like scaling in and out of positions. Scaling into positions can be viewed as 2 different trades with different entry criteria, e.g. buy on the breakout and buy on the support can be tested quite easily as 2 separate timing criteria. I think scaling out is something that must be built into the models though, at least the way my models are organized. We’ll have to run the numbers and see if it makes a difference.
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