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Greetings --

Thanks for all the responses to my comments on "take every signal."

I do trade futures and I do trade common stocks. I agree that there are differences between them. But I don't think those differences are the difficulty we are having in getting together on this discussion.

I define a trading system as a combination of a trading model and a market or group of markets to be traded using that model. Usually there is no confusion and model and system can be used interchangeably. I think that is causing the difficulty in this discussion.

If I am trading just a single issue in an account, say five-year treasury notes and nothing else, a mechanical trading system will have me long, short, or flat. The system has been designed, tested, and validated using the treasury note price data, and I am satisfied that it is tradable. If what I am trading is a futures contract, the system will also specify the number of contracts to hold. While flat, the funds in that account earn money market interest, but nothing else. The system is a trading model and the treasury note series.

If I am trading a group of common stocks, the group must have been selected by some process. Selection of tickers to include must be subject to the same procedures as selection of parameters for a model. The system is a trading model that will be applied to all issues in the group, plus the price and volume series for the issues in that group.

Focusing on the system that is made up of a model and a group of common stocks. During the process of developing the system, I will see that some days there are more buy signals than I have funds to cover. The system must recognize that and handle it as part of the system. There must be some mechanical way of assigning a score to each individual signal, then taking positions in those stocks with the highest scores.

AmiBroker does this in a two step process, all within one system. The model is run over all the tickers in the group. Say the group consists of 20 stocks, each a candidate for a signal to buy, sell, or be flat. I decide ahead of time, and build into my system, how many positions I wish to hold at any given time; say it is five. Assume I am trading using end-of-day data and taking positions at the next day's open. At the end of each day, I run the system. If there are sell signals for stocks I own, those will be sold at the next open. If there are buy signals for stocks I do not own, say there are seven buy signals, each individual signal will be assigned a number called its PositionScore. If there are positions available after the sales, say three, then orders will be placed to buy three stocks -- the three chosen from among the seven are the three with the top PositionScore values. The system knows how to do this and all I see (unless I want to see the deeper details) are the Sell and Buy orders for those tickers that the system chooses.

If I want to change the stocks in the group, or add stocks to the group, that has the same implication as changing the length of a moving average. The stocks in the group are as much a component of the trading systems as the length of the moving average, and must be chosen using good system design and validation techniques.

Thanks for listening,
Howard
www.quantitativetradingsystems.com

<blockquote data-quote="howardbandy" data-source="post: 199321" data-attributes="member: 9179">Greetings --Thanks for all the responses to my comments on &quot;take every signal.&quot; I do trade futures and I do trade common stocks.&nbsp; I agree that there are differences between them.&nbsp; But I don&#039;t think those differences are the difficulty we are having in getting together on this discussion.&nbsp; I define a trading system as a combination of a trading model and a market or group of markets to be traded using that model.&nbsp; Usually there is no confusion and model and system can be used interchangeably.&nbsp; I think that is causing the difficulty in this discussion.If I am trading just a single issue in an account, say five-year treasury notes and nothing else, a mechanical trading system will have me long, short, or flat.&nbsp; The system has been designed, tested, and validated using the treasury note price data, and I am satisfied that it is tradable.&nbsp; If what I am trading is a futures contract, the system will also specify the number of contracts to hold.&nbsp; While flat, the funds in that account earn money market interest, but nothing else.&nbsp; The system is a trading model and the treasury note series.If I am trading a group of common stocks, the group must have been selected by some process.&nbsp; Selection of tickers to include must be subject to the same procedures as selection of parameters for a model.&nbsp; &nbsp; &nbsp;&nbsp; The system is a trading model that will be applied to all issues in the group, plus the price and volume series for the issues in that group.Focusing on the system that is made up of a model and a group of common stocks.&nbsp; During the process of developing the system, I will see that some days there are more buy signals than I have funds to cover.&nbsp; The system must recognize that and handle it as part of the system.&nbsp; There must be some mechanical way of assigning a score to each individual signal, then taking positions in those stocks with the highest scores.&nbsp; AmiBroker does this in a two step process, all within one system.&nbsp; The model is run over all the tickers in the group.&nbsp; Say the group consists of 20 stocks, each a candidate for a signal to buy, sell, or be flat.&nbsp; I decide ahead of time, and build into my system, how many positions I wish to hold at any given time; say it is five.&nbsp; Assume I am trading using end-of-day data and taking positions at the next day&#039;s open.&nbsp; At the end of each day, I run the system.&nbsp; If there are sell signals for stocks I own, those will be sold at the next open.&nbsp; If there are buy signals for stocks I do not own, say there are seven buy signals, each individual signal will be assigned a number called its PositionScore.&nbsp; If there are positions available after the sales, say three, then orders will be placed to buy three stocks -- the three chosen from among the seven are the three with the top PositionScore values.&nbsp; The system knows how to do this and all I see (unless I want to see the deeper details) are the Sell and Buy orders for those tickers that the system chooses.&nbsp; If I want to change the stocks in the group, or add stocks to the group, that has the same implication as changing the length of a moving average.&nbsp; The stocks in the group are as much a component of the trading systems as the length of the moving average, and must be chosen using good system design and validation techniques.Thanks for listening,Howard<a href="http://www.quantitativetradingsystems.com" target="_blank">www.quantitativetradingsystems.com</a></blockquote>

[QUOTE="howardbandy, post: 199321, member: 9179"] Greetings -- Thanks for all the responses to my comments on "take every signal." I do trade futures and I do trade common stocks. I agree that there are differences between them. But I don't think those differences are the difficulty we are having in getting together on this discussion. I define a trading system as a combination of a trading model and a market or group of markets to be traded using that model. Usually there is no confusion and model and system can be used interchangeably. I think that is causing the difficulty in this discussion. If I am trading just a single issue in an account, say five-year treasury notes and nothing else, a mechanical trading system will have me long, short, or flat. The system has been designed, tested, and validated using the treasury note price data, and I am satisfied that it is tradable. If what I am trading is a futures contract, the system will also specify the number of contracts to hold. While flat, the funds in that account earn money market interest, but nothing else. The system is a trading model and the treasury note series. If I am trading a group of common stocks, the group must have been selected by some process. Selection of tickers to include must be subject to the same procedures as selection of parameters for a model. The system is a trading model that will be applied to all issues in the group, plus the price and volume series for the issues in that group. Focusing on the system that is made up of a model and a group of common stocks. During the process of developing the system, I will see that some days there are more buy signals than I have funds to cover. The system must recognize that and handle it as part of the system. There must be some mechanical way of assigning a score to each individual signal, then taking positions in those stocks with the highest scores. AmiBroker does this in a two step process, all within one system. The model is run over all the tickers in the group. Say the group consists of 20 stocks, each a candidate for a signal to buy, sell, or be flat. I decide ahead of time, and build into my system, how many positions I wish to hold at any given time; say it is five. Assume I am trading using end-of-day data and taking positions at the next day's open. At the end of each day, I run the system. If there are sell signals for stocks I own, those will be sold at the next open. If there are buy signals for stocks I do not own, say there are seven buy signals, each individual signal will be assigned a number called its PositionScore. If there are positions available after the sales, say three, then orders will be placed to buy three stocks -- the three chosen from among the seven are the three with the top PositionScore values. The system knows how to do this and all I see (unless I want to see the deeper details) are the Sell and Buy orders for those tickers that the system chooses. If I want to change the stocks in the group, or add stocks to the group, that has the same implication as changing the length of a moving average. The stocks in the group are as much a component of the trading systems as the length of the moving average, and must be chosen using good system design and validation techniques. Thanks for listening, Howard [url]www.quantitativetradingsystems.com[/url] [/QUOTE]

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