The Personal Side to Trading System Development (Part 2)

I ended the last post discussing books as a starting point to learn about trading system development. Different authors use different software packages so immediately what I read has been passed through a specificity filter.

As available information shrunk in the law example I gave, after making a book choice the usable information narrows further due to personal trading factors. If my brokerage differs from the author’s then the same technology may not be available to me. I may also prefer to watch the market differently than the author (i.e. different time frame) or enter orders differently. Perhaps I use contingent orders with a larger offset or no offset at all just waiting for the fill. What if I don’t get filled? These are unables that can affect system results. How do I factor in slippage to the backtesting? Does the author?

Perhaps worst of all for establishment of a system development discipline is the observation that everything discussed in the last paragraph is not even addressed in many writings. Now, I can only gain partial education from books with the rest destined to be completely individual based on my eventual experience. This means system development will be different for everybody. Furthermore, how can I even attain that “eventual experience” before having a complete understanding of system development? Certainly not through backtesting or paper trading, which some experienced traders believe are nothing like live trading.

The upshot of all this is that I will have to do some gambling to truly learn about system development. If it’s not based on a complete understanding then I am trading to learn from my performance. I may or may not have an edge and if I don’t then I am gambling. Who wants to gamble when they can participate in other forms of discretionary trading that can allegedly be taught?

“Forget system development,” the intelligentsia might say, “because I want to hold onto my money.”