Anatomy of a

Trading System

Peter Aubourg
 Disclaimer
If you loose money

Trading any of these systems or

Ideas . . . .
 It
is
Your
Fault !
 Your
Fault !
 Your
Fault !
 “Chunking” the System
• A way to examine the huge range of trading
Ideas and Methods that we see at ATAA

• A Framework to see the Structure of a System

• Bite size Chunks so that we can Focus on one

element at a time.

• A means to Learn from each others Experience.

 The Plan for 2014

• Discuss one of these 10 elements each month.

• Have Contributions from Members.

• Learn from each others experience.

 Example System

• Broad Brush look at a complete system

• Pigeon hole each Component of the System

• ( Do NOT trade this... It is an example )

 Trading Universe What will you trade and why?

Filter How do you select what to trade from your universe?

Set Up What indicators or events are you looking for?

Entry Trigger When you have a set up, how do you enter a trade?

Position Size / Stop How do you manage risk?

Exits
How do you decide when to take profit or cut losses?

Pyramid / re-entry How do you decide whether to add to a position?

Back Testing Would your system would have worked in the past?

Records / Analysis How do you decide if our system is broken?

Multiple Systems Will multiple systems smooth your equity curve?

 Trading Universe
Trading Universe
Filter What will you trade and why?

Set Up Stocks in ASX 500

Entry Trigger
Foreign Exchange
Position Size / Stop
CFDs on ASX Stocks
Exits
Commodity Futures
Pyramid / re-entry

Back Testing Options; US Stocks

Records / Analysis ASX200 Futures; SPI

Multiple Systems
 Trading Universe Stocks in ASX 500
Filter
Filter How do you select what to trade
from your universe?
Set Up
MA200 Slope
Entry Trigger
Subscription Watch List
Position Size / Stop

Exits Broken 200 day High

Pyramid / re-entry
Stocks > $2
Back Testing
Stocks < $2
Records / Analysis

Multiple Systems
 Trading Universe Stocks in ASX 500
SetUp
Filter Broken 200 day High What indicators or events
are you looking for?
Set Up
MA 10 Sloped Up
Entry Trigger

Position Size / Stop Stochastic < 20%

Exits

RSI(4) < 10%

Pyramid / re-entry

Back Testing

Ranked by Slope
Records / Analysis

Multiple Systems
 Trading Universe Stocks in ASX 500
Entry Trigger
Filter Broken 200 day High When you have a set up,
how do you enter a trade?
Set Up MA 10 Sloped Up
Close > Yesterdays High
Entry Trigger

Position Size / Stop

RSI(4) < 10%

Exits

Pyramid / re-entry High > HHV 4

Back Testing

Open; next day

Records / Analysis

Multiple Systems
 Trading Universe Stocks in ASX 500
Position Size / Stop
Filter Broken 200 day High How do you manage risk?

Set Up MA 10 Sloped Up

Entry Trigger High > HHV 4

Risk 2% Float / Stop 2 ATR(20)
Position Size / Stop

Exits

Pyramid / re-entry 5% Float / Stop 7 ATR(20)

Back Testing

Records / Analysis Risk 0.5% Float / Stop 0.5 ATR(20)

Multiple Systems
 Trading Universe Stocks in ASX 500
Exits
Filter Broken 200 day High How do you decide when to
take profit or cut losses?
Set Up MA 10 Sloped Up

Entry Trigger High > HHV 4 MA 37 X Below MA 63

Position Size / Stop Risk 2% Float / Stop 2 ATR(20)

Exits

Pyramid / re-entry Price < LLV (40)

Back Testing

RSI(4) > 55%

Records / Analysis

Multiple Systems
High > MA(40) + 4 ATR(20)
 Trading Universe Stocks in ASX 500
Pyramid / re-entry
Filter Broken 200 day High How do you decide whether to
add to a position?
Set Up MA 10 Sloped Up

Entry Trigger High > HHV 4

Position Size / Stop Risk 2% Float / Stop 2 ATR(20)

Exits Price < LLV (40)

No Pyramiding
Pyramid / re-entry

Back Testing After 1st Retrace to EMA 10

Records / Analysis
Re-enter on new signals
Multiple Systems
 Trading Universe Stocks in ASX 500 Backtesting
How do you know if your system would
Filter Broken 200 day High have worked in the past?

Set Up MA 10 Sloped Up

Entry Trigger High > HHV 4

Excel; Simple
Position Size / Stop Risk 2% Float / Stop 2 ATR(20)
Excel; Complex
Exits Price < LLV (40)

Pyramid / re-entry No Pyramiding Wealthlab /Tradesim

Back Testing
Metastock/Tradsim
Records / Analysis
Amibroker
Multiple Systems
 Trading Universe Stocks in ASX 500
Records
Filter Broken 200 day High How do you decide if our system is broken?

Set Up MA 10 Sloped Up

Entry Trigger High > HHV 4

Position Size / Stop Risk 2% Float / Stop 2 ATR(20)

Exits Price < LLV (40)

Paper; Journal
Pyramid / re-entry No Pyramiding

Back Testing Amibroker Excel; Simple

Records / Analysis
Excel; Complex
Multiple Systems
 Trading Universe Stocks in ASX 500
Multiple Systems
Filter Broken 200 day High Will multiple systems
smooth your equity curve?
Set Up MA 10 Sloped Up

Entry Trigger High > HHV 4

Single Trend Following
Position Size / Stop Risk 2% Float / Stop 2 ATR(20)

Exits Price < LLV (40) Trend + Mean Revert

Pyramid / re-entry No Pyramiding

Shares + Options
Back Testing Amibroker

Records / Analysis Excel; Simple FX + Commodities

Multiple Systems
 Trading Universe Stocks in ASX 500

Filter Broken 200 day High

Complete
Set Up MA 10 Sloped Up System
Entry Trigger High > HHV 4

Position Size / Stop Risk 2% Float / Stop 2 ATR(20)

Exits Price < LLV (40)

Pyramid / re-entry No Pyramiding

Back Testing Amibroker

Records / Analysis Excel; Simple

Multiple Systems Single Trend Following

 Summary
• Focus on one element at a time. In depth analysis.

• Uncover the system “edge”.

• A systematic way to analyse and build systems.

• Learn from each others experience.

• See how presenter’s systems work against the

template?
 Next Month

Trading Universe
What do YOU trade and Why ?

• Stocks on ASX ?
• USA Stocks ?
• Options ?
• Futures ?
• ETFs ?
• Other ?
Please have YOUR stories ready

and Contribute to the Discussion

Thank You for Your Attention