Profit factor 30

Drawdown 30

Time averages 31

RINA Index 32

2.5 Conclusion 33

Introduction 37

3.1 The birth of a trading system 38

The free LUXOR system code 39

The entry logic 41

3.2 First evaluation of the trading system 43

Calculation without slippage and commissions 43

Calculation after adding slippage and commissions 47

3.3 Variation of the input parameters: optimisation and

stability diagrams 49

What does stability of a system’s input parameter mean?

A short theoretical excursion 49

Dependency of main system figures on the two moving

averages 51

Result with optimised input values 56

3.4 Inserting an intraday time filter 59

Finding the best entry time 59

Result with added time filter 61

3.5 Determination of appropriate exits – risk management 64

The concept of Maximum Adverse Excursion (MAE) 66

Inserting a risk stop loss 70

Adding a trailing stop 74

6.1 Short repetition: “normal”, static optimisation 147

6.2 Anchored vs. rolling walk forward analysis (WFA) 149

6.3 Rolling WFA on the LUXOR system 150

Periodic optimisation of the two main system parameters 150

Out-of-sample test result 153

Conclusion 155

6.4 The meaning of sample size and market structure 155