Лекция: Introduction

This chapter examines many key system design issues. Now that you un­derstand some basic principles of system design, you can consider more complex issues. And as you understand these issues, you can design more powerful systems.

We will begin by asking the question: Do markets trend? The an­swer to the next big question, whether you should trade with the trend or against the trend, is that you should trade with the trend. This chap­ter presents some test results to support this answer. You can then ask whether you should or should not optimize your trading system. We ex­plore here how well you can predict future performance based on opti­mization of historical data.

The chapter begins the discussion on risk control issues by address­ing whether the initial stop is a problem or a solution and discussing the different types of risk you may face in your trading. You should consider these issues early in your design process. We then look at the different types of data you can use for your testing and what difference, if any,

40 Foundations of System Design

they make. Finally, the chapter explains what is found as well as what is lacking in the system performance summary.

At the end of this chapter, you will be able to:

1. Explain how you can diagnose trending markets.

2. Know whether to use a trend-following or countertrend strat-


3. Explain the benefits and pitfalls of optimization.

4. Understand the type of risks you may encounter.

5. Know how to select data for tests.

6. Effectively use the performance summary of system testing re­sults.

7. Understand and explore what is not covered in the performance summary.

8. Explain why system design has its limits.

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