Menu Homepage: An overview of Prudent Trading Systems and our area of expertise.

Development Cycle: An outline of the cycle used in designing, testing, and optimizing trading systems.

Methodology: Company principles, analytic techniques and trading strategies used.

Sample System: A detailed example of a basic trading system.

Services: An outline of services provided by Prudent Trading Systems.






















Time Stability
Favorable performance of a system over any time period as opposed to several isolated intervals.






Parameter Stability
Optimal parameters are checked for independence from the testing time period they were developed in.

Development Cycle

The following diagram outlines the development cycle of a trading system from birth, through testing and optimization, and to implementation.



Formulation/Reformulation of Entry/Exit Rules
A successful trading system must have a technically sound foundation on which effective Entry/Exit Rules are defined. These rules are used to decide when to open and close market positions.


Formulation/Reformulation of Money Management Rules
A successful trading system must also have suitable Capital protection and Profitability. Money management rules are used to control potential losses while allocating investment Capital to attain profitable trades.


Validation of each System Component
Each system component (Entry/Exit and Money Management Rules) is analyzed independently to ensure its statistical reliability.


Evaluation of System performance
The performance of the trading system is analyzed under different time periods to assess its Time Stability in diversified market conditions with special attention to time periods where the systems performs poorly. Under such periods, each entry/exit signal is analyzed individually to identify reasons for poor performance (for example: exceptionally low/high frequency of signals, strong correlation with underlying market, statistically expected period of poor performance, etc.). The performance testing process is repeated for different values of system parameters to attain Parameter Stability. During this process, statistics describing system performance are collected.


Summary System Analysis
All collected statistics and results are summarized and analyzed in order to select system components and parameter values that yield the best performance characteristics (usually not highest rate of return). If the trading system is deemed satisfactory, then the system is ready to be tested in current market conditions. If the trading system lacks in performance, then the cycle returns to step one and components are reformulated and modified in search of a satisfactory configuration.


Market Testing
The trading system is tested in market conditions with a fraction of the capital used in regular trading. If testing is positively completed, the system is ready to be used in a full scale production environment.


Deployment
Finished trading systems can be deployed on Windows, Unix and/or Web platforms.



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