Chapter 1: Introduction

Discusses the professionals and cons of system buying and selling when in comparison with discretionary buying and selling. Systems have some distinct benefits. Specifically, they keep away from loads of problems with stress and psychology that plague discretionary merchants, they will implement methods too sophisticated for people to grasp, and so they can simply be leveraged as much as flip small accounts into extremely huge ones. Best of all, they will do all of that with no need human interplay, which makes them supreme for individuals who have higher issues to do in the course of the day than stare at value charts.

Chapter 2: The System Report Explained

Good and unhealthy buying and selling methods each have very distinct methods of telling you whether or not or not they’ll proceed to work when shifting ahead into the long run. After working via this chapter, you’ll perceive the fundamentals of the best way to go about evaluating a system, and can achieve expertise by utilizing these strategies as we take aside and talk about good (and unhealthy!) methods working ahead via the e-book.

Chapter 3: William Tell Bonds

This system was developed all the best way again in 1997, and was actively used not solely in Earik’s private accounts, but additionally within the accounts of his companions when he labored on the Board of Trade. In the years when it was actively traded, this technique crushed the Bond market with accuracy approaching 90%. Although it’s now an previous system, and Bond futures have modified considerably within the final 16 years, the core concepts behind this technique proceed to be legitimate, and if accuracy is your cup of tea, you can be arduous pressed to seek out something that may maintain a candle to this.

To offer you a style, right here’s the system report from simply one of many nineteen particular person patterns that go into this technique:

Notice the accuracy quantity. Over 91% of the trades had been winners, with the worst dropping streak ever being a set of two losses in a row. This system report has been run from 1990 via 2013, and this sample continues to crank away because it has been for the final 16 years working on stay information.

All methods might be made to be extraordinarily correct, and after studying via the William Tell chapter, you’ll know precisely the best way to construct 70%, 80%, and even 90% correct methods. The strategies that consequence on this degree of accuracy are common, so if you have already got a system you want, odds are you may remodel it right into a hyper-accurate system as effectively, just by including a couple of adjustments to the best way you enter and exit your trades.

Chapter 4: The Fallacy of Optimization

In this chapter, we’ll check out parameter migration, the place an optimized parameter set works one 12 months, however then fails the following. This phenomena of markets is the primary motive why so many methods discovered on the market within the categorized advertisements behind buying and selling magazines fail to ever earn a greenback of earnings when traded stay. If you’ve ever bought a type of strategies, you recognize what I’m speaking about!

Not solely will we cowl what the problems are that trigger parameter migration, however we’ll additionally talk about the answer. To show that our answer works, we’ll truly construct a system that makes easy shifting common crossovers worthwhile! Yes, shifting common crossovers can be made to become profitable when traded in out-of-sample information, however solely when you can clear up the problem of parameter migration. Understanding this one core idea will prevent from numerous hours of unprofitable improvement work, and can mean you can construct extraordinarily strong methods that won’t disintegrate as they transfer ahead into unseen information.

Chapter 5: Mean Reversion Systems

Mean reversion methods are a category of methods that, when applied correctly, are extraordinarily strong and worthwhile. Once you perceive the core idea, they’re additionally very simple to design. Check out this one from the e-book, which might be run with solely two strains of programming:

Sure, it’s a bit wild, however it additionally made virtually $750,000 hypothetically buying and selling one contract of the SP! Think of this because the uncooked edge, which might be taken and developed additional. That will get accomplished in later chapters, and if you’re on the lookout for some concepts to base your personal methods on, it is a good spot to begin. The system proven within the chart above is definitely over 12 years previous, and works simply as effectively right now because the day it was first constructed. These methods don’t lose their effectiveness over time, which is why we like them.

Chapter 6: Stop Losses, Targets, and Other Ways to Lose Money

This chapter busts some myths. One of absolutely the worst issues you are able to do to a mechanical system is so as to add dollar-based stops and targets to it. But for no matter motive, this error is made each single day by novice system builders and merchants. There are higher methods to guard your account towards losses, and higher methods to make use of in your personal buying and selling. This additionally holds true for the discretionary merchants. You could not notice it, however the very instruments you might be utilizing to guard your self towards losses could in truth even be the explanation why your buying and selling isn’t producing any earnings. Learn the reality about stops and targets, and begin utilizing the methods that really show you how to generate earnings quite than losses.

Chapter 7: Lunar System

Many within the Wave59 neighborhood could have some familiarity with Earik’s Lunar System, first offered on the 2011 PowerPerson Conference. This chapter opinions Spherical Astrology, a brand new approach to outline planetary elements, and discusses the features inside Wave59 that permit this expertise to be applied in buying and selling methods. Unlike typical astro, we will backtest Spherical Astrology, and show that it truly does present a timing edge. What type of edge? Check out the chart under:

If you’ve ever thought that the Moon and Sun may need some impression on markets, that fairness curve proves that you just had been right. This chapter walks via constructing an astro system from the bottom up, all the best way from the theoretical concepts behind Spherical Astrology, via implementing and high-quality tuning the method on the Dow.

For these already accustomed to this technique (or already buying and selling a model of it), you’ll be interested by among the work accomplished on Venus, which offers a place to begin for growing one thing much more highly effective than the core Lunar system.

Chapter 8: Machine Learning

This chapter discusses the machine studying algorithms out there in Wave59, each within the present PRO2 platform, in addition to the upcoming PRO3 platform. In addition to an summary of the applied sciences, we will even consider precise methods constructed utilizing each Hives and the brand new Genetic Algorithm toolkit.

After Earik launched the Unified Theory of Markets over a 12 months in the past, he went right into a interval of very intense improvement work which resulted within the creation of a man-made analysis assistant. Give your assistant varied methods and system concepts, and utilizing the ability of synthetic intelligence and machine studying, you may make extraordinarily efficient leaps within the creation of mechanical buying and selling methods. How efficient are these leaps? Check out the chart under, which particulars an ES buying and selling system developed utilizing this new expertise:

In testing, this method made virtually $200okay buying and selling one contract of the ES since 2000. It wons over 60% of its trades and has by no means had a dropping 12 months. What does it use? UltraSmooth Momentum, one of many core technical indicators in Wave59. I’m certain many individuals are accustomed to this indicator, however I doubt many would have been in a position to make use of it as skillfully as our machine studying program did. No must excellent making an attempt to learn this software anymore, simply let this technique take it and run.

This chapter presents 4 methods based mostly on machine studying algorithms, two developed with Hive Technology, and two developed with the brand new instruments out there in PRO3. All 4 of those methods can be utilized in probably the most present editions of Wave59.

Chapter 9: Random Numbers

Some exit approaches, like most dollar-based stops, will take a great system and switch it right into a constant loser. Others can take a mediocre system and switch it right into a rock star. This chapter discusses some of the most wonderful methods within the course, an exit method so highly effective that it truly works when utilizing fully random entry alerts.

Check out the fairness curve under:

This graph comes proper out of the e-book, and reveals what would have occurred to a theoretical account had it purchased and offered each single bar on the ES and applied this exit system in each a type of trades. In different phrases, that is the results of taking each single doable commerce out there within the ES since 2000 utilizing this exit method. Since we’re monitoring each shopping for and promoting each bar, pattern and timing cancel one another out, and all we’re left with is the results of how we handle these trades.

The sensible results of doing this take a look at is that we now have an exit technique that may truly be used as a buying and selling indicator all by itself, whatever the entry sign used to enter the commerce. Because of that, you may create a beautiful system by FLIPPING A COIN to your entries. Seriously. Combine this with an entry sign that really has an actual timing edge, and also you’ll have one thing particular.

Chapter 10: Merged Systems

This chapter discusses a method to create an adaptive method based mostly on utilizing many methods collectively. By permitting the energy of 1 system to counteract the weak point of one other, two methods working collectively can generate extra earnings with much less danger than every was capable of accomplish by itself. Done correctly, this method makes the general consequence extraordinarily drawdown resistant, and strong sufficient to be virtually immune from problems with parameter migration, curve-fitting, and a bunch of different issues that plague lesser methods.

By pulling collectively every part accomplished in earlier chapters, we’re capable of arrive at a base system that has an extremely easy fairness curve as proven above. This system generates $13okay per ES contract per 12 months, on common, with over 60% accuracy, very low drawdown and really excessive reliability. If you do nothing else however learn this chapter and implement this technique, you’ll have an superior ES technique.

Chapter 11: Position Sizing

In order to finish a commerce, we should know three issues: when to enter, when to exit, and the way a lot to commerce. The majority of retail merchants focus their vitality on the least essential of those three components, the entry. Our random exit proved we will become profitable with out even needing an entry sign, and this chapter reveals the best way to take a worthwhile system and leverage it up right into a fortune. There are varied place sizing approaches floating across the business, and on this chapter Earik shares the one he makes use of himself, which is a modified method that ends in extraordinarily quick account development whereas conserving drawdowns cheap.

This fairness curve is from the very same merged system as proven earlier than, with one exception – we now have applied place sizing. Give the primary system one contract and 13 years, and it generated virtually $200 thousand in earnings. Give the second system one contract and 13 years, and it cranked out $200 million. Same alerts, identical quantity of effort, identical beginning account dimension. If you might be severe about buying and selling, then you definitely should implement place sizing appropriately.

Chapter 12: Options

This chapter follows within the steps of the final, detailing a manner to make use of choices quite than outright inventory purchases as a way to achieve huge leverage on a stock-based buying and selling system. Futures buying and selling might be accomplished with enormous leverage, however the preliminary required account dimension as a way to commerce futures is oftentimes fairly massive, particularly for brand spanking new merchants. On the opposite hand, choices contracts might be purchased for less than a pair hundred {dollars}, and supply a approach to obtain comparable leverage with solely a fraction of the required account dimension.

Unfortunately, there are a lot of methods to lose cash buying and selling, and much more if you’re buying and selling choices. If you will have a great inventory system, and easily buy as many choices as you may for a hard and fast share of your account, you will notice your account crumble, although your system itself stays theoretically worthwhile. This chapter presents a place sizing method for choices buying and selling that can be extraordinarily helpful when buying and selling small accounts, based mostly on a method developed right here at Wave59. Simply enter your account dimension, varied choices pricing numbers, and your buying and selling sign, and it’ll spit out precisely what number of choices contracts to buy at what strike value as a way to maximize your outcomes.

The chart above reveals the outcomes of implementing this method during the last two years. The blue line is a inventory buying and selling system (for the SPY), and reveals the results of what would have occurred utilizing most margin buying and selling a $20okay preliminary account. You can see that doing this earned 150% in two years time, an amazing consequence. The pink line reveals what would have occurred had we traded this method utilizing our choices method as a substitute. Not solely did we earn greater than twice as a lot, we did so with much less danger. Harnessing volatility is vital, and when accomplished proper, choices present extra leverage than every other funding car on the planet. This chapter particulars the method, and steps via the best way to implement it in your personal buying and selling.

Appendix: The Systems

Last, however not least, we now have the appendix: virtually 30 pages of Wave59 QScript supply code, which is able to mean you can implement each system mentioned within the e-book by yourself. There aren’t any secret black-box strategies right here. The logic to every part is totally revealed, and pre-programmed for you. Just enter the scripts into Wave59, apply them to a chart, and also you’ll have a full working model of no matter system you have an interest in. An auto-trading script can also be supplied, which is able to mean you can set Wave59 as much as commerce hands-free by itself, with no need any human enter except for ensuring the Internet is on and the dealer is related.