Itech lecture 7

Question 1

What are some characteristics of designing a non discretionary trading system?

Answer 1

-A trading system that exploits a predetermined type of market activity
-Has objective buy and sell (no emotions, not subjective)

Question 2

What is a discretionary trading system

Answer 2

Trading entry and exits determined subjectively by intuition or gut feeling

Question 3

Name a disadvantage of a discretionary system

Answer 3

Often gut instinct can be wrong

Question 4

What is a non-iscretionary trading system?

Answer 4

Trading entry and exits determined objectively mechanically by signals because it is a system that runs itself based on data that is continuously fed into it

Question 5

Name some advantages of non-discretionary trading systems

Answer 5

-removes emotions from trading
-predetermined decision rules
-can back test results
-prevents large losses and the risk of ruin

Question 6

Name some disadvantages of non-discretionary trading systems

Answer 6

-operations can be sometimes boring
-period updates
-modifications may be needed

Question 7

What is the system that uses both discretionary and non-discretionary trading systems at the same time? Explain it

Answer 7

Partially discretionary system
-signals that act on the investors personal confidence or experience
-set rules with non-discretinary system but the use your own feelings on whether to buy or sell

Question 8

What are the 4 things to consider when trading?

Answer 8

1) what type of strategy are you using
2) Determine a trend filter
3) Data and market selection
4) Analyzing results

Question 9

What is “what type of strategy are you using”? What are the 3

Answer 9

1) trend following
2) counter trend
3) swing trading

Question 10

What is determine a trend filter

Answer 10

Properly define the trend to the system, regardless of your approach

Question 11

Which is harder, selling or buying a security?

Answer 11

Selling

Question 12

What is “data and market selection”? Name the 3

Answer 12

1) portfolio to test on: stocks, ETF’s, etc
2) time period to test: 1 year? 10 years?
3) time frame to test: daily, weekly, etc

Question 13

What is “analyzing results”

Answer 13

-Are the historical results representative of a good system
-Possible adjustment to the system
-Need for money management

Question 14

What are 4 things a system must identify?

Answer 14

1) initial stop
2) trailing stops
3) profit targets
4) opposite signals