See attachment for stock trading system (Including all rules*). Sharpe Ratio by third party determination is 60 plus. the document was thrid party checked using 400,000 sample; no changes were made. * An ATS library may be found for many platforms. Go to the ET thread that supports this and other independent variable based systems derived from the PEP algorithm.
I'm a bit late to the party on this one, but here is the core code for an EOD system that has worked quite well on ES recently... if(QE) { JustBuy(); }
Re leading indicators: Sometimes you can get a bit of a visual idea of lead/lag on a tight pairs trade. Plot both legs on the same chart, one with an offset to synthesize the other, and, some of the time it is evident that one is leading the other. Maybe it's a big fish unloading one, while the arbs play catch up on the other. 2c.
Sir; Let's say that we can value a security at its last traded price of "v". No one wants to quote this price but there is a two sided market either side. Say, a possible next trade occurrence at v+1 or v-1 has re-priced the market. Further; that after either a +1 or -1 trade; another +1 or -1 trade occurs, so that we are now at either +2 or -2. Then; we have a two sided market at v+1 bid / v+3 offer. Now; It seems to me that hitting the v+3 offer is the most aggressive way to trade the market. Selling at +2 (inside market) is wack. Bid at +1 is a good trade but not easy to get filled. How can you explain an asymmetrical pay-off ratio like this?
I can't. I do not use the dependent variable signals to make money. It looks like you are viewing an illiquid market. this is a no no .
In CW the majority of people believe as you do. Fortunately this is not going to change. Markets are counterintuitive but it will be a long time before the dependent valriable leads the independent variable.
What is CW please? Approaching markets with sets of beliefs is not a good way to go. If markets are counterintuitive then there are no dependent and independent variables present.