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Creating Multiple Models within Strategies

Creating Multiple Models within Strategies. BTM Presentation: by Rob Friesen. Personality. It has been my observation over the years that personality traits largely contribute to a trader’s success

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Creating Multiple Models within Strategies

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  1. Creating Multiple Models within Strategies BTM Presentation: by Rob Friesen

  2. Personality • It has been my observation over the years that personality traits largely contribute to a trader’s success • The best trader in the room at any given time has been those whose personality, strategies and market conditions line up in concert.

  3. It has been my observation traders are not aligning with their real potential. They are living in someone else’s shoes. They may be trying to be contrarian in their trading but they are not suited for it. • A trader often brings to this trading game, his/her personality, experience, knowledge, account size, and then attempts to implement a borrowed strategy from some source rather then having personally crunched it out. • Instead of borrowing strategies, let’s look at what goes into building your own.

  4. Philosophy • A trader needs to approach trading with a personal philosophy. • Do you like making contrarian bets? • Do you believe in working with trends? • Do you like watching for breakouts and set-ups? • Do you like carrying and trading a portfolio? • Do you like being flat every night? • Do you like to staying market neutral? • Do you like quick turn-around?

  5. Strategies • There are strategies that will fit into a personal style and philosophy • A person can adopt more then one strategy • Some of the strategies used at Bright • Opening Only Orders • Relative Strength • Scalping • Pairs Trading • Enveloping • Imbalances • ECN Rebates • Piston Trading • Basket Trading

  6. Models • Many models can be created for each strategy • Various inputs for models • Seasonality • Type of Day • Quality of Opportunity • Conditions • Trending • Range bound • Industry group rotation • Fit for identified leadership or engine of the day

  7. Vehicles • Stocks or ETF’s that you trade regularly • Stocks or ETF’s that you choose for special opportunity • These stocks fit your personality, style and philosophy as well as your capital

  8. Parameters • Rules • All systems need rules to govern them • Risk to Reward • Stops • Target

  9. Putting it all together • Philosophy = Volatility Trading • Strategy = Broken Open • Model 1. = Gap Open: Up • 10pts above Fair Value • Moderate News Catalyst • Vehicles = Stocks with volume of 2 million shares/day. Preferably stocks in the OEX 100

  10. Parameters • Watch for stocks to Gap Open, and break their open price continuing in the same direction • Monitor distance from open and ATR or DR or both. • Initiate trade • Target is most often near the open price • Can start with smaller trade and add at certain interval or start with larger trade and not add. • Set stops. Generally risking .20 to make .40 or similar ratio.

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