Abstract
The trading models must be periodically evaluated to trace common patterns in the profits and losses to look for methods to avoid unnecessary losing trades and to improve the timing of the winning trades. This will assess the fitness of the assigned parameters to the current market condition. The objective of the out-of-sample test is to confirm the trading instrument with the chosen strategy is the best choice. Another equally important consideration, money management is risk management with adequate capital. The most professional way to execute stop loss is to place stop order at the entry of a new position. If a stop loss of $6 had been used for N-CAMA′, the profits would have been 150 for in-sample period and 447 for evaluation period.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Bessembinder, H., & Chan, K. (1995, July). The profitability of technical trading rules in Asian stock markets. Pacific-Basin Finance Journal, 3, 257–284.
Brock, W., Lakonishok, J., & LeBaron, B. (1992, December). Simple technical trading rules and the stochastic properties of stock returns. Journal of Finance, 47, 1731–1764.
Chan, J. (2005, March/April). Using time series volatilities to trade trends: Trading technique—BBZ. Australian Technical Analysts Association Journal, 31–38.
Chan, J. (2006, March). Trading trends with the Bollinger Bands Z-Test. Technical Analysis of Stocks & Commodities, 46–52.
Chan, J. (2011). Financial Times guide to technical analysis: How to trade like a professional. London, UK: Financial Times Prentice-Hall.
Chan Phooi M’ng, J. (2018). Dynamically Adjustable Moving Average (AMA′) technical analysis indicator to forecast Asian Tigers’ futures markets. Physica A: Statistical Mechanics and Its Applications, 509, 336–345.
Fama, E. (1965). Random walks in stock market prices. Financial Analyst Journal, 16, 1–16.
Irwin, S., & Park, C. (2009). A reality check on technical trading rule profits in the U.S. futures markets. Journal of Futures Markets, 30, 633–659.
Lukac, L., Brorsen, B., & Irwin, S. (1988). Similarity of computer guided technical trading systems. Journal of Futures Markets, 8(1–13), 64.
Olson, D. (2004). Have trading rule profits in the currency markets declined over time? Journal of Banking & Finance, 28, 85–105.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2019 The Author(s)
About this chapter
Cite this chapter
Chan, J. (2019). Evaluation and Stops. In: Automation of Trading Machine for Traders. Palgrave Pivot, Singapore. https://doi.org/10.1007/978-981-13-9945-9_7
Download citation
DOI: https://doi.org/10.1007/978-981-13-9945-9_7
Published:
Publisher Name: Palgrave Pivot, Singapore
Print ISBN: 978-981-13-9944-2
Online ISBN: 978-981-13-9945-9
eBook Packages: Economics and FinanceEconomics and Finance (R0)