The Striker Report

John Gallwas: Tell us a little about yourself and what led you to starting Trading Technicians?

Chris Degiere: I've been interested in the financial markets since the dot-com bubble in the late 90s. A lot of money was made and lost during that period and I had my own naive part in it. After the bust I set out to learn all I could about alternative investment strategies to hopefully beat the next downturn.

Mechanical trading strategies and money management techniques were a great fit for me with my software automation and data engineering background. Being able to code seemed like a good advantage and I started building my own trading systems for TradeStation and scripting a lot of the discovery and testing process. Automated trade execution also freed up the time I'd otherwise be glued to charts during market hours so I could keep working on research and development projects.

It took a while before I made significant progress. I launched Trading Technicians mainly so I could lower the barrier to entry to alternative investment technology like this for others. Trading system development is difficult and time consuming and there's so much emotional stress involved with active trading that I saw an opportunity to offer a valuable service to other traders and investors.

John Gallwas: As an active trader yourself, why would you want to sell your trading systems to other traders?

Chris Degiere: One of my original goals was to develop trading systems that worked well with small accounts. My private trading is still modest and geared more towards account growth so it's not an immediate source of income for me. By keeping profits in the account I can better utilize position-sizing techniques to grow the account faster. Leasing my trading systems helps cover some of my costs so I can focus on research and development and trade to the fullest potential.

I think the Striker platform is also a great place to build a public track record, and accountability is a terrific motivator. Already I've met a lot of traders, investors, and experts in the industry that I might not have otherwise met if I had stayed private. By offering a service to the public I get to talk with people and learn from their experience and find out how to focus on what matters most.

John Gallwas: What are the key points to your trading systems and do you periodically update?

Chris Degiere: The biggest breakthrough for me has been applying machine learning techniques and automation to the strategy development and testing process. The key point with this method is to avoid over fitting. What has worked for me has been concentrating on systems with simple trading rules and a small number of moving parts. I look for candidate models with a high number of trades spread over as much historical data as possible and over different market conditions so I can trust the performance statistics. Making sure there's a good balance of long and short trades and a high enough average trade size to cover slippage and commission is also key. The most robust models will perform on unseen data, hold up to stress conditions, and produce realistic live results in my own live account before they're released to the public.

Entry and exit signals for my trading systems are adjusted by volatility so they can adapt to changing market conditions on their own. I also look for stable ranges of inputs to the trading rules so they will have good longevity without changes. Market dynamics do change over time though so I keep a number of candidates ready to rotate in that are variations of the core model. This allows me to "evolve" the live trading system to adapt and offer the best chance for ongoing positive performance. Being able to react to change quickly and adjust without starting from scratch is also a key point for me.

John Gallwas: Why is it important to consistently follow every trading signal?

Chris Degiere: I think of mechanical trading systems in the market as a probability game. Any single trade is mostly random but if there's a statistical edge to the trading system, the more times you can trade it, the more likely you are to converge on your predicted gains. A trading system is really just a coded trading plan and the more you deviate from that plan, the more things can and will go wrong.

Also, it seems more often than not I make the wrong move if I intervene. On a given day, if I don't feel like trading, inevitably that will be the best trading day of the month. If I think a losing position will move back in my favor and I disable a stop, the market will blow right through that point for a much bigger loss. Murphy's law of trading I call it. Automation for me is key here to remove that emotion and ego from trading for much better results.

John Gallwas: Are you working on any new trading systems or markets?

Chris Degiere: In the near term I hope to launch Evolution Natural Gas and Evolution Crude Oil, then more in stock index futures. My plan is to offer a basket of trading systems that work well enough on their own, but perform even better as a portfolio across different time frames and several different markets.

Interested readers can join my email announcement list at http://tradingtechnicians.com or follow @tradetechnician on twitter for updates.

Longer term I'm working on a distributed version of my strategy development and testing software platform so I can run in parallel over more markets and time frames at once and bring better candidates live faster. As part of this I've had fun learning how to trade the spot market for Amazon's computing cloud to provision inexpensive servers to test ideas. There are so many new things to trade these days.