Cycles and Trading Systems by Jeffrey Owen Katz, Ph.D.
This time, this Contributing Writer looks at using cycles as the basis of a trading system.
In previous articles, my search for successful trading systems led me to discover a very effective development methodology: the use of genetic algorithms to find not only appropriate rule parameters, but also optimal combinations of rules chosen from a large set of rule templates I provided. Since then, my intention has been to acquire useful knowledge about the markets that may be cast into rule templates. With that in mind, I decided to explore some simple but powerful ideas regarding market behavior that could be easily tested in TradeStation. Ideas that prove useful may be cast into rule templates later and incorporated into the genetic search methodology to produce some truly outstanding systems.