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What Traders Are Saying About Champion Trader Kevin Davey And His "Strategy Factory®" Approach To Trading |
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Dave F. - North Carolina - "Kevin's ongoing commitment and support go well beyond the initial workshop and have been invaluable as I learned how to develop trading algorithms that have an actual edge (rather than being random luck). His Strategy Factory Club is inspired. Through my participation in the club, I have been able to connect with other like-minded traders and further develop my own systems through shared ideas & algorithmic strategies." |
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Roland W. - London - "The Strategy Factory is the best trading investment I've ever made. If you want to know how to build robust, proven strategies that actually work in real time, this is your course. The email support Kevin gives is amazing, and he is very generous with his time. Having a guy like Kevin to bounce ideas off is so valuable. He really cares about his students becoming profitable traders, and goes above and beyond. I love the simplicity of the strategies and Kevin shows you that you don’t need to be a master programmer to succeed. Simple, non-correlated, properly tested strategies is the way to go. "
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Dr. Jem Y. - Florida - "Joining Kevin Davey's Strategy Factory was the most important mile stone in my trading life (journey if you prefer). After trading futures for many years, my search for a trading edge brought me to Kevin Davey's Strategy Factory. Within 2 months of signing up, I was able to test my ideas and see the results of my strategies and performance without risking real money. His data oriented scientific approach to testing was the main reason for my decision to join and am I glad that I did!" |
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Dave W. - Switzerland - "Kevin's approach to trading has had a dramatic positive impact on my trading profitability since taking his course two years ago. The strategies I develop using some of his strategy factory processes give me more confidence, and most importantly, more real trading profits. His workshop courses are A+, unmatched." |
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Eric B. - Colorado - “If you are thinking algorithmic trading may be for you, there is no one better to teach you how to create strategies the correct way. The support Kevin and the community provides will shave years off your learning curve.” |
How I Build Successful Algo Trading Strategies
Kevin Davey, Champion Trader & Founder, KJTradingSystems.com
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Here's the brutal truth about trading: Trading is HARD! I've always said it is the hardest way to make easy money... And trust me when I say that in the early years I failed, and failed a lot.
But after many years of trading failure, in the early 2000's I discovered "algo" trading systems. This is trading based on a set of rigidly applied, backtested rules. Once I fully embraced algo trading, a few years later I was a 3 time trading contest trophy winner... |
I now use a standardized process to build my algorithmic trading strategies - a trademarked process I call the Strategy Factory®.
I used that process to build this algo trading system for the mini S&P futures (backtest created with Tradestation):
The best part? It's a simple, 8-step process.
The process takes hard work, and trading is risky. But it does not have to be complicated. And it's one of the fastest ways I've discovered to quickly build a portfolio of algo trading systems.
If you want to get access to the above strategy - a real-life case study of the Strategy Factory in action - just enter your name and e-mail address below and I'll send it over.
The process takes hard work, and trading is risky. But it does not have to be complicated. And it's one of the fastest ways I've discovered to quickly build a portfolio of algo trading systems.
If you want to get access to the above strategy - a real-life case study of the Strategy Factory in action - just enter your name and e-mail address below and I'll send it over.
What are Algorithmic Trading Systems?
I'll make the answer VERY simple, even though "algorithmic" sounds super complicated.
Think of an algo as "rules to trade by."
If you want to buy 52 week highs and sell 52 week lows, those are rules that can be turned into a computer algo. Maybe you add a stop loss in there, or even a profit target. Basically, you program the rules you want (the algo), and then test it on whatever stock, forex pair, futures instrument or crypto that you want.
An algorithmic trading system, then, is just a set of rules to control your trading decisions. These rules can include buy/sell decisions, position sizing rules or even concepts like equity curve trading.
Think of an algo as "rules to trade by."
If you want to buy 52 week highs and sell 52 week lows, those are rules that can be turned into a computer algo. Maybe you add a stop loss in there, or even a profit target. Basically, you program the rules you want (the algo), and then test it on whatever stock, forex pair, futures instrument or crypto that you want.
An algorithmic trading system, then, is just a set of rules to control your trading decisions. These rules can include buy/sell decisions, position sizing rules or even concepts like equity curve trading.
Types of Trading Systems
Most retail traders trade one of the following trading systems:
Full 100% Algo - ALL rules for entry and exit are determined by the computer. No intervention by the human trader. Can be easily historically tested (known as a backtest).
Hybrid Algo - Rules are defined, but sometimes the human trader overrides the computer rules/decisions. Many traders fall into this category, since they like rules, but they also think they are smarter than any algo they create.
Discretionary - Trading is conducted via guidelines rather than hard and fast rules. The trader uses a lot of judgement and intuition to make trading decisions. Most traders start out with this approach, since they feel they can easily outsmart the market (usually a bad assumption!).
Full 100% Algo - ALL rules for entry and exit are determined by the computer. No intervention by the human trader. Can be easily historically tested (known as a backtest).
Hybrid Algo - Rules are defined, but sometimes the human trader overrides the computer rules/decisions. Many traders fall into this category, since they like rules, but they also think they are smarter than any algo they create.
Discretionary - Trading is conducted via guidelines rather than hard and fast rules. The trader uses a lot of judgement and intuition to make trading decisions. Most traders start out with this approach, since they feel they can easily outsmart the market (usually a bad assumption!).
How To Build An Algorithmic Trading System
This is a complex topic, for sure.
I could write a book on how to create an algo trading system - in fact, I actually did! My first book is called Building Winning Algorithmic Trading Systems. It was released in 2014, and in many trading circles it is now considered a classic in trading system development.
My approach to building trading algos is a multi step process I call the Strategy Factory®. It is an objective process, built to help traders avoid common mistakes like over-optimization, curve fitting, etc. The best part? This process is what I use to develop trading strategies AND it works for traders I have taught it to.
I've also written 4 other algo trading books. They are all best sellers at Amazon. Here is a time where 3 of them were in the top 5 bestsellers for Futures Trading!
I could write a book on how to create an algo trading system - in fact, I actually did! My first book is called Building Winning Algorithmic Trading Systems. It was released in 2014, and in many trading circles it is now considered a classic in trading system development.
My approach to building trading algos is a multi step process I call the Strategy Factory®. It is an objective process, built to help traders avoid common mistakes like over-optimization, curve fitting, etc. The best part? This process is what I use to develop trading strategies AND it works for traders I have taught it to.
I've also written 4 other algo trading books. They are all best sellers at Amazon. Here is a time where 3 of them were in the top 5 bestsellers for Futures Trading!
Skills to Create Algorithmic Trading Systems
If you are thinking about algo trading, and creating your own algos, there are certain skills and experience you need:
Math & Statistics Knowledge
Programming Experience
Trading Platform Knowledge (how do you automate live?)
Mental Discipline (to not override your algos)
Ability To Deal With Frustration (algo trading is NOT easy)
I've created this simple interactive quiz that will tell you pretty quickly where you stand relative to algo trading. I also provided tons of free info at this site - KJTradingSystems.com - to get you rolling on your algo trading journey!
Also, take a look at my Ultimate Guide To Successful Algo Trading. It will help you get started.
And if you are looking for a detailed comparison of some of the best algo trading courses, check out my "best algo trading courses" guide.
Math & Statistics Knowledge
Programming Experience
Trading Platform Knowledge (how do you automate live?)
Mental Discipline (to not override your algos)
Ability To Deal With Frustration (algo trading is NOT easy)
I've created this simple interactive quiz that will tell you pretty quickly where you stand relative to algo trading. I also provided tons of free info at this site - KJTradingSystems.com - to get you rolling on your algo trading journey!
Also, take a look at my Ultimate Guide To Successful Algo Trading. It will help you get started.
And if you are looking for a detailed comparison of some of the best algo trading courses, check out my "best algo trading courses" guide.
Build Successful Algorithmic Trading Strategies
This is the goal. And what is a "successful" strategy? A winning algo trading strategy PRODUCES GOOD RISK ADJUSTED PROFITS IN REAL TIME. That is the goal.
This is a VERY important point. Traders new to algo trading mistakenly think the goal is creating a great looking historic backtest. WRONG!!! In fact, creating a great backtest is many times the exact wrong thing to do. Don't fall for "educators" who claim you can optimize your way to profits. You can't.
There is a paradox here, though. Optimizing is a bad thing, if you do too much of it. BUT, if you optimize properly, it can really boost your algo trading. This is kind of like the Goldilocks story - the porridge is not too hot, and not too cold, but is just right!
There are a ton of choices to make when setting up your algo trading. Many traders find my "best of trading" compilation very helpful in finding their way around.
This is a VERY important point. Traders new to algo trading mistakenly think the goal is creating a great looking historic backtest. WRONG!!! In fact, creating a great backtest is many times the exact wrong thing to do. Don't fall for "educators" who claim you can optimize your way to profits. You can't.
There is a paradox here, though. Optimizing is a bad thing, if you do too much of it. BUT, if you optimize properly, it can really boost your algo trading. This is kind of like the Goldilocks story - the porridge is not too hot, and not too cold, but is just right!
There are a ton of choices to make when setting up your algo trading. Many traders find my "best of trading" compilation very helpful in finding their way around.
Step by Step Algo Trading Strategies
If you want to succeed in algo trading, you need a process to develop algos. Ideally, the process will be objective, rigorous and comprehensive. I've created such a step by step process for my own trading. I can take a trading idea, develop a strategy based on it, test it and determine if it is worth trading.
The problem is most ideas fail! The algo building process I use routinely discards 99 to 99.9% of strategies I test. And that is OK by me - I only want to trade the best algorithms. I'll let losing traders trade the others!
The problem is most ideas fail! The algo building process I use routinely discards 99 to 99.9% of strategies I test. And that is OK by me - I only want to trade the best algorithms. I'll let losing traders trade the others!
Free Algo Trading Strategies
Many traders like to say "show me the money." So, on this site I give away an algo for the mini S&P. It has returned over $50,000 in hypothetical profits per contract in the past 5 years - not too shabby!
It can be yours free, just sign up for my e-mail list at the top of the page.
It can be yours free, just sign up for my e-mail list at the top of the page.
What are trading systems?
Trading systems are rules or instructions that control the buying or selling of a futures, forex or stock instrument.
Are algo trading systems hard to develop?
Trading systems can be very simple to develop, but can also be complicated. Developing consistently profitable trading systems is very difficult.
What skills do I need to create trading systems?
Trading experience and programming experience are two essential skills in trading system development. Most trading systems developers have experience with a trading platform such as Tradestation, Ninja Trader or Multicharts, which allow the user to program trading rules and create a trading strategy. Therforefore, most trading system developers know how to program in the language of the platform, the difficulty of which varies from platform to platform.
What is an algorithmic trading system?
An algorithmic trading system (also known as an "algo trading system") is a programmed set of buy and sell rules that can be applied to a futures, forex or stock instrument. Trading system rules are typically subjected to a historical backtest to ensure profitability before the trading strategy is traded "live" with real money.
What are major pitfalls when building trading systems?
The most common pitfall in trading systems development is overfitting or curvefitting - creating rules that produce great looking historical backtests, but almost never work on future data. Neglecting slippage and commissions is another major pitfall.
Is using a trading system better than other types of trading?
When developed properly a trading system can be better than other types of trading, such as discretionary trading. However, when developed incorrectly, a trading system can actually be worse than other types of trading, such as discretionary chart trading.