Ep. 77 – How to Win a Trading Competition with Kevin Davey
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In this episode:
Admitting that the Forex markets are a bit flat and sideways at the moment, we look at practical solutions
We discuss ideas on where to find volatility – commodities, cryptos? Or just sit back and wait?
The Crypto Competition is upon us! We talk opening strategies
Kevin Davey is our guest. He won the World Cup Championship of Futures Trading and tells us how to approach a Trading Competition with victory in mind
He has built countless profitable trading algorithms and lets us in on his secrets
Trader Interview – Kevin Davey – How to Win a Trading Competition and Algo Trading Strategies
Kevin Davey’s success at the World Cup of Futures Trading from 2005 to 2007 is the stuff of legend. He came second in 2005, first in 2006 and second again in 2007. This unprecedented level of success led the world to sit up and take notice.
Kevin achieved his remarkable run through developing trading algorithms. After 15 years of fruitless labour and after trying various trading techniques, Kevin perfected a winning process.
His process enables him to find and select trading ideas, backtest them, perform the perfect amount of optimisation, and release them into the wild to trade away at all hours, bringing him profit!
Crucially, his method of approaching the data and parameter optimisation prevents him from falling into the traps of hindsight bias and over-optimisation that most beginner algo-builders suffer from.
This trap is even more prevalent when using automatic backtesting than with manual backtesting. If you manually backtest a system then you have by definition already chosen the system and can’t “curve fit” it for the data.
With automatic backtesting, too often people run the data, change the parameters, run the data, change the parameters etc etc ad infinitum. This is because it is so quick and easy to do so. This approach will inevitably lead to over-optimisation and a system that works amazingly well in back testing but crashes and burns in real life! Disaster!
An Engineer’s Perspective
After reading Kevin’s Book – Building Winning Algorithmic Trading Systems – it is pretty clear that his background as an engineer is central to his process. That is not to say you need to be an engineer or otherwise very mathematical to master it, but the attention to detail and precision that he uses is second to none.
His use of Monte Carlo Simulation and out-of-sample Walk Forward Testing, take data analysis and edge-proving to the next level. If you want to build winning algos like Kevin Davey builds winning algos, then you need to accept the necessity for this mathematical approach.
Crypto Competition – It’s ON!
Tom and Owen discuss opening strategies for the competition on this episode. The comp started on Saturday 11th, but if you have only just heard about it, don’t worry, presuming you are reading this close to the release of the episode, there is still plenty of time left to make some (fake) $$$!
Sign up right away to get involved!