We believe that the markets have a story to tell, and by understanding the language and nature of the markets we can make predictions with a statistical edge. Modern traders have an unprecedented number of tools available to them – machine learning, data mining, neural networks, etc. Most technical tools are either worthless or have limited value. We believe that profitability comes from combining behavioral psychology with statistical analysis.
Our development process is founded on thousands of hours of “eyes on the market”. Ideas are synthesized into systems, which are then shelved to see how they would operate on unseen data. This method utilizes the strengths of the human mind to creatively analyze markets, rather than brute force computing which often results in curve fitting.
To generate a steady equity curve, all trading decisions begin with risk exposure analysis. Adjusting exposure to the nature of the market environment is akin to waiting for a good wind before taking a sailboat out, or a surfer waiting for good waves before paddling out. Positions are precisely sized according to the anticipated opportunity. Daily exposure and loss limits are strictly enforced, and stops are always in the market.
Finally, we trade our own money with these exact methods, and have for many, many years. The methods utilized have repeatedly proven themselves and remain effective because they are not overly complex, they adapt to most market environments, and they begin with a risk management perspective.