Algo Trader’s Toolkit Kevin J. Davey Copyright 2017 – KJ Trading Systems LLC. All rights reserved Contents Disclaimer ..................................................................................................................................................... 5 Introduction .................................................................................................................................................. 6 About Me ...................................................................................................................................................... 8 First Things First.......................................................................................................................................... 10 MY TRADING COURSE: STRATEGY FACTORY® WORKSHOP .................................................................... 10 MY TRADING BOOK: BUILDING WINNING ALGORITHMIC TRADING SYSTEMS ....................................... 11 Quick Start .................................................................................................................................................. 12 THE 26 HOUR EPIC VIDEO PACKAGE ....................................................................................................... 12 What Exactly Is “Algo” Trading? ................................................................................................................ 13 Articles – Part 1 .......................................................................................................................................... 16 100 PERCENT RETURNS PER YEAR .......................................................................................................... 16 WHEN TO STOP TRADING A SYSTEM ...................................................................................................... 19 USE MARGIN TO POSITION SIZE? ............................................................................................................ 21 WALKFORWARD TESTING ....................................................................................................................... 22 DID NOSTRADAMUS TRADE FUTURES? .................................................................................................. 25 SCALES - HAZARDOUS TO YOUR HEALTH ................................................................................................ 27 THE LEVERAGE BEAST ............................................................................................................................. 29 THE TWO PERCENT RULE ........................................................................................................................ 31 WHEN LIGHTNING STRIKES ..................................................................................................................... 33 ALL THAT GLITTERS IS GOLD ................................................................................................................... 35 FORGOTTEN NUMBERS ........................................................................................................................... 37 WIN AT ALL COSTS? ................................................................................................................................ 39 FOCUS ON THE NEGATIVE ....................................................................................................................... 41 PUT YOUR MONEY WHERE YOUR MOUTH IS ......................................................................................... 43 THE 90 PERCENT CLUB ............................................................................................................................ 45 I DID IT MY WAY ...................................................................................................................................... 47 THAT'S A SNEAKY TRICK .......................................................................................................................... 49 SHARP AS A RAZOR ................................................................................................................................. 51 HOW TO CREATE A PROFITABLE TRADING STRATEGY FROM SIMPLE SETUPS ....................................... 53 ARE BREAKEVEN STOPS WORTH THE EFFORT? ...................................................................................... 59 GOING LIVE WITH AUTOMATION ........................................................................................................... 60 FINDING OUT WHAT WORKS, AND WHAT DOESN’T WORK – PART 1 .................................................... 62 FINDING OUT WHAT WORKS, AND WHAT DOESN’T WORK – PART 2 .................................................... 63 THE PERILS OF BUYING TRADING SYSTEMS ............................................................................................ 64 3 WEAPONS TO SLAY THE TRADING WOLVES......................................................................................... 65 5 PITFALLS TO USING A TRADING SIGNAL SERVICE ................................................................................ 66 AUTOMATED TRADING – FRIEND OR FOE? ............................................................................................ 67 My Algo Trading Book ................................................................................................................................ 68 Articles – Part 2 .......................................................................................................................................... 69 FROM CLICHÉ TO STRATEGY ................................................................................................................... 69 AFTER TESTING, BEFORE TRADING ......................................................................................................... 70 REFINING CRUDE OIL BREAKOUTS .......................................................................................................... 71 IMPROVING BOTH ENDS OF A SYSTEM ................................................................................................... 72 EXITING ON A HIGH NOTE ....................................................................................................................... 73 ENTERING ON THE RIGHT FOOT ............................................................................................................. 74 DON’T BUILD A BETTER BACKTEST .......................................................................................................... 75 BUILDING A TRADING STRATEGY – AFTER TESTING AND OPTIMIZATION .............................................. 76 BUILDING A TRADING STRATEGY INVOLVES MORE THAN TESTING AND OPTIMIZATION ..................... 77 TOP 3 MISTAKES OF TRADING SYSTEM DEVELOPMENT ......................................................................... 78 AVOIDING TRADING PARALYSIS BY ANALYSIS ........................................................................................ 79 MYTHS AND FACTS OF EQUITY CURVE TRADING.................................................................................... 80 EQUITY CURVE ANALYSIS: A FOOL’S PATH? ............................................................................................ 81 AVOIDING DRAWDOWN BREAKDOWNS................................................................................................. 82 DON’T BE A GUNSLINGER ....................................................................................................................... 83 SWIM WITH THE SHARKS ........................................................................................................................ 84 Presentations .............................................................................................................................................. 85 CRUSH THE COMPETITION ...................................................................................................................... 85 Keep Up To Date With My Work ............................................................................................................... 87 Videos ......................................................................................................................................................... 88 HOW TO TRADE LIKE A CHAMPION (5 PART SERIES) .............................................................................. 88 HOW TO PICK A WINNING TRADING SYSTEM (5 PART SERIES) .............................................................. 89 FORMULATE A TRADING PLAN ............................................................................................................... 89 TESTING FOR SUCCESS ............................................................................................................................ 90 7 WAYS TO TRADE THE MINI S&P ........................................................................................................... 90 HYPOTHETICALLY SPEAKING ................................................................................................................... 91 UNORTHODOX TRADING ENTRIES .......................................................................................................... 91 HOW A STRATEGY FACTORY CAN HELP YOU .......................................................................................... 92 DEVELOP A STRATEGY WITH STRATEGY FACTORY PRINCIPLES .............................................................. 92 2 MINUTE TRADING TIPS (12 PART SERIES) ............................................................................................ 93 POSITION SIZING 101 .............................................................................................................................. 93 TRADING GAMES PEOPLE PLAY .............................................................................................................. 94 WHAT IS THE “STRATEGY FACTORY” CLUB? ........................................................................................... 94 INTERVIEW WITH A SUCCESSFUL STUDENT ............................................................................................ 95 Interviews ................................................................................................................................................... 96 BETTERSYSTEMTRADER.COM INTERVIEW .............................................................................................. 96 CHATWITHTRADERS.COM INTERVIEW ................................................................................................... 97 52TRADERS.COM INTERVIEW ................................................................................................................. 98 Code Pieces and Snippets .......................................................................................................................... 98 CONTINUOUS CONTRACT CHANGE NOTIFIER – PAINT BAR STUDY ........................................................ 99 POSITION MISMATCH NOTIFIER – PAINT BAR STUDY ............................................................................ 99 BARSSINCEENTRY EXIT STRATEGY ......................................................................................................... 101 SIMPLE MOMENTUM ENTRY ................................................................................................................ 101 Putting It All Together .............................................................................................................................. 102 My Strategy Factory Workshop ............................................................................................................... 103 3RD PARTY REVIEWS OF THE STRATEGY FACTORY WORKSHOP ............................................................ 104 STUDENT CREATED STRATEGIES ........................................................................................................... 107 STRATEGY FACTORY WORKSHOP – SPECIAL OFFER .............................................................................. 109 Final Reminder- Join My List, Stay Up To Date! ...................................................................................... 110 Disclaimer U.S. Government Required Disclaimer - Commodity Futures Trading Commission states: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures, stocks or options on the same. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR OWN. Introduction Welcome, and thanks! Just by downloading this document, I hope you realize how I am different than the typical trading “educator.” Most educators require an e-mail address before they send you their precious report. What a crock of $#^#^$, and usually a waste of time – how many so-called educators have you given your e-mail to, only to unsubscribe a day later, because you realized they were just knuckleheads? I refuse to play games like that, so I am giving you this toolkit, and I want nothing in return. Why? Because I know that about 87% of serious traders will find a ton of value in this report, and will visit my site and then sign up for my e-mail newsletter (and get even more free information). That is how confident I am in this material. And if you don’t find value here, that is OK – at least you haven’t given away your e-mail address! This e-book is really more than a simple document – it is a roadmap to a lot of trading material I have written and produced over the years. You will find more than a few nuggets of wisdom here – bits and pieces of information that I uncovered the hard way – by losing money in the markets! In the next sections you will find:  43 articles on all aspects of trading, from beginner’s advice to intermediate tips to in-depth analysis geared toward professional and advanced trader  33 videos about trading, everything from how to videos to demonstration videos  2 presentation handouts  3 High Quality podcasts I was interviewed for  A bunch of indicators and code snippets I use in my own trading  Information on how to get advance notice on future free webinars I conduct  A description of my Strategy Factory Workshop (along with a bonus offer) – a great way to take your trading to the next level So, without further ado, let’s jump right into the material! Kevin Davey Champion Trader About Me Kevin J. Davey, Founder, KJ Trading Systems KEVIN is a professional trader and a top-performing systems developer. Kevin is the author of “Building Winning Algorithmic Trading Systems – A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading” (Wiley, 2014). An aerospace engineer and MBA by background, Davey has been an independent trader for over 25 years. Although Kevin has had a great deal of recent success, many of the early years were met with failure. Bloodied but not defeated, Kevin spent the next few years researching, reading and otherwise devouring all he could about trading. That legwork certainly paid off in a worldwide futures trading contest. In the years from 2005 to 2007, Kevin was usually near or at the top of the leaderboard. • 2005 - 148% return (2nd place) • 2006 - 107% return (1st place) • 2007 - 112% return (2nd place) With a background in aerospace engineering and quality assurance, Kevin brings a unique perspective to trading. Currently, Kevin trades full time, writes for trading publications and gives trading workshops. Kevin also consults for private individuals and CTAs, when he is not developing new strategies for his own personal account. Almost forgot, apparently Kevin is a little rat, too. At least, that is what one independent trading education reviewer said about him. Click his likeness below to read the review! Why did a major trading review site call me a dirty rat? Click the rat to find out! First Things First Before you take a look at my material, think about what you do not see here: no flashy cars, no sparkling diamond watches, no girls in bikinis, no private jets. In other words, on trader porn! Unfortunately, many people expect that nowadays, especially when you see all these “traders” on Twitter making tons of money (spoiler alert: most of them are frauds, either trading demo accounts, or trading in “replay” mode). You won’t see any of that nonsense here. I tell it like it is – trading is hard work. But I speak the truth, and trading industry awards show that: MY TRADING COURSE: STRATEGY FACTORY® WORKSHOP