Hi, Andrea Unger here. And today, I want to discuss econometrics.
People sometimes ask about trading systems and they think that you need to study econometrics to then build a profitable trading system. And sometimes, they come out with partial derivatives and other complex equations to try to find something that works. I’m not here to tell you that this is wrong because it is not wrong. It’s obviously correct, and many institutions do use this. But for our purpose, we are retail traders. We want to find a trading system that works.
Believe me, to look into the price dynamics and then try to find something that’s useful, it’s just a delay and a waste of time. You can go straight to the point. How? Just imagining an entry, an exit, and to measure how this works. So, what I do, I study directly a trading system. I put a trading idea into work, imagine the setup: okay, buy here, exit here. Does it make money? Yes—it’s something I can work on. It loses money—just, it’s a waste of time. So actually, what happens? I have my idea, I measure it, I get. Then, if for some reason I find out that there is autocorrelation of prices on a cycle of 20 bars—or whatever—you can imagine of the econometrics; obviously, there are much more difficult things there, but I’m not very skilled in that. So, I just imagine the very basic ones. Then this can just reinforce my pattern; reinforce and be a witness that my strategy is good. But it’s not a starting point.
So, believe me, guys, it’s not that difficult to build trading systems. I don’t use complex formulas. You can do it; it’s a task that we can do with no complex maths behind that. It’s your turn now. Stay tuned and get more ideas out of our channel.