Hi guys, hi from Andrea Unger! Today, I would like to talk about econometrics, explaining to you why I think that complex math is not necessary to build trading systems that work.
People sometimes ask me about trading systems. Most of them think that you need to study econometrics and complex math, in order to become able to build profitable trading systems.
Some traders focus on very complex equations, such as partial derivatives, in seach for a trading system that works. I’m not telling you that this is wrong, because obviously it is not. Many institutions use this method and it certainly works. However, we are retail traders, so we can build our trading systems in a much simpler way.
Believe me, in our case, looking into price dynamics in search for something useful would only be a waste of time. Why? Because we can go straight to the point. How? Just imagining an entry and an exit, and measuring how they work.
By doing this, you can study a trading system directly. You turn your trading idea into a setup (buy here, exit there, etc.) and check the results. If the system makes money, you can work on it. If it loses money, it’s just a waste of time.
So, you don’t need any complex math: you simply apply an idea and measure the results it produces. Then, if for some reason you find out that there is an autocorrelation of prices on a 20-bar cycle, or whatever, you can think to econometrics. Obviously, there are much more difficult things there, and I’m not very skilled at them. So, I just imagine the very basic ones. Then, this can reinforce my pattern and provide further evidence that my strategy is good. But it’s not a starting point.
So, believe me, guys, building trading systems is not that difficult. I think you can create your own as well, as this task does not require any complex maths or formulas.
So, it’s now your turn!
Stay tuned for more! Ciao from Andrea Unger!