Hi guys, hi from Andrea Unger! Today, I’d like to talk about multi-market trading systems. More in particular, I’d like to answer a question that is often asked in the trading business, that is: in order to be considered good, does a trading system have to perform well on many markets?
Basically, the idea according to which a good system is one that works on several markets derives from a partial knowledge of trading systems. In fact, there are two kinds of trading systems:
- The systems we build with the purpose of identifying the balance between the forces of buyers and sellers in the market; we can say that these systems fight inside this balance and try to take advantage of the moves that these fights cause;
- The systems we create for a specific market.
The former kind, that of multi-market trading systems, normally works on price dynamics. So, we can generally use these systems on a basket of instruments. We simply take a system with its logic and apply it to a number of different instruments; then, we get a balance of all the gains and losses that the system makes on these instruments.
Of course, there won’t be a perfect performance on any of them but, probably, there won’t be any disaster as well. On the contrary, there will be a good balance, as this system works on the dynamics of the markets.
The second family includes the systems that are born from the deep study of the features of a single market. These systems try to take advantage of the specific features of a market. So, it’s very likely that they won’t be as effective on other markets as they are on the one we built them for. The reason is that other markets have different features. It’s a bit like a suit that’s tailored for a specific body type and, so, doesn’t fit others.
So, we have two families. One includes multi-market trading systems that work on price dynamics (generally, they’re parametrical). The other includes systems that work on specific markets. The former normally work well on most of the markets we apply them to, whereas the latter perform well only on the market or the family of markets for which we created them, because they specifically identify what those markets normally do.
Well, it’s your turn now. Develop your own systems!
Stay tuned and see you next time.
Ciao from Andrea Unger!