Intraday Edge: Find strategies backwards

A large consideration of developing trading systems should be how efficient our capital is working for us. The quicker we can realize profits, the more trades we can make thus allowing our capital to compound more quickly. Additionally, sitting in positions for long periods increases our risk to extraneous events.

More importantly, it is typically easier to find daily or higher timeframe edges than intraday edges due to the increased noise in intraday data.

Is there a way to reduce the time in a position which would increase our trade count (via number of strategies) which would then allow us to arrive at the law of large numbers more quickly and therefore allow our capital to compound more quickly?

Yep. One of the new features in Build Alpha, called “Intraday Edge”, is a tool which allows us to do exactly that. It allows us to dig deeper into daily trading strategies to see if we can make them more efficient by reducing their holding times into smaller intraday time windows. Maybe we can capture most of the daily strategy’s edge during only a small portion of the typical holding time. That’s right.. turning daily strategies into intraday strategies.

A simple example can help clarify the power of this new feature…

First, let’s take an original daily trading system. I will use a simple one rule strategy that goes long the SP500 futures contract whenever the trading session closes in the bottom 20% of the day’s range (internal bar strength or internal bar rank – IBR in Build Alpha). We then hold that long position for 1 day. This assumes about a 23 hour risk (i.e., one Globex trading session).

However, what if we could dig into this strategy and realize that most of the gains only come from 1 am EST to 4 am EST? We can then reduce our holding time by about 87% which now only ties up our capital for 3 hours as opposed to 23! This gives us an additional 20 hours to utilize other strategies to continue to grow our capital while still capturing a large portion of the original daily strategy’s edge.

Imagine we only had enough capital for one strategy. This Intraday Edge feature can now make our capital work much harder by finding intraday edge strategies for multiple markets/times of the day. Tying up capital for 23 hours in one daily strategy vs. trading 7 different intraday edge strategies with the same capital.

*Original strategy can be reduced by Intraday Edge which allows other intraday strategies to be traded with the same capital that was orignially tied up by the daily strategy*

In the end, it makes our once daily system much more efficient. Check out the performance metrics of the original daily system compared to the new “Intraday Edge” version.

*Daily Strategy*

*Intraday Edge*

So how can this be accomplished in Build Alpha? It is simple.

  1. Highlight any daily strategy
  2. Click the Test Settings in the bottom right to configure the intraday timeframe you want to use
  3. Hit the Intraday Edge button

 

Build Alpha will then search all possible holding periods within the original strategy’s trading duration to see if there is a more efficient version with reduced holding times. You can include the original strategy’s exit criteria such as stops, etc. or choose to exclude them. Flexibility to test everything is always key in Build Alpha.

Intraday Edge can even be used on different markets at the same time. For example, imagine an original system built on Gold daily bars but then we search for an intraday edge version that trades oil but only during this specific 2 hour window while the original Gold System has an active signal.

This Intraday Edge feature essentially allows us to search for intraday and multi-timeframe strategies in a new way. In this above Gold and Oil example we have a multi-timeframe AND intermarket strategy created from a simple Gold daily strategy.

You can still search for multi-timeframe and intraday strategies in the original/traditional way. That is, just searching the intraday data from the start. However, it is often faster and easier to find daily strategies then work them into intraday ones. At least now with Build Alpha you have the option to search both ways. Something not possible elsewhere.

And of course, all of the adjustments from the Intraday Edge feature are then applied to the code generators so you can automate these Intraday Edge systems with one click as with everything.

As always, I will keep attempting to add flexibility and ways to dig deeper so we can have the best trading strategies possible. Leave no stone unturned and test everything!

Thanks for reading,

David


2 thoughts on “Intraday Edge: Find strategies backwards

Leave a Reply

Your email address will not be published. Required fields are marked *

Login


Username
Password
(close)

Create an Account!


Username
Email
Password
Confirm Password
Want to Login? (close)

forgot password?


Username or Email
(close)

Risk Disclosure

FUTURES AND FOREX TRADING CONTAINS SUBSTANTIAL RISK AND IS NOT FOR EVERY INVESTOR. AN INVESTOR COULD POTENTIALLY LOSE ALL OR MORE THAN THE INITIAL INVESTMENT. RISK CAPITAL IS MONEY THAT CAN BE LOST WITHOUT JEOPARDIZING ONES FINANCIAL SECURITY OR LIFE STYLE. ONLY RISK CAPITAL SHOULD BE USED FOR TRADING AND ONLY THOSE WITH SUFFICIENT RISK CAPITAL SHOULD CONSIDER TRADING. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Hypothetical Performance Disclaimer

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.