Dave Mabe teaches systems traders how to make more money with their trading strategies.
Here s a question from long-time list member Charles B. ( name used with permission, lightly edited for clarity .) Charles B: Following your Bionic Trader calls with Garrett and Tim from SMB Capital, I decided to go back to the drawing board and start again building AFL code for my Gap & Fade small-cap strategy. It uses five criteria to find an A+ stock — one is knowing the company s float level,…
Devin and I recorded a third coaching session. He s made serious progress! We discussed several topics: The strategy he s working on, including my take on what s likely to be profitable Confirmation of his current process (follow ONE strategy through the entire workflow) Going from backtesting to real-time trading with the MabeKit Trade Client Selecting the optimal stop loss across the entire…
First, an excerpt from a poem: Luck is not chance- It’s Toil- Fortune’s expensive smile Is earned... -Emily Dickinson When you look at any given trade, almost every one of them will have luck involved. Did you get stopped out by one tick? Seems like bad luck. Did you almost get stopped out, and then by the end of the day the trade was profitable? Seems like good luck. But when you start zooming…
Some of you have noticed some very annoying bad ticks on charts when using Amibroker and IQFeed. You would see a normal-looking chart and then, all of a sudden, a crazy wick would appear. Then, when you do a "Force Backfill," the wick would disappear. I finally got both Amibroker and IQFeed talking to each other about this issue, and I m happy to see a fix has finally emerged. There s a new…
In this week s episode of Line Your Own Pockets, we tackle volatility halts. We discuss: What they are and why they exist Whether or not they have value for the markets at all The mechanics of how halts work (and the auction that occurs to resume trading) Why auctions are a potential source for trading edge And much more... LISTEN NOW » -Dave P.S. Are you in a drawdown and ready to quit? Join the…
As I mentioned recently a couple of times , the IQFeed/Amibroker integration can seem like a black box at first glance. But there are actually several ways to dig into what s going on. I ve mentioned the Backfill status window and Debug View. Sometimes, you need to go even deeper. And that s where the diagnostic tools that come with IQFeed are really handy. These operate within IQFeed itself,…
Pre-S: I ll be on the B The Trader podcast soon. There s a "submit a question" segment where I ll be answering questions from listeners. If you have any questions, submit them here . Thanks! In yesterday s post, I shared how you can troubleshoot backfill issues with IQFeed and Amibroker. Today I ll share how you can go deeper with using a tool called Debug View. DebugView is a very simple, free…
Pre-S: I ll be on the B The Trader podcast soon. There s a "submit a question" segment where I ll be answering questions from listeners. If you have any questions, submit them here . Thanks! Occasionally, you ll run into a frustrating issue with IQFeed and Amibroker where the backfill in an exploration hangs and never completes. Sometimes this is solved simply by clicking the stop button and…
One of the lessons I learned years ago: If you re in a hurry for any reason while trading, bad things typically happen. Are you in a rush to trade a strategy with size after you see the backtest? Probably a mistake. Are you tripling your size in your strategy that you ve traded live for a week and it looks bulletproof? Probably a mistake. That s why it s always satisfying to see a trader take a…
In this week s episode of Line Your Own Pockets, we discuss strategy diversification versus strategy hopping. One is productive; the other is not. Topics include: How to go deeper on strategies rather than hop from one to the next Before moving on from a strategy, document why Thorough notes about why you re moving on will make it easier to return to it in the future "This strategy doesn t work"…
When traders start using the Strategy Cruncher, there s a temptation to take ANY strategy and run it through the optimization process to make it profitable. This is possible, but optimizing some strategies is like putting lipstick on a pig. So the more edge your strategy has before optimizing, the better your final version will be. This is where market intuition and experience can save you a lot…
Occasionally, someone will ask me if they can have one of my trading strategies. The answer is always no, but not for the reasons you might be thinking. You may have heard me say that I want to help 10,000 traders go from being hobbyists to trading full-time. To accomplish that crazy goal, the traders I help need to be long-term successful. Think years and decades of trading success, not just…
One of the traders I m coaching just switched from TradeStation to Interactive Brokers. They both offer an API to trade through, but IBKR s is vastly superior and has been for years. The main game changer for this trader was the way IBKR handles partial fills with orders in an OCA group. Think about using a limit order for entry - there s no guarantee that it will be fully filled. You might get a…
One thing I learned in my Trade-Ideas CTO days was the value of a simple but powerful concept: a dead-man timer . Imagine you have an important process that needs to complete each day. It s reliable, so it only fails every once in a while. But when it does fail, someone needs to know immediately. You could add a step to the process that sends you a notification when it completes, but you will…
In this week s episode of Line Your Own Pockets, I share details of a recent conversation with a trader I m coaching on why you would want to backtest without a stop. Note that this doesn t mean you re actually trading without a stop loss, but running a backtest without one can be very valuable. We discuss: The two major benefits of running a backtest without a stop What "maximum adverse…
Here s a follow-up question from Varun, one of the interns in the current cohort at SMB Capital (name used with permission): Varun: You mentioned trading day 1 earnings yourself - my day 2 work found only a thin unconditional edge survives there. Did you ever try day 2 and kill it, or never look? Curious whether that s an absence or a graveyard for you. Dave: Yes, I trade a few strategies you…
SMB Capital recently invited me to give a talk to their quant intern group. The SMB Capital internship is a very competitive program for young college grads to get hands-on experience on a trading desk. I ve received several follow-up questions from the presentation. Here s one from Varun ( name used with permission, lightly edited for clarity, and I ve removed the strategy details ) Varun:…
Vacations are valuable - I ve learned to take more of them over the years. But when you trade profitable strategies, the cost of going on a vacation goes up dramatically due to opportunity costs. I have gone through several iterations of a remote trading setup over the years, and each has serious shortcomings. (I m pretty sure the first remote software I used was a program called PC-Anywhere in…
Several traders have gone through my Better Backtesting course. One of the lessons describes going from backtesting to trading live. It recommends paper trading first, then trading live with tiny size to start gathering data. Rick H. replied and asked a good question ( name used with permission ): Rick H.: But wouldn t paper trading alone accomplish the same thing? Dave: I do believe paper trading…
In this week s episode of Line Your Own Pockets, we follow up on last week s topic of trading drawdowns and discuss concrete things you can do when you re in one. We discuss: Even though you can t predict when they ll happen, that doesn t mean you can t prepare for drawdowns Update your data, rerun your backtests, and reconcile all live trades Small execution differences can cause large P&L gaps…
Here s a question from Ami (name used with permission, lightly edited for clarity): Ami: I was wondering if I could ask you a question about moving from backtesting to live trading. I asked ChatGPT how many live trades are generally needed before gaining confidence, and it suggested around 50–100 small-size trades, then comparing the live results to the backtest’s expected distribution to see if…
Garrett Drinon invited me on the SMB Podcast to discuss using Claude Code to create profitable trading strategies through backtesting. Garrett, Tim, and I go deep on a wide variety of topics in this area. Here are the show notes: 00:00 Most Traders Ask AI the Wrong Questions 01:36 From Automation to Claude Code 03:31 Step 1: Let Claude Run Your Backtests 05:11 The Trap of Making Claude Do…
The first thing you should do in Amibroker when you create a new strategy is to configure the backtest to use unlimited buying power. It s not that you have unlimited resources to trade - it s that you don t want your backtester to exclude trades from your backtest prematurely. At the beginning of the process of creating a profitable trading strategy, you need to include all the trades - even if…
In general, the more recent the action, the more predictive it can be in your strategy. Here s a good example from a strategy I m working on. It s a short strategy based on gapping stocks. I ve run a broad backtest in Amibroker with the MabeKit column library applied, and I ve run it through the Strategy Cruncher. This is the first optimization I ve run on the strategy. Among the suggestions in…
Every trader who has quit trading did so during a drawdown. In this episode of Line Your Own Pockets, we discuss this difficult topic and what you can do now to prepare. Topics include: Drawdowns are psychologically much harder than most traders expect The biggest pain isn t the money - it s questioning whether your strategy actually has an edge Having only one strategy makes your identity more…
A few weeks ago, David Capablanca invited me on his Friendly Bear podcast. Here are the show notes: In this episode, discretionary trader and author of Short Selling Master, David Capablanca sits down with algorithmic trading expert Dave Mabe to break down how discretionary and systematic traders can actually work together instead of staying in their own lanes. Dave has been trading systematically…
That s a question I asked a trader I m coaching on our last call. And his response was: rarely. Running out of buying power is a good thing. If you re efficiently using your capital, then you should be hitting the limit pretty regularly. If you re not, then your top priority should be figuring out what would give you the confidence to scale your trading so you do run out of buying power routinely.…
Here s a good question from fellow North Carolinian, Ross C. ( name used with permission, lightly edited for clarity ): Ross C: Using IBKR s API, how do you handle an OCA order if you have a stop, limit, and MOC (market on close) order? Seems that MOC orders will go through if the limit or stop hits within the last 5 minutes of trading. Any recommendations? Dave: Market-on-close orders are nice,…
Here s a question from Angel R. (name used with permission): Angel R.: I ve been testing an intraday trading strategy. I wanted to ask you about the following: I m trading with IB-Gateway on a VPS located in the US. Everything looks good, but lately I ve noticed a delay in IBKR executing my entry orders (more than 10 seconds, up to 1 minute!), which includes increased slippage in the entry price.…
In this week s episode of Line Your Own Pockets, we reflect on 100 episodes of the podcast. (!!) We compare the most popular episodes by downloads with those we think are most valuable. Michael and I independently came to the episode with a list of 3 episodes we thought were the best. I was shocked when we compared the lists! Whether you re new to the podcast or a veteran of LYOP, this is a good…
In the last webinar I did for Interactive Brokers, there were so many great questions that we ran out of time. So Andrew Wilkinson invited me on the IBKR Podcast to discuss the topic further. The webinar was titled How I Scaled My Trading Strategy Using the IBKR API . We discuss: My original motivation for automating my trades The advantages of using the IBKR API Order types available at IBKR…
Yesterday, I shared how to exclude stocks that reported earnings yesterday after the close or today before the open using Trade-Ideas. But if you look closely at the Earnings Date filter in Trade-Ideas, you ll notice that if the most recent earnings date and the closest upcoming date are both relatively far away, the value will be blank. And when it s blank, it won t appear when you use a value in…
Yesterday, I shared how to filter for earnings names, but what if you want to do the opposite? Some strategies specifically look for stocks that are moving outside of earnings. So how can you set up a filter to exclude earnings names from your strategy? There s a clever way to do this in Trade-Ideas. Each filter in TI has a minimum value and a maximum value, both optional. Normally, the minimum…
Some strategies are specifically looking for stocks moving due to an earnings announcement. Earnings announcements always get a lot of attention since they re so standard and routine - all types of investors and traders know what they are and react to them. But how do you create a strategy to only trade symbols that are moving due to earnings? Earnings are released either after the close or before…
In this week s episode of Line Your Own Pockets, we discuss how to network with other traders to help develop your strategy creation muscle. Once your core backtesting process is honed, you re ready to put any trading idea through it. We discuss: Trading success can create the illusion that "this is how trading works" Helping others without expecting anything in return is a powerful way to build…
Here s a question from Sridhar R. ( name used with permission, lightly edited for clarity. ) Sridhar R: I recently came across Jaffray Woodriff s chapter in Hedge Fund Market Wizards and found it fascinating — particularly what he calls "secondary variables." It seems like this maps pretty closely to what you describe as column variables in RealTest. What struck me most is that his approach is…
In yesterday s email , I shared how using multiple timeframes in your strategy just for the sake of it is mostly BS. Requiring confirmation to take a trade - using a secondary timeframe, or any other data point for that matter - will reduce the number of trades in your strategy. This could be a good thing, but without more information, you have no way of knowing. This is exactly the kind of thing…
A common question I get from traders is about using multiple timeframes. One trader I m coaching put it this way: What s your view around multi-timeframe analysis? Do you use it in your strategies? The information out there is confusing: others swear by it, other groups say it s useless. He s right, there are plenty of gurus out there that think using multiple timeframes is the holy grail. I put…
Here s a good question from Hayes (name used with permission): Hayes: I am noticing fluctuations in my PnL during the day as the market fluctuates. For my gap up and down strategies, for example, today I am in 20 positions, and the PnL has fluctuated from slightly negative to strongly profitable and now back to modest profit. To maximize my profit, I would like to set a profit target for my day…
In this week s episode of Line Your Own Pockets, we continue the recent series on the mindset of creating new strategies. This time, we focus on branching out from your first profitable strategy, after you ve started creating variations of that first one. Topics covered: Why do even successful traders struggle to create a second strategy? Develop new strategies before you need them Daily review is…
Here s a question from long-time MabeKit user Mugu M. ( name used with permission, edited lightly for clarity ) Mugu M: I have the change in the 1-minute column from MabeKit coming up as highly predictive for a strategy I’m backtesting. However, when I apply the constraints to the Trade Ideas Alert config window, I get no stocks that satisfy the criteria. Here is the Strategy Cruncher suggestion:…
Here s a question from Oleg on short locate costs versus slippage in a backtest ( name used with permission, edited for clarity ): Oleg: Wouldn t accounting for HTB (hard-to-borrow) cost in a backtest be a bit different than slippage? We don t know how much they will be when the time to place a trade comes, but unlike slippage (outcome of which we find out only after the trade is placed), with HTB…
Long-time friend of the list, Dallas P., sent me a link to the Acquired podcast episode on Jim Simons and Renaissance Technologies . Acquired does long-form episodes on big companies and their histories - this one is over 3 hours long and is on the shorter side. (!!) They appeal to a wide audience, so I had low expectations for this episode, but I was pleasantly surprised. "RenTech" is commonly…
Devin C. and I recorded another coaching session. He has made lots of progress since the first one. Things we cover: Getting market data into the Amibroker backtesting database using the MabeKit IQFeed backfill tool Running a backtest across the entire market using the AFL generator Verifying data from the MabeKit column library is present Why you should turn off compounding in your backtest If…
In this week s episode of Line Your Own Pockets, I share the exact steps I took to go from 300 trades a year to 3500 by backtesting and automating my trading system. We discuss: Moving down timeframes to add more trades How I added more trades but spent less time trading How backtesting changed everything for me Most strategies have more depth than traders realize And much more... LISTEN NOW »…
Here s a question from Silvan P., who has seen some of my guest appearances on SMB Capital s Bionic Trader webinars with Garrett. ( Name used with permission, lightly edited for clarity. ) Silvan P: I have been listening to your podcast, and I am also a member at SMB Insider, where I have seen some of your videos. I am interested in backtesting some SMB style strategies, and I am wondering which…
A trader I m coaching asked a specific question about the New High alert in Trade-Ideas. I created a video showing some of the details of the alert and its properties. There s a lot more depth to this alert than meets the eye. If you re a Trade-Ideas user, you re going to want to see this: WATCH NOW » -Dave P.S. Afraid to size up because you don’t trust your edge? Build confidence to trade your…
Here s a question from reader John L. on tight stops and optimizing. ( Name used with permission ) John L.: I have been running into the same problem over and over with the day trading strategies I am developing. The stops on many trades are set very tight, whether on a %, ATR, or absolute basis. These also tend to be the most profitable trades in the tests. I have not started trading live yet,…
I have written whole books in order to avoid writing other books - Sarah Manguso I love that quote. It gets to the heart of what I see myself and a lot of traders doing at times. Avoiding the harder but more meaningful work. Putting off the big project that makes you uncomfortable because there s an easier one to do now. Are you working on a strategy because it s convenient rather than another one…
In this week s episode of Line Your Own Pockets, we take on a listener question from Emmett on how to go from one profitable strategy to two. We discuss: How most traders never get to this point and why Different approaches for strategy two - a variation of strategy one or completely different? It s easier to create a variation of strategy one - start going a mile deep rather than a mile wide Why…