Adapting your system for non-linear markets

摘要

Markets move in non-linear fashion, so your systematic trading strategies should be built to adapt to such changing conditions. Here's one approach that allows your strategies to evolve with the market. Nonlinear modeling is a process that enables the systematic exploitation of short-term market inefficiencies. This modeling process enables traders to adapt their systems to current market conditions, which is crucial to the long-term success of any trading program. Here, we'll show how to build an S&P 500 futures trading system using two non-linear modeling examples. The first example shows the construction of a single market timing input. Market timing inputs are indicators that are used by the modeling software to develop profitable trading systems. The second example is the construction and training of the final trading model. This second example will show how financial modeling software trains on historical data to produce profitable trading models.