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"Here's How I Prioritize Strategy Ideas"

By Dave Mabe

Reader Mike M. replied to my post on using the ICE method for prioritizing strategy ideas. (Name used with permission, lightly edited for clarity.)

Mike M.

Here's how I prioritize candidate ideas for trading strategies:

Weigh a lot of different factors and prioritize based on that.

  1. Does the candidate idea fit well into the current market regime?

  2. Is there potential for uncorrelation with current active strategies? Maybe if it’s different than current strategies. But not necessarily. And what level of uncorrelation?

  3. Level of confidence in the idea.

  4. How quickly can I expect to prove whether the idea is worth pursuing?

  5. Do I know other people who are using the idea similarly and having success with it?

  6. Would it actually be tradeable with the resources I have? I certainly wouldn’t try to compete as a market maker against HFT firms.

Dave:

A great list and mindset. I love this.

These all could fall neatly into the Impact, Confidence, and Ease categories using the scoring method.

I especially like the last three in the list.

Thinking that through before deciding to work on a strategy could save a lot of wasted time.

If you haven't looked closely at the ICE method, you should - several traders have told me they have implemented the scoring method and found it quite valuable.

Here's the podcast episode where I discuss the method in detail.

Thanks for sharing with the group, Mike M!

-Dave

P.S. I've been receiving more and more excellent questions from traders. I can't answer all of them here on the list, so I've started answering some on my YouTube channel. If you like the Q&A, please like and subscribe.