"Why Use a Scanner for the Daily Review?"
By Dave Mabe
Here's a question from long-time list member, Marek. (Name used with permission)
Marek:
As a systematic trader, you are doing the daily review of a strategy's live trades vs backtest and looking at the charts to get ideas. Why then would you use additional scanners to check the movers?
Is it for additional ideas or to get the feel for the market regime?
Dave:
The daily review I do at the end of the trading day is sacred for me.
You're right, I'm mainly analyzing live trades versus the backtest.
As I do that, I'm asking myself questions like:
Did I miss any trades, and if so, why? (This is important even when you miss losing trades.)
How much profit was lost due to slippage and partial fills?
What trades were just outside my rules? (Is there some way that would make sense to include them in my strategy?)
This part of the review is the most important since it involves scaling an already working strategy - and therefore the potential gains are more concrete.
The second part of the review is equally important in the long run, but more vague in the short term.
I'm looking for symbols that moved that I haven't captured in one of my existing strategies.
And brainstorming ways to create new strategies that give me coverage of that move.
The questions to ask yourself here are:
How unusual is this move?
If it's rare, can the parameters be relaxed to find more related unusual moves?
If you HAD to participate in that move, how would you have done it?
In this phase, I'm looking for ways to create a new backtest that I can feed to the Strategy Cruncher to give me a completely new trading edge.
The second phase is where scanners come in handy by presenting you with a steady stream of potential trades/ideas.
The daily review might seem like a lot, but the more you do it, the quicker and better you'll get at it.
It's the one non-negotiable thing I do every trading day.
Thanks for the question, Marek!
-Dave
P.S. Amibroker users: are you trying to use ChatGPT to create a backtest only to discover how bad the LLMs are at coding Amibroker's language? You're not alone! You need my Amibroker AFL Course. It comes with a demo strategy that serves as the perfect starting point for any strategy you want to create.