What are the basic steps to develop a quantitative trading strategy?

The first step is to build logic with ready-made indicators

The software has many built-in technical indicators, take out one, write the trading point, and back-test the historical market, so that you can get a simple strategy.With the accumulation of strategic experience, the logical choices here will become more and more diverse.

Of course such a strategy is generally not profitable.

The second step is to optimize parameters

Select parameter traversal and observe how different parameters affect the strategy.In general, we will get several sets of parameters that seem to be more profitable.

The third step, out-of-sample testing

For example, the parameters we traversed before were the data of 2016, and several parameters with good performance were obtained, then we will use the data of 2014/2016 to test these parameters.Generally speaking, this parameter will be bleak outside the sample, and it will not be as powerful as the optimization in the sample.

The fourth step, observation to determine what is the reason for the failure of the strategy

Assume that the reason for the failure of the strategy is that one or two special market conditions outside the sample lead to large losses, then we can set a hard stop loss to avoid this risk; if we find that the failure of the strategy is due to too few transactions, then weJust relax the transaction logic a little, such as changing the place where >x is required to >=x or even >=x-1.Wait, this modification is the experience of the strategy.