Evaluation of Systematic Trading Programs
Posted: 21 May 2019
Date Written: August 11, 2014
This paper is intended as a non-technical overview of the issues I found valuable in evaluation of systematic trading programs both as a systematic trader and as a large, institutional investor, having looked at numerous, diverse managers in this space on a global basis over the years. Some of the topics discussed below apply to discretionary traders and all types of investment organizations though the focus will always remain on systematic trading. Throughout this paper, I assume that systematic trading refers to an investment program for exchange listed instruments or spot FX that generates signals, manages positions and executes applicable orders via an automated, previously programmed process with little or no human interference. The list of topics is not by any means exhaustive but it should be sufficient to allow an investor to start on the path towards successful allocations with systematic trading managers. As I hope will become clear over the course of this paper, systematic trading is a highly unique field with its own set of advantages over other investment approaches that investors should not overlook.
Keywords: risk management, systematic trading, statistics, data snooping, backtesting, complexity
JEL Classification: C10, G10
Suggested Citation: Suggested Citation