Observation
This preliminary step involves watching the markets intensely for an endless number of hours – through this process, intuition is refined and ideas are developed.
Idea
This step involves formulating an idea based on a behavioral bias. The idea is then quantified into a set of rules, and coded using our proprietary technological platform. Ideas take into account numerous variables, ranging from price action to sentiment indicators, options skews, positioning, etc. All strategies must be based on a behavioral phenomenon, and rules are applied across all markets.
Backtesting
Using our proprietary platform, a backtest is conducted. Results are analyzed to assess statistical significance and expected profit per trade; in addition, parameters are fuzzed in order to assess the robustness of the strategy. Finally, the strategy is added to the portfolio to determine whether it increases the risk-adjusted return of the program. Should the strategy pass this final test, it is ready to be put into production!
Production
The strategy is put into production, and live results are monitored against backtested results on an ongoing basis to ensure that the strategy’s performance is consistent with expectations.
