Home | About | Features | FAQ | Demo | Order | Support | Resources | Testimonials | Contacts

 

Q1: When will the 32-bit version of Trading Recipes be available?
A: It is now available! Please visit our sister site Mechanica Software for a full list of products. Trading Recipes owners may purchase Mechanica Standard (Upgrade Edition) at a substantial discount.
 

 
Q2: What is TRADING RECIPES, and why should I use it for my end-of-day trading?
A: It is a language-driven software tool for developing, testing and trading rule-based mechanical trading systems, for maximum profitability, by successfully quantifying and managing risk. It is the best tool for multi-market system analysis and trading that is commercially available. It is not specifically geared toward the professional trader, although quite a few well known traders and professional money managers use it. It is also a tool for those who want to become professionals and for those who want to learn how to use trading to become more self sufficient.

Q3: Why End-of-Day?
A: Trading is about making money. The shorter the time frame, the more difficult it is to overcome the execution costs.

Q4: What markets can I trade using TRADING RECIPES?
A: TRADING RECIPES can be used for trading Futures, Stocks, Mutual Funds, Forex, Crosses.

Q5: What formats of price data does TRADING RECIPES use ?
A: The most popular formats are supported. Metastock, CSI, Technical Tools as well as various ASCII formats (Date[YYYYMMDD],[MMDDYY],[DDMMYY],[MM/DD/YY],[DD/MM/YY], Open, High, Low, Close, Volume, Open-Interest", zero-filled fields are OK) and our own HST format. TRADING RECIPES expects back-adjusted (continuous) data for historical testing, as provided by several vendors, like Pinnacle, CSI, Genesis etc.

Q6: Why is it a DOS application?
A:While some criticism of DOS is appropriate, we think the more logical approach is to ask the question "How do I learn to make money and control my drawdowns?". When the answer to this question is "buy software and learn to use it", you need to then ask "OK, what software?". If the answer to that question puts you into a program written for DOS, or the Mac's System X, or Linux, or Solaris, or VMS, or whatever, that's what you need to do. Remember, the question is not "how do I learn to test systems while multitasking 14 other projects and be able to look at really keen graphs".
TRADING RECIPES has been in development for about 12 years. Until some point in time, there were doubts that (given the state of Windows 3.1 then and the limitations of available third party database tools) a program like TRADING RECIPES could be ported to Windows and still provide adequate performance for larger portfolios. The database libraries under DOS were still  lightening fast by comparison.

Q7: Is it Year-2000 compliant ?
A: Yes, all calculations, routines and data are Y2K compliant. In fact, with this opportunity, we would like to point out that (unlike some popular trading software tools) TRADING RECIPES uses double precision floats for all price based calculations. The reason for using doubles is because your price data may be expressed with 5 or 6 digits to the right of the decimal point. Calculations (indicators) involving floating point operations on numbers with 5 or more digits to the right of the decimal can't be accurate because the result of any such calculations can easily exceed the limitations of the single precision format.

Q8: Can I run it under Windows?
A: Most users run it under WindowsXP, Windows95/98, Windows2000 or WindowsNT4 .

Q9: How complex simulations can I test?
A: We have heard from customers running models consisting of 14 trading systems, each system running on 70 markets, over a time period of 20 years of data per market.

Q10: Having read Ryan Jones, Van Tharp etc, I would like to research position sizing ideas, like  Fixed-Fractional, Fixed-Ration etc. Can I do that with TRADING RECIPES?
A: Yes, TRADING RECIPES is in fact uniquely positioned to let you do this kind of testing.

Q11: How does TRADING RECIPES treat drawdown and risk?
A: TRADING RECIPES treats drawdown as maximum dip in equity, not open equity. Also, having a predefined stop in your system is not critical to sizing positions as you can define risk any way you please. We like to define it as what you stand to lose. Many traders who use TRADING RECIPES, including some well known ones, define risk as some measure of volatility. It's your call.

Q12: Having implemented position-sizing ideas like fixed-fractional, what tools does TRADING RECIPES provide to further fine-tune risk?
A: Traders use TRADING RECIPES to carefully control their risk. One limitation of fixed fractional methods for bet sizing will be seen when markets start to move as sectors. What happens is that as your system adds more and more positions in a (hot) sector, your portfolio becomes overbalanced with sector risk.

You could conceivably end up with a highly correlated portfolio consisting of, say, all grain commodities or biotech stocks. If that sector turns against you drawdowns can be severe. A simple way to control sector risk is to incorporate an additional bet sizing rule, using the GROUPRISK directive, to risk no more than some threshold percentage of your equity in any one sector.

Another problem with the fixed fractional method occurs during times of great activity in a broad range of markets. In this case, particularly if your system trades actively in many markets, you end up with too many 2% risk trades. Your total portfolio risk could easily be over 100% of your equity.

You can't always depend on the diversification which you forced with the previous rule to save you. This time the problem is that there is no cap (control) on overall or total portfolio risk. Solution? Add another risk control rule. Plan to risk no more than X% of equity on all open trades.

The values of these percentages are largely personal choice and will reflect your own tolerance for volatility. "Limitations" like the ones presented above can be discovered and theories for overcoming them can be evaluated using the portfolio level simulation software TRADING RECIPES.

In TRADING RECIPES you have many Money Management functions among which:

- GROUPRISK: Returns the total amount that equity would be reduced by if all open positions in the same GROUP (stockmarket sector, commodity group) as the trade being presented were stopped out

- TOTALRISK: returns the total dollar amount that equity would be reduced by if all open positions were stopped out.

For example:

Trading Basic Code	Explanation
If TOTALRISK > Equity * 0.50 Then Newcontracts = 0	discard any trade that would put your possible total losses (if all currently open positions in that group were stopped out) at greater than 50% of your equity.
If GROUPRISK > Equity * 0.20 Then Newcontracts = 0	discard any trade that would put your possible losses in a single group (stockmarket sector, commodity group) at greater than 20% of your equity
IF NEWTRADE = SHORT AND SHORTRISK < TOTALRISK * .5 THEN NEWCONTRACTS = MEMORY[1]	take a new short position only if less than half of the current portfolio risk is currently held in short positions.

Q13: What are the more sophisticated back-testing features, in order to avoid curve fitting and emulate more accurately how my system would have performed in real-time even under the most adverse conditions?
A: A backtest is a simulation of how a real-life investor with a mechanical investment strategy might have responded to data, whether buying, selling, or forgoing any transaction at all. A backtest determines which tradeable instruments (stock, commodity, mutual fund etc) an investor would have bought, sold, or held, given the market information available at the time of the hypothetical transactions. A backtest also determines what the percentage return to the investor would have been, had the investor made these transactions.

TRADING RECIPES provides you with the features and the flexibility to do this kind of backtest studies.

WORST CASE ANALYSIS
Most trading system results you will see, assume you started trading from the beginning date of your testing. However, we feel this is a huge mistake. When you look at an equity curve there are always many peaks and valleys. Your results may indicate that had you started on a certain day that you only needed a certain size account. However, what if you had started a month (or whatever) later, right before a valley in your equity curve? You might have needed 2 times more starting capital (or more). This is what we call "WORST CASE ANALYSIS". It goes from trade to trade progressively using each trade's execution date as its starting date, rerunning the Portfolio Report beginning on that date and letting the portfolio regenerate from every possible perspective, and displaying the results. In this manner you can see, column-by-column, your system's most important results generated when each trade is taken as the very first one. It tells you that if you were unlucky enough to start trading the system at the WORST possible time, how much equity would you have needed to trade the system. You get a list of possible outcomes!This way you can answer questions like "What are the chances of getting a negative result?" or "What is the chance of earning profits over $500,000?". The Worst Case Analysis tells you what to expect, and it pinpoints the greatest percent drawdown, the minimum percent win/loss ratio, and the maximum required capital.

You gain a remarkable amount of confidence in your system if it can pass this gauntlet. If the system was curve fit, even accidentally, it will not pass.

MAXIMUM SLIPPAGE
Furthermore with TRADING RECIPES you have the flexibility to design the system's behaviour to match exactly what you try to achieve. For example, some user has implemented a "maximum slippage" test, where buy orders always suffer the maximum possible slippage: all buys occur at the High of the day. Similarly, sell orders always suffer the maximum slippage: all sells occur at the Low of the day. It's a test designed to see whether a system is robust against slippage under the most adverse conditions.

Q14: Other than regular O,H,L,C,V,OI market data, can TRADING RECIPES reference external data?
A: TRADING RECIPES allows users to access external data. All you need is a text file formatted: date, numerical data item. In that text file, you can have any conceivable numerical data. You might create it in a spreadsheet program and use it in TRADING RECIPES. You can reference each day's data value either while making entries/exits or when sizing your positions. Up to 4 data items are available for each market, each day, or four for the entire portfolio each day. Lots of possibilities for using fundamentals, rates, indices, COT, etc. here too.

Q15: Can TRADING RECIPES trade markets which are denominated in different currencies?
A: TRADING RECIPES can handle portfolios made up of tradeable instruments denominated in different currencies (e.g. 10yr Japan Govt Bond, 10yr Swiss Govt Bond). Portfolio equities (and consequently position sizes) are consolidated into a common currency (usually USD) calculated from daily exchange rate data files for each foreign currency (USD/JPY, USD/CHF etc), while the trades for each instrument are maintained in their underlying currency (JPY, CHF etc).