MAR ratio, 104–105
maximum drawdown, 97
with price shocks, 92–95
R-cubed, 188–189
R-squared, 97
Sharpe ratio, 100–104
standard deviation of returns, 97
with system death, 94, 96, 105–106
and tolerance for pain/expectations for
reward, 106
in Turtle Way, 37
and types of risk, 86–87
unified, 98
Mechanical trading systems, 16,
245–246
MFE (see Maximum favorable excursion)
Mies van der Rohe, 268
Mindset for trading, 36, 47–62
being right vs. making money, 48–49,
61
and blame for failures, 61–62
and focus on future, 48–50, 53
and focus on past, 49–51
probabilities thinking in, 53–60
and taking responsibility for outcomes,
61–62
Minimum tick, 6
Money:
happiness and, 241–244
making, being right vs., 48–49, 61
Money management, 109–121
as art, 110
backtesting algorithm for, 136
defined, 32, 109
estimating risk in, 120–121
level of risk in, 110–113
N factor in, 117–120
and risk of ruin, 113–116
in Turtle Classes, 32–33
uncertainty in, 116–117
in the Way of the Turtle, 117
Monte Carlo simulation, 199–205
Moving averages, 124
as building blocks, 125–127
dual, 131, 141–142
exponential, 126–127
simple, 126
triple, 132, 142–143
with volatility channels, 127, 128
N factor, 33, 117–120, 251–252
New Concepts in Technical Trading
Systems (J. Welles Wilder), 33
Normal distribution, 53–54
Observer effect, 153
Optimization, 163
and myth of the expert, 134
need for, 164–166
rolling optimization windows,
197–199
single-market, 195
Optimization paradox, 153, 164–172
and basis of predictive value, 168,
170–172
deception associated with, 172
moving average days parameter,
166–169
and need for optimization, 164–166
overfitting vs., 172–173
Or better orders, 34
Outcome bias, 15, 19–20
expectation and avoidance of, 35–36
in Turtle System, 48–49
Outcomes, taking responsibility for,
61–62
Overfitting, 172–177
defined, 153, 163
optimization paradox vs., 172–173
and sample size, 176–177
Parameter scrambling, 196–197
Parameters, 163, 166–172
Perception:
edges from differences in, 75, 84
price movement and, 8
of support and resistance, 78
Performance measures, robustness of,
182–186
Pits, 9–10
Points of price instability, 82–84
Portfolio filters, 68, 69, 71, 72, 212
Position sizing, 118, 251–258
Position traders, 4 (See also Speculators)
Position trading, 24
Predictive value, 168, 170–172, 180
Price(s):
fluctuation in, 6
as foundation for traders, 2
Index • 283