One size fits all?

A lot of people asked this question many times – is there a trading system that works on all instruments and can be traded in real time with no change to the parameters at all?

The answer is plain and simple – no.

Trading systems are inherently models that exploit the characteristics of the underlying data. Since not all tradable instruments are the same, for example, stocks comparing to real estates, it is not possible for a trading system to work, or, being profitable across all these instruments consistently.

On the other hand, a trading system that is good at exploiting a particular characteristics of time series, can be used to trade a basket of instruments that are statistically independent from each other, as long as they all exhibit a similar characteristics that is tradable by that particular system. In fact, the selection of instruments is as important as the system itself because a different basket of instruments will likely result in drastically different results.

For normal traders, they are likely to track a limited number of instruments during their trading career. Thus spending more time to understand and identify each instrument’s special behaviour is something managable and should be done by the traders. Afterall, it is their livelihood on the line, it makes a lot of sense for them to pay some attention to what they deal with everyday 🙂

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