A Brief History on the Model Development of WaveTech
One of the greatest advantages that quantitative or systematic traders bring to the investment process is the consistency of problem-solving that comes from being a technologist and having mathematical computation skills to develop processes with high probabilities.
When developing WaveTech, I was required to deeply consider many aspects of the strategy that are often taken for granted by non-quantitative investors. For computers to execute a black box trading strategy, precise instructions must be provided. Therefore, developing a computer to implement a trading strategy requires significant effort on the part of the developer.
When building a model, every aspect of the strategy, from each step of consideration to the conditions for purchasing, holding, and exiting positions, needs to be defined. In the case of WaveTech, these aspects were carefully defined.
In 1980, I developed my first quantitative trading process using an Apple II with VisiCalc (a spreadsheet similar to Excel) to determine a mathematical set of numbers to generate buy and sell signals for stocks and futures contracts. Over 3,000 hours of research were conducted during this time to develop concepts that would help to understand the markets and generate profits.
Trades, market conditions, and other factors that could affect the output of the models were documented during this process. Through this process, it was determined which types of market conditions could be identified through price action to represent opportunities for profit.
At no point in time was beating the “buy and hold” strategy considered when developing the concepts. The goal was to identify trending patterns that could be captured and profited from. While WaveTech often outperforms the “buy and hold” strategy, this was not the primary consideration. The aim was only to locate opportunities and capture them.
This is why we continuously teach how to rotate assets and build portfolios based on concepts aimed at developing profits. There should be a sufficient number of symbols and rotation when dealing with individual stocks to locate more trending environments. For example, the final leg up or the top of the market was eliminated as a trade to avoid exposure to sharp turnarounds or collapses once the high price is reached, as these periods were deemed to be extremely risky. The targeted period of time was when the markets are in their highest momentum and represent the strongest period of a market advance. Due to this, WaveTech may not own a symbol when it is making new highs. In the next segment of the articles, I will provide further explanation of these specific concepts.
There are places where being involved in the markets poses more inherent risk than others, which is a challenging element for investors to understand. For the most part, WaveTech aims to recognize trends, and there are three basic trade locations in which it attempts to capture profits.
Sometimes investors may assume that WaveTech should own a symbol based on the fact that it is going up, but this is not necessarily the case. WaveTech only purchases the sequences that are programmed in to recognize substantial, sustainable trends. This is crucial to understand when utilizing WaveTech in practice. Over time, by locating these trends and executing the WaveTech sell process, your portfolios will perform well.
It is not always apparent why WaveTech has decided not to execute a trade. The trades made by WaveTech are the result of concepts that I have developed through years of experience and rigorous research. The aim of this series of articles is to help you better understand these patterns and build better expectations for how the WaveTech models can help you manage your practice. I will delve further into the concepts of what WaveTech is looking for, how it operates, and what it is willing to risk to generate returns.
The Foundation of the WaveTech Models
It is important to note that the rules in the quantitative trading models used in WaveTech are established by humans, not machines. Quantitative trading is a methodical implementation of trading strategies that are created by humans through meticulous research. The same holds true for WaveTech. It is a product of years of research and an in-depth understanding of the markets that has been acquired throughout my career.
In this context, the term “systematic” refers to a methodical and automated approach. When referring to the WaveTech models, it is often described as a structured and systematic trading approach. Despite the label of being a “quant” or “systematic” trader, it is ultimately my decision as to how the strategies will behave in different market scenarios based on my extensive research and experience.
This can lead to instances where investors may question why WaveTech has chosen to own or not own a particular symbol. I have carefully selected the trading setups that are most likely to be profitable and have the highest statistical probability of success based on my research and experience. Therefore, some decisions made by WaveTech may seem counterintuitive. However, after thorough analysis, many sequences were identified as being too risky and were therefore eliminated from the trading strategy.
The goal of my years of research and the development of the WaveTech models was to eliminate the subjectivity that plagues so many discretionary trading strategies. These are often driven by emotions, lack of discipline, passion, greed, and fear. By implementing a systematic and analytical approach, these subjective elements are eliminated from the investment process. This is why I consistently emphasize the importance of “Process over Attitude and Opinion.”
Instead, an analytical and systematic approach is adopted, which is based on the lessons learned from my extensive trading experience over the years.