Quality Money Management : Process Engineering and Best Practices for Systematic Trading and Investment

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Check Performance

CHAPTER ◆ 11

As we have said, there are three types of trading systems—trigger systems, filter systems,

multifactor systems—and systems of each type should have their own unique method and

mechanism for testing performance. Since systems rarely fall neatly into one of the types,

product teams must develop a unique testing process for each new system. Checking per-

formance includes not only determining whether or not the trading system makes money,

but also checking the performance of design and development processes through quality

assurance testing. This is the step where a team tests the validity of the proposed trading

system in addition to another review of the correctness of the units. Outputs of this step

will control the evolution of the trading/investment system either through the following

loop through Stage 1 or through Stage 2.

3

2

1

Research

quantitative

methods

Prototype

in modeling

software

Design and

document trading

strategy

Check

performance

Describe

trading idea

FIGURE 11-1

11.1. Walkthroughs and Inspections

Some product teams skimp on time allotted to quality assurance practices, such as design

reviews, walkthroughs, and inspections, while others try to make up for lost time by com-

pressing the testing schedule. A decision to ignore techniques that find defects is tanta-

mount to a conscious decision to postpone corrections until later stages when they are

more expensive and time-consuming. That is not smart, especially when time-to-market