Advice You - Finance

When should you override a trading strategy?

Let's use the following example for trading the e-mini S&P:

Your

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

system establishes a long position at 1190.00 and the profit target order was placed at 1192.25 ($112.50 profi

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

per contract). Prices moved up to 1192.00 and reversed. One hour later the system tries to reverse at 1191.00.

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

Again prices moved up to 1190.75 and reversed. Two times the system missed the profit target by one tick.

Sho

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

ld you change the strategy? or Should you manually override the strategy when something like this happens?

D

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

oing any of this is like opening Pandorra's Box: Let's say you start lowering your profit goal by one tick. Of

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ourse you will be instantly rewarded, because the number of winners would increase. Next week you might experie

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

nce the following situation: Your stop is hit and you are taken out of the trade, but then the market turns and

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

takes off and you are missing a nice winner. What now? You start moving your stop a little bit further away and

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

again you are instantly rewarded: The number of losers decrease.

One week later you experience a similar situ

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

tion and you continue "finetuning" your system by slightly moving down your profit goal and minimally increasin

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

your stop loss. And very soon the winning system that you once had turns into a losing one, because your losse

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

s are much bigger than your profits.

I have seen it many times: A trader backtests his system over 700 or mayb

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

even 1,000 trades and then "finetunes" it after the first 5 trades. This doesn't make sense: If you have a sou

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

nd logic why your system should work then it won't need "finetuning" after 5 trades.

You should evaluate your

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ystem periodically, but instead of curve-fitting your system's parameters you should ask yourself: "Does the lo

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

gic of the system still apply?"

If you have a trend-following system and markets are trading sideways, then "o

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

timizing" the system parameters won't help: It's the wrong market condition and the market is just not right fo

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

r your system.

Exercise discipline: If your system worked well over 1,000 trades, and you have a sound logic a

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

d didn't curve-fit the system, then you should not override the system or "finetune" it after only a few trades

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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