William Eckhardt: Wise ‘Price’ Trader

From William Eckhardt:

“An important feature of our approach is that we work almost exclusively with price, past and current. One reason for this is that to make any progress in the early stages of quantitative investigation you usually have to reduce the relevant factors to one or two crucial variables. Price is definitely the variable traders live and die by, so it is the obvious candidate for investigation. The other reason is that in a system that’s making good use of price information, it is very difficult to add other information without degradation. Pure price systems are close enough to the North Pole that any departure tends to bring you farther south.”

More from a conversation never heard on CNBC:

“Many systematic traders spend the majority of their time searching for good places to initiate. It just seems to be part of human nature to focus on the most hopeful point of the trading cycle. Our research indicated that liquidations are vastly more important than initiations. If you initiate purely randomly, you do surprisingly well with a good liquidation criterion. In contract, random liquidations will kill the best system.”

More from Eckhardt can be found in my 2nd book.