ISSUE 1 - The Model Is Not the Market
Three gates a strategy has to pass
Trading Reality has, until now, been one practitioner writing from the seat. It becomes something else today.
Each issue, we’ll gather a handful of pieces — some from people whose work I’ve read for years, some as original commentary — around a single problem that matters in production. This first Publication Series — ISSUE 1 — takes up the oldest and most expensive problem in systematic trading: the gap between the model and the market. The track record that doesn’t survive contact with reality.
We take it in the order you meet it. Someone hands you a number — an equity curve, drawdowns, a history. You need to pass three gates that very few strategies do:
Do the numbers mean anything — or is the apparent skill a measurement artefact that vanishes the moment you measure honestly?
Even if the numbers are honest, is the edge real — if your strategy works: why, and when — or do you only have a pnl-based measure and a prayer?
And even if the edge is real, what’s left of it once it runs in production, not in research?
Joachim Klement and Robert Carver take the first and last gates. The middle one is written here.
We start with the scrutiny of the numbers, first.
The pieces publish over the coming days — one a day. If you’d rather read the whole issue now, the links are here: Klement · Trading Reality · Carver. Otherwise, they arrive in sequence.