GPEngine, you are bringing a good point here - that is the quality of this forum and I hope to get a constructive discussion going on here Here are some thoughts I want to share - comments would be very appreciated.

Building a good mechanical strategy requires to solve 2 problems:

1) transform the raw data into a meaningful structure
2) find a profitable trading strategy

If 1 is not done properly then 2 can be really hard if not impossible. I personally have invested a lot of research into 1 because this has proven to me to have a much bigger impact then 2.

At then end we need some sort of a filter which puts the data into a certain structure we can work with. There are different valid approaches to do this one of them being DSP methods, other being simple things like range bars, volatility units etc. What is important here is that we always need to select the most effective approach which is not necessarily the most beautiful and theoretically appealing one - there is no need to stop at a certain method or to blindly follow other people's ideas.


As markets have become prone to extremely sharp changes of trends obviously we need to avoid any additional lag resulting from filtering the data in order to be able to build strategies which can survive such wild environments.

We also have to think about the fact that certain types of structure might favor certain types of strategies and vice versa. I have seen many times that applying a classic technique on a properly transformed data all of the sudden becomes a killer strategy. When you structure is correct you can have absurd simple looking but profitable strategies which basically pop up upfront of you when you see the result of the transformation.