Outside the box: Random entries, rules based exits
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Sorry can't share the code but I am willing to share ideas and pointers if you get stuck.
Regarding heteroskedacity, you don't really have to understand the math, just the concept. Basically all it means is that volatility forms clusters, using that fact to your advantage is the key to robust MM.
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This month's Active Trader Magazine had some experiments with random entries and the performance of 5 different money management strategies around those entries. In essence, the trailing stop set to 3-5 times ATR performed best. Next month they will have a follow up article with random exits.
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I don't have any original thoughts on this, but can share a few snippets I've picked up from others:
Van Tharp & Tom Basso did an experiment with a random entry system on a basket of stocks and futures. They used an ATR based trailing stop. Tharp claims the approach was profitable, albeit barely.
Chuck LeBeau tells a story from his days at EF Hutton of a (obviously crazy) trader who carried around a Dr pepper bottle with a straw in it & claimed he got trading signals from Mars. The funny thing was he was one of the most profitable traders upstairs. Mainly because when he was losing, he exited quickly to avoid the ridicule of the other traders. When he was winning, he let the positions run to prolong his triumph.
Chuck also tells of his system building days & how difficult they found it to evaluate the efficacy of entries. Basically, all entries did well with certain exits & the same entries did poorly with other exits. His conclusion was that exits were the overwhelming deciding factor in the profitability of their systems.
The conclusion: There is precedence of random entries outperforming the herd. At a minimum, this should make us question the emphasis that we place on entries & think whether we focus enough on exit strategy.
I've personally found that in my discretionary daytrading, that simply entering with the trend and maintaining a positive risk:reward ratio keeps me out of trouble. I find that good entry technique is more often knowing when NOT to enter than it is about when & where to get in.
I think elaborate systems and entry methods are simply to give us a sense of control. We set the criteria for entry and when the market complies, we feel in charge. In reality, the ONLY thing that we as traders have any control over is our risk. Nothing else.
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