Dave's first backtest told him he was the weakest link. He was glad to hear it.

Part two on building strategy number two: go deep before you go wide, and let the data fire you from your own system.

Dave started in 2005 with one gapping strategy. Gap up, pattern on the 30-minute candle, go long, hold the day. He had a full-time job, so he had a half hour. That constraint was the advantage. It forced him deep into one thing while everyone else chased the whole market.

Going deep was just asking questions the data could already answer. Same setup on 15-minute bars: more trades, just as profitable. Flip it short on the gap downs: more profitable than the long side. Same behavior, exploited more ways.

Then the humbling part. His strategy had one discretionary piece, a watchlist he built by hand every morning, years of feel he was sure no machine could touch. His first backtest beat it with a single rule. The data told him to remove himself from the equation.

That stung, but it let him automate and scale. 300 trades one year by hand. 3,500 after automating.

Before you chase a new strategy, go deep on the one that works. The juice runs deeper than you think.

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— Michael Nauss, CMT, CAIA, CDMS