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Thursday, August 21, 2008, 3:13:18 PM, 'professor' wrote:
psb> The problem with dicretionary trading is that everyone has bad
psb> cycles where things go wrong. A discretionary trader needs to
psb> have great discipline at all times, but expecially when things are going bad.
This is just as true of rule-based systems as it is of discretionary
trading; there is no difference at all in this respect between the
two types of trading. None. Zero. The system without drawdowns has
yet to be designed. And system traders don't also need discipline,
and just as much, if not more? C'mon.
psb> When you are a rule based trader and you have throughly tested
psb> your rules, you can believe in your rules. This is much like my
psb> gambling in the casino. I know that mathematically, I have an
psb> edge on certain games. So even when things are going bad and I
psb> am losing, I know that in the long run, I will be ahead. I have
psb> math on my side plus now I have almost 12 years experience.
I can't believe I'm reading this. You are going to sit there and
type to the world that 'thoroughly tested ... rules' are equivalent
to a mathematical edge? You have to be joking, right? Mathematical
edges don't go on tilt and *stay* on tilt forever. Trading systems
(which are NOT mathematical edges, but assumptions about what might
prove to be edges -- and almost surely edges with expiration dates --
based on historical research) do just that.
(As an aside, the only game in the casino that I know of that can be
tilted in favor of the player is Blackjack, and I sure wouldn't want
to try and make a living at it for quite a few reasons that should be
obvious to the casual observer.)
psb> I am not saying that one type of trading is better than any
psb> other. It is just that some people are better suited for rules than discretionary trading.
When you lead with "the problem with discretionary trading is ... "
it negates your disclaimer in the paragraph above. Certainly you are
saying that rules are superior, because you claim that discretionary
traders will have bad 'cycles' (as if rule-based traders will not,
certainly what you are implying). And you are entitled to that
opinion. You're just not entitled to say that it isn't your opinion
when you very clearly state what you have stated.
Yuki
psb> Tom
psb> ----- Original Message -----
psb> From: brian_z111
psb> To: amibroker@xxxxxxxxxxxxxxx
psb> Sent: Wednesday, August 20, 2008 9:30 PM
psb> Subject: [amibroker] Re: 'Rule Based' versus 'Discretionary' trading...
psb> Hello Ed,
psb> I would include that case under point a)
psb> I agree that this is possible however that person wouldn't be a
psb> Discretionary Trader.
psb> We would have to invent a new class, say XTraders.
psb> The problem here is that we won't be able to reach an agreement as to
psb> what consitutes knowledge - even the experts (philosophers) can't
psb> agree.
psb> http://en.wikipedia.org/wiki/Epistemology
psb> Without going that deep we could attempt to prove the claims of
psb> Intuitive Traders by testing their trading performance in a
psb> controlled environment.
psb> This would be almost impossible to do because of the difficulty of
psb> finding an 'experienced' intuitive trader who is also not tainted by
psb> exposure to backtesting, trading rules (textbooks) i.e. they are not
psb> both an experienced Intuitive Trader and an experienced Rules based
psb> trader.
psb> The ultimate test would be to submit (claimed/known) X types, who
psb> have never seen a stock chart, or traded before, to a controlled
psb> stock trading test.
psb> I doubt if we have to go that far to disprove the idea that anyone is
psb> making discretionary decisions when they trade.
psb> To qualify they only need to be free to make a choice, say whether a
psb> trend is up or upNOT (it could be any number or type of choices - it
psb> doesn't really matter).
psb> If they are FREE to choose then they can do so INDEPENDENTLY of any
psb> other factor. If the choice is DEPENDENDENT on any other factor then
psb> they are not making a free choice.
psb> An INDEPENDENT choice is a random choice, therefore they will flip a
psb> coin to decide if the trade is up or upNOt.
psb> Any other method they used to make the choice would have dependency
psb> wouldn't it (I am trying to think of an exception but I can't come up
psb> with one so far)?
psb> I guess that the people who like to argue about this type of thing
psb> (the Philosophers) would say that an XTrader is not making a free
psb> choice either since their choice is dependent on their special X
psb> factor knowledge i.e. they are still bound by dependency - the have
psb> merely used a different method to arrive at that point.
psb> brian_z
psb> --- In amibroker@xxxxxxxxxxxxxxx, "Ed Hoopes" <reefbreak_sd@xxx>
psb> wrote:
psb> >
psb> > Another possible irrational explanation is that some humans may have
psb> > the ability to see the future.
psb> >
psb> > In competitive sports some players just seem to know what their
psb> > opponents will do. Maybe the same is true of some successful
psb> traders.
psb> > They can't explain it rationally, but they "just know it"
psb> >
psb> > Reef
psb> >
psb> > PS
psb> > Unfortunately, I don't have this trait.
psb> >
psb> >
psb> > --- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@> wrote:
psb> > >
psb> > > From the 2nd article:
psb> > >
psb> > > "Paul Taglia sees high-probability Window set-ups that the rest
psb> of us
psb> > > don't. I've seen him do this for nearly two years. He can't
psb> explain
psb> > > it...he simply says that he's looked at thousands and thousands
psb> of
psb> > > charts over his career and some charts simply look better to him
psb> than
psb> > > others. We once asked him to keep a journal to see if we could
psb> > > systematize what he saw. It was a useless exercise. He sees it
psb> but he
psb> > > can't explain it."
psb> > >
psb> > >
psb> > > According to Occams Law the simplest explanation is usually the
psb> best.
psb> > >
psb> > > http://en.wikipedia.org/wiki/Simplicity
psb> > >
psb> > > Possible explanations, of Paul Taglia's discretionary style are:
psb> > >
psb> > > a) He can 'see', or sense, the future in the charts,
psb> > > b) he has a set of rules that he learnt in the past (based on
psb> > > experience) and they have become second nature - possibly he has
psb> > > forgotten what they are or when he learnt them (or at least some
psb> of
psb> > > them)
psb> > > c) he has a set of rules, and he knows that, but this is an
psb> excellent
psb> > > posture to take if his game plan is never to reveal them to anyone
psb> > > d) he has a set of rules but has a playful nature OR likes to
psb> take
psb> > > the mickey out of his associates OR has a superiority complex and
psb> > > disdains the idiots who surround him
psb> > > e) he has an inferiority complex and needs the boost that comes
psb> from
psb> > > the adulation of others - this is an excellent strategy to
psb> establish
psb> > > mystique as a trader and achieve legendary status
psb> > > f) it is a great way to market ones employment value in a
psb> transient
psb> > > workplace (its a resume that can't be questioned to any extent
psb> either)
psb> > > g) some combination of a-f
psb> > > h) he has a set of rules (some conscious, some sub-conscious) but
psb> he
psb> > > can't be bothered explaining them (it is a form of energy
psb> > > conservation - an alternavtive version of this is that he could
psb> be a
psb> > > very focused trader and has eliminated the non-essentials, like
psb> > > defining his style OR chatting about his style.
psb> > >
psb> > > BTW irrationality is the common name for the shadow (I used the
psb> > > symbolic name).
psb> > >
psb> > > There is no irrationality in maths, programming etc which is
psb> probably
psb> > > why I quite like programmers etc.
psb> > >
psb> > > Trading myths are born out of, and perpetuated by irrationality.
psb> > >
psb> > > brian_z
psb> > >
psb> > >
psb> > >
psb> > > --- In amibroker@xxxxxxxxxxxxxxx, "wavemechanic" <timesarrow@>
psb> > > wrote:
psb> > > >
psb> > > >
psb> > >
psb>
psb> http://www.tradingmarkets.com/.site/stocks/commentary/lcbattlep/082720
psb> > > 04-39801.cfm
psb> > > >
psb> > > >
psb> > >
psb>
psb> http://www.tradingmarkets.com/.site/swingtrading/commentary/lcbattlep/
psb> > > 09022004-39899.cfm
psb> > > > ----- Original Message -----
psb> > > > From: sidhartha70
psb> > > > To: amibroker@xxxxxxxxxxxxxxx
psb> > > > Sent: Wednesday, August 20, 2008 10:52 AM
psb> > > > Subject: [amibroker] Re: 'Rule Based' versus 'Discretionary'
psb> > > trading...
psb> > > >
psb> > > >
psb> > > > I think you're right Brian. We do all use rules of some sort.
psb> > > >
psb> > > > But I guess discretionary traders don't use 'hard and fast'
psb> rules
psb> > > and
psb> > > > can't always define the same set of rules by which they
psb> choose to
psb> > > > define an entry or exit.
psb> > > >
psb> > > > For example, as we all know, something as simple as defining
psb> a
psb> > > trend
psb> > > > programatically can be more problematic as you might at first
psb> > > think.
psb> > > > However, a good trader can see very quickly what state the
psb> market
psb> > > is
psb> > > > in by looking at various time frame of chart.
psb> > > >
psb> > > > Likewise, divergences of various sorts can be easy to see
psb> with the
psb> > > > naked eye but difficult to code in their entirety.
psb> > > >
psb> > > > Like driving a car, or a golf swing, you learn the 'rules'
psb> but
psb> > > when
psb> > > > you get really good you are no longer thinking rules... you've
psb> > > > effectively let go of the rules and are just 'doing'...
psb> > > >
psb> > > > --- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@>
psb> > > wrote:
psb> > > > >
psb> > > > > Here is my definition:
psb> > > > >
psb> > > > > We are all rule based traders.
psb> > > > >
psb> > > > > Mechanical Traders are a specialist group who have
psb> programmed
psb> > > > > computers to autotrade their rules OR automatically
psb> announce
psb> > > their
psb> > > > > rules via computer communications (audio, email, chart
psb> prompts,
psb> > > > > spoken text etc).
psb> > > > >
psb> > > > > I am prepared to continue the discussion with any seers,
psb> > > inituitives
psb> > > > > etc, who come forward, and adjust my definition to meet
psb> > > anything new
psb> > > > > that comes out of that.
psb> > > > >
psb> > > > > In advance I admit to the possibility of exceptions to the
psb> rule.
psb> > > > >
psb> > > > > brian_z
psb> > > > >
psb> > > > >
psb> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "brian_z111"
psb> <brian_z111@>
psb> > > wrote:
psb> > > > > >
psb> > > > > > >Descretionary traders make decisions that are based on
psb> > > personal
psb> > > > > > >knowledge and circumstances, perhaps using many factors
psb> > > unknown to
psb> > > > > > >themselves. Like which journal they read the night
psb> before.
psb> > > > > >
psb> > > > > > This is the nub of the question for sure, and the point
psb> that
psb> > > I am
psb> > > > > > investigating.
psb> > > > > >
psb> > > > > > I suspect that when they (self-nominated DT's) think they
psb> are
psb> > > > > making
psb> > > > > > discretionary decisions they are in fact making rule
psb> based
psb> > > > > decisions.
psb> > > > > >
psb> > > > > > That is why I asked for specific examples
psb> of 'discretionary'
psb> > > > > decision
psb> > > > > > making e.g. I haven't seen Bilbo's chart yet but I
psb> consider
psb> > > it
psb> > > > > highly
psb> > > > > > unlikely that the decision about whether a trend is in
psb> place
psb> > > is a
psb> > > > > > discretionary decision - I can define a trend in several
psb> > > different
psb> > > > > > ways - all of them can readily be written as a rule (in
psb> words
psb> > > or
psb> > > > > with
psb> > > > > > code) - I don't care if the definitions are 'correct' or
psb> not
psb> > > as
psb> > > > > long as
psb> > > > > > the system that they are part of works i.e. my rules for
psb> a
psb> > > trend
psb> > > > > depend
psb> > > > > > on the context.
psb> > > > > >
psb> > > > > > As Dennis said, our rules might be difficult to program,
psb> > > causing us
psb> > > > > not
psb> > > > > > to automate the trade, but mentally we are still running
psb> the
psb> > > rules
psb> > > > > and
psb> > > > > > if we are honest with ourselves we do know what the rules
psb> are.
psb> > > > > >
psb> > > > > >
psb> > > > > > >For a novice traders to try and mimic the techniques (of
psb> > > > > Discretionary
psb> > > > > > >Traders) without
psb> > > > > > >having similar backgrounds merits caution.
psb> > > > > >
psb> > > > > > What I am suggesting is that, over time, the sub-
psb> conscious
psb> > > mind
psb> > > > > will
psb> > > > > > automate what was intially habitual conscious behaviour,
psb> and
psb> > > even
psb> > > > > make
psb> > > > > > some improvements on it, so that 'we' can skip the
psb> conscious
psb> > > part
psb> > > > > for
psb> > > > > > some 'tasks' e.g. driving the car becomes second nature.
psb> > > > > >
psb> > > > > > That won't happen for new traders, in a short time, so
psb> they
psb> > > do need
psb> > > > > to
psb> > > > > > persevere, be patient and not try to mimic people who
psb> have
psb> > > been
psb> > > > > around
psb> > > > > > for years.
psb> > > > > >
psb> > > > > > IMO formal (written) rules based
psb> > > trading/backtesting/optimization
psb> > > > > is
psb> > > > > > the best place to start - it grinds the basic lessons in
psb> very
psb> > > well.
psb> > > > > >
psb> > > > > > If anyone can look at a chart, and without recourse to
psb> any
psb> > > rules,
psb> > > > > know
psb> > > > > > which way the price is going to move and trade
psb> successfully
psb> > > (long
psb> > > > > > term) on that basis then that is something else
psb> altogether.
psb> > > > > >
psb> > > > > > If it is at all possible to do that then it definitely
psb> can't
psb> > > be
psb> > > > > taught.
psb> > > > > >
psb> > > > > > That is why I asked, "Anyone doing it?".
psb> > > > > >
psb> > > > > > It is just like >100%PA returns - anything is possible
psb> but
psb> > > once
psb> > > > > someone
psb> > > > > > confirms that they have done it then it moves from the
psb> realm
psb> > > of
psb> > > > > > possibility into reality.
psb> > > > > >
psb> > > > > > In the meantime I will stick to my guns by saying
psb> > > that "except for
psb> > > > > > people who KNOW what the price is going to do everyone
psb> else
psb> > > is a
psb> > > > > rule
psb> > > > > > based trader and categorizing traders, as DT's or MT's,
psb> is
psb> > > > > arbitrary".
psb> > > > > >
psb> > > > > > brian_z
psb> > > > > >
psb> > > > >
psb> > > >
psb> > > >
psb> > > >
psb> > > > ------------------------------------
psb> > > >
psb> > > > Please note that this group is for discussion between users
psb> only.
psb> > > >
psb> > > > To get support from AmiBroker please send an e-mail directly
psb> to
psb> > > > SUPPORT {at} amibroker.com
psb> > > >
psb> > > > For NEW RELEASE ANNOUNCEMENTS and other news always check
psb> DEVLOG:
psb> > > > http://www.amibroker.com/devlog/
psb> > > >
psb> > > > For other support material please check also:
psb> > > > http://www.amibroker.com/support.html
psb> > > > Yahoo! Groups Links
psb> > > >
psb> > > >
psb> > > >
psb> > > >
psb> > > > No virus found in this incoming message.
psb> > > > Checked by AVG - http://www.avg.com
psb> > > > Version: 8.0.138 / Virus Database: 270.6.6/1623 - Release
psb> Date:
psb> > > 8/20/2008 8:12 AM
psb> > > >
psb> > >
psb> >
psb>
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