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Title: Re[2]: [amibroker] Re: 'Rule Based' versus 'Discretionary' trading...
Great to hear from you Yuki!
Keep it coming ;-)
happy trading,
herman
Thursday, August 21, 2008, 6:14:34 AM, you wrote:
> 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
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psb>> > > 8/20/2008 8:12 AM
psb>> > > >
psb>> > >
psb>> >
psb>>
>
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