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Hello,
This thread reminds me of a private tour I had many years ago on the Pacific
Stock Exchange (San Franscico), near the pit I pointed to a 'kid' on a
computer and the guide said he works for one of the big players tracking the
latest indicator so that the big player knows when the 'heard' is going to
jump in so he can jump out!
Also, my claim to system fame is "selling" a TradeStation system, putting in
as part of the code an expiration date 1 year down the road. Of the two
customers one called back one year for an upgrade, gave him another two
years, and never heard back from both:) Moral is people will change a system
over time or just go on to the next one thus all systems fail.
Regards,
Jerry
-----Original Message-----
From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
Of brian_z111
Sent: Tuesday, June 02, 2009 9:16 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Re: Do all trading systems stop working? - Howard
Bandy's book
Thanks for the feedback.
Samantha's question fired off my search algorithms for sure and they are now
zeroing in on the US institutions... I think that is where the answer lies
to the question of 'eroding the edge' e.g. if I am trading the SPY, and buy
on a system entry at 0930 US time, there is so much volume going through
that instrument, at the same time that I am buying, what difference does my
little bit make and who knows what is motivating every single dollar?
My assumption is that the vast majority of money going through the US
markets is controlled by institutions and that in most cases they would not
be the least bit interested in my trading systems, or theories for one
simple reason, .... they are restricted officially by due diligence etc and
unofficially by their clients tolerance for risk .... I am far to extreme
for their tastes.
No matter how well a manager invests the money they can't stop a run on
their funds when the fund, or the indexes are dipping markedly, so they are
forced to sell 'under their clients orders'.... I guess that played a big
part in last years debacle.
The only interest in 'trading systems' would come from boutique funds (hedge
funds etc) so it depends what % of the total US market they are controlling.
Even then there is so much literature out there I doubt very much that they
would ever stumble on my posts let alone take them seriously.
You are quite right though ... I am going to do some more homework on the US
funds ... I have been underestimating them and some of them are far more
interesting than what I thought, up until now.
I dare say a lot of the boutique funds got their butt kicked last year too
because of the mistaken believe that they were diversified into
non-correlated markets/systems.... I will have to look into that also.
I have to say, though, that I am more afraid of my broker getting in front
of me, which would definitely clip my take, than I am of sharing my systems
with a bunch of investors/traders/fund managers.
brian_z
--- In amibroker@xxxxxxxxxxxxxxx, "Ed Hoopes" <reefbreak_sd@xxx> wrote:
>
> There are publicly traded funds organized around various trading systems.
Below are a few for comparison:
>
> NFO - Insider Info
> STH - Stealth
> XRO - Sector Rotation
> PIQ - Magni Quant
> PSP - Private Equity
> FVI - ValueLine 100 Stocks
> BWV - Covered Calls
> CSD - Spin Off Companies
> DEF - Defensive Stocks
> EZY - Low PE Ratio Stocks
>
> Now take each one of the above and do a relative performance to the
overall market - like VTI Vanguards Total Market ETF - and you can see how
well they work.
>
> NFO, PSP, EZY top the list with a modest out performance using my ranking
algorithm. The majority equal the market or underperform.
>
> For me the most disappointing is FVI only as good as the broad market - so
much for $650.00/yr fundamental/technical analysis newsletter. XRO - is the
worst.
>
> ReefBreak
>
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@> wrote:
> >
> > Hello Samanatha,
> >
> > Thanks for your post ... a good topic and thanks also to D and PS for
additional leads and others for the discussion.
> >
> > <snip> .... all trading systems will stop working forever at some point
(because the inefficiency in the market they exploit will be killed by
everybody jumping on board).<snip>
> >
> > This point of view isn't shared by all traders.
> > There are at least two grounds for objection:
> >
> > - the massive number of possible permutations, at any point in time in
the market, make the chance that two traders are doing the same thing with
significant amounts of money are unlikely e.g. Aronson puts forward this
idea in his book, "Evidence Based Technical Analysis".
> >
> > - based on the behaviour of market participants it is also unlikely that
a significant number of traders will trade exactly the same trade even if it
is "published in the Washington Post" e.g. one of the Wizards interviewed in
one of Schwagers book's argues along those lines when he is asked if he is
reluctant to talk about his trading methods.
> >
> > Take this topic for example ... how many people read the topic ... read
it carefully ... read the links ... thought about it ... did some homework
... go on to study the system ... put it into practice (without changing
anything) and then go onto to trade it in the same market, same instruments,
same timeframe etc with significant amounts of money.
> >
> > I consider myself to be a trend trader but my definition of a trend is
unlikely to be used by more than a handful of people ... the chance that
others are watching the same trend, in the same instrument and the same
timeframe is almost zilch.
> >
> > The caveat is if and when large institutional traders are systemic
traders and/or algorithmic traders .... perhaps large players can mop up
systems if they are interested enough to do so.
> >
> > There has been little discussion, on this board, about systematic
trading by institutional players.
> >
> > Siddhartha did say he didn't observe that the practice was widespread in
his time in the industry. On the other hand I recall reading an article that
said Goldman Sachs were into algorithmic trading in a big way.
> >
> > As an aside ... I thought that the axiom "We will miss most of the
growth if we miss the 10% biggest gain dayss in the market (ditto for a
weekly/monthly/yearly basis etc) was basic (same for missing most of the
losses if we avoid the worst ten%).
> >
> > Looking at any index chart, with hindsight, it seems obvious that there
are several points where any number of indicators could have told us to get
out and we would have been better off ... the trade off is the cost of exit
and re-entry.
> >
> > I put a lot of effort into investigating that payoff/versus cost when
deciding how often to trade (buy and hold versus, say, short term or day
trading).
> >
> > I was surprized last year when so many in this forum (of all places)
seem to be hurting.
> >
> >
> >
> > Re Momentum trading:
> >
> > There are two articles here on trend trading (scroll down to 3.1a and b.
> >
> >
> > http://zboard.wordpress.com/library/miscellaneous-articles/
> >
> > Michael Covel appears to be the current king of trend trading (I like
his book but not his videos).
> >
> > www.TrendFollowing.com
> >
> >
> > How do we know when a system is failing?
> >
> > We can't get a math measurement to tell us when that momement has
arrived ... all models assume stationarity and as soon as it is broken we
are in unknown territory .... classically a shift in the average value or
the dispersion (of the trade series) signifies non-stationarity, although
random data series contain a good deal of variance and it is hard to
distinguish random variance from a system breakdown. However IMO most
traders are trend traders and almost anything will work while we are on the
right side of the trend .... so in the real world a system is broken when
our assumptions about the underlying trend are incorrect.
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "samu_trading" <samu_trading@> wrote:
> > >
> > > All,
> > >
> > > In his really good book Quantitative Trading Systems, Howard states
that all trading systems will stop working forever at some point (because
the inefficiency in the market they exploit will be killed by everybody
jumping on board).
> > >
> > > On the other hand you have momentum / ROC based systems working
forever now, same for trend following MA crossover systems like The one
propagated by Mebane Faber. Momentum and MA rossover trendfollowing does
seem to work "forever".
> > >
> > > Any comments from the gurus here?
> > >
> > > Thanks, Samantha
> > >
> >
>
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