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Yiki, tashikani soodesu. You have made a valid point, as the profit have to be made somewhere and those accounts would be subject to scrutiny.
Huanyan
--- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga <yukitaga@xxx> wrote:
>
> Huanyan,
>
> Splitting the trading probably won't help you. If you could identify
> the weakest trades (the ones you would, perhaps, direct to brokerage
> B), you would eliminate them completely. So the results over time of
> split trades should approximate your overall results. And of course
> if you shunt only the bad trades to broker B, then the results at
> broker A are going to be even more spectacular. Brokerage A is then
> going to have even more incentive to examine your play.
>
> There would seem to be no way to disguise your play, because you are
> not a market specialist. ^_^
>
> Remember, it's not the amount you win (splitting would affect this
> number, but it's meaningless), but the consistency and the
> methodology and the risk metrics, that will draw attention.
>
> One way to disguise the system itself would be to occasionally throw
> in the deliberate "anti-system" trade -- a throwaway trade made on an
> absolutely contrary-to-the-system basis. That might throw off a
> search for your system. (Perversely, it might also win.) ^_^ But
> unless you did it often enough to influence your real returns (which
> you would not do, because then your returns would be negatively
> affected), then it would have no value in terms of stopping someone
> from shadowing you.
>
> I've never worried about brokers taking the other side of my trades.
> I'd end up owning the companies if they did that long enough. ^_^
> But just as I assume that they look at good traders, I would assume
> that they look at clueless traders (although clueless traders tend to
> run out of money, so they would be limited to looking at clueless
> traders that seem to have a wellspring of money somewhere to
> replenish their accounts). I wouldn't mind taking the other side of
> any trade made by someone with a demonstrated capacity for being
> wrong.
>
> But I think the practices are almost impossible to stop. Brokers are
> often members of exchanges (if not always), and they routinely
> generate data for the exchanges (margin long outstanding and margin
> short, for example). So they have at least some valid reasons for
> analyzing data.
>
> And as I say, human beings, generally, are not going to pass up any
> profit opportunities. If you are trading at *MY* firm, and you are
> consistently making a pile of money, with risk metrics that I find
> acceptable, I'm going to have a look at your action. A very close
> look. Think of me as the camera behind the overhead mirror at
> Caesar's Palace. ^_^
>
> Yuki
>
> Saturday, June 6, 2009, 12:26:07 PM, you wrote:
>
> h> Interesting idea, Yuki.
>
> h> Can someone verify if it is a common practice for brokers to
> h> investigate the performance of its clients ( of courese internally
> h> and act in low profile ) and then try to figure out the
> h> methodology of the successful clients ?
>
> h> If it is the truth, then is it advisable to split the trading
> h> operation among accounts in different brokers ?
>
>
> h> Huanyan
>
>
>
> h> --- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga <yukitaga@> wrote:
> >>
> >> KM> Why would it be discovered?
> >>
> >> I would be inclined to believe that any system that is employed for
> >> any reasonably lengthy period of time will be discovered. I think
> >> this is particularly true now in the data processing age. Human
> >> beings are, after all, human beings. And behind all the machines,
> >> there are human beings. You can't trade without exposing yourself to
> >> the machines (which "remember" all your trades forever) and, very
> >> importantly, to the people who have access to the machines, or who
> >> control the people with access.
> >>
> >> I don't know where this might be illegal or legal, and I'm sure it is
> >> in some places and maybe isn't in others, but if I was a ranking
> >> officer in a brokerage firm, you can be absolutely sure that I would
> >> know exactly who my most profitable clients were over time -- using a
> >> basket of metrics to look for outstanding performance that fell
> >> within allowable risk parameters. And you can also be sure that I
> >> would spend no small amount of time and effort trying to ascertain
> >> how any sustained profitability that was in the bounds of my metrics
> >> was being generated. I'd be running the data periodically. Need I
> >> say more?
> >>
> >> If you are siphoning money out of the market on a consistent basis,
> >> and doing it better than almost anyone else (basis simple RoR, better
> >> risk-adjusted numbers, some the combination of the two, or whatever
> >> measures you happen to be looking for), it is going to be noticed.
> >> There is almost no way to get around this. Your identity can be
> >> cloaked without too much trouble, but cloaking your play is much more
> >> difficult -- because you have to play. Conceivably, you could break
> >> your play up among several sets of machines, but if you are
> >> successful enough I think your play is going to be detected.
> >>
> >> If you are small potatoes, you have less of a problem I'm sure.
> >> Almost no problem. But if you have a system good enough to interest
> >> someone else, you aren't going to remain small potatoes very long.
> >> And in the meantime, you are going to be putting up some trade
> >> statistics that should attract someone's attention. Let me change
> >> that to *will* attract someone's attention.
> >>
> >> It's called the smell of money. And one of humanity's most powerful
> >> olfactory capabilities is detecting that odor.
> >>
> >> Yuki
> >>
> >> Saturday, June 6, 2009, 10:32:32 AM, you wrote:
> >>
> >> KM> The statement, "they will be discovered and traded", contains two
> >> KM> assumptions, which I find difficult to accept.
> >>
> >> KM> First, addressed by Brian below, it will be discovered only if it is
> >> KM> used to an extreme extent. The system may, for example, just trade
> >> KM> relatively small lots in large and universally held equities. One could
> >> KM> possibly make millions from futures and forex without effecting the
> >> KM> markets one iota. Why would it be discovered?
> >>
> >> KM> Second, even if it were discovered and even became widely publicized, it
> >> KM> still might not be traded sufficiently by others to have any effect on
> >> KM> its success. The system might, for example, require considerable
> >> KM> patience by the trader, so much so that only a very small number of
> >> KM> traders would be willing to use it. Or it could be based on some theory
> >> KM> that all but a few would reject, despite its effectiveness.
> >>
> >> KM> It's believed by many, including yours truly, the the most effective,
> >> KM> low risk/reward, way to make money from the stock markets, is to write
> >> KM> books and give lectures about how to make money in the stock market.
> >> KM> This system has been going on for years, is well known, and so far
> >> KM> appears to be quite profitable. I doubt that it will ever stop working.
> >>
> >> KM> -- Keith
> >>
> >>
> >> KM> brian_z111 wrote:
> >> >>
> >> >>
> >> >> <snip> I find the statement that all trading systems stop working
> >> >> eventually to be too vague.<snip>
> >> >>
> >> >> Howard has provided supportive arguments, to this theory, at various
> >> >> times, and we can not accuse Howard of being vague or equivocating
> >> >> when it comes to trading (I thank him for that).
> >> >>
> >> >> As I recall the basis of his view is:
> >> >>
> >> >> - all systems will fail eventually
> >> >> - they will be discovered and traded
> >> >> - trading the edge erodes the edge
> >> >>
> >> >> By 'erodes the edge' Howard means that if, for example, I am trading a
> >> >> system and buy, at the entry signal of 100.00,, and sell on the exit
> >> >> signal of 103.00, I have made a profit of 3%.
> >> >>
> >> >> If a lot of people start trading the same system (same market/
> >> >> timeframe etc) then the second person in will have to buy at, say
> >> >> 100.01 and sell at 102.99 (because my action in buying/selling before
> >> >> them moved the bid/ask (theoretically trader 2 ends up with a profit
> >> >> of 2.98% , calculated on a commission free basis and so on, down the
> >> >> food chain).
> >> >>
> >> >> According to this theory, the efficiency of the trade has been
> >> >> diminished i.e. what was a 3% trade has been reduced to a <3% trade(on
> >> >> average) due to other traders piling in to the trade.
> >> >>
> >> >> My critique of that argument is:
> >> >>
> >> >> - the reason why any trade (tick) is made (appears on the tape) is
> >> >> unknown to us (except for our own trade)
> >> >> - all ticks, other than those that are trading our system, are noise
> >> >> (to us) and therefore random
> >> >> - ticks associated with our trade, that are not placed by us, will be
> >> >> dispersed in time, (due to the various trading time delays experienced
> >> >> by individual traders).... so they will be interposed by random ticks
> >> >> - in a pure market (no commissions and no manipulation of the trades
> >> >> by insiders) there is a 50/50 chance that my tick (if I take the
> >> >> market price) will be less than the midprice of the bid/ask when the
> >> >> signal was generated at the exchange.
> >> >> - my price could move away from the original midprice substantially,
> >> >> in a fast market, but no one can know the reason for the fast trading
> >> >> or attribute it to our system (my system only produces a buy signal
> >> >> once every 2-3 days on average - fast markets happen all of the time,
> >> >> when I am not trading my system, and presumably slippage is still
> >> >> occurring, in other transactions, so the evidence is against the fact
> >> >> that my system is the cause of slippage and fast markets).
> >> >>
> >> >> The exception to that is if a 'player' with a big account, relative to
> >> >> the liquidity of the instrument, is also playing the same system, at
> >> >> the same time, in the same market/instrument/timeframe.
> >> >>
> >> >> So the question is:
> >> >>
> >> >> - to what extent are 'big players' trading a system, in a highly
> >> >> liquid instrument, with enough clout to move the market?
> >> >>
> >> >> - IF big players are system trading what type of system would they be
> >> >> likely to play and what% of the total funds they are controlling are
> >> >> they likely to risk on any single system?
> >> >>
> >> >> - are they likely to play with large enough sums of money to erode the
> >> >> efficiency of the system they are trading?
> >> >>
> >> >> - IF they are playing a system, with large amounts of money, is it
> >> >> likely that their system would involve entering all of that money at
> >> >> the same time i.e. they would trade in such a way that they would make
> >> >> an intraday splash OR are they more likely to trade systematically
> >> >> over longer timeframes (that might be a reason that intraday sytems
> >> >> don't get eroded as often as EOD systems ... if that claim, made by
> >> >> some, is true).
> >> >> - IF big players do trade in such a way that they are 'moving the
> >> >> market' do you think they would be so naive that they are unaware of
> >> >> this and haven't factored that in to their strategy..... if 'moving
> >> >> the market' is negative to their strategy would they do that ...if
> >> >> 'moving the market' is positive to their strategy are they more likely
> >> >> to implement that strategy in illiquid instruments/small timeframes OR
> >> >> the reverse?
> >> >>
> >> >> But all of that is just a nice theory.
> >> >>
> >> >> The best argument against any theory is evidence.
> >> >>
> >> >> Some forum members have listed some example trading systems that have
> >> >> been published for decades AND they are still going strong AND their
> >> >> performance has not 'faded in and out'.
> >> >>
> >> >> Anyone who wants to defend the 'trading the edge erodes the edge'
> >> >> argument now needs to prove that these systems were never published
> >> >> AND that after they were published they ceased to work.
> >> >>
> >> >> That won't be an easy task because Samantha's unequivocal example (a
> >> >> 10 bar SMA on monthly data) is based on a trading idea (MA crossovers)
> >> >> that has been around forever (Tomasz even ships AB with a example code
> >> >> in his formula folder and the manual) and there are published studies
> >> >> on the net (rigorous studies at that) that are relatively current.
> >> >>
> >> >> However, the more imporanat question seems to be, if these systems did
> >> >> not fail, due to being published and/or traded, why didn't they?
> >> >>
> >> >>
> >> >> --- In amibroker@xxxxxxxxxxxxxxx <mailto:amibroker%40yahoogroups.com>,
> >> >> "Leading Edge Systems" <rdcpa@> wrote:
> >> >> >
> >> >> > I am new to Amibroker and I have been using Howard's which I find to
> >> >> be excellent, as a guide to learing AB.
> >> >> >
> >> >> > I find the statement that all trading systems stop working
> >> >> eventually to be too vague. First "stop working" is a relative term
> >> >> and would have a different meaning for each of us. Also I think
> >> >> inefficiencies can come and go in cycles based on the popularity of a
> >> >> particular type of trading. Once an inefficiency has been traded away
> >> >> due to over-popularity, it probably will go out of fashion and then
> >> >> become an inefficiency again some time in the future. All this depends
> >> >> on the specifics of what we mean by "stop working" and "a system".
> >> >> >
> >> >> > Rich
> >> >> >
> >> >> >
> >> >> >
> >> >> > --- In amibroker@xxxxxxxxxxxxxxx
> >> >> <mailto:amibroker%40yahoogroups.com>, "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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