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All of our software is our own. We use no packages except
for what we have programmed ourselves (actually me). My
dad, who is 87 still writes some programs based upon some
models I put together for him, so that he can test out
different indicators. We use Downloaded to get our data
(actually, my dad still enters everything manually from the
WSJ). I was able to convert some of our calculations to
MetaStock for DOS but when MS for Win came out, we had to
drop back to the DOS version. Also used TAS to program the
stuff MS couldn't handle (no variables).
We don't use any of the indicators in MetaStock. Not one.
The closest indicator in MS is William's %R which we
developed about 20 years before Larry, albeit in a modified
form. We think ours is better, naturally.
The only thing I can say about what we do is conceptual in
nature. First, we don't believe in gaps. I know that
sounds strange, but we feel that realistically the market
actually trades at those points, so when we look at the
days range, we modify it to close the gap. Additionally,
we're purely technical traders. Even in this age of
information, we feel that we're sufficiently removed from
the information pertaining to our markets, that we have to
assume that the market is a pure thing, insofar as
everything is known by someone, and is reflected in the
price movement.
Anyway, that's about all that I can cover, simply because
what we do is so different than anyone else, that unless I
wanted to really take the time to document it in detail, it
really wouldn't make much sense to you. We also believe
that keeping our methodology confidential means we won't be
competing with ourselves in the market. Years ago, there
was a Ph.D. who developed a wonderful trading system. Made
a ton of money, then published a book. I guess there was a
lot of ego involved here. Everyone read the book,
determined his methodology and wiped him out the next year
simply by triggering his signals and then taking the market
the other way. A few years after that, my dad was
approached by someone selling this 'great' system, touting
the first year's success. My dad asked if he knew whatever
happened to the guy who developed the system. The
marketing guy didn't, so my dad told him. He was so broken
by the fact that his system failed, be dropped out of
society and became a missionary in South America. Don't
remember his name. My dad might, but this was decades ago.
That's why we're really closed mouthed about what we do
and how we do it.
Regards
Guy
-----Original Message-----
From: Lionel Issen [SMTP:lissen@xxxxxxxxxx]
Sent: Friday, February 13, 1998 6:49 AM
To: Guy R. Tann
Subject: RE: "Systems" & Money Management
Gary:
Your posting is different and interesting. While I
presently trade only
stocks and funds, I have made made similar mistakes due to
greed and fear.
Can you tell what other software do you use besides
metastock and
spreadsheets?
If you have published any articles/papers can you give me
the references so
that I can look them up?
Can you tell me conceptually how you approach trading? (If
I understand
your concepts and I think that I can follow them, I can
develop a few
indicators).
Thanks again for a unique posting
Lionel Issen
After Feb 28 e-mail address will change to
"lissen@xxxxxxxxxxxxxxxx"
At 03:36 PM 2/12/98 -0800, you wrote:
>I guess I better preface this with a few comments. First
I
>am not selling anything, and I am not looking for
investors
>and am basically just documenting one of the problems I
>have found through personal experience. Now for my
>comments...
>
>You forget about one other factor in money management.
> Greed! We have a great system developed over the last 50
>years. My dad has traded commodities for over 60 years
and
>my brother and I for over 40 years. Our system works in
>all markets except long term, trending markets (our worst
>year was 1995 with 70% profitable trades and an annual net
>return of almost 34%) and we still manage to wipe
ourselves
>out periodically (I'm not bragging here).
>
>Our problem is the aforementioned GREED. After several
>months of 30% returns, we start to double up. For
example,
>from June, 1995 to June 1996, we were running along at the
>following profitability levels (actual trades, the system
>really worked better than this:) averaging 11.2% a month
>return (for the 13 months net after commissions). We
>decided to 'increase the bet' in January, 1996. Big
>mistake. Got too greedy and managed to wipe out 90% of
our
>capital in a few trades.
>
>% ROI Profitable
> Trades
>
>38.7% 50.0%
>33.2% 33.3%
>25.6% 66.7%
>-28.6% 33.3%
>44.0% 100.0%
>-5.5% 66.7%
>64.8% 100.0%
>
>-88.5% 33.3%
>-10.5% 0.0%
>47.5% 50.0%
>83.5% 100.0%
>-12.8% 75.0%
>14.9% 75.0%
>
>The above chart begins in June, 1995 and continues to
June,
>1996 (13 months). You would think with these numbers, we
>would be minting money. You would also think that we
would
>be able to refrain from getting greedy. Just investing in
>a single contract (no doubling up) of S&Ps in 1996 we had
>80% profitable trades with a profit of $118,000 on a
margin
>of $22,000. 1997 had profitable trades of 79% with a
>profit of $161,000. We really don't need to keep doubling
>up, but, unfortunately, we want to make a ton of money in
a
>hurry. Always bites you in the rear every time.
>
>Didn't do much trading in 1997 due to open heart surgery
>and the subsequent recovery, but we're in process of
>starting up again, albeit with a lot less capital.
> Actually, I'm back to doing some consulting to generate
>additional capital. Setting this one up as a partnership
>with my brother instead of a corporation.
>
>One of our decisions is whether to do it on our own again,
>or take in some investors. Have had $200,000 pledged for
2
>years, but due to my illness, we've held off on starting a
>pool. It seems to me that we would do a better job
>managing other people's money through a small, private
>fund. Then I talked to John Bollinger (a friend who lives
>a couple of blocks away and our kids went to preschool
>together). He recommends doing it on our own rather than
>take on investors and the required reporting, etc.
>
>Then we have the next question. Should we do this off
>shore, restrict ourselves to this small domestic fund with
>a total capitalization of $200k, or do it all ourselves?
I
>guess we'll have to research this a little more and look
>into the restrictions, etc. I have a complete abhorrence
>of the Federal Government and their paperwork and
>documentation demands. I like the off shore idea but my
>brother doesn't want the hassle. I still think doing
>everything off shore with no citizens involved makes a lot
>of sense and would take care of any taxation problems.
>
>Oh well, back to the planning stages while I complete the
>Visual Basic code in my spreadsheet. Also got to complete
>the design of our spreadsheet to see if we can figure out
>how to make a buck via the Net.
>
>Enough rambling. Like you thoughts regarding money
>management and gaming theory. Our trading system is
>strictly probabilities. All home grown indicators, so we
>don't really talk about what we do. Have tens of
thousands
>of hours invested and thousands of computer hours
>developing these trading rules.
>
>Regards
>
>-----Original Message-----
>From: Rick Mortellra [SMTP:rmjapan@xxxxxxxxxxxxx]
>Sent: Wednesday, February 11, 1998 3:57 PM
>To: MetaStock List
>Subject: Re: "Systems" & Money Management
>
>Hi Robert,
>
>I've posted this answer a while back, but I think the
>trading analogy
>compared it to the gaming industry is very apt. The fact
>that over the last
>7 years are so, the proprietary trading desks at many
firms
>have become
>populated with experts in game theory mathematics attests
>to its usefulness.
>It's also not uncommon for people who are successful
>gamblers to be be
>successful traders.
>
>As Al mentioned, there are times when the Blackjack deck
>moves from the
>house advantage to your advantage. It's the ONLY casino
>game where that
>happens. But just knowing that the deck favors you is only
>half the game.
>The other half is money management. Knowing when to double
>up your bet or
>reduce it, take insurance, etc. is what makes you a
>consistent winner. BAD
>MONEY MANAGEMENT CAN TURN ANY POSITVE ADVANTAGE INTO A
>NEGATIVE ONE, WHILE
>NO AMOUNT OF GOOD MONEY MANAGEMENT CAN TURN A NEGATIVE
>ADVANTAGE INTO A
>POSITIVE ONE.
>
>Trading is the same way. Like casino games, trading the
>market in general is
>a negative expectation game. At its basic level, the sole
>purpose of your
>trading system is to tell you when you may have a positive
>mathematical
>expectation.
>
>Once your trading system has given you a signal then
either
>your trading or
>money management "system" should signal if this positive
>mathematical
>expectation is large enough to trade. A general rule is
>that the projected
>upside/downside is at least 3:1. How you measure this is
up
>to you. True
>range, price channels (Jim Green method), etc. are all
>exceptable methods.
>It's up to you.
>
>If you have a system that gives you a tradable positive
>mathematical
>expectation of winning then money management becomes
>clearly definable as
>deciding how much to "bet" and how to control losses
either
>thru setting
>stops, hedging with options or other trades, trade
add-ons,
>or using
>multiple time frames for example. The complexity and
>accuracy of your money
>management system up to you. The old 2% rule can suffice
>for many. For
>various reasons I require mine to be very accurate and
>robust and have spent
>many years building it.
>
>Betting too much is one of the most common and biggest
>screwups a trader can
>make as it is the fastest way to turn the slim positive
>advantage negative.
>Worse, but perhaps appropriately, the severity of the
>screwup increases the
>smaller your available trading capital. If you want to
know
>exactly how much
>you should be trading there are precise mathematical way
to
>determine so.
>I'll point you to the works of Ralph Vince and Nauzer
>Balsara for further
>elaboration if you are so inclined.
>
>Unfortunately many would-be traders would not like what
the
>discover. First,
>they'll see that unless they have a minimum of $30,000 in
>DISPOSABLE trading
>capital, they are better off "investing" until they
acquire
>it. Further,
>it's only when this trading capital increases to around
>$300,000 (why I can
>sympathize with system sellers) should they even consider
>quitting their day
>job to trade fulltime. I suspect that at that level many
>would rather just
>put the money in bank and "retire" !
>
>hope this helps,
>rick
>Tokyo, Japan
>
>
>
>-----Original Message-----
>From: Robert C. Richmond <rcrich@xxxxxxxxxxxx>
>To: Al Taglavore <altag@xxxxxxxxxxxx>;
>metastock-list@xxxxxxxxxxxxx
><metastock-list@xxxxxxxxxxxxx>
>Date: Thursday, February 12, 1998 3:21 AM
>Subject: Re: "Systems" & Money Management
>
>
>
>Al Taglavore wrote:
>
>Robert,
>Blackjack is the one casino game by which the odds can
>shift to your favor.
>As cards are played from the deck, the composition of the
>deck changes,
>and thus the odds change. As opposed to dice, where the
>odds remain the
>same with each roll because the numbers are always the
same
>on each die.
>Yes, we have four riverboat casino's in the
>Shreveport/Bossier area, and my
>office is only 5 minutes from three of them.
>Al Taglavore
>
>
>Hi Al, the highlighted portion of your message is what I
am
>suggesting. As
>the odds change, one can calculate based on knowledge of
>the remaining deck.
>But I am still trying to understand how this might apply
in
>context of
>"money management" to which Rick referred.
>Just for kicks, proximate to the gaming industry that you
>are, do you think
>most securities "traders" would also engage in casino
>gambling or not? How
>about "investors?"
>
>
>
>
>
>
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