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Your questions are typical of people who want to be traders. These
are the most frustrating questions there are to answer, and frankly
in my experience a total waste of time to answer. (Sorry boys, that's
been my experience!)
Research done by the SEC and academics have concluded that 95% of all
traders lose money. Now why is that? Is it because they don't have
good systems? Or they didn't read the one right trading book? Or they
didn't ask the one key question on this site? Or maybe they're just
dumb. No, it's because trading is a business and 95% of the people
who get into any business have no idea how to run it, especially one
like this one.
A lot of people confuse part time trading with having a hobby. When
you have a hobby, you aren't doing it to make money. When you start
trying to make money with it, it's no longer a hobby--it's a part
time business.
I posted a reference to a group of articles by Charlie Wright that
explains very clearly how to develop a trading system, how to use it
and how to make money trading.
A total of probably 5 people bothered to read even one of the
articles, muchless all of them. And the 5 people who read them are
the very people who don't need to read them.
Here's the reference again.
http://www.elitetrader.com/tr/index.cfm?s=17
These articles will fill you in on the fundementals of developing a
trading strategy for all ten of your stocks. It's a good place to
start. From there you only have another 100 or so books to read, 5
years of applying what you've learned, and a lot of tuition to
graduate school in trading, and then you've arrived---or you've lost
your capital and found a new hobby.
The debates on this site are nearly worthless, just like that last
discussion on the number of bars to test. You have no idea if the
opinions being expressed are backed up by knowledge and experience,
or if, like most opinions, they're just hot air. No one has to post
their trading resumes. Just because someone is say an engineer, or a
Ph.D., or Albert Einstein that doesn't mean they know squat about
trading quarters with their grandmother.
The vast majority of opinions aren't backed up by anything like
knowledge or experience. Opinions are cheap, success is expensive.
People post questions pleading with someone to give them some little
piece of code. They don't have time read the manual, study the
formula primer or learn how to do things for themselves, because if
they just had this one piece of code they could make money trading,
and after all, that's all they want to do. Those suckers are the
worst of the lot. Don't be one of them.
There is an individual trading system for every person who becomes a
successful trader. For those who survive long enough, it's arrived at
through education, trial and error, countless hours of work, and some
luck. No single trading system works for every person. You notice I
didn't say there is no single trading system that works for every
stock. The trading system is about the person using it, not the
symbol it's applied to. A trading system is only one part of a
trading strategy. Most want-ta-be's never get far enough to even get
close to having a trading strategy.
If you read Wright's articles, you'll find out that a trading
strategy is not, "I'm going to trade breakouts based on the price of
spam tomorrow." Far from it. Just that one little piece of knowledge
will put you ahead of most of the pack.
Nearly everyday I talk to successful traders and systems developers
and some of them are doing just the opposite of what I'm doing. The
only thing we're both doing is making money, and have for a long
time. Neither of us tries to convinence the other one we're right.
The bottom line is, whether you're trading 1 stock or 500 stocks,
it's a business. Learn the business. It's a brutal business. There
are more people selling information on how to trade successfully than
there are successful traders. That ought to give you a clue.
Just remember, if some simple system, formula, charting technique or
whatever worked really well, everyone would be doing it, and they're
not.
The magic is in the way the system fits you. That's it. That's the
secret.
Read the articles and start learning how to tailor a suit of clothes
that fits you and you alone, not your ten stocks.
If things don't work out, buy a copy of The Four Pillars of Investing
by William Bernstein. It's the best buy and hold book ever written.
And please remember, if you're going to lose your money, at least
have some fun while you're doing it!
--- In equismetastock@xxxxxxxxxxxxxxx, "metastkuser"
<andysmith_999@xxxx> wrote:
>
>
> Well I had no idea my question would spur such a debate. After
> reading opposing viewpoints, here is what I have converged to:
>
> I am trying to find the best systems with which to trade my 10
> favorite stocks. I have about 50 systems at my disposal. I have
> decided to backtest each stock (against all systems) with 5000
bars,
> 1000 bars (which excludes the dot com bubble years) and 250 bars.
> Then, for each security, I will choose a system that performs well
> over all three time periods.
>
> So do I have an ice cubes chance in hell?
>
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "David" <junk@xxxx> wrote:
> >
> >
> > While I do respect your opinion on the matter that more
> > isn't "necessarily" better given changes in market conditions
from
> > the past. My view lies more in the fact that if you can design a
> > system not only to perform well in past market conditions, but
also
> > in the dramatic recent changes, your system is obviously more
> > robust. And I'm not talking about a system that performs well in
> the
> > past "on average." I mean consistent gains yearly as much is
> > possible. I would much rather have a system that performs just
as
> > well in the past as it is still doing recently, than having a
> system
> > that performs well recently but not in the past. In that aspect
I
> > believe more is better.
> >
> > But maybe my motives are different. I look for robust systems
that
> > can be applied to various securities for diversity and perform
> > consistently. I'm not looking for max possibly return. If a
> > businesss is to be run, you can't expect to have occasional
> > profitable results showing up here and there just when they feel
> like
> > it. If your system can only do well in today's market but not a
> > decade old market, who's to say that history won't repeat itself
> and
> > the market reverts to old? Not to say you can't adjust your
system
> > when the time comes, but you cannot pinpoint that until possibly
> > years too late.
> >
> > You said that the number of bars used has very little influence
on
> > curve fitting. In the most ridiculous of examples, if you have
> only
> > one month of data and go test a basket of systems, you will
> obviously
> > come up with a few that bought and sold at the exactly the right
> > point. Not necessarily because they are good systems. So what's
> > next? You can't have one month of data represent a whole year of
> > market movememt, it's not accurate enough of the whole. What
about
> a
> > year? That sounds like a decent amount, but it only represents
10%
> > of a decade worth of data. Just as a month is only roughly 10%
of
> a
> > years worth of data and thats not accurate enough, then how
should
> > one year be enough when it's only 10% representative of the
market
> > conditions over the past decade? Maybe, that then lies more in
the
> > time frames you plan to choose. If your trade time frame with
the
> > designed system is short, then superfragalist may be right, more
is
> > not necessarily better. The short time frame expected to trade
> might
> > be close enough to the previous short tested time, then you might
> > make money with the system you designed for it. But I wouldn't
be
> > willing chance my money on it. So even aside from the possible
> curve
> > fitting issue, I still would find the lack of bars to be a
negative
> > obstacle given that your system wouldn't have had time to "prove"
> > itself in more varying market conditions. As I said, I respect
> your
> > view superfragalist, but the aforementioned reasons is why I
> believe
> > otherwise. But after writing this, I guess a lot boils down to
> > personal objectives and trading style.
> >
> > Best Regards,
> > David
> >
> > --- In equismetastock@xxxxxxxxxxxxxxx, superfragalist
> <no_reply@xxxx>
> > wrote:
> > >
> > > Sorry, but I don't agree with this statement. "I'm sure
everyone
> > > would more than emphatically agree with me that the more
> historical
> > > bars the better to test on."
> > >
> > > While I do agree that using too little data can be a problem,
too
> > > much data is just a big an issue. Curve fit is a complex issue
> and
> > > the number of bars of data you use to develop your system has
> very
> > > little influence on it.
> > >
> > > I'm not going to go into a long piece on curve fit because
there
> > are
> > > many really good systems development books and internet
articles
> > that
> > > define, explain and debate the issue.
> > >
> > > Curve fit is easy to test for using out of sample data in walk
> > > forward tests. Indicators can be tested for robustness prior to
> > walk
> > > forward testing.
> > >
> > > Curve fit is caused by over optimization, lack of robustness in
> the
> > > indicators, too many variables in the optimized equation and
poor
> > > selection of variables within the equation.
> > >
> > > Not one of the systems development books that explore the issue
> of
> > > curve fit have a set number of bars of data that should be
tested
> > to
> > > reduce curve fit or to validate equations.
> > >
> > > No one says that 500 bars are too few and 2000 bars are too
many.
> > > Everyone has a different view. However, most authors and
systems
> > > develop people do agree on what causes curve fit.
> > >
> > > Robert Colby in The Encyclopedia of Technical Market Indicators
> > often
> > > tests using 20 to 40 years worth of data. Does that mean that
the
> > > best performing systems he has found historically will work
well
> > > today. Absolutely not. He admits that many of the historcially
> best
> > > performing systems have done poorly in the last few years. Is
it
> > > because of curve fit? No, it's because his historical data
> averages
> > > out all types of market cycles and the last few years have been
> > > anything but average. The point of his book is not to use
what's
> > been
> > > great over forty years, but to look in similar places for
current
> > > versions of the similar things that will work in these markets.
> > >
> > > Sorry I can't support your opinion. I've gotten a different
> > > perspective from studying the issue.
> > >
> > > Esignal is slowly increasing the amount of historical data they
> > > maintain because of intraday system's developers requests for
the
> > > data. However, there has been talk that the historical data
will
> > not
> > > be available to users of MS but only to Esignal trading
clients.
> > > Equis says this is not true, but I've seen some evidence of it.
> > >
> > > Historical one minute data since 1997 on the S&P 500 can be
> > purchased
> > > for about $2500 from Price-data.com. For people doing intraday
> > > trading that's reasonably priced. You can buy individual
symbols
> > for
> > > $75.
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