|
PureBytes Links
Trading Reference Links
|
Jim Murphy wrote:
> Seems like a no-brainer to me to NOT take signals from a system when
> Greenspan is in the news.
Do you always know ahead of time when Greenspan is going to be in the news?
How do you know what other news might occur?
If you are overriding your system signals then you are not trading a system.
You are trading a "method" which uses the system but which also uses your
own judgment.
So let us all agree on terminology: System trading is *mechanical* reaction
to previously written or programmed signals. All signals must be taken to
apply this type of trading. Anything less than taking all signals is
"method" trading (which then, at some point, becomes "discretionary"
trading). There are very few true system traders.
The problem that Robert raises (the problem of price shocks) is a very real
one for the system trader. What surprises me is that he says that this
problem affects only day traders. I do not understand why he says this. I
can think of all sorts of recent price shocks which affected position
traders. Both the position trading system and the day trading system must
deal with price shocks (or use them...).
So a question is: How should we deal with (or use) price shocks in our
systems? TJ recently suggested (on this list) an approach which involves
using "filtered" price data as feedback (or input) to the system algorithm.
His idea, if I may paraphrase, was that price shocks are abberations which
the system needs to notice but not overreact to. So he "tones down" or
mutes the system reaction when a shock occurs. I find his idea interesting
but not practical (for money-management reasons).
The point here is that we have 2 choices, and that these two choices apply
to both position and day traders:
(1) Deal with price shocks in our systems or
(2) Adopt method or discretionary trading
The Omega Man
----- Original Message -----
From: Jim Murphy <jmurphy1@xxxxxxxxxxxxx>
To: <Omega-list@xxxxxxxxxx>; Robert W Cummings
<robert.cummings@xxxxxxxxxxxxxxxx>
Sent: Friday, July 23, 1999 12:41 AM
Subject: Re: Bear Trap
> >One of the reasons I don't like systems was the trade today in the bonds.
> >Had a channel going then broke out to the upside that would trigger most
> >systems to buy. Followed a horrific break that lasted 12 minutes for
over
> >a point and a half before a small bounce up. I guess the people who use
> >systems would say the trick would be to reverse but today was an
exception.
> >Most times if you try and reverse this market you can get hit both ways.
> >Sorry if anybody got hurt today in the bonds but reaffirms to me systems
> >don't work for daytrading.
>
> Seems like a no-brainer to me to NOT take signals from a system when
> Greenspan is in the news.
>
|