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Omega man wrote..........
Both the position trading system and the day trading system must
deal with price shocks (or use them...).
Most systems use stops or some type of exit and reverse. Yesterday based on
time and sales, sell stops would have been filled at 17.08 and 16.28 in the
Sept Tbond futures. This isn't any big shock. Pretty damn orderly for a fast
market if you ask me.
BTW my system had sell signals all over the place going into the rally. I
stood aside for a variety of reasons, none of which was my system. You have
to have the balls and the cash to take the shocks in the bigger markets,
bonds and S&P are two of the biggest. Trade the corn if you want no big
shocks, but trust me plenty of people are willing to trade these volatile
markets, exactly because of the big swings.
Just my opinion on this.
Dale
----- Original Message -----
From: The Omega Man <editorial@xxxxxxxxxxxxx>
To: Jim Murphy <jmurphy1@xxxxxxxxxxxxx>; <Omega-list@xxxxxxxxxx>; Robert W
Cummings <robert.cummings@xxxxxxxxxxxxxxxx>
Sent: Friday, July 23, 1999 5:43 AM
Subject: Re: Bear Trap
>
> 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.
> >
>
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