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on pete's comments, my understanding is that he thinks :-
1. big trades are the meat
2. small trading losses does not matter.
3. 50/50 win/loss is ok, as trends are not coin flips
4. please check dax 30min future - and i know nothing about it :)
5. all trading systems suffers from generalization
(or is it - no standard to measure against?)
and he attached a chart too on the trading signals his program generate
with a comment saying the same system is used for cac and dax futures.
and now i am curious, the chart attached with his message is in fact
very easy to trade, and in fact #4 is wrong, as I do trade dax futures :)
and I think using a breakout system on the chart he shows will yield
better performance then his fuzzy logic system because a
break out system will be in the market less time on the same chart,
and most important of all, win/loss at a way better level :)
one thing I learned thru trading is to explore all avenue of possibilities,
not to stop at something oneself thought is right, but in reality may be
just marginally ok. would you be interested to just try testing some
breakout concepts on the dax futures, pete?! you will be surprised.
and you can create a breakout indicator to train your neural fuzzy engine,
should be easy, isn't it?
maturity of a time series is a technical term that has the follow qualities,
1. a lot of different type of players in the market at the same time with
about the SAME amount of money to bet.
2. no single type of players has way more capacity to move the market
in shorter time frame.
3. information (real time feed) is available to all type of players at
equal efficiency.
why these qualities? they are the basic qualities needed for equalibrium
in true supply demand condition. that also applies to something like
complex weather system, or, water flow of pipe systems.
example 1 - nasdaq stocks in a few years back, information is not in a
fair condition as most people participate cannot see the book of all the
dealers. Now we have level 2.
example 2 - sp future, there is virtually no moving power by the small
traders in the sp future as they cannot get the best price, they cannot
tell what is happenning in the pit. now, there are cheaper squawk boxes,
e-mini sp for better fills, etc. to bring the game to a better level.
example 3 - a storm is not mature when it is forming, and it is mature when
all its forces are mixed up at the maximum possible confrontation against
each other.
when such maturity happen, the key signature is the noise in the lower
time frame will increase and the chaotic order will get closer to random
at those levels.
european index futures are still dominated by the biggest houses and
their biggest clients - medium size funds virtually do not exist and
smaller traders are rare. thus these mkts are not mature.
And the best part of these markets is that they are more predictable
in very very short term, thus scalping in these markets is easy.
riding is harder.
the points pete made #1, 2, 3, and 5 can be all answered at the same
time.
Is there any trading system that does not depends on generalization of
specific setup in the time series which can perform better than 40-60%
range with low risk high reward? YES and NO. the key is not a trading
system but a mathematical model that could possibly derived from a
segment of the time series, but then "comes alive" based on new real time
data and the projection made ... something NN been trying to do
for years.
most people try to derive trading system off the time series directly,
without understanding the data. That will never result in any
friutful result.
Like MB, his way to pre-process
the sp futures is already a big hint - the understanding of the sp future
not to use its opening and closing segment of each day!
There are people who derived filters like Arm's TRIN, or
Put/Call ratio etc. Another great hint that to "forecast" a
market can have many different ways.
-Lawrence Chan
p.s.
the reason why US has lower interest in fuzzy logic and NN,
is that quite sometime ago some computer scientists in North America
has proven that if fuzzy logic, or any other equivalent mathematical
system, can produce exact accurate solutions - then P=NP. Thus,
when a fuzzy logic model or NN model get closer and closer to
solve a NP complete problem, it will theoretically take them forever
to compute the answer. Thus, the academic interest in america
immediately dropped to almost none - although practical applications
and interest has been kept increasing as they are indeed better
methodology to describe everyday real life conditions.
Are securities time series functions NP complete, I don't know! :)
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