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Hello Mark & list,
Thanks for responding to my email. To start with your last question "ps ed
what was your occupation yesterday?"
I worked for ING Bank in Amsterdam and was sent to Frankfurt to work as a
broker. I did the Bund arbitrage between Frankfurt and London when that was
hot back in 1994-1995. I traded with Carl Buraiko and you are excused if you
do not know this name. Carl Buraiko is a friend of Tom Baldwin and yes, he
was as big as Tom Baldwin when he traded the T-Bond futures in Chicago on
the floor. Positions of 1000 up to 2000 T-Bond futures were not uncommon.
Carl needed a new adventure and moved to London in 1994 and did the
arbitrage with me. He had his broker on the floor in London and had me on
the phone in Frankfurt. When the average tradesize was about 100 futures
Carl traded 500 lots. Lets say he is the prototype of a Big Swinging Dick.
My job was to quote him the electronic Bund market in Frankfurt as fast and
as accurate as could be. Whenever he said "Buy'em" he wanted me to buy his
standard size of 100 on the last offer I just gave him. You can imagine that
buying one point higher would ruin the arb and that would be my mistake,
ING's loss and finally my job. I used two keyboards a year, traded like this
6 hours a day and lived on coffee and cigarettes just to stay more than
razorsharp. Yes, I saw every change in bids and offers, quoted him as fast
as it changed and by my intonation he could notice where the market was
heading.
After this I started trading for myself the DAX futures and then the
Eurostoxx futures. In 1998 I had a pretty good year because the volatilty
was high. I made more money in a short time than any system could have made.
Just because I traded directly on the exchange. However being off-floor this
did not matter because every electronic exchange is off-floor.
During 2000 I was forced to trade through a broker. In my case this was
Refco. Every broker, no matter how fast their systems are, is slower than
trading directly on the exchange. We are talking about one or two seconds
delay but that is enough to miss good fills. Also the markets changed from
very volatile into slow, ranging markets.
It was during 2000 that I realized I needed a change and I am looking for a
change into trading objective systems instead of following my guts and
feeling supported by being faster than the rest.
And here I am; looking into a new world called system trading. In the
hierarchy of the trading community I did several steps down. From now on I
belong to the privateer who pays more per contract, has to deal with slower
systems and who misses the support of a lot of guys in the dealing room.
Just to work your email from the bottom to the top; "of course i would
have suspected no less, you should have time to count ticks also - and
if you continue to loose money chasing false trends you can always blame it
on poor fills and slow data feeds". I feel a sense of sarcasm here.
I recognize the, what I call, American sarcastic sense of humor. I am
American myself, worked with Americans and have seen every major city in the
USA. For a long time however I have been living in Europe. Chasing the false
trend, loosing money and blaming it on slow data feed sounds to me like "do
not use a trendfollowing system". You just said it in a different way.
Again in your words; "yea isn't it a bitch when all you focus on is those
big runs- called trends - that everyone else also wants to get on and ride.
i would suggest you stick with this trend chasing system until you have no
more money left and remember the trend is your friend." You are telling me
the same thing here.
Mark, you seem to be a personality on this Omega list. You seem to know a
lot about systems. You are telling me here you do not advice to use a
trendfollowing system. But than what do you advice me?
I know of guys in Chicago who spend $500,000.= a year on research on spread
engines. They use systems that have 27 winning trades out of 28. That is a
system. That is how the really professional guys work. They laugh at us
TradeStation users. But you won't hear them laugh. Because they live in
their mighty towers, work hard and buy their own airplanes to get away from
the people in the streets like us.
I am only asking for advantages and disadvantages of trend following and
non-trend following systems. And what I can do about the disadvantages of
trend following systems. Of course I know I will not be able to spend
$500,000.= on research and work with a fully automated electronic spread
engine. Of course I know I go bankrupt when I follow a trend following
system in the blind. But what can I do about it? Use some kind of trend
detecting indicator? Use position sizing? Use my plain brain? Suggesting to
stick with this trend chasing system until I have no more money left just
isn't a suggestion.
Just to work our way up further; "seems like you have a good system - just
need to enhance it." Thanks. I think so too, but how? Do I need to throw in
a trend detecting indicator like an ADX?
"try the trailing stops those will be most enjoyable to you. try the
floor and ceiling settings also those can really help out a bunch." I came
up with ideal settings for the 30 minute bars for the Eurostoxx for the year
2000 as 4,3,3,4 for the LE, LX, SE and SX. The Eurostoxx had a negative
slope during the year 2000 and that is why it came up with selling short
after 3 bars and buying into a long position after 4 bars. Whenever this
index breaks the negative resistance line ( from September 4, 2000 till
today) we might think of using 3,4,4,3 instead. Another good setting is
5,4,4,5 and of course this will change into 4,5,5,4 when the market breaks
out to the upside. Using my plain brain is a form of position sizing, risk
management whatever you will call it.
"or if it continues to not perform just keep optimizing until it does." Like
I wrote above the ideal settings come in around 3,4 and 5 bars of 30 minutes
each.
"good long history there, ed." I optimized the complete year 2000 because it
was a range year. During 1998 and 1999 every trend following system would
have worked. I optimized the worst possible year. The results of this are
below.
Last date; 01/01/2001
Monthly results 2000 trading with one (1) future;
Days back; 265
Jan 7,332.10
Intra-day; 30 minutes
Feb 1,861.90
First trade; 12/30/1999
Mar 7,153.30
Last trade; 12/29/2000
Apr 8,884.30
Product; Eurostoxx 50
May 4,832.00
System; break-out
Jun 2,944.80
Settings; 4,3,3,4
Jul 709,20
Total Net Profit; 29,663.63 Euros
Aug -2,739.50
Margin requirements Refco; 2500 Euros Sept
1,526.90
Slippage; 10 Euros per transaction
Oct -1,662.80
Costs; very essential but that is my deal with Refco. Nov
21.30
Gross Profit; 121,398 Euros
Dec -1,004.00
Gross
-------------------(+
Total trades; 669
Profit 29,663.63 Euros
number winning; 250
number losing; 419
MaxID; 7,286.34
Profit factor; 1.32
Account size required; 9,786.34
So my conclusions here are;
*) Of course this system generates nice profits during trends. Trend markets
were there from January till July.
*) The system starts losing beginning August.
*) The results are reached with trading one future. My own risk management
would include trading one future with a margin of 10,000 Euros in the
beginning of the year. Later I would expand this up to three futures till
July whenever 20,000 and 30,000 is reached. Then the market starts to trade
in a range in August. It's a purely subjective conclusion that I see this.
We all know a little bit of Elliott Wave, the dull summer months,
disappointing earnings etcetera. So whatever the system says; I see
declining results and dull markets and I will resize to only one future.
With this risk management my results would be higher. I calculated these
results with only one future so this would be the minimum for year 2000.
My question for the list again would be how to survive these range periods
by other things than position sizing? Would it be useful to implement some
kind of trend indicator that tells me; "OK, dear trend following system
user, it is now time to follow your trendsystem in the blind".
Mark, thanks again for responding to my email in a positive tone. Excuse me
if I do get you wrong at the end of the email. I sense a bit of sarcasm in
the end. In case this was not your intention excuse me for reacting the way
I just did.
You sure made me sharp and in that way you are a real contribution to this
list. And that's no sarcasm. I mean this.
regards,
Ed Kiers
.
----- Original Message -----
From: "Mark Brown" <markbrown@xxxxxxxxxxxxx>
To: "Ed Kiers" <rokinseq@xxxxxxxxxx>
Cc: "omega" <omega-list@xxxxxxxxxx>
Sent: Tuesday, January 23, 2001 8:50 PM
Subject: Re: daytrading & money management
Hello Ed,
Tuesday, January 23, 2001, 12:23:24 PM, you wrote:
EK> I might have sent this email twice. Excuse me for that.
EK> I will have overnight positions. I am using a simple break out system.
Trend
EK> following in nature this system gives me nice backtested results from
EK> January 2000 till July 2000.
good long history there ed.
EK> From then the 30 minute based results start to
EK> go down. Obviously a market related problem since the Eurostoxx perform
more
EK> sideways since August 2000. I am using this same system for daytrading
on a
EK> 5 minute basis.
or if it continues to not perform just keep optimizing until it does.
EK> question 1) I want to use this break out system for my 30 minute
charts
EK> together with a money management system. Does anyone on the list use a
money
EK> management system with full satisfaction? Is that a system which can be
EK> programmed for TradeStation 2000 users?
try the trailing stops those will be most enjoyable to you. try the
floor and ceiling settings also those can really help out a bunch.
EK> question 2) Concerning my daytrading. Is there anyone on the list who
wants
EK> to share ideas about a reliable daytrading system that can be used for
EK> trading futures on a 5 minute chart?
seems like you have a good system - just need to enhance it.
EK> I am running into too much sideways
EK> periods on a five minute basis. My break-out system does not seem to be
able
EK> to avoid these periods. Any suggestions or programs that give the so
badly
EK> needed satisfaction/positive results?
yea isn't it a bitch when all you focus on is those big runs- called
trends - that everyone else also wants to get on and ride. i would
suggest you stick with this trend chasing system until you have no
more money left and remember the trend is your friend.
EK> I am trading through Refco and the number of trades is not the problem.
I
EK> pay nice fees and I am behind the screen all day so I do not have
problems
EK> with labour intensive systems.
of course i would have suspected no less, you should have time to
count ticks also - and if you continue to loose money chasing false
trends you can always blame it on poor fills and slow data feeds.
EK> Thanks in advance,
EK> Ed Kiers
ps ed what was your occupation yesterday?
Mark
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