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following on this thread on the systems
i am going to say is systematic approach
beats the crap out of discretionary trading.
no doubt about that. all successful traders
that i know and knew are either half systematic
( entries or exits or what to trade )
or fully systematic ( all of the above ).
the problem is that all of you argue and some say
system suck others say systems shine. but
the key is that you have to have a tradable system
not just any system.
the system has to be a great system for you
to trade it. if it's a no good or a marginal system
forget about it. here is an easy rule on how to
id a good system. if you can load your system
in the chart and follow ten signals in a row without
any hesitation, regret, worry or low confidence than
you system is great. if however you question the
signals, you double guess, you hesitate and you think
twice that means your system is no good...
so if you look at all systems that are available out there
there might be NONE that are that good...
all because it's very hard to design a good one...
takes years of hard work and failures, plus on top of
that you have to know everything about how the markets
work, math and know how to code it...
designing a trading system is the hardest thing that
i have ever done... it like going thru
hundreds on losses in a row and then winning the big one.
like playing lotto for years and finally nailing one...
and the interesting thing is that
there are thousands of ways to design a system
but inadvertently it all comes down to the same two or three
variables. so in a way there is only one way
to design a successful system that would work
on any time series you throw it on. one only....
not two or three because the closer you get to
the theoretical solution the narrower the path
becomes. eventually you come to the best
possible solution given the current math
and the math problem. and another funny thing
as you get closer to the proper solution it
the math gets simpler and things get clearer.
at the end of the ordeal you get to what some
describe a nirvana ( funny word ), a perfect understanding
of how the markets work and how your
system must work. because if you look
at chaos in the pits or on L2 screen or
the weird reactions to the new reports or day to
day manipulation, or fast markets. you
might think that there is no f...king way the
system can account for that. but it can!!!
only a few problems have no mathematical solutions.
nailing the price curve close to turning points is
not the hardest mathematical problem even if
the curve is non stationary. it is doable.
so a good system is like that: you throw it on
any price series, i don't care what price series,
rice futures, ibm or housing prices... any time frame.
and it should be able to squeeze all
theoretically possible points out of it. ( without
optimizations ). the signals must look good
and the system must be right most of time.
doesn't have to be perfect but has to work
within given theoretical limitations.
my not so perfect sp system pulled out about 50K from
current 30 min sp on 1 lot
with approximately 80% winners and
average winner more than loser.
this is just about as close to the best
theoretical solution as you can get.
it is very unlikely that you can beat this strategy
if you trade on your own.
the machine is much better at making proper
decisions at certain tasks
than human does. it's funny because
we build the machines but the machine is
better than us... but we built it
so that it can do it better than we can.
so there is no contradiction there. we build trading
systems so that those can help us with what
we can't do well... basically nailing the tops and bottoms
as best as we can and making as little mistakes as
possible or correcting those mistakes the best way
possible... as simple as that, conceptually.
a machine is better at this task unless you
control the market.
the interesting thing is that given the math behind
it which is complicated but not too complicated,
one could come
up with the math solution a couple hundred years
ago because then we already had the math for it.
one could take an arbitrary curve and try to
mathematically nail those price turns as best
as one could. that's all there is to it.
given the current variables that we have access to namely
price curve, volume and that's about it, there are
theoretical limitation of what a system can do given
that we only have one or two variables which are not
the ones that we would like to have in the first place.
finding the right math for it and finding those limitations
is the solution.
the ideal math solution is when we know all variables
such as supply and demand, future profit loss expectations, etc...
it does not exist and never will in financial markets.
so there is no holy
grail in a way, but there is the best grail which is closest
to the holy grail that you can find :-)
the process behind the price discovery for example is known
but some vars are missing in real time.
we simply have no and will not have
access to those even some 100 whatever years from now...
so it is pretty hard indeed to build a great system.
it is tough task for our mind that we call
the search for the holy grail of trading.
but it is possible. i'd say given the current state
of things in trading, a system can do about 60-85%
winners with ave winner larger than loser depending
on the level of noise, volatility, trendingness and
predictabilty
in a particular price curve on a particular time frame
without the need for optimization.
just has to be done right.
i hope i shed some light on this fascinating subject.
take it as pointers without the math.
regards.
----- Original Message -----
From: "Prosper" <brente@xxxxxxxxxxxx>
To: "Don Roos" <rosewood@xxxxxxxxxxxx>; "Omega List" <omega-list@xxxxxxxxxx>
Sent: Saturday, April 28, 2001 10:27 PM
Subject: Re: Trading Systems
Don,
You’ve cause me to have a change of heart. I now believe in systems and
support people using them whole heartedly. Although you were wrong
about me losing big with systems, your reproval has caused me to repent
and see the error of my logic. Thank you very much.
Prosper
>Thank you for your dogma. I will keep it under advisement in a special
file
I use frequently. The only problem is that my file frequently is found
empty, so needs repeated filling.
I suspect such a dogmatic statement has to be written by one burned
severely
by blown systems. One does not recover easily from that trauma, but
just
because I may have suffered a trauma from slipping on a banana peeling
does
not mean that all bananas are bad. However, I am sure any manner of
attempts at convincing you of the value of a systematic approach would
fall
on deaf ears, so I will not waste my time further. I did not want your
statement to go unanswered for the sake of other hopeful seekers that
may
find excellent and viable systems whether you believe that to be
possible or
not.
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