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"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...
Some good points made here. But what gets you to this point isn’t just how
much money your systems makes but also the depth of your historical testing.
You need a good system to trade confidently and a good system is defined not
just how much it makes but also by how it performs over different market
modes (up, sideways, down). How many systems have had great runs just to
give it all back and then some? I usually need no less than a year of real
time data (or at least a market with 2 obvious modes but I strive for 3) to
get confidence to do what bilo suggests defines a good system (on 60 min
bars). The shorter the time frame your system is, the smaller amount of
time you will probably need because you will get all 3 market modes in a
shorter period of time. This is one limitation of TS Pro. The 6 months of
real time data doesn’t offer enough backtesting for me to trade confidently.
For me, the amount of money the system makes isn’t the only factor, also
important is how many trades over what period of time and markets I’ve
tested against. When my system performs steadily in what I think are
different market modes then I can trade it without question because I know
that the odds are good, whatever the system loses it will most likely at
some point get it back. It’s just a matter of reliably placing the trades.
But I need sufficient and good data to get to this point.
Brian
> -----Original Message-----
> From: Bilo Selhi [mailto:citadel@xxxxxxxxxxxx]
> Sent: Saturday, April 28, 2001 9:44 PM
> To: Omega List
> Subject: Re: Trading Systems
>
>
> 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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