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<DIV><FONT size=2>I think one of the critical decisions a trader makes, and one
of the true distinctions between trading styles is systematic vs.
discretionary.<FONT size=2> When I say systematic trading, I mean
mechanical trading, X closes under Z with A, B, C in line, I sell with a stop at
Y EVERY time.</FONT></FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>I will make the argument for systematic trading and invite
someone to do the same for discretionary.</FONT><FONT size=2> This is my
opinion derived from what I consider to be a fairly solid argument. People
have made money with all types of trading, so I do not begin to suppose that
what I believe is the only or even necessarily the best way to profit. I
do believe that my points are valid and do provide the path of least resistance
to successful trading. I will also (and I encourage anyone arguing for
discretionary to as well) constrain my points to sys. vs. disc. only, not
subsets of each class. I will try to stay as objective as
possible.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>The major advantage that systematic trading offers
is that</FONT> <FONT size=2>it removes as much human emotion as possible
from the trading decision. Human nature wires us to be losers in the markets.
Problems at home, traffic, surroundings etc. all affect our emotional
disposition, which in turn usually affects our market perceptions. It is rare to
be able to make clear, consistent, rational trading decisions under the
circumstances of life. It is very difficult to keep your 'mood', good or bad,
out of your thinking process. With a system the traders reactions to the
market environment are determined outside of market hours allowing for the
maximum amount of reflection and for the best judgment of the trader.
This has not even begun to consider how much affect our recent trading results
can have on our decision making process. Win a lot, feel good, overly
aggressive. OR Win a lot, afraid of losing it, overly
conservative. Lose a lot, want it back, double down...etc.
</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Second major advantage is that of consistency. Most
strategies work sometimes and don't work sometimes. One needs consistent
application of a theory over a large set in order to catch the good and the
bad. A system trader by definition will make the same decisions to the
same relevant information time after time, year after year. He/she allows
creativity to come out during research and testing, but reacts the actual
trading process like a robot. The model of consistency. The burden
of consistency on a discretionary trader is enormous. When one
is discussing a trading career that may last into the decades, one can see
how hard it is to use the same thought process again and again. Weigh the
same factors again and again. Another note is the incredible pressure
placed on the trader and the wear it might have over a lifetime,
particularly if decisions are being made 'on the fly'. You have had a
solid year as a discretioary trader. Can you be sure that you can repeat
that performance again and again and again? There is much less day to day
pressure on the systematic trader.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>A third advantage is in testing theories and delineating
between problems with the method or mistakes by the trader. Discretionary
trading can not be back tested, and it is very difficult to judge the underlying
theory, since the individual trader plays such a large roll. The only way
to judge a discretionary method is by real time trading and even then one can
not place the cause of losses. For example let's say I am trading
discretionary method X, and I am not making money. Am I going through a normal
down period? Am I bringing too much emotion and inconsistency into my decisions?
Are my problems or triumphs at home influencing my trading? Or, does method X
not give me a market edge? How do you tell? Am I looking at the wrong
fundamental factors/market patterns, or am I nervous about my impending wedding,
or does the entire idea just not work? Systematic trading avoids these
paradoxes. Systems can be back tested and future performance, therefore,
estimated. Emotions are removed, and broken rules alert the trader to their
re-appearance. Discipline and consistency are much easier to have and to track
when one trades a system. If losses occur, one can say, "Have the rules
been followed?" If they have, you know the problem lies within the
method. If not, the problem lies with the trader.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Last, discretionary trading attracts many weaknesses of our
psyche. With discretionary trading we might be able to sell the high, buy
the low, or be 'right'. Market prediction becomes foremost. We can
become too tied to each individual trade or decision rather than seeing them in
their proper context as one of a very large
set. Discretionary trading's siren song is the possibility of
all winners or to be all knowing or to have figured out some market order to the
nth degree. While these things may or may not be possible, they are NOT
necessary in order to make large trading profits.</FONT></DIV>
<DIV> </DIV>
<DIV> </DIV>
<DIV><FONT size=2>Scot Billington</FONT></DIV></BODY></HTML>
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<BLOCKQUOTE>
<DIV align=left class=OutlookMessageHeader dir=ltr><FONT face=Tahoma
size=2>-----Original Message-----<BR><B>From:</B> listmanager@xxxxxxxxxxxxxxx
[mailto:listmanager@xxxxxxxxxxxxxxx]<B>On Behalf Of </B>G.John
Boggio<BR><B>Sent:</B> Sunday, January 23, 2000 6:50 PM<BR><B>To:</B>
realtraders@xxxxxxxxxxxxxxx<BR><B>Subject:</B> [RT] ADMIN Advertising Policy
1/23/00<BR><BR></DIV></FONT><FONT size=3>Realtraders, <BR><BR> As many
of you know, we have had a little bit of a problem in the recent past
regarding a member(s) who were blatantly advertising a product through the
RealTrader's Email Forum. We apologize to all our members who have had to read
such posts and the subsequent follow-up messages. Therefore, in an attempt to
avoid such situations in the future, please read the below messages regarding
advertising.<BR><BR> Please note, these policies were first written
nearly 3 years ago (with only a slight change in verbiage) but still apply
today.<BR><BR>Thank you, <BR>John Boggio - RT Moderator<BR>PS The below
message is broken up into two parts.
<BR>+++++++++++++++++++++++++++++++++++++++++++++++++++++++++ <BR>Part
I<BR>RealTraders:<BR><BR> If you sell a trading related product of some
kind and are a participant in these discussions on RealTraders, please refrain
from using this forum as a way to sell your product without first reading our
Advertising Guideline To Vendors (see below). A violation of our
advertising policy could result in a termination your membership in this
Forum.<BR><BR> Now we don't want to create an atmosphere of paranoia with
respect to subtle differences when it comes to the method of posting such
messages to the Forum. But we can't help but notice the number of
complaints we have received from RealTrading members. This is incredibly
unfair to the other vendors/members on this list who follow both the letter
and spirit of our policy and we commend those vendors for their restraint.
<BR><BR><BR> Anyway, if you're a member who wants this discussion to
stay clean of advertising, then please support our efforts by letting us know
about blatant attempts to bypass our advertising policies. Further, to those
vendors who we continually receive complaints about, you will be notified of
such and this will act as a warning to you. If we continue to receive
subsequent complaints, we will be forced to remove you from our
Forum.<BR><BR>PART II - Guidelines to the
Vendors<BR><BR>RealTraders,<BR><BR> In an attempt to accommodate all
members (and vendors) in this Forum, we have created<BR>guidelines to
assist RealTraders who are <B>genuinely</B> trying to educate the
members of this <BR>Forum about a methodology, system, or software program
that is for sale or has the potential to be <BR>sold. The reason
for this is that we don't want to snuff out information that RealTrading
members may find useful, just because there is a commercial product associated
with it. <BR><BR> Therefore, here is our policy about commercialism in
RealTraders: <BR>1) <B><U>No one is allowed to post blatant commercial
messages on RealTraders. <BR>There is, nor will there be any change to this
rule, in the future.</B></U> <BR><BR>2) <B>Very Important</B>: Since
RealTraders is about traders educating and learning from each other, the ban
on commercial messages should not impinge upon the flow of information that is
potentially educational. Therefore, you can post messages of an <B>educational
nature</B>, whether or not you have a product <BR>associated with it, <U>as
long as you maintain the intent of educating people and/or communicating
useful information</U>. However, please read point #3 directly below as to the
<B>only acceptable method</B> of making reference to your product or
service.<BR><BR>3. <B><U>YOUR METHOD OF INFORMING OTHER REALTRADERS ABOUT YOUR
PRODUCT OR SERVICE IS THROUGH THE ADDRESS OF YOUR HOMEPAGE (URL LINK).
</B></U>THIS URL SHOULD SIMPLY BE PLACED BELOW YOUR SIGNATURE AND NO REFERENCE
SHOULD BE MADE TO IT OR YOUR PRODUCT OR SERVICE. WE HAVE AN INTELLIGENT GROUP
OF TRADERS IN THIS FORUM, AND THEY ARE SMART ENOUGH TO GO TO THE URL IF THEY
WANT FURTHER INFORMATION. <BR><BR> If you wish to post messages on
RealTraders which refer to a product or service that you have available for
sale, but you're not sure whether you're falling within the guidelines, here
are some tips to follow before hitting the send button: <BR><BR>1) Always try
to post signals from your system on RealTraders, IN ADVANCE OF THE EXPECTED
MOVE, or give a current market analysis of your projection. That is
information that many members will find useful and interesting. But remember,
you must remain educational with respect to your forecast/analysis.<BR><BR>2)
You must describe your methodology. How does it work? How can other people
apply it right now? Keeping in mind that you are trying to educate us.
Suggestion, consider writing up an explanation of your methodology or "How to
use and interpret it" and include it at the bottom of your post.<BR><BR>3)
<B>Important</B>: If your product is a ‘BLACK BOX’ type, whose methodology you
don't want to reveal, then DON'T bother talking about it on RealTraders. Doing
so will constitute a blatant advertisement.<BR><BR>4) Be factual and
quantitative in describing your methodology. Don't use a lot of adjectives or
hyperbole which are telltale signs of commercial posts.<BR> <BR>5) Be
coldly objective and point out both the pros and cons. If you tell us only
what's good about your methodology, then you sound like you're trying to sell
us something. Tell us the drawbacks and what we have to be careful about as
well. (You will get more respect from everybody if you do this
anyway).<BR> <BR>6) Past performance statistics are the fuel that propels
most system advertising; much of it is B.S. Therefore, you aren't doing us a
big favor by featuring it in your post. You will impress us, however, if you
<BR>post real time signals! <BR><BR>7) Rule of thumb: The amount of practical
and useful information, or lack thereof, in your post is inversely
proportional to the probability that your message will be viewed as being
commercial in nature. <BR><BR> <B><U>NOTE</B></U>: Members who
reply to vendors have an important role to play as well. If individuals become
curious and seek more information regarding a product, please begin/continue
your discussions with that individual using THE PRIVATE EMAIL CHANNELS. Thus
keeping any "sales" communication off of <BR>RealTraders. <BR><BR> <B>So
essentially what does all this mean</B>. If you are a vendor, you are
going to have to be willing to share, educate and instruct your fellow members
on RealTraders with respect to your methodology and forecasts. This
includes being open about what indicator or oscillators you are using and how
one would interpret them. This might not sound fair but then again this
Forum is privately owned and you are essentially getting free publicity, but
at a price of being more open then you have ever been regarding your system or
service. And then, all you get to do is list your URL link below your
name. In return, you get to educate your fellow traders in hopes that they
will some day buy or join your service. <B>No teasers of any sort will be
allowed</B>. <B>Be willing to share or don't bother trying to sell your
product in this Forum!<BR><BR></B> Finally, since there is a constant
addition to the members list of RealTraders, we will be reposting this message
on a regular basis. <BR><BR>Thank you, <BR>John Boggio <BR>Hyrum
Paulsen<BR><BR>Special thanks to JW, Eddie Kwong and Ed Kasanjian for their
contribution to this <BR>policy change.
<BR><BR><BR></FONT><BR></BLOCKQUOTE></BODY></HTML>
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Date: Mon, 24 Jan 2000 08:48:55 +0100
From: Gwenael Gautier <ggautier@xxxxxxxxxxx>
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Subject: [RT] Re: inflation/implication on bonds
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Status:
Just a plain stupid question: everybody here seems to dread inflation like
hell. Is there anything bad to it? I mean why would a 4% inflation be
bearish...? It has been there before, and it didn't prevent markets from
rising. BTW, in Ben's numbers, I am sorry, but really I am not impressed by
any inflation except for oil. But then who cares about oil in our economies.
In Europe Oil is 4 times more expensive than in the US, DOes it make a
difference? NO.
What is dangerous for markets, is lack of confidence. If people are scared
of losing their wealth, they'll pull liquidity, but if not, they'll keep
adding, with or without moderate inflation.
IMHO
Gwenn
swp wrote:
> Ben -
>
> 1) It is Poser, not Posner.
>
> 2) I am a technical analyst who happens to have a degree in economics.
>
> With that out of the way, I can give you lots of on the one hand and on
> the other hand.
>
> First of all, before I get into all of my equivocating, be aware that I
> do believe that inflation is likely to pick up. I would not be at all
> surprised to see US CPI inflation reach 3.5% (core could only reach 3.0%
> or so). Currently total is at 2.7% and core is around 1.9%. I doubt that
> we can get as high as 4.0% total and 3.5% core. Given that the long bond
> is at a real rate of 4.0%, which is relatively high historically, I
> suspect that we could see a pinch sooner or later.
>
> As far as the CRB goes, it does not have a sterling record as far as I
> can tell predicting inflation. Studies have been done on it, and that is
> what it has shown. Much of the CRB itself focuses on the non-core food
> and energy sectors. The remainder is manufacturing based commodities.
> The US is no longer a commodity based or manufacturing based economy. If
> I remember correctly, US GDP is more than 60% services. Of course,
> services by heat and electric and that is affected by energy inputs.
> But, did your electric bill go down when oil fell? I do not think that
> regulators will allow utilities to raise rates, and competition will
> keep electric prices better in check. Heating oil and nat. gas are a
> different story, but at least a correction, and a deep one, is due from
> $30-$32 per barrel in oil.
>
> Going quickly back to the CRB, there is a possible wave count that says
> the bottom from last year was not the final bottom. It is not my
> preferred count, but we only last week retraced even 38% of that fall.
> The CRB is barely above where it was when the Russian debt crisis began
> and caused a deflationary scare.
>
> Of course, much of the inflation in the USA is wealth effect related.
> But, if the stock market crumbles at some point this year, that will be
> largely ameliorated. If it happens quickly enough, the psyche of the
> consumer will not become inflation oriented and prices will stabilize. I
> do not think we need a crash in equities for that, just a nice 30% or so
> drop over a year or so to remind people that it is not a one way bet
> (and enough to clobber some of the nasty equity borrowing habits going
> on out there).
>
> Note that it is not just the Fed. Yes, the US economy is stronger than
> just about anywhere else, but rates are near nil in Japan and extremely
> low in Europe (except the UK). We shifted from deflation scare to
> inflation pretty quickly. But, much of what caused the disinflation of
> the 1990s still exists:
>
> Productivity gains, which are probably still under reported.
>
> Competition from emerging markets.
>
> Free trade.
>
> The internet.
>
> Overall, I am concerned and do expect that inflation has higher to go. I
> do not believe that commodity prices are a fair measure. Also, look at
> producer prices. You will see lots of time with deflation (falling
> prices), but consumer prices did not fall. So, you have a situation of
> lower raw materials and better productivity, but stable to slightly
> higher prices. That means margins increased. Companies will likely be
> able to hold prices steady a while longer before margins are
> significantly pressured.
>
> So, yes, inflation has bottomed for now. Yes, inflation is likely to
> increase. Yes, the Fed has messed up. It never should have cut in
> November 1998 and should have started raising rates sooner. But, no we
> are not likely to get an inflation spiral, and a crash is possible in
> equities, but unless you consider 30% a crash, my opinion is that it is
> not super likely.
>
> Steve
>
> ---
> Steven W. Poser, President
> Poser Global Market Strategies Inc.
>
> url: http://www.poserglobal.com
> email: swp@xxxxxxxxxxxxxxx
>
> Tel: 201-995-0845
> Fax: 201-995-0846
> ----- Original Message -----
> From: <Proffittak@xxxxxxx>
> To: OnWingsOfEagles@xxxxxxxxxxxxx <realtraders@xxxxxxxxxxxxxxx>
> Sent: Saturday, January 22, 2000 2:56 PM
> Subject: [RT] inflation/implication on bonds
>
> > Hello
> >
> > This is now the 9Th week in which inflation is showing in full
> force
> >
> > Where?
> >
> > here are the Prof
> >
> > Baron's page MW 15 this weekend
> >
> > year ago last week today
> > crb 190.50 208.01 211.51
> >
> > industrial 183.90 202.19 205.21
> >
> > grains/oils 172.7 169.78 171.69
> >
> > livestock 208.90 248.19 249.94
> >
> > energy 132.5 233.39 243.45
> >
> > precious metals234.7 243.88 250.15
> >
> >
> > Steve posner and all other economist feedback welcome
> >
> > have a great weekend
> > Ben
> >
> >
> >
> >
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