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  • #1,381
  • Oct 9, 2017 8:35pm Oct 9, 2017 8:35pm
Quoting CrucialPoint
{quote} There will be no Mayweather without his dad and uncle to train him. There will be no Steve Job without Steve Wozniak There will be no Michael Jordan without Phil Jackson Despite having a success-mindset, you won't reach your potential without the people (or the environment) that can leverage your potential. If Randomness and chaos didn't provide you with the right environment, your success-mindset will dry up against the wind. You will be a totally different person if you didn't meet me.
Yes, it's true that I will be a totally different person if I didn't read your posts.
I like my person now rather than the one before. So thank you.
May the luck be with you.
  • #1,382
  • Oct 9, 2017 8:36pm Oct 9, 2017 8:36pm
Success requires innate skill, talent, hard work and right mindset. But it's not the be all and end all.

Success requires luck. Luck plays a larger role for success than many will want to believe, much more than this former listed above.

It's hard to believe that success is to a degree out of our control, chance do play a huge role.

If success has not come to you then it's just too bad blame your bad luck.

Don't rest on your laurels though, get up keep challenging, keep trying.

You might get lucky the next time.

Quoting medici
{quote} Very good comment ST. I don't know Copernicus at all, and can't speak for or about him, but generally speaking an over-analytical and/or over-intellectualised trading approach is the telltale sign of a fearful trader. I know so because I've been there myself, and I've seen others in the same situation. The way out of the dilemma is to manage the fear instead of trying to control the market through analysis ad absurdum. The risk and unpredictability, as well as the limitations of analysis, need to be fully accepted, and the fear managed,...
I agree to a degree. Fear and greed constantly affects the trader from day1 in all aspect of our trading.

In most cases, it's about bad analysis and under-intellectualised trading approach.

Quoting strongtrader
{quote} Well, this time I do not agree with you. I would say that there are a few people that have been grown with the mindset oriented to success; for this reason they are lucky; the majority are not so lucky and have to build their mindset to success, but the good news is that it is possible to re-educate your mind. It is not easy at all but the important thing is that is is possible: I am one of those unlucky that made it. It is a matter of working on yourself enhancement; every normal person can do whatever would like to do. "Simplicity is even...
Simplicity requires you to peel off the layers of complexity. A task much harder than the complexity you conceive.
  • #1,383
  • Oct 9, 2017 9:11pm Oct 9, 2017 9:11pm
Quoting extraw
{quote} Do you still have the link to that cartoon? Please share it. I'm really want to watch it. Thank you.
Here you go. Cartoon as in graphic cartoon.

Attached Image


If you prefer simplicity....then go right. If you prefer complexity then go left.

One of those Yin-Yang jokes that has a flip at the end to confuse us all. It's all in the eye of the beholder :-)

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  • #1,384
  • Oct 9, 2017 9:59pm Oct 9, 2017 9:59pm
On the topic of luck
Attached Image (click to enlarge)
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IMPROVISE ADAPT OVERCOME
  • #1,385
  • Oct 9, 2017 11:14pm Oct 9, 2017 11:14pm
Quoting RondaRousey
{quote} I have not used mean reversion strategies since 2010 and I am still in the game. With over 7000 live trades. I believe your trading style is a diversified trend trading. There are a couple of questions about your diversification. On one hand, you have a lot of correlated markets that you trade and, on the other hand, it is not diversified enough. The problem with trend trading is that if the payoff drops say 20-30% you will lose money. I would not accept a declining PF as it means the trading strategy has vulnerabilities. This can get worst...
All good points RR and very valid for traditional trend following. I think I have specifically responded to those issues in the design....but as they say, time will tell...but I will extend the range of my backtesting as far as I can muster as one thing is certain, you can never be sure...and yes there still are weaknesses in the design which is a current work in progress :-)
  • #1,386
  • Oct 9, 2017 11:18pm Oct 9, 2017 11:18pm
Quoting metta87
{quote} oh ok so you have the open and the moving average as reference point, but how/when do you enter and exit ? and does it have anything to do with "95% of the time price will close above or below the open" ?
Good question. I think the safest entries would be above open and MA or below open and MA. However, the exit is another question ... Maybe we could use another (shorter period) MA?!
  • #1,387
  • Oct 10, 2017 12:10am Oct 10, 2017 12:10am
Quoting RondaRousey
{quote} I have not used mean reversion strategies since 2010 and I am still in the game. With over 7000 live trades. I believe your trading style is a diversified trend trading. There are a couple of questions about your diversification. On one hand, you have a lot of correlated markets that you trade and, on the other hand, it is not diversified enough. The problem with trend trading is that if the payoff drops say 20-30% you will lose money. I would not accept a declining PF as it means the trading strategy has vulnerabilities. This can...
regarding what you mentioned in bold... correct me if I am wrong, it's because you trade news/events (like me when I trade manually) and there is no such mean reversion during volatile events that are tradable. You have no choice but to follow price or else you will lose your shirt and wallet within minutes if you try and catch spikes.
Staying in my lane...
  • #1,388
  • Edited 12:41am Oct 10, 2017 12:26am | Edited 12:41am
Quoting Copernicus
{quote} Nice mate. If it works for your strategy then simple is best. I am a anal inquisitor that needs to look at problems from multiple angles. :-)
Perhaps this needs a further dialogue but in no way I am being a critique here. You are way too advanced in your journey than I am. At the foundational level,

if there is no edge found in Money Management i.e. MM alone cannot improve positive expectancy of a trading strategy and if this is true (Hanover has a nice writeup on this topic), then to me, it does not make sense to include any elements of MM/RM/PositionSizing/StopLoss@%Risk of Equity TP management/ trade mgmt/etc into our backtesting methodology.
I guess in your case, you are backtesting a strategy to evaluate equity curve towards diversified portfolio so it may be justified but does it apply towards gauging a strength of a setup i.e. edge generated by a signal ? Each signal (i.e. trade setup) has its own characteristics that need to be uniquely and universally assessed and for this reason pipcurve (all stats based in pips) makes it ideal. This is the primary reason why I do not understand or rely or believe in optimization techniques used in strategy tester. They skew the outcome. Backtesting imo needs to be bare bones focusing on signal strength and nothing else. After a signal (or series of signals) over a wide spectrum of timelines is proven to show some merit, only then these signals ought to be converted into tradable strategies. Am I understanding this shit correctly or do I have this all wrong :-(
Staying in my lane...
  • #1,389
  • Oct 10, 2017 12:34am Oct 10, 2017 12:34am
Quoting VEEFX
At the foundational level, if there is no edge found in Money Management i.e. MM alone cannot improve positive expectancy of a trading strategy and if this is true (Hanover has a nice writeup on this topic), then to me, it does not make sense to include any elements of MM/RM/PositionMgmt/StopLoss Mgmt/TP management/ trade mgmt/etc into our backtesting methodology.
Just a quick note: when I refer to "MM", I mean position size; NOT exits or trade management. I consider both entries and exits to be part of the trading strategy; both can affect expectancy. Whereas MM is how much of your account you want to place at risk on a given trade; position size is merely a multiplier that increases/decreases both return and risk in like proportion. Detailed explanation here.
  • #1,390
  • Oct 10, 2017 12:36am Oct 10, 2017 12:36am
Quoting CrucialPoint
{quote} The psychological aspect of trading is a very big part of the trading and should not be overlooked (some would argue against). Of course, in search and to create a system is hard enough, but the psychological mountain is as big as the technical aspect of trading. I might just have a couple more post and will be forever gone.
Before you are forever gone, perhaps you could put an end to the misery of a whole lot of seekers out here still puzzled with your cryptic posts. Perhaps you can share your entire trading plan (and block those aspects that expose your "secret" edge)

Of all your posts that I could read, I don't think you have covered EXITS. How do you exit your trades?
Staying in my lane...
  • #1,391
  • Oct 10, 2017 12:43am Oct 10, 2017 12:43am
Quoting hanover
{quote} Just a quick note: when I refer to "MM", I mean position size; NOT exits or trade management. I consider both entries and exits to be part of the trading strategy; both can affect expectancy. Whereas MM is how much of your account you want to place at risk on a given trade; position size is merely a multiplier that increases/decreases both return and risk in like proportion. Detailed explanation here.
Thanks David. I have edited my post. I am aligned with your understanding as well. I also find a fundamental flaw with %Risk of equity based position sizing. It should be used only on strategies that trade one position at a time but that's a completely different topic to delve in. Would you agree with my backtesting approach?

EDIT: Just to add from the link to your post... "You can take a given trading system (entries and exits), and then apply any desired MM to it, without interfering with the system rules." ... 100% agree and because of this, my signals take a very simplistic approach. Exists are always at candle close (just to gauge signal strength). Stop loss is always universally set xx times yy range. the combination of two determines PnL in pips resulting in pipcurve and all other related stats in pips
Staying in my lane...
  • #1,392
  • Oct 10, 2017 12:49am Oct 10, 2017 12:49am
Quoting RondaRousey
{quote} Show how you would trade a parabolic market with a mean reversion strategy: https://www.forexfactory.com/attachm...1&d=1504125889
You just CANNOT ! It's like riding a horse facing backwards holding his tail and falling flat on your nose and getting kicked in your nuts LMAO
Staying in my lane...
  • #1,393
  • Oct 10, 2017 12:52am Oct 10, 2017 12:52am
Quoting VEEFX
{quote} Perhaps this needs a further dialogue but in no way I am being a critique here. You are way too advanced in your journey than I am. At the foundational level, if there is no edge found in Money Management i.e. MM alone cannot improve positive expectancy of a trading strategy and if this is true (Hanover has a nice writeup on this topic), then to me, it does not make sense to include any elements of MM/RM/PositionSizing/StopLoss@%Risk of Equity TP management/ trade mgmt/etc into our backtesting methodology. I guess in your case, you are backtesting...
If you don't include exits of either SL,TP and trade management as part of your strategy in your backtest, then it's incomplete.

Quoting RondaRousey
{quote} Show how you would trade a parabolic, run away market with a mean reversion strategy: https://www.forexfactory.com/attachm...1&d=1504125889
Exactly. The risk profile of reversion toward the mean is completely different from diversion from the mean.
  • #1,394
  • Oct 10, 2017 1:00am Oct 10, 2017 1:00am
Quoting skyway
{quote} If you don't include exits of either SL,TP and trade management as part of your strategy in your backtest, then it's incomplete. {quote} Exactly. The risk profile of reversion towards the mean is completely different from diversion from the mean.
I guess I am not backtesting a 'strategy' then. I don't use TP but do evaluate the outcome of whether SL is hit or not in my trade outcome feeding my win/loss stats.
Staying in my lane...
  • #1,395
  • Oct 10, 2017 1:06am Oct 10, 2017 1:06am
Quoting RondaRousey
{quote} Show how you would trade a parabolic, run away market with a mean reversion strategy: https://www.forexfactory.com/attachm...1&d=1504125889 And it can crash at any time.
Copernicus and nealpek posted earlier their individual ways to exploit spikes like this.
  • #1,396
  • Oct 10, 2017 1:10am Oct 10, 2017 1:10am
Quoting skyway
{quote} Copernicus and nealpek posted earlier their individual ways to exploit spikes like this.
Calculus knows more about trading spikes on short timeframes than anyone I know. The shoutouts on his profile are worth the read. If you ask me, it's a recipe for ulcer up your butt trading this style every freaking day.
Staying in my lane...
  • #1,397
  • Edited 4:00am Oct 10, 2017 1:30am | Edited 4:00am
Quoting VEEFX
{quote} Thanks David. I have edited my post. I am aligned with your understanding as well. I also find a fundamental flaw with %Risk of equity based position sizing. It should be used only on strategies that trade one position at a time but that's a completely different topic to delve in. Would you agree with my backtesting approach? EDIT: Just to add from the link to your post... "You can take a given trading system (entries and exits), and then apply any desired MM to it, without interfering with the system rules." ... 100% agree and because of...
Hi V

You might be making some fatal flaws in your assumptions mate regarding the use of fixed fractional position sizing using volatility measures. While we have very understandable laws of the universe, in the markets few such laws exist even the good ol' Law of Supply and Demand. Unfortunately we need to be very careful about the assumptions we adopt for different types of strategies.....especially portfolio management. The use of volatility adjusted fixed fractional position sizing may not be as sexy as other position sizing techniques but is a standard adopted in industry given the capacity to weight the portfolio under volatility....but we won't get into that yet.

Making things very simple mate you need to view an equity curve arising from a single instrument or consolidated group of instruments as just that....a single equity curve or more specifically a return stream that has it's own characteristic risk-reward profile. It possesses a unique risk-reward signature over the time series that the return stream has been generated from. It has a characteristic volatility of return, a maximum drawdown and a resulting end point return which is calculated as Compound Annual Growth rate (CAGR).

As you dig into a portfolio return stream and see how it is comprised, you actually find it is a blend of a composite of return streams from it's individual elements that produce a return stream. Each with their own unique signature. These elements may be a return series from a choice of instrument, a return series from a choice of timeframe or a return series from a choice of system or combinations thereof.

Now once this has clicked.....this is where the magic of the blend occurs to produce higher risk-weighted returns.

If you blend a return stream with another return stream that offsets the volatility of returns and the max drawdown of the other return stream you will find that the effect of amplification and dampening applying to the blended result (the composite return stream) has a higher relative risk-weighted return than the sum of its parts. Now note that what you are doing is reducing risk....not amplifying profits....but the net result is that you are altering the R:R relationship.

For example we might blend two uncorrelated return streams with the following characteristics:
1. Return stream A has a sharpe of 0.3, max draw of 30% and CAGR of 10% - a suitable risk weighted measure to use is the MAR ratio = (10/30) = 0.333
2. Return stream B has a share of 0.5, max draw of 20% and CAGR of 12% - A MAR ratio of (12/20) = 0.60

Now if these are not perfectly correlated return streams the blend may have a MAR ratio of 1.1 with a CAGR of 11% and a max draw of 10% and a sharpe of 0.8.

Can you see how we have now achieved a better risk weighted return. The blend is 3.3x more powerful in relation to Return Stream A and 1.8 x more powerful than return stream B in terms of risk-weighted returns using the MAR ratio as the measure. It's Equity Curve (signature) is now a more linear line and less of a volatile return series than the individual return streams that comprised it.

Now apply a standard position size of say 1 lot to return stream A, 1 lot to return stream B and summate the result as if you were trading them seperately by two different traders, Then compare this against 2 lots applied to s 50:50 blend for a single trader. Can you now see how you have just earned your free lunch?

We have reduced our risk profile to increase capital efficiency in this process. The efficiency is attributed to constructive and destructive interference of the return streams. This is where you need to go back to the physics class and look at wave tanks to understand this effect.

While I may apply a fixed fractional position size in my testing to each return stream for blending and weighting purposes, we can now throw away the concept of applying a small stake of our capital towards a portfolio and because of the lower risk return relationship apply a greater capital allocation towards this portfolio as the risk of the return stream has been significantly reduced and we can afford to be more aggressive in allocating capital towards it.

For example with my commencing blends before amplification I might have a CAGR of 3% and a max draw of 1.5%. Now that I am happy with this R:R relationship I can multiply it through position sizing to my desired risk profile which might be a max draw of 20%. I can therefore apply *almost* a 13.3x multiplier through position size magnification to achieve this outcome deriving a 40% CAGR in the process. This is where we start skyrocketing compared to say single strategy competition that have to play it safe to fund a potential higher drawdown and avoid a margin call. If they try and ramp up their risk-return relationship they will reach risk of ruin in no time at all.

I will stop there as this is just demonstrating the principle of what is achieved through structured diversification....but hopefully I have been clear enough to enable you to see the wood for the trees.

All I will say is that if you diversify you can use principles of diversification to amplify your risk -weighted returns and get far better use of your finite capital and also use very simple underlying strategies with bugger all alpha to achieve this....those strategies that most retailers would throw into the bin as it doesn't achieve their financial objectives.

Your emphasis is therefore placed not on strategy selection per say but on principles of diversification to achieve your *desired* as opposed to *hoped for* returns. You structure your desired outcome with this technique.

...I have gas bagged on a bit too much mate and need to focus efforts elsewhere so hope I have at least helped a bit. :-)

PS Just backtracking a bit....while Hanover's statement was totally right as he almost always is for a retail trader with a single return stream, position sizing is the way you amplify your risk weighted returns under a portfolio. Its a bad thing for introducing more risk for a single return stream but a good thing when you can control risk through a portfolio. Note the word CONTROL. Different horses....different courses.......the bottom line is test every statement you hear until you are convinced it applies to your system.
  • #1,398
  • Oct 10, 2017 6:24am Oct 10, 2017 6:24am
Quoting RondaRousey
{quote} Show how you would trade a parabolic, run away market with a mean reversion strategy: https://www.forexfactory.com/attachm...1&d=1504125889 And it can crash at any time.
Which symbols are used to unleash such beasts?
NZD has to be the one.
Do you have any indicator which can can identify such beasts in the past?
thank you.
Practice makes a person perfect
  • #1,399
  • Oct 10, 2017 7:44am Oct 10, 2017 7:44am
People, in my experience, you can't trade a parabolic runaway train. The key is to board the train before the event, not trying to join after the fact. If you miss it, don't worry about it. 99% of the time it gives you a second chance, so why sweat it!!
  • #1,400
  • Oct 10, 2017 8:18am Oct 10, 2017 8:18am
Quoting nealpek
One of the reasons I'm still biased to the upside for now! Unfortunately, can't help with mean reversion strategies as they play no part in what I view on the charts. {image}
Me too - fundis look good too
In detegere possumus omnes mortui sunt
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