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At the end it all comes down to the same thing 43 replies

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We're all saying the same thing

  • #81
  • Nov 10, 2008 12:46pm Nov 10, 2008 12:46pm
Quoting tdion
We're all posting the same ideas over and over every few months

  1. PermanentJuan: "Don't trade the cross wait for confirmation" -> my own "MA w/ Jacko AH" thread
  2. How many moving average systems do we find? Lever's "Cornflower?" "Key to the mint?" "Vegas Tunnel" "Bunnygirl cross" etc....
  3. My "Martingale EA Almost can't lose" posts -> FXTradePro's "SemiMartinglae strategy"
  4. Should I even start talking about Finonacci? "BAT by Team Aphid"
  5. Countless hedging systems that explode. Where does it end????

It's the same wheel reinvented OVER AND OVER. In other words, we are all so desperate for a REAL advantage, that we wander the same circles.

My question...

The sooner you realize that the system is only 20% of trading, the sooner you will be on the road to profitability.

For example the turtle traders were all taught the same system by someone who turned a few thousand dollars in to a few hundred million trading. It was a very very simple system. Their first set up came and only one of ten traders followed the system completely. When he interviewed they all gave him reasons for why they either didn't take the trade, buy the amount of contracts, or follow the exit strategy. This was a guy who made hundreds of millions trading that system and they didn't have enough confidence to follow it. And they weren't even trading with their own money.

During the following months some traders were very profitable and some actually lost money. All using the same system. It even got to a point where one of the traders thought Dennis had shared secrets with some of the others that were allowing them to trade well.

Look at this forum. Every time I come here the vast majority of people are in the trading system section in their search for the next new thing. They follow one system, but then it produces a few consecutive losses and its on to the next. Until that one produces a few losses and the search continues. Losses are part of this business, but people try to avoid them at all costs. When a new system pops up, within in the first couple of pages someone asks how many losing days the system creator has experienced and then next, if they have ever experienced a losing month.

Some of the best systems I have seen produce consistant small losses on a regular basis, but the winners are huge. It takes a certain personality to follow these systems. Losing regularly week in and week out and being able to ride the occasional winner for a very long time are both extremely difficult. I know I couldn't do it.

I would venture a guess that people who develop their own systems are far more likely to be profitable than the people who adopt someone elses. First, they have created a system that works with their personality and not someone elses. Second, they understand how and why the system works and they develop confidence in it.

But most people take the easy way out, and fail.
  • #82
  • Nov 10, 2008 1:04pm Nov 10, 2008 1:04pm
Quoting threei
The sooner you realize that the system is only 20% of trading, the sooner you will be on the road to profitability.

For example the turtle traders were all taught the same system by someone who turned a few thousand dollars in to a few hundred million trading. It was a very very simple system. Their first set up came and only one of ten traders followed the system completely. When he interviewed they all gave him reasons for why they either didn't take the trade, buy the amount of contracts, or follow the exit strategy. This was a guy who made hundreds of millions trading that system and they didn't have enough confidence to follow it. And they weren't even trading with their own money.

During...
Nice first post!

How did you know exactly what my problems were?
You must be psychic! LOL

For me to enter when I'm supposed to (instead of chasing
the market) and exiting when I'm supposed to (instead of
getting shaken out early) are just massive issues.

Not system or method related - ego related.

Oh, also it's not my broker, data feed, or platform. Right?
  • #83
  • Nov 10, 2008 1:33pm Nov 10, 2008 1:33pm
Quoting fxterrapin
That is incorrect. Their edges DID fail since other hedge funds started using similar arbitrage techniques. In addition, one could argue that the Asian Crisis of the late 90s and Russia defaulting on its debt were sufficient to erradicate LTCM's edge. It's all in When Genious Failed.
That is why I said "they [the strategies] still work where the inefficiencies still exist".

The main point remains: over-using or using a strategy wrongly doesn't automatically invalidate the edge; and while the fund was still profitable on their original strategies like "stat. arb.", they leveraged themselves into oblivion with the swaps and option strategies.

For an edge to work, certain conditions must be adhered to: if one changes the parameters, the system fails while the edge itself is still valid.

I agree that some "inefficiency - linked edges" simply have disappeared because of thechnological progress. I have traded futures contracts from the DTB against the same contracts on the LIFFE. Once it became EUREX, that opportunity was gone. But for one lost opportunity, several others appeared because of ECN's, more reliability in execution, more private market participants through smaller sizes offered etc.

Strategies like volatility arbitrage, algorithms, market neutral, pure alpha, long/short equity, credit default swaps, they all rely on an edge since quite some time. The amount of funds operating profitable still outperforms the relative few that blow up in dramatic fashion. Otherwise no-one would trade anymore besides the majority [in numbers] of private losers.

And more to your comment about the Asian crisis: the downside on the exposure was obviously to high - if one invests or trades a market that involves high risk without measured approach, no edge will save you anyway.

regards
daytrading
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  • #84
  • Nov 11, 2008 2:04am Nov 11, 2008 2:04am
Hi dt,

I would have said theories myself.
But on researching,i found that theories are just 'unproved' assumptions.
It looks like we were both headed down the same road.
I never much liked the word assume.It can get you in all sorts of bother.LOL


Take it easy.
Steve
  • #85
  • Nov 11, 2008 2:17am Nov 11, 2008 2:17am
Quoting skfx
Hi dt,

I would have said theories myself.
But on researching,i found that theories are just 'unproved' assumptions.
It looks like we were both headed down the same road.
I never much liked the word assume.It can get you in all sorts of bother.LOL


Take it easy.
Steve
Hi Steve,

...yes, they say that assumption is the mother of all f*ck-ups. Then again, we have to start somewhere.

regards
daytrading
Enter Signature
  • #86
  • Nov 11, 2008 2:50am Nov 11, 2008 2:50am
Quote
But on researching,i found that theories are just 'unproved' assumptions.
You do realize that's absolutely untrue, right?

Scientific method clearly distinguishes the difference between an idea, a hypothesis, a theory, and a law. At no point is any of it based on assumption. You start with understood theories (based on previous evidence) and build up from there. The whole point of the scientific method is to avoid assumptions, and require evidence in order to extend a postulate.

It's all about the evidence you have, and what counter-evidence exists. We can all say whatever the heck we want, but unless there's evidence to support the idea... it's best ignored.
  • #87
  • Nov 11, 2008 3:20am Nov 11, 2008 3:20am
Assumption

From Wikipedia, the free encyclopedia


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Look up assumption in
Wiktionary, the free dictionary.


An assumption is a proposition that is taken for granted, that is, as if it were known to be true.

Assumption may also refer to:

  1. In logic, more specifically in the context of natural deduction systems, an assumption is made in the expectation that it will be discharged in due course via a separate argument.
  2. Mathematical modelling can be used to map the outcome of different assumptions on the system being modelled.

I think we are fairly safe in using the term "assumption" in the context of this discussion.

regards
daytrading

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  • #88
  • Nov 11, 2008 4:51am Nov 11, 2008 4:51am
Quote
I think we are fairly safe in using the term "assumption" in the context of this discussion.

Of the discussion as a whole? Probably. But you should clarify the difference between unfounded and founded assumptions. A founded assumption is a postulate based on evidence or prior theory. An unfounded assumption is something you just make up.

Hence if you're talking about an edge, either pro or con, it's important to know what evidence you're basing your conclusion on, and how reliable that evidence really is.
  • #89
  • Nov 11, 2008 5:02am Nov 11, 2008 5:02am
Quoting Rabid
Of the discussion as a whole? Probably. But you should clarify the difference between unfounded and founded assumptions. A founded assumption is a postulate based on evidence or prior theory. An unfounded assumption is something you just make up.

Hence if you're talking about an edge, either pro or con, it's important to know what evidence you're basing your conclusion on, and how reliable that evidence really is.
We have been through that part during the thread.

regards
Enter Signature
  • #90
  • Nov 11, 2008 5:55am Nov 11, 2008 5:55am
Quote
You do realize that's absolutely untrue, right?

Yes,it would be completely untrue in terms of scientific method.
However,dt and i were discussing market laws.

The scientific method works best in situations where one can isolate the phenomenon of interest, by eliminating or accounting for extraneous factors, and where one can repeatedly test the system under study after making limited, controlled changes in it.
Scientific method is not applicable in this case because one cannot isolate the phenomena and cannot repeat the measurement over and over again.


'Not' related to scientific method.
definition of 'theory' taken from the Merriam-Webster Dic:
6 a: a hypothesis assumed for the sake of argument or investigation
b: an unproved assumption

definition of 'hypothesis':
1 a: an assumption or concession made for the sake of argument
2: a tentative assumption made in order to draw out and test its logical or empirical consequences

As dt mentioned
Quote
we have to start somewhere.

Cheers
Steve
  • #91
  • Nov 11, 2008 6:21am Nov 11, 2008 6:21am
Quote
We have been through that part during the thread.

Hrm, I don't see it.

Quote
However,dt and i were discussing market laws.

Yea, but you really weren't... hehe. DT brought up "how do you think laws in science start off?" then you brought up theories, etc, etc, so... it's easy to see how ppl would think you're talking about that, right? =)

Quote
Scientific method is not applicable in this case because one cannot isolate the phenomena and cannot repeat the measurement over and over again.

Whoa... Isolation of external factors is a useful part, but the basic method can be applied to anything, whether or not isolation can be achieved.

So since you have to start somewhere... how are you starting?
  • #92
  • Nov 11, 2008 6:24am Nov 11, 2008 6:24am
So, if I say, "This thread looks like its in the shitter", is that a founded or unfounded assumption?

I think it is ironic, however, that such a useless topic (in regards to trading) carries so much interest to its participants. Its ironic because as I read this dialog it just seems like We're all saying the same thing.

Of course, I could just be wrong. As they say, when you assume you make an "ass out of u and me"
Headline: USD drops due to news of USD dropping!
  • #93
  • Nov 11, 2008 6:50am Nov 11, 2008 6:50am
Quoting Gaston
So, if I say, "This thread looks like its in the shitter", is that a founded or unfounded assumption?

I think it is ironic, however, that such a useless topic (in regards to trading) carries so much interest to its participants. Its ironic because as I read this dialog it just seems like We're all saying the same thing.

Of course, I could just be wrong. As they say, when you assume you make an "ass out of u and me"

Gaston,

you're probably not far off the truth here, haha.

I usually don't post since I am extremely busy. The point I was trying to convey [in this thread] was linked to some question I can hardly remember - had something to do with an "edge" I believe. The answer for it was the following though: [and please, Rabid, don't hang me for my choice of words here]

There are ways to build a "constant" framework around reoccurring price behaviour. The only way to test for a real edge, is to have a rigid construction in terms of the testing parameters. Like in simple terms trying to test for the validity of the law of large numbers by flipping a coin X times.

By rigid, I mean the coin won't suddenly have 3 sides to it - it will stay the same. To achieve that in a more complex scenario like the daily price movements in FX for example, we have to construct rigid parameters around what is otherwise "fluid" or constantly changing.

So, in order to create such an environment [one that we are able to test],
we have to look for occurrences that happen over and over again - in our case it won't be a 100% precise or accurate [to the pip] occurrence but it doesn't need to be. If these occurrences have only one single part [in their otherwise more complex nature] in common, it is often enough for the creation of an "edge".

Thats really it from me,

regards
daytrading
Enter Signature
  • #94
  • Nov 11, 2008 7:10am Nov 11, 2008 7:10am
Quote
I think it is ironic, however, that such a useless topic (in regards to trading) carries so much interest to its participants. Its ironic because as I read this dialog it just seems like We're all saying the same thing.
For me it's interesting because it's useless. I've got my trade windows open, but w/ the market is rather quiet today because of the holiday... not expecting much movement. So hours of boredom... need hours of useless threads.

Quote
By rigid, I mean the coin won't suddenly have 3 sides to it - it will stay the same. To achieve that in a more complex scenario like the daily price movements in FX for example, we have to construct rigid parameters around what is otherwise "fluid" or constantly changing.
hehe... How would you read the results of a variable-sided die? =)

Quote
So, in order to create such an environment [one that we are able to test],
we have to look for occurrences that happen over and over again - in our case it won't be a 100% precise or accurate [to the pip] occurrence but it doesn't need to be. If these occurrences have only one single part [in their otherwise more complex nature] in common, it is often enough for the creation of an "edge".
Have you read Perry Kaufman's book? A must read if you're planning to do pattern analysis. He makes several good points, one that proves that even frequent correlation doesn't prove a pattern's existence.

As for more sustainable patterns tho, have you read Mind over Markets? Good book, the authors there make another useful point. That most patterns are not patterns of price or "market structure" but rather patterns of logic and time, that precede market structure patterns. That by the time the market creates a structural pattern (double top, bottom, pinbar, whatever), a strong part of the opportunity is gone.
  • #95
  • Nov 11, 2008 7:29am Nov 11, 2008 7:29am
Quoting Rabid
For me it's interesting because it's useless. I've got my trade windows open, but w/ the market is rather quiet today because of the holiday... not expecting much movement. So hours of boredom... need hours of useless threads.

hehe... How would you read the results of a variable-sided die? =)

Have you read Perry Kaufman's book? A must read if you're planning to do pattern analysis. He makes several good points, one that proves that even frequent correlation doesn't prove a pattern's existence.

As for more sustainable patterns tho, have you...

Hi,

No, have not read any of the books you mentioned. Although what [you] said about logic and time comes closest to how I perceive the markets - any markets. I am not hoping to find any new insights [and I don't need to] - not after over 20 years in the market. What I am exploiting was there when traders used pen and paper instead of screens, telex machines instead of ECN's. It is the simple genius of the power of observation. It is not complex but ever present, ready to be harvested at almost any time. No indicators will show it and the only sophistication which is necessary is good money management as well as the correct position sizing.

Anyway, that's my contribution.

All the best evryone.

regards
daytrading
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  • #96
  • Last Post: Nov 13, 2008 6:19am Nov 13, 2008 6:19am
Very interesting discussion. Of course we are all talking about the same thing, and I like the thoughts about observation by daytrader. If you are looking for a simple and fixed framework to trade by, it is there. The trick is then to be in the right mindset to both see it and trade with it.
The framework is there; we just have to work on our frame of mind.
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