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I Had No Idea I Took So Much For Granted

  • #21
  • Apr 12, 2006 5:53pm Apr 12, 2006 5:53pm
So you say the main issue is recursion. and the dependence of dependent variables. The problem from your perspective is the bifurcation of the original discretionary rule... Have I got it? thanks SMJ


Quoting JaxPacific
I think I get what you're asking, but after much trial and error I don't think it's possible without a more complex neural network or something that can think through and compare different sets of information in realtime and I'll try to explain my experiences. Tell me if this sounds familiar when you started to try and come up with a few discretionary rules:
So the short answer I think would be no. Discretion isn't something that is simple and is therefore hard to narrow down. The most common problem you will run into is that a discretionary filter will most often override a larger rule that your system is dependent on, and therefore you would need a dicretionary rule to govern the discretionary rule and the complication becomes obvious and never ending. You will also miss some "normal" trades that were filtered out from a discretionary, rule and catch others because of the same rule. So you'll either loose some trades because of a non-discretionary loose rules system but still be profitable, or use a discretionary filter and depending on how many normal trades it ends up filtering out, might not end up being profitable. So just because it's hard to do, and I have not been successful at doing it yet, does not mean it is not possible. And yes I will continue my persuit. BUT if you're looking for some friendly advise here it is: If you have more than three discretionary rules in addition to your original system..stop! because you'll end up with ten more later and have wasted a lot of time Also, don't get too excited about a set of rules until they work on more than one pair, you'll find often times they won't which is frustrating after you've put in the time. Only form your discretionary rules around constants. EXAMPLE: when basing a rule off of price action it doesn't make sense to say that 10 pips before "X" happens is a filter. The strength of 10 pips on one pair's volatility could be 25 pips on another. However, basing something off of a fraction of that pair's daily range for instance, would be a constant for that particular pair.

I know this probably sounds like ramblings from a forex kook (newbie in surf lingo) but I tried to keep things vague while trying to address the problem I think you're trying to get at.

If you want to discuss specifics get ahold of me.

Jax-
  • #22
  • Apr 12, 2006 5:57pm Apr 12, 2006 5:57pm
Well now, between Merlin and your text that deals with the concept of descreasion. The first part of my question, is it a valuable tool to try to write down both the mechanical and discretionary rules we use and also try to keep them updated on a regular basis? Or is it even necessary, because our rules are evolving as we continue our trading career?


SMJ
  • #23
  • Apr 12, 2006 6:06pm Apr 12, 2006 6:06pm
I would say yes and for that exact reason. But it ends up looking a lot like a journal. I've gone through three notebooks doing this. Sad I know but I'm dedicated. What happens is: you have your basic system and a few discretionary rules. You'll keep finding better and better rules (or just better ways of explaining them) until after a while some work so well they become a part of the mechanical system. Is this helping at all??
  • #24
  • Apr 12, 2006 6:20pm Apr 12, 2006 6:20pm
Well there you go again, I had not considered the idea that a discretionary rule could become a mechanical rule, simply by applying it consistently. But then if you think about it, that is the definition of a mechanical rule. That you do the same thing every time to a given circumstance.

SMJ


Quoting JaxPacific
I would say yes and for that exact reason. But it ends up looking a lot like a journal. I've gone through three notebooks doing this. Sad I know but I'm dedicated. What happens is: you have your basic system and a few discretionary rules. You'll keep finding better and better rules (or just better ways of explaining them) until after a while some work so well they become a part of the mechanical system. Is this helping at all??
  • #25
  • Apr 12, 2006 10:13pm Apr 12, 2006 10:13pm
SMJ,

For my own trading I went through the same process and found it very beneficial to write down all my rules. There are two great advantages. Firstly, it is easier to be disciplined because it removes ambiguity from trading. Even when your trading rules are somewhat subjective it still helps to have a framework from which to work and to which you refer when potentiaal trades arise. The second benefit is psychological. In the markets we have freedom to trade whenever, and however. By constantly defering to your "rules" you feel less of the uncertainty and obtain a structure for your trading that (for me in anycase) makes them seem less intimidating and makes your thinking more productive and less reactive.
  • #26
  • Apr 12, 2006 11:59pm Apr 12, 2006 11:59pm
Yes, I always trade accordin to my rules,

I have changed many systems (not because of large drawdowns, but converting my trading to long-term), but I was never trading breaking my rules (I was doing it on mini account which I blew up ). You should be confident to your system, if in 5 trades in a row your stop was hit and then market went to your direction may be you will become discouraged to use stop, but this is not correct decision. may be you are not placing stop correctly or market in enormously performing, just relax and be patient find another opportunities
Or use my belief why I trade exotic pairs
Because as 95% are losers and 99% of traders trade majors, if I am not a crazy that's why i trade exotic pairs
kiss the trend
  • #27
  • Edited 1:40am Apr 13, 2006 1:33am | Edited 1:40am
Automation isn't the panacea everyone makes it out to be. It no doubt has a place for certain strategies and individuals, but it is not universal. If you are doing something and it is working, be very careful about changing the way you look at the process.


Rules are important for money management, which should never be compromised, but that doesn't always extend to trade execution. I genuinely believe that trading is more of an art then a mechanical science and over time one only gets better at it. With enough experience and discipline, a discretionary trader can trade circles around any mechanical system because the markets ARE a collection of individuals and they are inefficient creatures at best.



I think the original intent of your post was less about defining how you trade then defining why you take the trades you do. This is absolutely worth your time to analyze and attempt to quantify. Not only would you be able to share it, but you would also be able to improve the methodology in the process.
  • #28
  • Apr 13, 2006 4:52am Apr 13, 2006 4:52am
Please excuse my poor english.

I would like to answer to your question because it definitely deals with something I had to ponder by myself. Just to put things in perspective, while I consider myself actually kind of a newbie, what is really a new experence to me is taking money from the markets with some consistency, as I've been trading for about five years (with a completely chaotic somewhat gambling mindset), jumping from a mechanical trading system to someone's advice to pure emotional (lyzard) action back and forth, and spending as if I was Gordon Gecko money taken from my trading capital. I have some programming skills but what I definitely have been underestimating for a long time is the role of emotions in my own decision making process.

Some time ago, about two years and a half, I was about to quit having lost a big part of my starting capital without even knowing how or why, I found a resource which had a great impact on my attitude towards this activity. It's a book, offered for free on the web which covers in detail the construction of a mechanical trading system. Reading that was for me pure enlightenment. Although I knew something about the subject, yet it gave me the right spin, it meant something. My capital was much smaller than before but meantime I had encountered the forex market and demo trading. I passed all my summer holiday into that, enthusiasically programming a system and backtesting, and another kind of system, I tried many paths, my wife was getting angry.


So I stuck to a very simple EURUSD breakout system for some time demo first and then live, with very little room for discretion (I wouldn't trade during asian session, if that's discretion btw) and acceptable (and coherent) results, and while at that, my curiosity led me to the shores of chart reading and discretional trading.


To get to the point, I guess that the one factor that allowed me to adopt discretionary strategies (which now constitute the core of my trading and perform much better than my own mechanical ones), was the discipline of writing down a set of rules and defining them as strictly as I could, annotating my charts with as much detail as possible and reviewing one thing against the other constantly.


I just want to emphasize that I recognize this as a key point for me, having taken the wrongest path at the beginning, cause this simple behaviour allowed me to see the amount of information I had acquired during the painful times while at the same time being a shield against useless doubts and second guessing.

Quoting darkstar
I genuinely believe that trading is more of an art ...

Quoting J.Ross|M.Douglas...dunno
The medium for your artistic endeavour is your mental environment.

... I see value in these words, and, as many other useful quotes, I'll stick them to the inner walls of my mind if I don't offend anyone .


My 1/16c

Happy Trading

QG
  • #29
  • Apr 13, 2006 5:31pm Apr 13, 2006 5:31pm
This time I decided to go public, smjones. Thanks for your answer, though.

I did much more psychology in my life than trading, although I am sure they are very much related. Why I am saying it? Because, in many self-discovery techniques it is highly recommended to write the stuff down. When you are putting anything on the paper, very often, if not always, you are reframing and reorganizing your own thought processes. I did it with many other areas in my life, and the results are amazing. It is not the place to discuss how much you can benefit from, for example, rewriting the story of your life, or just an attempt to write down your ultimate wish, that I did, too. The overall rule is: in the process of putting into the structured form anything, you are making the major discoveries, first of all for yourself.

To put it shortly, you will discover many things about yourself and will definitely enrich whatever you do, if you will try to look at it through the attempt to share with others. Although, it may take much longer than you thought it would.

And, as I said before, I am really-really waiting for your post. Even in unfinished form.

Thanks.
  • #30
  • Edited 8:27pm Apr 13, 2006 8:16pm | Edited 8:27pm
Hello smjones



first, I would like to say. I am a mechanical automated systems trader, because that's the way I trade it's what I'm better at and it is what I enjoy

So what really matters is, what kind of trader, are you.

Your original question of writing down your rules is an absolute for me. But I have friends that are trading on instinct. Some may say this is suicidal. But I envy them. They're doing it consistently and profitably.

But making an automated trading system is not the reason you came up with this question. It is because you want to teach others. I found in my experience teaching others has many rewards, one of which is, it forces you to write down your rules and begin examining why those rules exist.

I have met many people that teach let it be mathematics, engineering science trading, whatever the case may be, they all agree the experience of teaching has made them better at what they teach.

You have to ask yourself why is teaching a particular subject make you better at that subject???

Could it be that you're defining your thought patterns
or Investigating why you're making certain decisions?

Digging deeper than you ordinarily would so that you can answer questions.

Good luck to you, I look forward to your next post.

And who knows if your explanations good enough. We just might coded up
A truly wise man, always has more questions than answers.
  • #31
  • Apr 13, 2006 8:23pm Apr 13, 2006 8:23pm
Claude, Thanks for your reponse. I am not sure I would be that good at teaching. I suppose you are right in a braod sense though, because what brought me to these questions was my desire to share information with people who have asked for it. Then relizing I did not have a quantative way of doing so. I am working to that aim. It is a work in progress.

SMJ


Quoting Claude
Hello smjones



first, I would like to say. I am a mechanical automated systems trader, because that's the way I trade it's what I'm better at and it is what I enjoy

So what really matters is, what kind of trader, are you.

Your original question of writing down your rules is an absolute for me. But I have friends that are trading on instinct. Some may say this is suicidal. But I envy them. They're doing it consistently and profitably.

But making an automated trading system is not the reason you came up with this question. It is because you want to teach others. I found in my experience teaching others has many rewards, one of which is, it forces you to write down your rules and begin examining why those rules exist.

I have never met anyone that teaches let it be mathematics, engineering science trading, whatever the case may be, who hasn't said the experience of teaching has not made them better at what they teach.

You have to ask yourself why is teaching a particular subject make you better at that subject???

Could it be that you're defining your thought patterns
or Investigating why you're making certain decisions?

Digging deeper than you ordinarily would so that you can answer questions.

Good luck to you, I look forward to your next post.

And who knows if your explanations good enough. We just might coded up
  • #32
  • Apr 13, 2006 8:26pm Apr 13, 2006 8:26pm
Claude, on side note, off topic in this thread and I am unwilling to change threads... To my knowledge from what I have read in my new version of AmiBroker. Auto trading is not fully integrated yet... I will read further.


SMJ
  • #33
  • Edited 8:50pm Apr 13, 2006 8:33pm | Edited 8:50pm
Quote
Rules are important for money management, which should never be compromised, but that doesn't always extend to trade execution. I genuinely believe that trading is more of an art then a mechanical science and over time one only gets better at it. With enough experience and discipline, a discretionary trader can trade circles around any mechanical system because the markets ARE a collection of individuals and they are inefficient creatures at best.


I think I agree with Darkstar here. You might have many rules that you follow before entering a trade. You might not enter enter a trade before your first cup of coffee in the morning, or you might not enter a trade at 3 pm friday afternoon. You might follow your rules for several different systems that you may be trading, but they might not affect the way you trade that system.

I think reevaluating your rules as well as your systems on a continual basis is a good idea. I might decide I need two cups of coffee before looking at the charts in the morning.

I think the original question was about the rules for ones methods of trading, money managment, and style. I think that these might be broken down into seperate catagories, and you might decide to write down the "rules" for each seperately, because, for instance your rules for your frame of mind before entering a trade might chage over time, but your mechanical reasons for entering the trade might not, or vice versa.

JMHO.
Jimmy
  • #34
  • Apr 13, 2006 8:48pm Apr 13, 2006 8:48pm
Ok I need to interject something right here. Maybe someone should start a thread in the apporpriate category that can list all of the known abbreviations

I am an old fart and am not up on the nomenclature. What does JMHO, IMO, IHMO mean? I just learnd what LOL means... LOL

CISL (clueless in Salt Lake)
SMJ

Jimmy,

Oh And I really like your cup of coffee analagy

You have made very good points about categorizing the process.
  • #35
  • Apr 13, 2006 9:01pm Apr 13, 2006 9:01pm
Quoting smjones
Ok I need to interject something right here. Maybe someone should start a thread in the apporpriate category that can list all of the known abbreviations

I am an old fart and am not up on the nomenclature. What does JMHO, IMO, IHMO mean? I just learnd what LOL means... LOL

CISL (clueless in Salt Lake)
SMJ

Jimmy,

Oh And I really like your cup of coffee analagy

You have made very good points about categorizing the process.
Hi SMJ,

May interject also a little?
Here's my translation of them (I still had to do some searching on others )
JMHO = Just My Humble Opinion
IMO = In My Opinion
IMHO (not IHMO) = In My Humble Opinion

Others:
ROFL = Rolling On (the) Floor Laughing

For more, check this out:
http://en.wiktionary.org/wiki/Catego...laughter_slang

SDRAGER,
East
  • #36
  • Apr 13, 2006 9:03pm Apr 13, 2006 9:03pm
Quoting smjones
Ok I need to interject something right here. Maybe someone should start a thread in the apporpriate category that can list all of the known abbreviations

I am an old fart and am not up on the nomenclature. What does JMHO, IMO, IHMO mean? I just learnd what LOL means... LOL

CISL (clueless in Salt Lake)
SMJ

Jimmy,

Oh And I really like your cup of coffee analagy

You have made very good points about categorizing the process.
SMJ,

I have to LOL myself . I meant "just my humble opinion" by JMHO. IMO is "in my opinion, and IHMO, I think you might mean IMHO is "in my humble opinion".

Man, a lot of alphapet soup to learn when doing the internet thing, huh?

Looking forward to more in this thread, thanks for starting it, very interesting stuff. Just goes to show how many different viewpoints to the same concept there can be.

Jimmy
  • #37
  • Apr 13, 2006 9:09pm Apr 13, 2006 9:09pm
Beat me to it East!

But thanks, great link too. Man, your faaaaaaaasssssst.

My meager defense is that is I'm on dial up right now, plus I'm using a loaner laptop and have to hit the backspace button every other letter to correct my spellliong, the sun got in my eyes, and the grass tickled my feet.

Seriously though thanks,
Jimmy
  • #38
  • Apr 13, 2006 9:32pm Apr 13, 2006 9:32pm
Quoting dangerman
Beat me to it East!

But thanks, great link too. Man, your faaaaaaaasssssst.

My meager defense is that is I'm on dial up right now, plus I'm using a loaner laptop and have to hit the backspace button every other letter to correct my spellliong, the sun got in my eyes, and the grass tickled my feet.

Seriously though thanks,
Jimmy
LOL.. Well, that was a close call. I posted ahead only by 2 minutes..

Oh, great excuses BTW.. but I think the main cause was the chicken crossing the street, the black cat also crossing the same street..

Glad the link helped.

SDRAGER,
East
  • #39
  • Apr 13, 2006 9:33pm Apr 13, 2006 9:33pm
Mourning, morning, East,

Thanks I bookmarked the damned link and put it next to Encarta so I can find it.
SMJ
  • #40
  • Apr 13, 2006 9:36pm Apr 13, 2006 9:36pm
Sure guys.. No prob.. Now where were we? This is a great thread and I don't want to be the cause of it getting into a whirpool.. Back to work (me)!
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