3 thoughts about behavior

Quote from TradeWrecker:
...Compliance takes longer than you think (and it's worse now)... And God forbid the markets move, your phone lites up like it's Christmas and everyone wants their hands held and their feet rubbed, while you're trying to manage the volatility...

I think one of the take-aways from this was the $3000 account and the decisions I made to use that amount. Nobody typically would publish that size portfolio ... but my thinking was different.

My personal bias on this is; if you're going to trade for a living, whether it's your money or OPM - frugality is a really good trait to have. It helps you survive the business. Live well below your means if possible, pay cash, stay out of debt etc. If you're going to be a smart trader you need to be smart with your own finances first and foremost. [/B]
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LeeD - Great question

TradeWrecker - Great story, Great Thinking, Great Advice :)
 
Quote from outsource:

How is it possible if the capacity is 600k per turn, per price bar?

Different people use different types of displays. It may be that your charts are not showing much capacity In ET most people who post do not include the chart that is important to them.

Serious trading usually has as an pbjective: "taking the market's offer" This comes in segments and each segment has two ends: beginning and ending

And how do you measure ATR in regard to volume here?

Volume is a leading indicator of price. The PACE of a market is dictated by the volume.

Posting the nature of display bars is usually connected to the two above volume indicators. MAK posted both the volatility and the overlap of diplay bars so that it could be understood how the market behaves. Deciles of about a month's display bars were used. The ranges have names: Extraordinary, High, Medium, Low, DU and VDU. Four decile pairs and two extreme single deciles.

In all this you get to see how a reference system is always in place. These lookup type tables are kept current by the normal means: delete>>>> add.

ATR is a formula. It is made compatible with other data.

During RTH money changes hands; pool extraction is a manner of consideration. Pool extraction ties the market's offer to the"taking" of the offer.

Don`t know what or who A/Lo btw

There really are no demands made up0on anyone to participate in ET. I happen to be a person who is able to "read" others simply by virtue of my experience. The financial industry has, by its nature, people who are indicative of what is going on. There is a lot of humor associated with the "goings on".

A way of keeping track of the "goings on" is to read papers and to keep track of the federal government and how it is "doing its thing". Andrew W. Lo is one of the contemporary characters. People believe and act upon what he says.

One of the realities of the financial industry is just how money is made and who makes it. Behavioral Finance is an interesting aspect of this. It is precisely clear how people deal when they are doing financial things in markets.

You saw the OP comment in 3 areas of the BF actual themes. You saw how leaving out a lot of BF stuff skews how to repair personal and individual problems.

Lo gets NSF grants to do what he wants. No one at NSF could think up what he chooses to spent time and money upon. He is a misbehavor in terms of behavioral science. And his stuff gets published in polaces like the Journal of Finance.

Some people get to enjoy the humor others do not.

Give a read to his 34 page statement to the Committee on Oversight and Government Reform (13NOV2008)


tnx
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jack ,i ve got an irish friend from mayo.the may have the toughest irish brogue to understand,his own from different counties ridicule his accent, he ,when i first met him, left it on the barely understandable while he was sizing me up,now he speaks the worst brogue to strangers, and dumbs it down so i can undersatnd,could you do the same without all the abbreviated 3 letter explanations, been reading your stuff for 3 years and still only understand about 20%,fck all they naysayers, they will never vanish ,so who cares what they think,please dumb it down

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Quote from jack hershey:


May 6th was a demo of resonsible parties not meeting their regularitory obligations when they faced not knowing what was going on. On that fractal the market followed the "short" pattern part by part precisely. You can see it printed in a leading financial magazine including the timing of BF's "events". I probably should put up a screen shot to make the point more sensually. [/B]
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just for the record, i heard from an inside source,(trader)that the flash crash started out from a large firm that is automated, in the hft of many arenas, had a meltdown(programming glitch) on an asian desk, and shit down there system,there worry over there programming setup, caused an artificial black swan


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thanks to pointone for posting the BW/Bloomberg illustration of 06MAY10.

There you see the 2B....R2R...2B...2R.....B2B

As you say this is Irish to a person who speaks your language.

So dumbing it down is called for in order to reach across to anyone who follows the CW of the financial industry.

there are five shorthand symbols above.

The B's and R's stand for Black (up or long direction) and stand for red( short or down direction). >>>>> this is to and I write it as 2.

06May10 was going along and the end of the third move of a long trend occurred. This is 2B in the lingo of trend monitoring and analysis.

A person trading with the market and on the correct side of the market was just looking to go short on a reversal out of the end of the long trend.

A lot of time was available to collect the long segment's profits and get ready to ride the short trend. Some people just do the whole trend and other do each 0of the three segments.

So an SCT trader would have carved from long to short doing partial fills at the market block sizes. I am usually not too conscious of what partial fills will happen BUT I do not place a market order bigger than the blocks going through. Timing is the deal for me and it is based on the three part patterns of P and V.

R2R is the first short move. See two parts on the BW illustration. R is from the end of the prior trend to the RTL of that long trend. Volume is Peak to Trough during this portion of the move. Overlap of trends ands. this is "2" time. R then ensues on increasing volume to a peak volume.. This is the second point of the three point parallelogram for the short trend.

You see the black move to the point 3 of the parallelogram.

As I said some traders take the red profit segment and the black profit segment. Others just "ride" through the black brief non dominant move and hold until the short third move ends.

The thrid red move comes after the black non domiinant decreasing volume move. At the volume trough the black ends and the red begins with a dominant final move of the trend.

It ends in the pits and the three move short trend is over.

All traders reverse here.

So overlap black begins to take price long and across the RTL as the short ended trend. This is B2B.

PEP paradigm users and SCT traders do recognize the BW article's illustration and they get to chuckle at the narration.

In these times, the financial industry folk are going to put their needs ahead of their regulatory obligations and the regulators are going to not be enforcers.

the government is explaining to us all that they will make changes.

Here, however, is the bottom line.

The government cannot get rational imput form the financial industry. The industry is not too functioinal any more.

As you see we got Dodd - Frank. Then we got a clock running 280somthing today as I speak. Gensler is chugging away like the little engine going up the hill. He is saying... " I think I can .....I think I can..... He can't and won't and will not.

We are in a depression and those who are retiring are not going to get what they expected and the businesses and the banks are not interrelating to keep people emplyed. Government cannot the the income to meet its expenses and borrowing is not going to be a quality based activity any more.

Some traders are immune to all of this. they know how markets work and can "anticipate the order of events that always unfolds.

Here BF is being used to explain the foibles of ordinary traders. Ordinary traders are screwed at this point.

So in Vegas I worked through how to get to the end of the year since I need an Appendix for one of my up coming books.

I will do in exact science, five cycles of skill and knowledge development.

Cycle 1: Two trades a day with 2 contracts. Both Dominant 2 point trades. 12 days of this. This is entry/exit with most time spent annotating and logging.

Cycle 2: Three trades a day with 10 contracts. Dominant, non dominant, dominant 3 point trades. 12 days of this This is entry/exit with most time spent annotating and logging. Occasional reversal.

Cycle 3: Four trades a day with 20 contracts. Dominant, non dominant, dominant, dominant 3 point trades. 12 days of this This is mostly reversal trading with some entry/exit. More time spent annotating and logging than in the market.

Cycle 3: Four trades a day with 30 contracts. Dominant, non dominant, dominant, dominant 3 point trades. 12 days of this
This is mostly reversal trading with some entry/exit. More time spent annotating and logging than in the market.

Cycle 3: Four trades a day with 40 contracts. Dominant, non dominant, dominant, dominant 3 point trades. 12 days of this
This is mostly reversal trading with some entry/exit. More time spent annotating and logging than in the market.

This might be a process that can take an entry/exit trader into some reversal trading. For 60 days, the time will be mostly spent on annotating and loggging.

Stepping beyond four trades a day will be done in cycles 6, 7, 8, and 9. No more than 50 contracts will be traded to keep it easy going and a partial fills ripple type reversal. At this time the targeting of 3 points will be off the table since there will be a shift in fractals occasionally as the cycles are stepped through.

A while back, I made an attempt at getting a systemic approach in place. I got hing up on using color printing be a possibility. dumbing it down was done at that time but it is very very difficult for something as complicated as a repeating pattern to even get in the picture. There is zero chance that posted records will be understood.

I agree with you that there is a language barrier in ET. I orient to plans, strategy, and a routine. BF points out the the foibles of potential traders preclude catching onto any critical thinking oriented efforts.

Look at the BW illustration and article. Look at the testimony I mentioned. Grab a tape of Gensler discussing with the press and the financial industry what he is "going to be doing".
 
And have different skills with different studies. I got no skills in using ATR.I think using high ATR reading is similar to using VIX and high beta tradeable in order to achive multiple ATR of the exist offer.

Still can`t get how to trade 20-30K or more per turn with partial fills as you suggest. Please, expand on the topic 'How to trade high volume without getting fried'.tnx:)

"Give a read to his 34 page statement to the Committee on Oversight and Government Reform (13NOV2008)"

I`ll chek.
 
Quote from jack hershey:

In these times, the financial industry folk are going to put their needs ahead of their regulatory obligations and the regulators are going to not be enforcers.

the government is explaining to us all that they will make changes.

Here, however, is the bottom line.

The government cannot get rational imput form the financial industry. The industry is not too functioinal any more.

As you see we got Dodd - Frank. Then we got a clock running 280somthing today as I speak. Gensler is chugging away like the little engine going up the hill. He is saying... " I think I can .....I think I can..... He can't and won't and will not.

We are in a depression and those who are retiring are not going to get what they expected and the businesses and the banks are not interrelating to keep people emplyed. Government cannot the the income to meet its expenses and borrowing is not going to be a quality based activity any more.
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Jack - You're scaring the CW (conventional wisdom) out of folks with these remarks. A quick look at Dodd-Frank gives the same feeling of panic as the original thinking behind TARP. TARP's original intent - as best as I can remember - was the creation of auction markets to keep the toxic OTC instruments in circulation until they died a natural death. It was a Hail Mary pass that was effectively a non-starter because banks could not sell at a price investors wanted to pay. There seems to be a lot in Dodd-Frank that is about dismantling and orderly liquidation. The folks who made the big (really bad) bets deserve to loose, but in the end the rest of us go down the toilet with them if the financial system can't wait out this mess. It's easy to see (20/20 hindsight) how the repeal of Glass Steagull really cast the die. The rest is a story of pure conflict of interest. Conflict of interest as a story is older than dirt.

Roosevelt said it best:
"So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance."

What remains to be seen is whether our dysfunctional political system is capable of the unified efforts necessary to keep the economy afloat. I've always liked Abby Jessy Cohen's "Supertanker America" point of view on the US economy. But in my years of sailing the high seas, what I learned working on supertankers is that "Bigger Ships have Bigger Problems". Your comments above are the primary reason I didn't stay retired. :( The last thing the US needs right now is a trade war with China; The idea that politicians can pass laws which will positively adjust FX rates rather than just provoke trade wars is a measure of how ignorant and out of touch Washington is from understanding how the world works. If China wants to adjust FX all they need to do is dump all the treasuries they are holding. Perhaps Ben will be the buyer of last resort for the Chinese.

I guess I'm a bit off topic here, but anyone who doesn't have some kind of perspective is likely to be really blindsided if things don't go well. There are reasons the Fed is doing QA, that bonds are way overbought, and gold is making new highs. Scary stuff. BF(Behaviorial Finance); COI (Conflict of Interest); GT (Game Theory) - Its almost beginning to feel like some smart folks figured out how to game the system at the expense of everyone not on the inside.
 
Quote from outsource:

And have different skills with different studies. I got no skills in using ATR.I think using high ATR reading is similar to using VIX and high beta tradeable in order to achive multiple ATR of the exist offer.

Still can`t get how to trade 20-30K or more per turn with partial fills as you suggest. Please, expand on the topic 'How to trade high volume without getting fried'.tnx:)

"Give a read to his 34 page statement to the Committee on Oversight and Government Reform (13NOV2008)"

I`ll chek.
More...

Please set up a tab for the 5 upcoming cycles (Excel sheets). There are several columns mentioned. Add in a couple of columns that relate to your learning about how partial fills work. You colud put in three columns at least: smallest, largest and average.

As a warmup you could fill in a full set of columns with the completed trades for the 60 days. this will prepare you for how to anticipate fills on market turns.

Read some of the speculation on what caused the flash crash. some of the cometary deals with the period of time available to get short doing the turn from long to short that began the flash crash.

In the introduction to his comments to Waxman et al, A. Lo suggests: "Before we can hope to......"

Here is a guy invited to testify. So he starts out saying "my guys know nothing.....BUT we suggest you don't do anything rash....."

Extracting capital out of huge pools is an exact science. And from my point of view, none of this extraction will ever be regulated.

I had many run ins with the SEC. They were like A. Lo is today in skills and knowledge. The SEC issues citations to people they think are doing illegal things, i. e. , people who are not following the regulations or cheating the public. My episodes with the SEC centered on thier getting their computers to a functional state. The SEC was trying to find out what was going on. As expected they were looking at multiple traded accounts (in my case 15 POA's) in large brokerages.

What is it like for the SEC to watch crossover trading on 15 bundled accounts? I was using a Universe and the trades were planned in advance. Naturally, I bought at a time when the volume signal announced the trade. since volume leads price and the SEC is what it is; they probably were not watching volume but only watching price. That meant they were "seeing" an insider trader at work over and over. I was buying and selling before price made its respective moves. I must be a "bad" guy.

At some point the SEC probably did learn to monitor accounts in some ways. Not many, apparently. It still may be the case that guys like A. Lo say what they say and Congress passes legislation that, in turn, is turned into regulations like we have today and which are going to change next 15JUL11.

Will doing hold /reversal trading change? No probably not since BF indicates trader foibles have no relationship to regulations.

What is it that smart traders exploit as indicated by BF?

Smart traders are parasitic to the "herd". They anticipate the "herd".

For me, I monitor smart traders and front run smart traders.

Logging these things fills in rows on a log. By looking row to row, the order of events can be seen to be playing out.

It would be like looking at the Excel spread sheets you are going to provide for the five cycles. Imagine 30 ET'ers using the spread sheets to do trades for the 60 days. Everyone is learning and doing the trades as the days go by.

We used to do that on raging bull long before ET was in existance.

A look ahead to Tuesday when the first cycle will begin.

Cycle 1 begins with two trades a day, both dominant. Dominace also has a characterisitc called sentiment. Each characteristic is measured using the respective change in the variable with which they are accociated.

Ammo wants me to talk without a brogue.

Dominant means increasing volume over time. More volume as time passes. In gaussian language it is climbing a mountain. At the top increasing volume ends so that is the exit. Market timing is done by volume. When a dominant begins, volume is at a trough. So to enter on dominance a person waits for a trough to end and then increasing volume bgins the climb up the mountain.

cycle 1 will be two trades a day. Just two dominant trades.

Sentiment of the dominant move is determined by relative price. A long sentiment is where price is going up A short sentiment is where price is going down.

To do two trades a day, they could be long or short or both could be the same direction. Who cares, because the trades are independent of each other.

Cycle 1 begins with 2 pt holds and graduates to 3 point holds. 3 points is used thereafter for cycles 2, 3, 4, and 5.

There are three challenges for cycle 1:

1. wait for a volume trough, then after end of trough enter.

2. Enter according to the sentiment as measured by incresing price for long or decreasing price for short.

3. Exit to the sidelines whne the PRV of the bare is less than the prior bar. PRV is greek to most of you. It is Pro Rata Volume. PRV tells you what the volume will be at the END of the bar. This means at the beginning of a bar you can "know that you know" the ending volume of the bar. This means you can compare the volume of PRV to the last bar's total volume. By knowing this you know that you know what price will be doing in the bar.

There are nine things a bar can do during its formation. You want to exit when you get to the part of the bar that is BEST. CW doesnot have names for the parts of the bar. Ir is all Greek to CW people.

Very neatly, this brings us back to BF and the A, B, C and D of BF.

A is over and under reacting. steps 1, 2, and 3 help prevent that. The early exit will be there fpr a while but we will take care of that soon.

B is continuation and reversals. We can't deal with that right away; ewe have to consider the stigma that CW has for entry/exit trading.


C is making reasonable change in approach upon emotional signals. The emotion of PRV is not too tough to deal with. It takes two bars so the market will progress beyond the target as volume is watched. this makes it nice emotionally. Holding for three bars can happen as well. that is a big step for some people. Emotions will come the longer the hold. So exit and make reasonable changes to this approach. There are none to make but at least you will find that out by trying to make changes AFTER you made a profit.

D irrationalities you have as baggage. Write these in your journal. Also figure out why you believe in these irrationalities.

As you annotate and log these trades also note the irrational annotating and logging. The two most common are: not annotating and not logging. A reasonable change in technique is to draw lines and to write on a sheet of paper that has columns. Make up the vocabulary as you go along and put the vocabulary on 3x5 cards that you can paste on 8 1/2 x 11 sheets when you have more in your brain.
 
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