Activating/Deactivating system

[nitro]

In this thread,

http://www.elitetrader.com/vb/showthread.php?s=&postid=702121&highlight=embed#post702121

I made the following statement:

I have tested many systems for twenty years now. In that time, every time I thought I should turn off a system intraday based on either discretion or some clever analysis I had done, it invariably more often than not the wrong decision. I agree that this may be more a statement about my thinking skills than about the feasibility of being able to come up with a good answer, but I doubt it.

You can embed any question you like about any trading system in the question - Should I turn off this system now?

The markets can and will do anything at any time. The more efficient the market the less memory it has.

IMO the only thing that might work is if you think about it in terms of in/de creasing bet size, but I think that may be as hard a problem in anything but the Options market.

nitro

I realize today that is incorrect. Originally I had thought that trading was like Blackjack in that, you know when to bet small or big based on count, is the same thing on whether to enter or not.

I now realize this is false in trading. In/De creasing bet size can be completely seperate from the decision to enter or not. In fact, it is obvious that my orirginal idea is false. For example, many people step aside during the FED, and yet their system(s) may have nothing to do with "event trading".

 

[abattia]

Quote from nitro:

... In/De creasing bet size can be completely seperate from the decision to enter or not...

IMO, entry or exit is a function of the market autocorrelations you're trying to exploit, and of whatever calculations you've made to determine where entries and exits must be to give the strategy the positive expectancy you've targeted.

Bet size on the other hand, in my case at least, is a separate determination, aimed at maximizing the benefits over time of compounding while also maintaining a reasonably defensive preparedness for the inevitable bad runs.

 

[nitro]

Quote from abattia:

IMO, entry or exit is a function of the market autocorrelations you're trying to exploit, and of whatever calculations you've made to determine where entries and exits must be to give the strategy the positive expectancy you've targeted.

Bet size on the other hand, in my case at least, is a separate determination, aimed at maximizing the benefits over time of compounding while also maintaining a reasonably defensive preparedness for the inevitable bad runs.

Nice way of putting it, but why autocorrelations? What about cross correlations or even correlations?

I have come to the conclusion that bet size is dependent on at least these things:

1) Time frame you are trading
2) General liquidity of instrument(s)
3) Account size

Everyone would agree with 2 and 3, but few consider 1, and not just as it relates to 2. It is more subtle.

 

[dtrader98]

Quote from nitro:

Nice way of putting it, but why autocorrelations? What about cross correlations or even correlations?

I have come to the conclusion that bet size is dependent on at least these things:

1) Time frame you are trading
2) General liquidity of instrument(s)
3) Account size

Everyone would agree with 2 and 3, but few consider 1, and not just as it relates to 2. It is more subtle.

I would add volatility to the list (which is indirectly related to 1).

 

[kut2k2]

#1 - very misleading title for this thread.

#2 - position sizing and signal generation are completely independent (or should be). If they aren't for your system, you might want to rethink your system, especially if your system is marginal or failing.

Quote from nitro:

I have come to the conclusion that bet size is dependent on at least these things:

1) Time frame you are trading
2) General liquidity of instrument(s)
3) Account size

Everyone would agree with 2 and 3, but few consider 1, and not just as it relates to 2. It is more subtle.

#3 - for me, position sizing is purely a function of the trade returns, which may in turn be dependent on the factors you named.