Combining multiple systems

[RedRat]

Quote from MAESTRO:

Here is another good illustration

http://www.cut-the-knot.org/Curriculum/Probability/Parrondo.shtml

Maestro, I never believe.
I read and understand the Parrondo paradox. But you can not apply it to the trading.

I suppose that your strategies somehow were profitable for this short period. But in the long term you can lose.

Do you run all 3 strategies simultaneously, or change them one by one with some algorithm? If there is some hidden algorithm then you possibly have algorithm to differ "trend" from "contrtrend" market and run according strategy just in time.

But I do not have such an algo , I run my strategy each day, one by one. Even when I have huge loss the day before. I only skip major events like FED meetings etc.

 

[MAESTRO]

Quote from RedRat:

Maestro, I never believe.
I read and understand the Parrondo paradox. But you can not apply it to the trading.

I suppose that your strategies somehow were profitable for this short period. But in the long term you can lose.

Do you run all 3 strategies simultaneously, or change them one by one with some algorithm? If there is some hidden algorithm then you possibly have algorithm to differ "trend" from "contrtrend" market and run according strategy just in time.

But I do not have such an algo , I run my strategy each day, one by one. Even when I have huge loss the day before. I only skip major events like FED meetings etc.

It's not that straight forward. The strategies needed to be alternating.

 

[Fractals 'R Us]

The thing about combining strategies is what is meant, how is it done. Do they share the same capital and when one takes a trade it crowds the other strategy out until the trade completes... or do they each trade some money allocated to them every time they get a signal..

 

[traderdragon2]

Quote from phattails:

If two systems are volatile enough, neither of them have to be profitable to get a profitable total system.

We need a system where we can mark users as "people who proved they have no idea what they are talking about"

Then turn on an auto-filter mechanism for people on your list

 

[vikana]

Back to the original post: In my experience the real value of running multiple system is the ability to code simpler systems. In stead of having multiple filters for all sorts of conditions, I find that I do better by having different independent systems exploit each type of entry condition.

It's then also a simple to test the combination and see how the combined equity curve and systems looks.

My semi-philosophical take on this is that it's a practical way to scatter your entries and exits while still staying deterministic.

 

[phattails]

Quote from traderdragon2:

We need a system where we can mark users as "people who proved they have no idea what they are talking about"

Then turn on an auto-filter mechanism for people on your list

If you have multiple strategies (let's say the are all losers) which have an indentifiable mean to which they revert, then it is possible to dynamically allocate money so that the overall system is profitable.

Imagine the volatility of the systems as being greater than the overall loss of the equal combination of the systems.

Is this practical? No, but that wasn't the question.

This ties into topics of the Universal Portfolio and Volatility Harvesting.

 

[TSGannGalt]

So we've got a fancy name for trading the equity curve.

Maestro, you've disappointed me...

 

[phattails]

Perhaps one day they'll be Equity Curve products to trade which will give those losing traders with some steady income. Of course the caveat is that you must have "unexplainable losses".

Guess you'd have to expirations, so when the modelled trader goes broke or quits, you can "roll over" to the next loser. lol

Anyways enough jokes, check out page 15 of this PDF:

http://rafefurst.files.wordpress.com/2008/02/icand07_derek_v4.pdf

 

[psytrade]

Parrondo's Paradox perfectly explains an offshore money laundering syndicate.

Portfolio A loses Continuously, While Portfolio B Gains =

Money comes out the other side clean, and mildly profitable.

Doubtful that it works in the real world, but who knows

 

[TSGannGalt]

"The paradox is inspired by the mechanical properties of ratchets, the familiar saw-tooth tools used in automobile jacks and in self-winding watches. However, there is less to this paradox than meets the eye. It hinges on an incorrect probabilistic analysis - dependent random variables are treated as independent, and the paradox resolves itself as soon as the dependence is accounted for. For this reason, the initial burst of interest in the paradox rapidly faded."
- from Wikipedia.

C'mon guys...

Give it some more thought... You had to realize this is BS, when you Googled around about it. Even Wikipedia, gives the answer to all this BS...

All systematic traders are supposed to be skeptics... Or do people in here actual trade systems? Or... trade multiple systems??? I thought the psycho-babble forum is funny but this thread is sadly funny. I've been reminded, again, that most people in ET are brainless followers who can't think on their own...

*sigh*

Maestro.... you've disappointed me!!!