Going public with a system ruins it?
- Thread starter Martini
- Start date
Have you tried backtesting your system? Check the results on that or papertrade it for a minimum of 3-6 months before putting your investment capital at work. Also the win/loss ratio is a bit on the low side but if you average winner is higher than the average loser that's a positive. Do you have any stop loss mechanism in your system? Every system (trader) needs to have stops.
Getting back to the orgin of this thread, publicizing a trading system does not wreck the system! That is complete BS. How can it? This assumes that people trading a system will have exactly the same entries, targets, feelings/anxiety, emotions, greed, fear etc. Also there are probably as many systems being traded today as traders! So the market if anything would stay more on the chaotic/random side of things and a system that has an edge should continue....I never heard of any of the turtles say there system was destroyed by publicizing it. Think about this, if you have a simple system that only trades YHOO...how many traders, with how many systems will trade that stock in one day?
Getting back to the orgin of this thread, publicizing a trading system does not wreck the system! That is complete BS. How can it? This assumes that people trading a system will have exactly the same entries, targets, feelings/anxiety, emotions, greed, fear etc. Also there are probably as many systems being traded today as traders! So the market if anything would stay more on the chaotic/random side of things and a system that has an edge should continue....I never heard of any of the turtles say there system was destroyed by publicizing it. Think about this, if you have a simple system that only trades YHOO...how many traders, with how many systems will trade that stock in one day?
For reasons I cannot explain, I cannot back test it because the data is only available each day. Well, at least I cannot find the data for days gone by other than the ones I tested.
I will be testing tomorrow. I have documented all the information so that if I plan to modify or refine it, I can.
Is anyone a probability or statistics buff?
I have taken one course on it, and I remember one part of it that said taking data samples of more than 1200 will not lead to a better depiction of the population. This would be something relating to taking a survey of 1200 people and saying that the entire population of the USA is such and such. And, the Confidence Level will be somewhere in the 95% area.
It's been a while since I took the class, maybe I need to dust off the book and go back and see about this area.
I am curious why you mentioned 3-6 months of testing. Any reason to that? or just a ball park figure of how long you would need data to attain a 95% confidence level?
Am I trying to analyze this too scientifically?
comments.
I will be testing tomorrow. I have documented all the information so that if I plan to modify or refine it, I can.
Is anyone a probability or statistics buff?
I have taken one course on it, and I remember one part of it that said taking data samples of more than 1200 will not lead to a better depiction of the population. This would be something relating to taking a survey of 1200 people and saying that the entire population of the USA is such and such. And, the Confidence Level will be somewhere in the 95% area.
It's been a while since I took the class, maybe I need to dust off the book and go back and see about this area.
I am curious why you mentioned 3-6 months of testing. Any reason to that? or just a ball park figure of how long you would need data to attain a 95% confidence level?
Am I trying to analyze this too scientifically?
comments.
No it isn't. No one on this thread has disagreed that the B-S model by itself is just a tool, rather than a system. Rather, the recent discussion was about whether B-S represented something new in the markets - in contradiction to Random Capital's claim that there is nothing new under the sun. Clearly B-S was something new, a financial innovation, when it was first unearthed. Therefore Random Capital, cable and others, are wrong, and myself and nitro are right. There are innovations in the financial markets, and they bring great profits to the people who first use them. And, once publicised, the edge gets competed away. Anyone who has traded such an edge, and seen it degrade as competitors start to implement it, will be well aware of this fact. Those that deny that such a thing could occur are simply revealing their ignorance of how a large section of the financial markets operate.
imo, to say there are no secrets in this industry would be questionable.
I wonder how many of the hedge funds operators, particularly those consistently outperform others, would like to share their secrets or knowhow publicly, even they are merely part of the system(s) they trade daily.
I wonder how many of the hedge funds operators, particularly those consistently outperform others, would like to share their secrets or knowhow publicly, even they are merely part of the system(s) they trade daily.
I think the validity of that statement depends on the timeframe and the liquidity of the market that the system applies to.
For the longer timeframe (ie months) systems, you would in fact want more people to know about your system, since the advantage from timing entry/exit is marginal. Many aspects of trading is akin to going to war, longer timeframe trades are like large battles where you want more forces (capital) on your side.
By making your system popular, there is a greater regularity in the paradigms of the other participants thus validating your own.
In the shorter timeframe (scalps/short swings), where entry/exit dictate a large portion of the trades outcome, if the market lacks adequate liquidity, you definitely do not want others to participate since they will be competing with you in entry/exit. However, if the market is liquid enough then I would assume the war analogy in the above paragraph would apply.
As some posters have mentioned, there are no secrets in this game. Any pattern that a system mines revolves around the variables price, volume and time. The only constant is constant change.
zman:
>Getting back to the orgin of this thread, publicizing
>a trading system does not wreck the system! That
>is complete BS. How can it? This assumes that people
>trading a system will have exactly the same entries,
>targets, feelings/anxiety, emotions, greed, fear etc.
I just don't get how people can make such misinformed statements.
Systems are less and less being traded by humans with feeling/anxieties, and more and more with computers that don't share such weaknesses. Two computers trading the same system ARE competing against each other for liquidity. Our systems take little bites over and over and a reduction in liquidity means a reduction in edge, simple as that.
If I'm a little guy (I am) trading a huge issue like the minis (I don't) then another little guy doesn't bother me, but a BIG guy using my system sure would -- or a whole bunch of little guys.
Mhashe:
>For the longer timeframe (ie months) systems, you
>would in fact want more people to know about your
>system, since the advantage from timing entry/exit is
>marginal.
>In the shorter timeframe (scalps/short swings), where
>entry/exit dictate a large portion of the trades outcome,
>if the market lacks adequate liquidity, you definitely do
>not want others to participate since they will be competing
>with you in entry/exit.
At least someone gets it. Nice work.
JB
>Getting back to the orgin of this thread, publicizing
>a trading system does not wreck the system! That
>is complete BS. How can it? This assumes that people
>trading a system will have exactly the same entries,
>targets, feelings/anxiety, emotions, greed, fear etc.
I just don't get how people can make such misinformed statements.
Systems are less and less being traded by humans with feeling/anxieties, and more and more with computers that don't share such weaknesses. Two computers trading the same system ARE competing against each other for liquidity. Our systems take little bites over and over and a reduction in liquidity means a reduction in edge, simple as that.
If I'm a little guy (I am) trading a huge issue like the minis (I don't) then another little guy doesn't bother me, but a BIG guy using my system sure would -- or a whole bunch of little guys.
Mhashe:
>For the longer timeframe (ie months) systems, you
>would in fact want more people to know about your
>system, since the advantage from timing entry/exit is
>marginal.
>In the shorter timeframe (scalps/short swings), where
>entry/exit dictate a large portion of the trades outcome,
>if the market lacks adequate liquidity, you definitely do
>not want others to participate since they will be competing
>with you in entry/exit.
At least someone gets it. Nice work.
JB
Actually few get it. Let's try one more time, this time more simply.
Imagine for the sake of argument that the holy grail of trading is Bollinger Bands. It was found out by the greatest scientists of our time that if a price hit the top BB then prices would always receed by an amount greater than the amount of the B/A spread and the cost of going short. Same thing happend when the price hit the lower BB, the price would always advance by an amount greater than the cost of the B/A spread and the cost of going long.
Now, if I am the only one with this knowledge, as price approaches the Bollinger Bands in a given context, I would sell or buy accordingly and I would ring the cash register.
Now suppose I tell a friend, who then tells his friend, and after a year it is now being taught to every trader that trades. What do you think would happen?
What would happen is that more and more aggressive traders would preempt the price from ever getting to either of the Bollinger Bands in a given context because it was riskless to enter at them.
Do you see the point? People _assume_ OVER AND OVER AND OVER again that if everyone knows of a working system, that the prices seen by that system will continue to be seen in the future in the given context no matter how many people know about it. That is so plainly absurd!
If you want a historical "system" that has diminished in effectiveness once word of it got out, go back and study the "January Effect." Once it got out, it became the Dec Effect to anticipate the January Effect, then the Nov Effect to anticipate the Dec/Jan Effect, until it simply became priced in to the market to the effect that most of the cheap prices are not seen _in_January_ because they are being anticipated by more and more traders.
Geez, give it up and move on. Who the hell cares anyway. No one with a system is going to give it to you if it works, unless they collect comission from you for executing it or they are trying to convince you to go into their Hedge Fund! LOL.
nitro
Imagine for the sake of argument that the holy grail of trading is Bollinger Bands. It was found out by the greatest scientists of our time that if a price hit the top BB then prices would always receed by an amount greater than the amount of the B/A spread and the cost of going short. Same thing happend when the price hit the lower BB, the price would always advance by an amount greater than the cost of the B/A spread and the cost of going long.
Now, if I am the only one with this knowledge, as price approaches the Bollinger Bands in a given context, I would sell or buy accordingly and I would ring the cash register.
Now suppose I tell a friend, who then tells his friend, and after a year it is now being taught to every trader that trades. What do you think would happen?
What would happen is that more and more aggressive traders would preempt the price from ever getting to either of the Bollinger Bands in a given context because it was riskless to enter at them.
Do you see the point? People _assume_ OVER AND OVER AND OVER again that if everyone knows of a working system, that the prices seen by that system will continue to be seen in the future in the given context no matter how many people know about it. That is so plainly absurd!
If you want a historical "system" that has diminished in effectiveness once word of it got out, go back and study the "January Effect." Once it got out, it became the Dec Effect to anticipate the January Effect, then the Nov Effect to anticipate the Dec/Jan Effect, until it simply became priced in to the market to the effect that most of the cheap prices are not seen _in_January_ because they are being anticipated by more and more traders.
Geez, give it up and move on. Who the hell cares anyway. No one with a system is going to give it to you if it works, unless they collect comission from you for executing it or they are trying to convince you to go into their Hedge Fund! LOL.
nitro