hmm.no edges in the markets

[R. Raskolnikov]

The only live trades I would ever even consider posting are ones that the system generate that do not meet the minimum requirements for a trade otherwise that's essentially giving away my exact system. Problem is, many setups DO just meet the minimum requirements and I know I would be accused of all sorts of "crimes" if I didn't post every trade.

Another problem is that trading the system is very demanding in realtime, I'm constantly scrolling through many time frames looking for the next entry while simultaneously managing open positions. I'm not getting any younger and it's very demanding so the idea of coding it is something I have been thinking about in the last year. The issue is, who to trust.

As long as I can still manually trade it, I'm ok but I will need to have an exit strategy (being me exiting the equation and letting and algo take over) at some point.

Quote from nitro:

Is it coded? If it is, it would be trivial to have it post its trade to a twitter channel, and then the viability of it would be obvious. No need to give it away.

If it is not coded, and you click a mouse to make the trading decision, it will be nearly impossible to prove. My interest in it is only from an intellectual point of view.

 

[R. Raskolnikov]

Good point but some models have liquidity limitations and these are traded rather than given out for free.

Quote from nitro:

Sort of. The whole thing about secrecy in markets is sort of funny. Lots of papers are published all the time in more academic parts of finance that are worth a fortune. For example, options models.

 

[nitro]

Quote from R. Raskolnikov:

The only live trades I would ever even consider posting are ones that the system generate that do not meet the minimum requirements for a trade otherwise that's essentially giving away my exact system. Problem is, many setups DO just meet the minimum requirements and I know I would be accused of all sorts of "crimes" if I didn't post every trade.

Another problem is that trading the system is very demanding in realtime, I'm constantly scrolling through many time frames looking for the next entry while simultaneously managing open positions. I'm not getting any younger and it's very demanding so the idea of coding it is something I have been thinking about in the last year. The issue is, who to trust.

As long as I can still manually trade it, I'm ok but I will need to have an exit strategy (being me exiting the equation and letting and algo take over) at some point.

It sounds like it is subjective and not automated. That means it is closer to the left than to the right on this chart, and it is very labor intensive:

Brain<--Subjective<-------TA&PA-->---QT-----------AT------>Objective-->Computer

If possible, you should consider automating it since it sounds like it is already rule based.

 

[R. Raskolnikov]

Not subjective at all. All the rules are objective, I'm just the one trading it. When I say "meeting the minimum requirements" I mean the objective system requirements

Quote from nitro:

It sounds like it is subjective and not automated. That means it is closer to the left than to the right on this chart, and it is very labor intensive:

Brain<--Subjective<-------TA&PA-->---QT-----------AT------>Objective-->Computer

If possible, you should consider automating it since it sounds like it is already rule based.

 

[nitro]

Quote from R. Raskolnikov:

Not subjective at all. All the rules are objective, I'm just the one trading it. When I say "meeting the minimum requirements" I mean the objective system requirements

Then you could be sitting on a beach reading a book and sipping chi chis while using your smartphone to monitor you PnL (hopefully ++), or problems, if you automated it, since going from objective rules to computer code is trivial.

My systems are fully automated and they even run while I sleep. I use my cell phone (or iPad or laptop) to control them no matter where I am.

 

[R. Raskolnikov]

You're a few steps ahead of me then

Quote from nitro:

Then you could be sitting on a beach reading a book and sipping chi chis while using your smartphone to monitor you PnL (hopefully ++), or problems, if you automated it, since going from objective rules to computer code is trivial.

My systems are fully automated and they even run while I sleep. I use my cell phone (or iPad or laptop) to control them no matter where I am.

 

[traderslair]

Call it gambling, trading, edge whatever...

I just make money every month.

Oh, and I need new suckers in the market every day. Thanks.

 

[R. Raskolnikov]

Now think about this....if the below is true for something as simple as a 200 day MA, imagine what the results might be on a more complex combination of inputs.

If what you posted below is true, you are essentially admitting that there is value in TA. If something so simple can actually produce a slightly favorable probability of success, then one should continue to explore the possibilities, as they are endless.

P.S Over the long term....but you said markets are always changing

P.P.S Markets do change in some ways, yet remain the exact same in others ways.

Quote from marketsurfer:

Well, there has been a study that proves the long term viability of a TA system based on the 200 day SMA--- It actually shows a slight increase in the odds away from randomness over the long term--but the edge is so slight its unprofitable due to transaction costs.


surf

 

[galvinlee888]

Quote from marketsurfer:

Well, there has been a study that proves the long term viability of a TA system based on the 200 day SMA--- It actually shows a slight increase in the odds away from randomness over the long term--but the edge is so slight its unprofitable due to transaction costs.

The market can't repeat in a exploitable way for long--- Because if there was, it would be found and the market would stop working. this should be common sense.

surf

Without going into the details on how I get this information, a similar situation in option pricing using dynamic hedging based on historical data. However, the edge are so small that when take into account the slippage and transaction cost, you are actually in negative expectancy.

 

[Swan Noir]

Let me add some points from a marginally profitable PA trader -- better than the minimum wage but not much. I trade full time and can afford to do that because I have owned a variety of businesses over the years that have given me some capital.

1) I think markets do repeat the rhyme; sometimes (but rarely) for an extended period but they certainly don't do in the same way forever. Just like a poker player (although for different reasons -- not table image -- the concept only exists at the very top echelon of traders) one must be ready to change approaches. One trick ponies that are not arbing something have a difficult time of it.

2) PA is best used to exploit basic truths in the market: ie, trends can and often do have more steam than the trader has nerve ... nerve to risk -- to risk open profits.

3) PA is best used as a device to enter a market you want to be in anyway. The setup is generally speaking, for me not a reason to get in but rather an opportunity to enter a context I want in on. I realize that means I can't automate but I'm nowhere close to that. That does not mean others have not coded what they trade: If NoDoji (as one example) says she has automated I believe her. She has given me helpful advice in the past that was well reasoned, on target, saved me time on the learning curve and was greatly appreciated. Little stuff but little stuff counts.

4) For an intraday directional trader of moderate skill PA only rarely presents an opportunity to gain a significant edge of random entry. I believe for Al Brooks and others (one of which I know fairly well) it is different. It provides small edges more often but for the moderately skilled trader these 55/45 edges on a 1:1 RR should be avoided like the plague ... discerning that it is in fact that slim edge is beyond their/my skill level. With a thin edge just a few bad reads means you are trading without an edge ... or even worse trading a negative expectation. Most PA traders are in fact trading a negative expectation much of the time. No winning there!

I have been trading more or less full time for five years. I have taken chunks of time off because of family health issues and the need to take a break from the disappointment of not "breaking through". So call it 3.5 years of experience or maybe 3, 000+ hours of screen time Unlike many others I have never blown up nor have I had extended periods of losses. I'm a few bucks ahead (after five long years it might amount to the Indonesian minimum wage) and I credit my avoidance of disaster to my business experience. I don't double down on losing nor do I keep the same game plan.

I'm an admirer of Gladwell but I think his 10,000 hours to be expert while possibly true is less important than what it takes to b e a journeymen ... a workhorse that earns. I think the 10,000 might be nearly universally true but I strongly suspect the experience required to be a journey varies tremendously. Some guys pick it up pretty quick. I am clearly not one of them.

I have a CL scalp (10 to 14 ticks to quantify) that currently is profitable for me and it is starting to get me beyond that minimum wage category. My experience is that slippage (on the spot liquidity) is a problem that effects your best trades. If anyone thinks I am willing to share my statements and potentially destroy what precious liquidity I have when I hit the button THEN THEY HAVE LOST THEIR FREAKIN' MIND!

That's my four cents worth.

BTW, in my youth I owned -- with a partner -- three tiny securities brokerage firms. One in NYC, one in London and one in Switzerland. I am no stranger to markets but my small time corporate finance background -- we were manufacturers of small public companies and wholesalers of restricted stock before Rule 144 -- was of no help to me as a trader. In fact dealing in the rigged pink sheet market of the 70's (I use the word rigged with enormous affection -- it was heaven) meant I had to unlearn almost everything my experience had taught me. Real markets with size and some liquidity are a horse of a different color and a very hard horse to ride and be in the money. My final comment is that, from my observation, nitro probably has a better rubber-meets-the road understanding of markets than almost all the rest of us put together.