Originally posted by dottom
A variety of system development threads have popped up in the past, but they always ended up in mechanical vs. discretionary trading methods and all the mumbo jumbo that comes with it. Discretionary prop traders vs. aspiring system developers. A few quants come in and talk about their experience. Then you find out most of the quants that spoke up were just crunching numbers for arbitrage-type advantageous, and not the swing/day-trading approaches that many here trade/test/aspire to. Then Don Bright jumps in and says he's seen 'em all and hasn't seen a profitable mechanical system yet. He'll back it with his money if someone proves it to him. Then he says 'but he has his own guys looking at 100% mechanical systems' and they 'are having some success'. And always in there is discussion on over-optimizing and a claim that all mechanical systems are doomed to fail due to nature of changing markets and/or curve fitting.
If we can do away with all of the noise and deal with real signal, I'd be more than happy to contribute.
I missed this one !
Great post Dottom. I agree so much, you are 100% right. There is a new forum on ET now on strategy dev. We'll see what happens (expect the same pattern though, but I hope not, since it is a dedicated forum).
I don't do arbitrage and I do work on day/swing trading systems that actually work. Sharing results and ideas is always the problem because as you know, it's so much hard work (so why give it away) and often, work is tagged with confidentiality agreements.
But there are general things we can discuss (we as you pointed out, we usually start on those) and some details too. What people should expect is to hear about the discipline of the work, and understand the process. But usually they are more interested in getting a working system for free (until they are self convinced it does not exist).
an example of something I learned from experience and I confirmed reading you and a few selected others : system scalping is not the way to go. Maybe it is actually impossible (maybe not, someone please tell me wrong).
Anyway, so difficult it's more efficient to focus on other methods.
I know emini trading is profitable, as soon as you forget about the obvious stops and switch to a longer time frame (than 1 or 2 points). That's my experience at least.
However, most members and readers here are not capitalized enough to do it that way.
I am in the camp of "keep it simple". that's the new battlefield on ET : those who think trading can't be easy and those who think it does not have to be complicated.
Again, when I was a junior it was first the easy thinking (playing lottery or dice, shame on me) then the super complicated thinking (consider all possible patterns and thousands of rules, work on being a zen monk to deal with them) and all this failed.
Then I finally went back to 'seek the simplicity' but not in a random way. The market is not random, it's chaotic. you can trade it when you focus on probabilities near you ( 'near' can be a few minutes or a few weeks or a few months -I don't do longer, but I expect it continues).
there is a basic model at work in double auction markets. and it's simple. then you build on that.
funny enough, just like relativity theory and quantum physics (trend theory and scalp theory) there is a missing link, it's not unified (for my group and I at least). It seems to hold true with other experienced traders here.
the missing link makes it very difficult to system scalp (besides arb maybe) these markets.
On the floor they used to have this missing link, by being there (I theorize).
anyway, I know several succesful traders and groups on these markets trading bigger swings than the scalp we read about in this thread. None, including myself, succeeded in making it work scalping (one exception, low volume emini periods are very easy to scalp, even automatically. but these periods are rare in the year and you can't move size anyway. it's fun though).
tntneo
