After a PM, I'm going to list what I refer to as some useful texts with an important forwarding acknowledgement.
First off, let me get this out of the way: The 'Holy Grail' is that there is no 'Holy Grail'. Thanks for stating the obvious? But there is some important subtext here: One can reasonably assume that at least a few human beings through the ages wasted/spent their lives searching for the Holy Grail. But the Holy Grail was and is a fantastical and mythical legend that is so powerful it has coined a phrase - could be proven, I'm not saying it doesn't exist per se, but my sense of risk/reward says don't stop my own personal life and go out and look for it. If somebody else finds it, well then, I'll watch the Nat Geo Special in HD. With a Sam Adams in one hand and the remote in other.
Second point: Simpler is almost always better. Trading attracts Geeks, and Geeks like to create science fair projects that like large boats over 25 feet in length, are a giant sucking hole which to throw money into. Back in my twenties I was an engineer who was recruited to trade the emerging commercial power and fuels markets. Only I was at a Mid-Western utility with deep pockets and Enron was my bitch. When I left that gig to start trading proprietary, David Ellis (DE Trading and ITG in Glenview) was my first backer, and I became his first big size spread trader. DTB and the Liffe electronic markets had just started up and I made my mark quickly. Now, a bit more about Dave: if Dave threw his wallet at me it would kill me. And Dave was superb at trading corrections and retracements. That was it - that was his strategy. He did it for 200 big S&P contracts on the floor in the late 80's and early 90's, and he did it for stupid size on the screen in the Dax and the Bund. But too many people on ET couldn't possible believe that it could be that simple, and they would insist that they add their own creative embellishments to make it much better. I mean, what about Kurtosis and all that other valuable stuff they talk about on the Wilmott Forums? P.S.: Dave could buy 400 Quants outright. At least.
OK, rant over. Mark Whistler's "Trading Pairs" is a great primer to get some meaningful direction on using statistical concepts in the marketplace. It is a very elementary but entirely functional guide to using an Excel Spreadsheet for statistical analysis. There are some great toolboxes out there like Statistica and S-Plus; I am particularly fond of Zivot and Wang's Second Edition of "Modeling Financial Time Series with S-Plus". Don't get caught up in the minutae and the semantics - the idea is to know the statistical characteristics of the instruments you are trading. I have a penchant for short and sweet, and have traded plenty of OTC energy products up until 2009. I highly recommend "Modeling and Forecasting Electricity Loads and Prices - A Statistical Approach" by Rafal Weron. I used it for financially-cleared PJM-W heat rate options spreads. In terms of good vignettes about tradecraft, it's hard to beat "Charlie D." by William Falloon - but good luck finding one. I do like "Pit Bull" by Marty Schwartz in terms of how he thinks and prepares for the market, but find his approach using flat price directional risk and 'an axe to grind' a bit too 'risk of ruin' for my taste.
First off, let me get this out of the way: The 'Holy Grail' is that there is no 'Holy Grail'. Thanks for stating the obvious? But there is some important subtext here: One can reasonably assume that at least a few human beings through the ages wasted/spent their lives searching for the Holy Grail. But the Holy Grail was and is a fantastical and mythical legend that is so powerful it has coined a phrase - could be proven, I'm not saying it doesn't exist per se, but my sense of risk/reward says don't stop my own personal life and go out and look for it. If somebody else finds it, well then, I'll watch the Nat Geo Special in HD. With a Sam Adams in one hand and the remote in other.
Second point: Simpler is almost always better. Trading attracts Geeks, and Geeks like to create science fair projects that like large boats over 25 feet in length, are a giant sucking hole which to throw money into. Back in my twenties I was an engineer who was recruited to trade the emerging commercial power and fuels markets. Only I was at a Mid-Western utility with deep pockets and Enron was my bitch. When I left that gig to start trading proprietary, David Ellis (DE Trading and ITG in Glenview) was my first backer, and I became his first big size spread trader. DTB and the Liffe electronic markets had just started up and I made my mark quickly. Now, a bit more about Dave: if Dave threw his wallet at me it would kill me. And Dave was superb at trading corrections and retracements. That was it - that was his strategy. He did it for 200 big S&P contracts on the floor in the late 80's and early 90's, and he did it for stupid size on the screen in the Dax and the Bund. But too many people on ET couldn't possible believe that it could be that simple, and they would insist that they add their own creative embellishments to make it much better. I mean, what about Kurtosis and all that other valuable stuff they talk about on the Wilmott Forums? P.S.: Dave could buy 400 Quants outright. At least.
OK, rant over. Mark Whistler's "Trading Pairs" is a great primer to get some meaningful direction on using statistical concepts in the marketplace. It is a very elementary but entirely functional guide to using an Excel Spreadsheet for statistical analysis. There are some great toolboxes out there like Statistica and S-Plus; I am particularly fond of Zivot and Wang's Second Edition of "Modeling Financial Time Series with S-Plus". Don't get caught up in the minutae and the semantics - the idea is to know the statistical characteristics of the instruments you are trading. I have a penchant for short and sweet, and have traded plenty of OTC energy products up until 2009. I highly recommend "Modeling and Forecasting Electricity Loads and Prices - A Statistical Approach" by Rafal Weron. I used it for financially-cleared PJM-W heat rate options spreads. In terms of good vignettes about tradecraft, it's hard to beat "Charlie D." by William Falloon - but good luck finding one. I do like "Pit Bull" by Marty Schwartz in terms of how he thinks and prepares for the market, but find his approach using flat price directional risk and 'an axe to grind' a bit too 'risk of ruin' for my taste.
