Surf's Special Situation Journal

[marketsurfer]

Quote from burt_schroder:

So you don't believe in repeating price patterns? After all, the market is just a series of squeezes on liquidity, however you look at it. This process plays out on a chart just as it does on the DOM, and both are susceptible to being 'read' incorrectly.

If anything was absolutely repeatable, the market couldn't exist. There are super computers and teams of PhD;s looking for that-- once found its immediately exploited then the pattern changes. surf

 

[NoDoji]

Quote from jo0477:

No one is saying that its not possible to code a rule based system based on "contextual clues", but I believe that it must be extremely difficult. I would imagine the problem would lie in culling the logic down to a level of complexity where it is codable yet keeping the system functional and at a point where you are comfortable letting it run. Congrats Nodoji if you managed to accomplish that because I'm sure it was a tough job to get there!

Now assume you are a manual trader working on a system, trying to determine if its viable. You take 100 trades according to various rules. 50 winners and 50 losers to breakeven. Now the subjective part comes into play and this is where I assume most get into trouble? Going back over your trades, maybe you decide all 50 losses were executed according to your rules and count them towards your statistical analysis of the system - its a scratch. Or maybe 10 of the winners were poor trades so they should be excluded - now its a loser. Lastly, maybe 10 of the losers shouldn't have been taken - now its a winner.

My point is, a statistical analysis is only so scientific if the data being analyzed is being subjectively selected by an individual person. How do you guys manage to avoid sort of curve fitting your results and get your rule base to the point where you are able to automate successfully (since I see several of you have apparently done so). I would really like to have some guidance here if I ever do try and attempt it in the future.

Automating what I do using context filters would require quite complex coding and a great deal of time. The ATS is based on my core concepts, not the advanced stuff I do now, manually.

I compiled statistical data surrounding "tradable" price swings (price swings of N ticks or more). I found certain price action footprints that led into these price swings and I found a few that repeated often enough that the odds were tilted favorably (55% or better). I took the ones with the highest odds and used MFA and MFE stats to create trading rules for maximum stops and minimum targets. I applied the rules to every appearance of these setups and saw that by doing this exclusively and precisely, it resulted in consistent and significant profitability.

There was nothing to curve fit. The stats helped me create rules and the following the rules resulted in consistent daily profit. The key was to trade every appearance of a setup that was triggered by specific price action. Many traders can't surmount that difficulty and so they will need to automate their plan. I struggled terribly until my core plan was automated and I saw what it did each day, I heard the system signaling a trade entry and I would cringe and think "It's not gonna work, feels really weak here..." and at the end of the week it had worked. That finally convinced me of the importance of just following the rules like a good little kindergartner

 

[NoDoji]

Quote from marketsurfer:

If anything was absolutely repeatable, the market couldn't exist. There are super computers and teams of PhD;s looking for that-- once found its immediately exploited then the pattern changes. surf

Then how do you explain the FACT that the same patterns that existed decades ago are still repeating today?

 

[cornix]

Quote from marketsurfer:

If anything was absolutely repeatable, the market couldn't exist. There are super computers and teams of PhD;s looking for that-- once found its immediately exploited then the pattern changes. surf

Never absolutely. With enough probability to justify trading it, yes.

And you are right, PhD's look for them... some even trade them.

 

[marketsurfer]

Quote from NoDoji:

Then how do you explain the FACT that the same patterns that existed decades ago are still repeating today?

what ones are those? I betcha you can't even define one in a testable format. If so, please do, it will be a revolutionary change.
surf

 

[Xspurt]

Quote from Xspurt:


As the Fed Research paper concludes "A proliferation of behavioral models can reproduce the trending seen in foreign exchange markets and show that TECHNICAL TRADING can be CONSISTENTLY PROFITABLE in certain circumstances.

The adaptive market hypothesis provides a promising framework in which such models can be further developed. Its emphasis on behavioral decision rules that depart from the standard rational paradigm, and on learning and evolutionary selection mechanisms, indicates a shift in focus in currency market research and, indeed, in financial markets in general."

http://www.core.ucl.ac.be/~laurent/pdf/Survey_handbook.pdf

"such (TA) models can be further developed" and have been by many TA traders.

Someone's got their head in the sand

 

[marketsurfer]

Quote from Xspurt:

Someone's got their head in the sand

I made this clear years ago, but I guess its important to say again

I am speaking strictly of the stock market and stock index futures. I have not tested currencies or commodities--- but I do know, there is no inherent upward drift in either. surf

 

[Lucrum]

Quote from marketsurfer:

If anything was absolutely repeatable, the market couldn't exist....

I've seen you spout this nonsense many times before.
We're talking about markets, represented by its value/price. Which is a number, that can only do one of three things at any given time. Increase decrease or remain the same.

 

[marketsurfer]

Quote from Lucrum:

I've seen you spout this nonsense many times before.
We're talking about markets, represented by its value/price. Which is a number, that can only do one of three things at any given time. Increase decrease or remain the same.

How is it nonsense?

 

[Lucrum]

Quote from marketsurfer:

How is it nonsense?

"We're talking about markets, represented by its value/price. Which is a number, that can only do one of three things at any given time. Increase decrease or remain the same."


Ergo recognizable repeating patterns are inevitable.