The Flaw in Trading System Reasoning...?

Quote from Mathemagician:

Um, I did.
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If I understood it right, you defined an equivalence on a time period (let's say 10 years). What I mean, is that in a space of states of 10 years (example) of possible transactions, systems can be equivalent for 5 minutes, 10 minutes, 3 years or whatever. They are equivalent on this time frame, but not on the whole space of states.

Another point would be your reference to the infinity of time. You just refer to it as an increasing time period, but you forget that your time scale can go subsecond and create an infinity at that level. This is why mathematicians tend to consider their models on a continuous time frame, in order to represent observations of everyone.
 
Quote from GetWhatUDeserve:

First, regarding that finite number...what is it? I substantiated my point about the infinite number using asymtotic limits as they are applied in calculus. Maybe you haven't had calculus so that didn't really click with you. But, thats one reason why the calculus evolved, was to explain and work with concepts like "while the number of variables between any two systems increases arithmatically (that is from 1 to 2, from 2 to 3), the number of different systems created from that arithmatic increase increases geometrically (from 1 squared to 2 squared, 2 squared to 3 squared). This it becomes infinite at some finite variable input.

Okay...so you don't understand the math.

Lets just say that there are more variations in between the numbers 1 and 2 than there are on the rubics cube. In fact, an infinite number. (1.001, 1.00002, 1.00000005, etc). So a rubics cube is not a true example of the infinite. Even still..AS YOU ADMIT...the number of combinations is quite high for a Rubic's cube....CERTAINLY INFINITE COMPARED TO THE 5000 systems you used for your hypothetical example of profitable systems.

And, most basically, yes. If you say there is a finite number, you need to be able to either name that number, or at least, give the order of magnitude of that number. That would be an example of a rigorous proof. That proof you have not provided.




How many ways are there to reach a P/L of $100.00 on any given day? Each way represents a different system. Maybe to you all systems that go long are the same type of system. So thats why you appear stuck in the finite.

Fundamentally, everyone who trades follows a DIFFERENT SYSTEM. Every trader who makes a profit in a given timeframe has been profitable at slightly different entry, exit and slippage points even if they are trying to follow EXACTLY THE SAME RULES>

Have you ever traded in a trading room with others? Ever been with guys who are supposedly trading the same system? Guess what, each guy trades it slightly differently. IF both guys are profitable, in reality, they trade different systems.

I think our definition of what a system is is just plain different. Yes, I think mine is better and more indicative of the kind of mentality one needs in order to be a top level trader. But if your definition is more narrow, and it works for you, and you are successful, then probably the essential idea behind this talk is the same.

The idea that infinite numbers derive from using a system of infinite numbers (decimalization, for example) is the only point needed to show, mathematically, the truth of my belief. The belief that there indeed are an infinite number of profitable systems. Just because so many are not profitable has nothing to do with that fact. All the observations in the market behavior of many traders are incidentals that support that core idea.

The bottom line is, if your belief is functional (if it works for you), then its right (for you). Since my belief works for me, then its right for me. I spent time writing these ideas because they represent another core belief: the idea of abundance vs. scarcity. Since mathematically, abundance is supported given the variables inherent in trading, I thinks its a more flexible and powerful belief to hold. I hope that my ideas reach someone who can use them to their benefit and improvement.

I used to belief what you do, and the changes in my beliefs seemed to coincide with my explosion in my success as a trader.
But that doesn't mean it was the sole reason for my success.

Thanks for the debate.
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Thanks for not resorting to name calling. :D

I'll need to chew on it first (though my conclusion might not necessarily be same as yours kekeke) as I have yet to learn calculus beyond the very basics. :P

Just to clarity : Your belief is that for any set of data, say ES data for '95-'00, an infinite number of systems exist that could work on it?
 
You know the saying 'more than one way to skin a cat'? Well for every different 'way' thats found you add one. You dont add zerro on the basis that the result is the same.

Skinning a cat is a good example of trading in that its a verry simple rssult we want, make money, buy low sell high. But the number of ways you can go about it and the amount of extra information you can use is phenominal (unlimited even). I know traders who have made systems based on moon phases.
 
It doesn't matter that two systems might 'track together for some time, if they're different then they will eventually show different trades and need to be considered as different. As long as we are prepared to consider the example of real big numbers as finite, then we need to consider the systems in a market going forward way more than ten years. We need to consider tousands of years or more, when slight differences in systems will surely show up.
 
it doesn't matter if there are are infinite or finite number of systems to be created, since if there is a finite number none of us will ever come close to exhausting the potential

if you feel limited to what you perceive as the 'finite' systems your not a very good systems developer

start from scratch and try to make a simple MA crossover indicator into a working system, because it definitely can be done
 
After these many comments I realised that I committed two fallacies at the beginning of this thread:

1) That mechanical system developers are bound to using the entire history of a market during backtest.

2) That there aren't systems that last forever, or so long that it doesn't matter (10yrs?).

3) That the number of finite profitable systems that exist is not so large that can be consider infinite.

Quote from mogul:


start from scratch and try to make a simple MA crossover indicator into a working system, because it definitely can be done
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I'm intrigued by this comment.
Perhaps it'll make a good topic for another thread. ;-)
 
What indicator could you use for an automated system that has several lines and one of them tracks (gives a value for...) volatility? The higher the volatility the better your signal is for entry....or at least if the volatility is low at entry, then your volatility value should at least be increasing to give the best entry signal. Trade systems that use a volatility value/measurement as one of your entry conditions are the trades that will give you very powerful profits....trade entries into high or increasing volatility work the best IMO. Automated trade entries in a low volatility environment or one that is decreasing give you most of those "chop" type trades that whittle down your equity curve....as I have said before in this thread, find a way to include a value/measurement of volatility to add as one of your conditions for very strong system yield curves. :)

Merry Christmas All!!!
 
Quote from Remiraz:

Thanks for not resorting to name calling. :D

I'll need to chew on it first (though my conclusion might not necessarily be same as yours kekeke) as I have yet to learn calculus beyond the very basics. :P

Just to clarity : Your belief is that for any set of data, say ES data for '95-'00, an infinite number of systems exist that could work on it?
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Okay, you asked the direct question. My direct answer, is, yes, I believe there are an infinite amount of ways ES could be traded profitably from 1995 to 2000. Of course there are not an infinite number being traded. But the math supports the belief.

So basically that idea gives a whole lot more reference material to one who is looking for a new edge. How much more effective do you think one would be carrying around the idea that there is ALWAYS an edge, than one that believes that there are a limited amount of edges, and all the good ones are gone?

But in honest, that probably edge (the system) is one part of the necessity. The other part is: hey....can you trade that system as you designed and tested it? It makes no difference if you plug into the infinite combinations available if you don't find one that you can actually trade given your personal makeup.
 
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