I have been thinking a lot about the fact that the absolute fastest, most powerful computer on the planet for trading is the human mind. The only problem with it, is that it is infected with the "emotion" virus that makes it not quite as good as it should be for trading. You could try and build a system and let a normal computer trade it, but it's all but impossible to really build a self adapting, logically thinking system on a PC. So how can we use the most powerful computer and bypass or eliminate the emotion virus? Two thoughts come to mind. The first one would be to find a true sociopath (person completely devoid of emotion) and teach them to trade your account. The problem with this is that they are very rare and usually end up as serial killers. The second thought is the main one I have been thinking about. If you have 2 traders with a similar system of manual trading and both are profitable but not great due to emotional mistakes...would they trade better if they traded each other's accounts instead of their own? By trading someone else's account it could reduce your emotional stress b/c it's not your money and thereby allow better smarter trades. The issue I see with this is if one trader makes his buddy 50% in a month and his buddy only makes 10% there could be some friction. Either way it is an interesting hypothesis I think.
'teach them to trade your account' if your strategy is programable then many brokerage house set ups will trade them automatically for you. I think 'strategyrunner' is one such service.
Yeah I know. What I am saying is while many strategies are programmable up front, the program cannot be made to adapt automatically and on the fly. A program can't understand that a plane just hit the WTC and the market will go to complete shit in about 2 seconds so get out now. If the market does something outside of the programs parameters the computer has no idea how to handle it. What will your program do when a late print comes though and triggers a false event? Only the human brain can truly comprehend, improvise, adapt, and overcome. Which computer do you want making your trades?
If you are emotional in your trades, then you assume you lost because of your emotions or defeated yourself because your opponent, which is the market, was unemotional. Once you have mastered your emotions and are able to think without emotion, the market is emotional. You are one person in control up against a group of emotions (other traders, market) much as the psychologist who is logical and without judgement and unaffected with his patient. You may recognize a behaviour (pattern) and hypothesize a probable outcome.
Understand that you are an emotional being who has developed emotions as a way to survive in your environment and that the reality you see is not the way things are but the way things seem. http://en.wikipedia.org/wiki/List_of_cognitive_biases
'A program can't understand that a plane just hit the WTC and the market will go to complete shit in about 2 seconds so get out now.' A strategy which has no stop loss mechanism is not viable. Even the sudden event or news item can be mechanized. Just have some service rate each and every news on the scale of 1-10. Any news rated 8 or above on 'Bearish' or 'Bullish' category will automatically close out or introduce positions. Some intelligent human being will have to rate these news items and this rating will become an indicator. I bet TS would love this idea and can improve further on it. Artificial Intelligence can help.
Such a program had better understand quite a few key words. Assassination. Resignation. Troops. Bombing. Earthquake.
There is no need to classify news events as 'good' or 'bad; there is no need to consider 'news' at all. If 'bad' news comes across the wire causing the market to go down and you are Long: you should get stopped out. If you are Short then your stoploss will not get hit until something else happens (like the top of the last two bars getting taken out.)