You may want to look up the compound interest formula some day. When you do you will see that of the three inputs, the most important is the exponent and the least important is the starting capital. the profit per cycle is sitting in the middle. I was chatting with a friend nd he noted his two days trading after Thanksgiving. The points per contract well exceeded the points of margin required per contract. We both cut off the T&S on ES at 50 contracts. The tape still moves pretty fast. 300% a year is a pretty small % a day to be compounding. On the ES 1 tick a day is the smallest profit. 2 ticks...3 ticks ...then you are at 1 point. We both know the contracts work like a postage stamp curve. No one can, at this point trade partial contracts for an account. But if a person is doing more than margin every two days it can add up a little bit here and there. You can double your position size every week for a while then it gets even better after you get in the double digits on cars you trade. I certainly am transparent on how I trade and its details. So are all the others who wish who are using the method (SCT). There's always somone else on the other side of our trades it turns out. There probably always will be. That is the way it is.
I agree. You will be suprised how differently you will react to once you start trading live. In fact, you will notice you will break your own rules just because you are feeling like you are "missing" an opportunity. It's not until you blow up about 3 accounts that you will get a hang of this. Sorry to draw such a gloomy picture. Good luck.
The PVT method? Is that like the PID used for feedback control loops? Do I need to refresh my memory on LaPlace Transforms for this too?
I am rarely in a room or place where I can use EE training to discuss making money. It is an automatic for me to apply periodic functions and transformations to the data I have on display. In that way when turns are coming up I do the carving from either an odd or even harmonic point of view. The vector aspect of markets is just a good way to extrct data (on a realtive basis to the context). If is very empowering to have a sense of front running smart monet by having a vector context.
Jack, Would you be able to explain a bit about the even odd harmonics you mentioned. I haven't been able to find anyone who understands it (from your point of view, I'm sure you know what I mean). Part of it is my ignorance as I never finished my EE degree, but have done a lot of study on cycles. I had thought the reference was to square and sawtooth waveforms, but after reading elsewhere it seemed to indicate you might be referring to the cycle overlaps creating the even/odd. For example, the double top vs. the head and shoulders. Is that something seen only on price, or on the volume cycles as well? Thanks - EZ
Sounds like Jack is relating the market to a 3rd or 4th order differential equation. Having a BSME, I am not fully intune with you EE's, but I'd have to say you are stretching it a bit to compare a financial market to a physical phenom that can be explained with advanced math models. peace.
I don't think the conventional wisdom here is to compound (increase bet sizes) as your capital increases. It is the continuous compounding that makes the equity (and risk) jump up quickly. I think many here just take their stake and try for the best return, taking out money to live on periodically but never raising position size as their account builds. Just my .02 Traveler
My approach is to divide up the winnings in a 50/50 approach - 50% goes into some (relatively) risk free investment where I might have some wealth left over for myself if I blow up (insurance, annuities, bond funds, treasury MM's, zeroes, whatever) to start over and 50% goes to either increase position size or distribute to other asset allocations. And yes, I know these are bad 'investments'. They do not serve a place as 'investments'. They are for my personal security - a place where it will be difficult for me to get to those funds and tap them out unless I really, really have to. My risk account is for the 100-300% gains. Not sexy, but dad was a trader and I have far too much personal experience with the blow-up, thanks.
I attribute periodicity to three independent variables of the market. It turns out that the lowest frequency is price. the period of volume is half that of price (Twice the frequency. I used this relationship to depict the P,V relationship in boolean algebra and a combination of two if then statements. In computers, you simply get a circuit that is where price is gated by volume. A clock could be used as well to cycle the four combinations. If you input a scope on each axis you get a figure eight as a consequence. I felt that the cycle of P, V could be extended to another degree of freedom for increased trading sensitivity. So I added another market independnent variable. It may be considered to be sentiment and I express it as A/D where A is accumulation and D is distribution. Both are broadly understood. It turned out that there is a periodic relationship that is part of the P, V relationship. the frequency of A/D is twice the volume and Four times the price fundamental frequency. Scoring was the resulting boolean concept that resulted. All trading universes can be sorted by using the three variable frquency concept. thus the cycle of price is divided into 8 parts and the combinations of the variables define the sequence of the cycle. 0 to 7 is the trough and 4 to 3 is the peak. All three variables go through change as expected at these end effects. crossing the axis of the cycle (acceleration to deceleration ) involves two of the three variables. The four other dividing lines occur with only one variable changing (A/D) The mathematical symmetry is elegant and unflawed. To deal with the waveform of the cycle due to pertibations there are also three influences. This are best expressed by using the periodic fumctions of either trig series or power series. For trig there is amplitude, frequency and phase angle. In EE and ME there are analogous functions for each characterisitc of the system whether it be field oriented or physically oriented. This made taking courses study free for the most part and extra courses could be taken in any term. In EE I did two of the three minors as a consequence of this. Price is the dominant wave form and the volume Gaussian I use and you see on charts is functioning at twice the frequency of the price trending. Thus for starters, you always know where you are, what is next and how fast things are changing. A channel setting up involves point 1, 2, and 3. By this time you see the "trend" and the volume as a harmonic of price. To get to pint three you go through a full gaussian of volume (dom then non dom). The trend continues and the volume oscillates. The A/D is shown as well. This is the first tough to understand paragraph. For me I am always cognizant of the perice waveform components as a function of their harmonics amplitude and phase angle. There are no missing harmonics usually but there is always an emphasis on the odd or even harmonics as a result of the amplitudes. This is tough for most people to get straight. Market pace is the most significant aspect of this. The slower the pace the more the odd harmonics dominate. The faster the pace the more the even harmonics dominate. Think of a psotagestamp curve, for example, where trading the nondominant is not usually done with two exceptions. I got started in the vacuum tube culture and in the days of radar in UHF. Television was available and there was only one block of frequencies and FM was not used in radio. Being imbued with all the maths of analysis and transformations was keenly desired because it gave better tube life and longer mean times to failure. For trading it is a dream come true because you know what is coming up in advance all of the time. I do not notice any stretching of rational thought at all. At any given time I am very conscious of the predominance of either odd or even harmonics in the waveform of price. The extreme objections to some of my prints were a direct result of being in an even harmonic modus on high paced markets. On "Greenspan's" new I am always in an odd harmonic and with multiple contracts on the DJXX before eminis it was possible to nail 900 points in less than two hours. For me it was three cascades (odd harmonic spikes) and a noise free regression to the mean being "critically" damped. None or most of this is meaningless to others, but for me it was a result of doing circuit design, being on scopes getting rid of noise and a host of other experiences. I see all formations and patterns as following the P,V relationship; there are no exceptions. Hence I am able to also apply the considerations of odd and even harmonics as an overlay on the patterns and formations as well. for making money this means that the market always "flows" for me and I see the relative importance of what is contributing to the rhythm of the markets. I have synthesized many many indicators and signals from the market variables. The differential aspects of this (calculus replicated using statistics) takes the "lagging" aspect of data off the table for me. By using differentially derived ignals, there is no past so to speak. There is only an instantaneous time rate of change and a second differential as well. From yearsand years of regarding these things, I do ome up with GO/NOGO values for certain popints in these rhythms. I have spent a lot of time translating all of this into what is now called "batting". I focus on P and V for batting until that is understood. then it is possible to add derivative signals to the mix for iterative refinenment. I am not going to be able to easily show you how the head and shoulders is odd harmonic unless I get a scope and a few signal generators. The same for even harmonic double tops. Just inmagine that because I have seen so many patterns on scopes, etc, I can also look at those scopes and see which components of circuits are messing up. Human psychology closely follows rational natural functions. the theory of large numbers is in effect and the HERD is there all of the time. the HERD follows the smart money and I front run the smart money simply by the "human nature" of price and volume movement. It is like the waveforms of psychology are "continuous functions". It is stats to be sure but for making money, the operating point of the market can only "migrate" and not anything else. I have reduced the movement of the operating point to a matrix that is "noisy". In any matrix one dimensional movement is more likely than compound movement. the market has no "hostile" characterisitcs and it is always a smooth and orderly sequences of events. That is how I got to SCT as a system and philosophy. From psychological principles, the independent varioables characterize the flow of the market. I am aleways in, always on the right side and always taking segments of profits as the side of the market changes rhythmically. It is like cheating in some ways because you always know what is coming along ahead of the market.