Sharpe Ratio Review. All the things a trading system does are reflected in the Sharpe Ratio. Making money without Draw Downs is one of the first achievements that the early stages of design will reveal. Starting in the middle of a system design is the fastest way to enter the ball park. Step 1. Recognize how entering late and leaving early affects the Sweet Spot. Here the trade is under way and you only enter when other capital is not doing as well as the increasing performance of the best money making possibility. Step 2. Step 1 has a recognizable inference. Trading only happens in the Present. So compare what you OWN with what is HOT. The comparison has to be based on making money. Money making has a dimension. The dimension is velocity. This means you design a velocity tool. Step 3. Certainty is a good dimension as well. All the stocks in your Universe have to be REPEATABLE. most people cannot measure this and will not consider it possible. This is a mental limitation of the trader. If you re entring late and leaving early, is it possible to not have this mental limmitation? Probably not. What are the dimensions of this context? At least, give up half the potential profit available. If you are OWNING a stock that is doing better than the first 25% of the run of the NEXT HOLD, then you may be able to have the mental health to be able to focus on the middle 50% of the run. If you can do 10% a turn using half the turn, then the HOLD is shorter and SAFER. You do not have to be so smart and so conscientious. So you eliminate almost all stocks from consideration If there are 20,000 to chose from you only need 12 to 24 active stocks. Next we can consider more the Test of Traders. The market's partner is very important. The mental part creates the emotional part. How does the Sharpe Ratio improve by having the proper market partner? Right now the concepts above put the Sharpe Ratio at a high value in CW terms.
For HOT, we use Rank. For OWN, how do we measure the money velocity? I would look at the column that computes the forming returns per day. Right?
Here is a little background on how making money works for position trading' A trader does his work to prep in the evening for 15 to 20 minutes. He knows what he is going to do the next day. At this point the Universe first sorted in this thread is stale and no longer useful. Universes are kept up to date by sampling the 20,000 stocks WEEKLY. This is done on Friday evening or Saturday morning. All the services (paper) hit the deck on Saturday AM. It takes one click to get a Universe. The initial sort on the universe is done so that 7's are at the top, zeros are in the middle, and 1's are at the bottom. A person can learn to use the sort effectively and efficiently. Sorting it alphabetically is not thoughtful and serves no purpose. Sorting it by score groups is very important. the stocks move up the list, go off the list and return to the list. A person can recognize easily that the 0's become 7's and the 1's become 0's. the 7's are already making their moves. So you think. You have to do the IAS on new stocks added to the list. you have to write about 20 items on the IAS after you print the chart and use a ruler to annotate it and then staple it into a file folder. think about which ones to do first. Think that if you do the ones you will be needing first, then do those first. Here in ET things move so slowly and inefficiently that no one is ever going to get to trading stocks. Lets say ET has five or 8 participants who want to be rich fast and want to train some staff to do the dtail work. wouldn't they be helping to fill in IAS's and scan them and post them? No that is not how a passive detracting outfit like ET works. No one pitches in ever. we wasted a week inventing what NOT to do. I saw a post that was the equivalent of 5 IAS filling ins. And it was logically ease to see the stock ws no good for making money. the chart had all kinds of typing on it as well. there was no intermediate term RTL. There were no trading fractal RTLS. the person knows that I will not respond positively to anything he does because he always switches to "inventing" before even trying to do what is asked. An OWNED list comes from entering stocks that have a BUY on the DAS. One after another each 25% of initial capital is used to BUY stocks. X dollars get you Y round lots. As time passes the Excel sorts the stocks to give you, for each day which stocks are HOT and they appear in order of their RANK by preference. every day you find how what you OWN is making money. Everyday you se the HOT stocks have FRV's and an hour and 1/2 latr they start making money. hold stocks kep making money for the average number of days of hold, then they poop out as a HOT stock gos closer and closer to the sweet spot. The only decision an expert trader makes is the moment when a HELD stock is done or a HOT stock needs to be bought. This is making use of the sweet spot effeciently and effectively. what would ET be like if the talkers actually did some work as a group? Et looks like it is going out of business. Why? No one on ET does any work to learn and to get rich. Trader mining by sponsors gaming dummies is the big deal here. a person starts. He becomes the owner of stocks on a given rading fractal. He replaces the stocks as they need replacing. His gola is to have capital to buy HOT stocks that have been anlyzed. As time passed he adds streams up to 12. As time passes he makes the streams rise to 100,000 shares each. I posted the results of a 100,000 share trade; a 17 point net for that stream. The third party evaluator (a broker) said he would give any trader using the method an additional 10% dicount. what did he want? he wanted to coattail trade with his other clients. The lazy approach. In a matter of time a person has 12 streams @ 100,000 shares a stream. His Sharpe Ratio is over 60. as the bullshitters say here he could own the world. hey do not know what rich people do with money. they help others. This person is also trading linked in accou8nts in commodities. He make money in this market 10 times faster. he takes the surpluses from both systems of trading and puts them in the slow system SSR. Here the app of cap is unlimited and decision only happen every 4 to 5 weeks. All stocks in thee Universe have to have IAS's. The HOT list is monitored a couple of days BEFORE the expercted lift off. three DAS's are used and filled in a day ahead of their use in trading. It taks over 30 partial fills to get out of 100,000 shars as the stock goes over its peak price mountain. And you are getting into another stock with 100,000 shares using about 20 trades. In ET about no one can even picture making money. You have to sort and create information. It is very very difficult to do the same simple thing over and over as part of a team of like minded people.
Now to answer your Question. Get "Putting the pieces Together". Leaf through the pages. Notice that I did 30 illustrations in 77 pages and I wrote in text how to read the illustrations. I had one goal. To make a video that allows a person to hear the words written in the transcript you can leaf with the illustrations that appeared on the video. there is a column there in each illustration that tells you the velocity specifically. It is there as it is on your display as you make money trading. I am describing PVT working in minute detail. do yourself a favor. you need to have a computer setup that lets you see the market. Most people in their lives nver see the market. here is a name: marketsurfer. David has never seen the market once in his life. He proves over and over that "surfing" is bullshit. Post pics of your screens and I will "fix" the mess you are looking at so you can begin to se the markets. At some point a person has to ask himself: Am I thinking? you are not thinking or getting references or leafing the references or asking any significant questions. you have to begin sometime. click a Universe next Saturday and post it here. do 50 Ias's next week and post them very day post the screen that shows the money velocity of the stocks you are looking at. find out that you are looking at the wrong stocks and ae not seeing the stocks that make mony for a Sharpe Ratio of 60 plus.
Thank you for the pointer. I am surprised to see you pushing me to do the PVT work, LOL. Didn't you implement similar efforts in Tucson early last year? Studying your old posts on short-term position trading saved me from throwing in the towel with your daytrading method several years back. It helped me to re-build the daytrading glossary and references. I am a lazy guy, spending the most two hours to daytrade in a day when I want to trade. I have never thought about trading PVT. It would interfere daytrade. Maybe I am wrong. Anyhow I have closed down equity data link long ago. Nevertheless, if there are enough participants here in ET to share the load, I don't mind to brush up my memory of PVT and chip in some efforts.
Now that I have proof they exist... I will later follow up with an IAS and more questions and comments. http://www.youtube.com/watch?v=h8W1ENLP-Ms
We now have 50% of the building blocks of coding done for PVT. We have an excel equivalant for the Universe, Owned and Hot lists ( replacement for Excel and Qcharts) and we have a replacement for stock tables.com. This work also replaces three DAS's. Still left to do are the RANK (Top of IAS) and the gizmo for signalling capitalis needed for buying a ripe HOT stock. We will compare the held stocks to assure an appropropriate sell will upgrade the owned list by the new buy. By putting these two pieces (the pieces to be completed) into the ATS, the ATS will automatically continue to optimize the use of capital. Since, optimization of application of capital is being added to PVT, this distances PVT even further from DD or having capital on the sidelines. By adding iteratively the details of the various parts, we can consruct a Cahrt of the Sharpe Ratio (vertical) vs each added ingredient. In this way it will be more apparent what the specific refinement represents to the whole. The CW (population) uses inductive proofs. Various sub sets of the CW (population) will be able to let us know when they are able to recognize the change in net profits becomes statisitically significant to them. It will be like watching LTCM and knowing and understanding when LTCM had qualified as a susccess. Convesely people can use the record to detrmine if and when they should decide that trading is not for them. They can also determine when they get to "revenge" considerations. Now, we also have a stock list for all exchanges (over 120,000 stocks)