How to research and verify trading ideas

And ScottD hasn't posted since March when he said "Cash Cow" (as certified by Jack) isn't profitable.
http://www.elitetrader.com/vb/showthread.php?s=&postid=2462769&#post2462769

 

you included your REPLY as an ATTACHMENT?

Now you are using boilerplate responses to ramble?

HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA

 

The beginning of Jack's rambling, disoriented (attached) response. He attached it because it went beyond ET's maximum post length



It may be true that if a person has different but rational views, he may be described as I have been described. Naturally, it is a good idea to not have that person's views in the milieu of the main accepted theme of how to research and verify trading ideas that is presented here. By not retaining my views, the theme is able to continue apace to its natural conclusions.

Researching and testing trading ideas is a common occurrence among those who think about the opportunity the market represents. The opportunity is often characterized by various evaluation tools that are commonly accepted.

My view on the characterizations assigned to me is that I have a non overlapping system as compared to the CW context of this construct and examples so far. So I mentioned that what I described probably sounds foreign and even sounds like something in a foreign language.


yadayada

 

Here's a cute snagit.... Enjoy

I regard this pic as a nice capture of an interesting moment. Sort of the end of a short move and how the indicators work. I used my SWD to detect it.

 

Ok... I read your 2000 word post in a taxi this afternoon... I'll read it again and also look at some of those other posts, but let me share a few thoughts. I'm going to break this up into 2 posts just to be crystal clear (hmm... there's that word again)

Please explain to us exactly how to generate this market operating matrix of values you refer to. Pretend you are speaking to a smart 12 year old kid who understands addition, subtraction, multiplication and division. Simple, exact terms. How do I get from OHLCV data to the Market Operating Matrix of Values?

This is set as a separate post because of its importance. Without a clear answer to this I don't see how we can really discuss your ideas.

 

And secondly, a few general thoughts:

As I read your post and tried to sort through what you were saying (in all honesty, your writing really can be difficult to read) I noticed a sense of superiority in what you do compared to what everyone else does. This is ok in a sense because everyone has to find what works for them. However, there are many valid approaches and to say yours is the only right one or even the best way... well, that's a hard pill to swallow.

The real irony is, I do most of the things you seem to imply you have an exclusive claim on. Everything we do is based on an understanding of how the market works. All trading ideas stream from concepts about market behavior that I have learned from two primary sources - years of trading and observation and past attempts (successful and not) at developing trading systems. We don't randomly test combinations of technical indicators or anything like that... rather we come up with a trading idea that should express a fundamental market tendency and work on development from there.

Everything goes back to my understanding of how markets work. For instance, I was out of the office and out of touch for most of the day and I was perfectly comfortable leaving the elves in charge. I had a conversation with our newest elf before I got on the plane where we discussed some of the things we had seen with market internals this morning, the way the market was trading in general, the way leading stocks were acting etc etc. It basically boiled down to the fact they really couldn't rally the market very far off the lows. So I said what are you going to do? She said "get short and stay short." "Where do you plan to cover?" "Going to make the market prove its strength. Going to sell bounces. I probably don't get nervous until 1120 on the S&P and probably don't cover anything until 2 handles above that." "What if they make new lows in the last hour?" "Get really really f*cking short and stay that way until the bell." "What are you worried about?" "Always looking out for the tricks so if they take us to new lows and start buying hard I have a problem."

See? Isn't that simple?? The person on the other end of the phone had been trading for less than a year... you don't need any concepts of overlapping markets, volume pace, data sets, fractals, indicators... you don't need none of that stuff lol. All you need to know is some basic ideas about how things usually work... you can put whatever statistics or systems you want on it, but at the core is a simple understanding of market behavior.

I do want to raise one serious issue with you. You seem to me to tread dangerously close to the "perfect order in the markets" school of Gann et al. Empirically, this is bullsh*t. Markets are highly random. Mostly random even.... absolutely not orderly and transparent. The challenge comes from being able to pick out the non random pieces of information that are significant... it's fairly simple to do so, but the signals are buried in a thick veil of random noise. This claim comes from looking at market data as it really is, letting the data speak for themselves... not any construct anyone imposes on the market.

I believe it is possible to be profitable by always being in the market, but there is no need to do so. When there's no clear opportunity, it makes sense to be flat... by always having a position you increase your exposure and risk considerably. (9/11 anyone?)

And... price is a lagging indicator? There are no leading indicators of price... no true reliable leading indicators. I suppose if you are reading the order book you may see some leading information there (imagine a print at 50.05 then the market goes .13/.17 without another print... there's leading information there but I doubt you're looking at that level since you seem to be focused on ES?), but price is really the only truth.

One piece of constructive criticism if I may Jack: I realize you have a lot to say and basically no one on ET will listen to you anymore. You don't have to say it all at once! Please don't dump massive posts in response to simple questions... let's take baby steps. I won't read and try to sort through too many more 2000 posts with 8 topics included. Let's focus on the Matrix first and go one step at a time. If we see empirical, testable value to your concepts there will be time to say anything and everything you want. Fair enough?

 

see attached.

 

Here is an intermediate level pic of cashcow giving one of the traderzones polka dot regions of the matrix at the time of the prior snap of the walls ending the short near the end of the day. The spread reached 1 1/4 points at that moment shown. I personally like snapping this kind of event but I recognize most people do not know it is coming or when it is happening. It is not idiosyncratic to me it is just how a differentiated mind is capable of getting the trading job done.

Just as there are cases for adjacent bars and they do progressions, the same is true for two line indicators. The cases there are limited to 6 and there is also the progression. In any cyclic progression the segments can serve as signals. So in synchronizing them so they work on all fractals, a kind of practice has to be deployed. This practice and others are foreign to most traders and certainly programmers and those who use mathematics.

The silly end of the spectrum in designing and verifying trading ideas is where a lot of people live. For example, some people think indicators are lagging. How could their minds get that ficked up? We may find out. At some poiint we may even be able to assign an age to it, at least an IQ type age. Dumbinnominators so to speak.

 

Talon

These two are truly golden


I respectfully disagree about the mkt being random – I say it is uncertain – but it’s probably just semantics and nothing I should go on about


You write very eloquently Sir – My respect to You

Happy New year

RN

 

This is your thread. I have been reading it out of interest.

I have never really done much to suggest the my way or the highway in the last four generations. There seems to be a spectrum of successful methods. Each one is multifaceted.

And there are a lot of myths out there. I have nixed them from my orientation.

I feel lucky to have taken the path I did; it is a lot of fun.

I really don't view other's work as something use for comparison.

You probably do this anyway, but with your elves and the newer ones, do you call the market a specified period ahead so that they can cut to the chase ahead of time and be focussed on those particular "'tells". As a cheater I was kinda looking for a lower end of the range today. In terms of humor I liked seeing the 1117 hit because a moderatred poll was relating to that...

Are you going to lay out the moves for new year in ET over the weekend?

have a great evening.