Mechanical systems a route to the poor house.

Discussion in 'Trading' started by jwecme, Jun 21, 2006.

  1. The hardest and most significant part of system trading is managing them.
    #21     Jun 21, 2006
  2. Interesting point about management - explain more for me please!
    #22     Jun 21, 2006
  3. And just because you can't hit off a major league pitcher either, must mean that's impossible too. Right?
    #23     Jun 21, 2006
  4. Think about all the people that suddenly broke the 4 minute mile right after Roger Bannister did it.


    Bannister stuns world with 4-minute mile

    © St. Petersburg Times, published December 17, 1999


    For years, the 4-minute mile was considered not merely unreachable but, according to physiologists of the time, dangerous to the health of any athlete who attempted to reach it.

    For Roger Bannister, it was vindication.

    When he crossed the finish line with a time of 3 minutes, 59.4 seconds, he broke through a psychological barrier as well.

    John Landy, considered one of the great milers of that era, never had gotten closer than within 1.5 seconds of the 4-minute barrier before. Within 46 days of Bannister's breakthrough, Landy surpassed the record with a 3:57.9 in Finland. Bannister and Landy raced later in the year in the "Mile of the Century" at Vancouver, a runoff to decide who was the faster miler. Bannister won in 3:58.8 to Landy's 3:59.6, the first time two men in one race had broken 4 minutes. By the end of 1957, 16 runners had logged sub-4-minute miles.
    #24     Jun 21, 2006
  5. mokwit


    This, excerpted from a an Amazon review of The Logical trader by trader75 (ET name is different) sums up a lot for me........

    As PTJ noted in Market Wizards, all forms of trading are ultimately systematic. Every human decision is based on some form of logic, conscious or otherwise, even if the `logic' in question is nothing more than base fight-or-flight response. So when you think about it, a trader really has three options when it comes to developing a methodology:

    1) He can hack away and reinvent the wheel on a regular basis, making arbitrary decisions over and over without examining them or even being consciously aware of them. This is otherwise known as beating your head against the wall.

    2) He can develop a system `in his head' through years of trial and error + costly experience, purging mistakes through sheer repetition and dogged determination. This is learning the hard way (maybe the hardest way), unless one has the good fortune of an excellent teacher / mentor at hand.

    3) He can consciously commit to the development of a robust 'system'--be it discretionary, mechanical or a blend of both--recognizing the need for structure and articulated reasoning. Through a deliberate process, mistakes are analyzed and rules reviewed with an eye for consistency and improvement over time, allowing the methodology to evolve into something sound and useful.

    Mark Fisher's gift, in addition to the ACD system itself, is clarifying by example how vital it is for a trader to reach level three. In creating a flexible structure and abiding by a clear set of rules, the discretionary trader ultimately finds himself liberated. As good brakes on a Porsche enable more speed on curvy mountain roads, intelligent trading guidelines enable more freedom and versatility rather than less.

    Why? Because when the method of operation is defined and systematized, the core elements no longer require conscious thought--or very little conscious thought--to execute in real time. Given enough familiarity and conviction, the basic workings of the method no longer take up valuable real estate in the conscious mind; instead, the rules are 'unpacked' into the vast airplane hangar of the subconscious. With the conscious mind no longer burdened by a need to reinvent the wheel / make arbitrary decisions / create structure on the fly, stress levels go down and awareness levels go up. It becomes easier to pay more attention to subtleties, take in more information, analyze more markets, engage in further R&D, or simply trade in a more relaxed and confident way.
    #25     Jun 21, 2006
  6. Good Copy/Paste.
    #26     Jun 21, 2006
  7. it depends on where in its life you start the system.

    let me explain--some of these systems have tremendous runs--if you start at the begining of one of the big runs, you can make a fortune.... if not, oh well--yes its a route to the poor house.

    see systems like aberration,checkmate,basis2,andSTC to see the runs i am talking about.


    #27     Jun 21, 2006
  8. You never found your holy grail then.

    Its exists, its not THE HOLY GRAIL: the much sought after system
    that has a win rate above 70% and limited drawdowns.

    But once you are able to trade a system that wins around 35-50% of the time and gives moderate (and on a few rare occasions large) drawdowns, and you are able to live through those drawdowns, you will be able to make as much money (over time) as youll ever need.

    Of course most people want to trade systems that win well over 50% of time and have limited drawdowns. Such system do not
    exist and are a sure route to the poor house.

    And the system you trade needs to based on some sound
    principle, based on the laws of supply and demand and/or
    crowd psychology. Developing systems from only data is another
    route to the poor house.
    #28     Jun 21, 2006
  9. I certainly agree. Once I have found The System and made enough profits, I'll also go away from ET quietly. :D
    #29     Jun 21, 2006
  10. tyrant


    Since you said biases on longer time frames are easier to trade, why are you still trading intraday? And, can you briefly state your performance stats like win probability, average win/average loss ratio of your 4 profitable intraday systems? I am curious just how profitable these systems are...Also, how frequently do these systems trade?
    #30     Jun 21, 2006