Fletch2, Welcome to the world of Futures trading and good luck to you. If you are thick skinned I would like to offer you a couple of suggestions. Please do not take trading as lightly as you are. You are coming into this new venture with 2 strikes against you; one you are an engineer which means you will over analyze everything and two you admit to having a gamblers attitude which is not a good quality to trading. The backtesting is ok but you should be doing a lot more than a few days of it before risking your account trading live. Trading is not difficult after you learn to acquire an edge but that takes at least a couple months to even begin to see where that might lie. Think about it. Would you make an appointment to have your gall bladder removed by a premed student? Give yourself some time to get a feel for what you are doing before you "crash & burn" and don't know why.
Well, frankly, I think the basis of your warnings are baloney. The idea that all engineers "over-analyze everything" is just BS. Second, it is a bit odd that you would in one breath say I am "taking it too lightly" and in the second say I am likely to "over analyze." Second, I suspect you have no idea what I mean by "gambler's mindset." If you think a quantitative mindset for probabilistic thinking and strategizing (aka "gambling") is a handicap in trading, I would ask you why Wall St firms spend huge amounts of money on Ivy League graduates with mathematical and computer modeling training (all three of which I happen to have.) I don't know how you invented that assumption, but I have been backtesting and researching for over a year before I put a real dollar on the line. Thanks for your concern, but while I may have a light writing style, I am not taking any of this lightly nor am I as underprepared or understudied as you seem to have assumed. Cheers, Fletch
I misunderstood your original post. Didn't know you had been backtesting that long. That was the reference to taking it lightly. Sorry to ruffle your feathers . . . I taught engineers for 15 years and just know the habits of creating "analysis paralysis" out of everything they do. I'm glad to hear you are the exception in the field. As far as Wall Street firms spending the big bucks on individuals with Math, Statistical and Computer Modeling backgrounds, well my answer will piss you off but it's because they don't know any better. The reason the industry hasn't found a model that consistently works is because they are looking to individuals with the above qualifications to figure it out. I can imagine you are most probably one of the brightest in your field but your talents won't find anything any other engineer hasn't already found. Math won't solve a varying equation. Statistics skew the results to whatever you want from them. The lone help will be computer modeling but I have yet to see any engineer get past the first two to understand how to use the modeling alone to solve the problem. I hope you are the one that can accomplish that on your own. A gambler's mindset "is" a handicap and maybe someday you will figure out why. Good luck again with your trading. I mean that wholeheartedly.
It doesn't piss me off, I just don't think it's particularly credible. It's not a new fad that hasn't had time to burn out or be discredited. As far as I can tell it's been a mainstay of successful investment and trading firm hiring strategy for over 30 years. I have people tell me all the time how it's impossible to win at poker or other forms of gambling. When I ask how they explain the existence of long-lived professionals, they say they are liars or cheats or charlatans who make money selling books or seminars. Well, I happen to know that's false because I have the statistical proof to show that it can be done beyond any reasonable doubt, having personally done it. It seems likely to me there's an analogy with quantitative strategy trading as well. I have evidence for this and that's why I'm here. I'm used to listening to emphatic, absolutely self-assured naysayers telling me what is impossible, so your comments aren't sufficient to dissuade me. And as far as I'm concerned, I don't need to. I am not trying to find a strategy sufficient for "the industry", only for an individual. If you want to claim that there has never in the history of trading been a winning individual who has taken a quantitative approach to the markets, I think that would be an interesting claim, and I'd be interested in discussing that further. Otherwise, if you expect I could do as well as others have done, as you say, why shouldn't that be sufficient to justify my endeavor? "Math won't solve a varying equation"? I'm sorry but your comments strike me as largely naive about what math is and isn't, and what it can or can't do. And my belief is that you are wrong about that. Cheers, Fletch
Someone should pass this onto TS. This sounds like a really great idea that should've been implemented many versions ago.
My point exactly. Open real-time data, available to the general public, has only been around for a little over 11 years. There has been some major inroads made in TA and TA/fundamental mix strategies during that time yet the "big" Wall Street firms can't or won't grasp those concepts. They are 30 years behind the curve and that is where the individual investor has an advantage over then if they take advantage of it. I agree that you can win at poker but not with any great consistency. You never see the same people win at each tournament but you do see the same group consistently in the finals. There is a certain amount of luck that exists in poker that doesn't exist in trading unless you inject it there. Don't get me started on Statistics, even Ph.D.'s in that variable science will tell you it is a self serving science. I never said what you are trying to do is impossible. Please read what I said not what you think I said. I said that was that thinking that gambling was a correct model was wrong and that if you use your apparent intelligence you will figure that out. It will take time though. A lot more than the "one" year you have been doing your backtesting. It will take many years of real-time market action to prove to yourself it doesn't contain the consistency you want. Of course I am assuming you are looking for consistent safe profits from the market. I'm not trying to dissuade you of anything. My only purpose was to offer my good wishes and a bit of my 11 years of continuos real-time experience researching price from a mathematical and pure physical standpoint. If you have more experience then I apologize for over stepping my bounds offering suggestions. You will learn all you need to know on your own . . . you don't need anyone telling you how it will turn out. Naive from a math major . . . whatever. If you can solve a problem where the equation is constantly in a state of flux then you ARE the next Einstein and I bow to you far superior train of thought. It is your right to have your own beliefs. The queen of Spain thought that the perfect way to get rid of Columbus was to send him over the edge . . . she changed her beliefs when he came back. Your beliefs will change on their own once the dampness behind your ears dries a little. Until then, great trading, great successes, minimal losses and Merry Christmas! Cheers, Charlie
"Consistency" is a slippery word. Is turning a profit every month without exception for 36 months "consistency"? If so, I disagree with your assertion, because I have done that. Given an edge, variance and sample size determine "consistency". What, the multi-hundred or thousand player TV tournaments? Of course not, but it's a non-sequitur from your previous sentence. Huge MTT's are the lotteries of poker. The variance is huge. But that's not how a player turns a consistent profit and everybody who has ever done it knows it. I think that's an absurd claim. You don't have all the information being fed into the market available to you. That extra information works for or against you more or less as a matter of chance, injecting an inherent luck factor in any trade. This is one thing I have learned from gambling theory and practice. Seeking "consistency" for it's own sake is a fool's errand. What you want to make money is an edge and a reasonable balance between variance and opportunity so that you can have a shot at getting into the "long term" so that your edge wins out with increasing certainty. Anything else is missing the point, including a myopic pursuit of "consistent, safe" profits. Scared money never wins. Nonsense. I do that every single day. Literally. Cheers, Fletch
Not necessarily. I don't want to get too much into poker talk in this journal except as it relates to trading. I'll just say that a good player plays where there is a balance between the size of his edge, the variance of the game structure, and the opportunity to repeatedly exploit his edge so that it will "show" with a high degree of certainty on a timescale that fits his needs for the income. All of those things are quite subtle to determine in practice, but the principle is the correct one. Fletch