In light of the ever present ET threads regarding edge, trading success, etc, I wanted to share something that I feel cuts right through to the heart of the matter. Am interested in your take regarding this. The following is Acrary's distillation from decades of market experience: With the info I have now, I would've done things very differently. I would trade 100% strategic and 0% tactical. By this, I mean I would diversify simple trading styles like trend, countertrend and rangebound over time and markets. I wasted too much time and effort on when to buy and when to sell. My time would've been better served asking; "should I be long, short, or flat?", for the simple strategies in multiple timeframes and markets. Rather than compounding I would add more timeframes or markets to build the account while continually lowering the overall risk. I would have never worked for another investment firm. They're good at discovering talent but useless at building it. The payouts are peanuts compared to hedge funds and the risk/reward demanded is ridiculous compared to the managed fund world. To make mega millions earlier I would've started a CTA ASAP and concentrated on marketing to fund of funds that had a negative correlation to my trading results. Building the account from opm is much easier than banging out the dollars and trying to build a account. I'd spend much more time at investor conferences and raise my profile. If I had some money early, I'd hire a publicist and a stylist. I used to argue with a investment bank guy that said "perception is reality". Now, I have to agree...he was right. Quote: Quote from m4a1: perception is indeed reality. acrary, i am surprised that you seem to be saying you have been adversely affected by this too. i thought someone with your background will have no problems with either the perception part or the reality part. Yes, I've fooled myself with the "perception is reality" argument. My work with my model on immunologic response has forced me to completely change my views on the markets. I used to think the markets were mostly random and chaotic with periods of stable recurring predictability. I couldn't prove this theory because I hadn't come up with a really good way of segmenting market movements and the sample sizes were always statistically small. This was my perception ... and I acted on it so it must have been my reality. I quickly realized if I wanted to come up to speed on immunologic work I'd have to abandon pattern matching and concentrate on letting the algo work on finding the best strategy for a market. To do this I built a handful of basic strategies and forced the market activity into a time box (1 day, 2 days, etc.). I then used the model (I call it Doron) to determine which of the available strategies should be used for the market in the time period. Anytime a large losing period was found I'd look at the data and determine that I didn't have a strategy for the model to use. So I'd code up a new simple strategy for it to sample (much like your immune system getting fooled the first time it faces a new disease...sample it...become resistant to future occurrences). In short what I found was a handful of simple strategies in a couple of markets were just as effective as all the years of work I did on finding market inefficiencies, measuring them, and exploiting them with tight edges. I had to give up my basic market premise and now go with "the markets are mostly inefficient and chaotic with small periods of stable predictability but with large periods of stable recurring strategic themes." In short, at 50 I feel like an old fool. Squandering my time trying to figure out the optimal way to fish in a pond when all I had to do was turn my back and throw out my line into a ocean full of opportunities. Maybe some 20 something will learn something from this and not waste his life like I have with the false perceptions I bought into. Our perceptions are indeed our reality. Quote from Arnie: I'm not so sure I see the difference? could you elaborate some more? If you accept the first case you have to believe there is a high signal to noise ratio. Because of this, the opportunities for consistent profitability would appear as islands of opportunity in a sea of randomness. It would require large, indepth study to locate the islands and large periods where you wouldn't trade. In the second case the markets are non-random but ever changing along the lines of themes (large trending periods, large chop periods, large counter-trend periods, etc.). In this case all you have to do is determine what large periods occur in a market and put in a strategy to exploit the opportunity as it comes around. No need to worry about randomness. Just define the dominant strategies in a market and do the basics like let profits run...cut losses short and let the strategies play out over time. Huge difference in salability between the two. Quote: Quote from m4a1: are you saying that it's easier to detect a change in one of these themes (case 2) than it is to detect a change from random to non-random behavior (case 1)? No, what I'm saying is in case 2 all you need to do is determine the themes, apply normal trade management skills, and diversify in time, approaches, and markets to control losses. I didn't think I could achieve superior results this way and thought it would end up like the one dimension long term trend followers that suffer through long and deep drawdowns. What I've found is you get the benefits of case 1 and the scalability of long term trend traders without having to pay in terms of deep drawdowns. No need to switch between themes. Cut losses short if a primary theme becomes secondary and let the secondary that becomes primary give you your profits. Not very exciting...but very rewarding. No prediction necessary.
As a precursor to building Doron, I had to find a way to characterize market activity. All markets are two dimensional (time and price). Of the two, only time is constant. I built some software to look at price action within a fixed period of time (1 day, 2 days, etc.). I expected to not find recurring themes (since I thought most maket action was random). What I found was a fixed number of behaviors that repeated themselves often. I could run a trendfollowing system in a market, find the poor performing periods and look at the classification system to find what would have worked best during the same time period. In a short period of time I was able to build a small number of systems that did almost as well as edge-based systems. The only thing necessary was to check the markets for changes to the basic themes (a much easier approach than checking for edge deterioration). In the end I felt pretty dumb looking for edges when the classification was so obvious. Anyway maybe it'll save someone else several years of looking in the wrong places.
So,...be ready to switch between counter trend and directional strategies (I'm generalizing)? I think Howard Brandy wrote of a methodology by which you constantly re-evaluated your systems and appropriately decided on when to wind it down. Though thats at the back of my reading list right now.
Yeah. A quibble here and there, but, pretty much. What I find astonishing about a site that allegedly caters to "elite" traders is that there is no little about characterizing markets. On the other hand, that works in my favor, so why rock the boat? In 1936, British economist John Maynard Keynes gave the best description of the stock market I've ever heard. He said stock market investors are like judges in a beauty contest. But the idea of this beauty contest is not to pick the prettiest girl, but rather to pick the girl that all other judges will think is the prettiest. This simple metaphor is profound because it reveals the truth: For all of our study of the economy and companies, it is subjective perception -- not objective reality -- that sets stock prices. And it's perplexing because, as Keynes pointed out, all of the judges are fully aware of the true nature of the contest and act accordingly. Each judge knows that he's a player in an fabulously complex game of psych and double-psych, an infinite regress of figuring out what the other guy is thinking you're thinking he's thinking you're thinking he's thinking, and so on and so on ... -- Don Luskin
Banks make money by trading with each other, inflating designated securities on cue.. the key is to figure out which derivatives/securities are being traded between themselves. http://www.elitetrader.com/vb/showthread.php?t=253318&highlight=ponzi thats all it is.
I've looked into every post Acrary made on ET and on other sites. I did this about 2 years ago. I thought it could add to my own knowledge. HERE ARE MY RESULTS Words of a Master will mean nothing to sheep Will mean very little to students. And will mean EVERYTHING to another master. Could Acrary have made it simple, of course, could he give things away, YES. But he didn't, he wrote in such a way that it is useless to 99%. Here is what he really meant to say. Hi, my name is Acrary, don't waste time with specific edge, develop a there-fold strategy that works on all the markets all the time. Your strategy has to account for change in market behavior, the strategy simply ROLLS to the side that the market changes to. And then eventually ROLLS back to the market behavior that was before. Like a giant circle again and again. Sometime it takes market 3 months to change its behavior, sometime 1 year. You adapt with already prepared same and yet different trading method. And you measure for change and apply three-fold strategy as needed. ------------------------------ See what I wrote, if you are new or old, and don't know crap, my words won't mean anything to you either.
Does he ever define "edge"? What he describes is the edge that one has trading behavior, continuously adaptable, never failing.
The guy lives in a $200k home in Lincoln, NE. Another guru bites the dust. Sorry to burst your bubble, but it's material as all we have is capital to gauge success in this business.
He could have 20 times that in a bank account though. If you were to gauge Buffet the same way u'd think he was broke..hahaha