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# SP trend following System

Discussion in 'Strategy Building' started by acrary, Oct 14, 2002.

1. ### MISSSNP

buy on monday, exit on friday!!!!!
god am I impressed!!!
what'd you do, steal this from one larry williams inner course
seminars?
this is all dow, (day of the week) bs.
this is not an edge. An edge is a priori probability. E.g., arbitrage,
Character trading is really empirically based, i.e., larger the sample size, greater the confidence level.

Paula

#31     Oct 16, 2002
2. ### acrary

Sorry to have wasted everyone's time on the topic of an edge. It's what enabled me to retire after 14 years as a pro. I can see that discussions of measuring an edge by using conditional entropy and probability sampling are beneath this sites members. If anyone has any further interest on this subject, here's a link worth checking out. There's a few articles with PDF's for download. The rest can be obtained at any decent college library.

http://web.mit.edu/alo/www/articles.html

#32     Oct 18, 2002
3. ### bozwood

"discussions of measuring an edge by using conditional entropy and probability sampling"

Would you mind explaining the two concepts? Or possibly posting a link to articles, etc. explaining the terms and their uses?

Thanks

#33     Oct 18, 2002
4. ### stu

conditional entropy:

qualifying by a proviso ( or possibly arriere pensee ie:unmentioned condition, doubt or reservation) a numerical measure of the uncertainty of an outcome.

probability sampling:

The selection of a representation of the whole, which is suitable for study in order that a measure can be made on how likely it is that some event may occur.

Call me cynical..... but do either sound like an edge to you?

#34     Oct 18, 2002
5. ### acrary

I have a couple of hours to kill before I close out my currently 50+ pt. winner per-contract in the weekly SP trade. I'm sure I'm just lucky! (LOL). This will be my last post on this site. I thought I could add value to some of the folks struggling. However, I didn't realize how thin my skin became since retirement. Too much sun I guess...forums aren't going to be in my future.

Here's my last rant on the the subject of trading. After this, I'm going to go hop on a charter flight with my buds to go see the series during the next week. Don't worry, I won't mention the E...D...G...E... word again. I see it's a psychotic drug for some of the posters.

There's little doubt the vast majority of people that attempt to trade, lose. The majority lose so the minority can have gains sufficient to justify the extensive research required along with the risk of time and money. That is, "above average returns".

The challenge then is not to avoid all the losing traits, (though I'm sure most of the things not to do are excellent), but to concentrate on the things that the minority of people do to win.

The first thing you need to do is convince yourself that the markets are not completely random. If the markets are completely random, no amount of research, emotional detachment, etc. will help. To continue to trade when you know the markets are random is to engage in gambling. Do you think that winning traders over a period of years gamble? I've been to Las Vegas many times and never put even a quarter in a slot machine.

Once you convince yourself the markets are not completely random, your search will take on new meaning. The challenge then becomes how do I locate non-random opportunities in the market so that I can exploit them? Once you've found a method for exploiting the ****, then the MMGT, and everything else is just a wrapper to ensure you are around long enough for the **** to be realized.

That's the direction I and many others that have pulled \$1.98 from the markets have taken. I've looked for, found, measured, and developed strategies for pulling pieces of profits from the markets when non-random conditions have appeared. Will wars, weather, and other newsworthy events screw up possible non-random opportunities? No doubt about it. That's why the search can only be done on a probabilistic basis. You will never have absolute certainty in the markets. If this is stressful to you, stay out. If the idea of spending possibly years looking for a single non-random opportunity seems overwhelming, stay out. If you decide it's more fun to trade than to treat this as a business, then plan on losing whatever you put into your account.

If, after all this negativity, you decide you want to still get started, then here's a link to an article to help convince you that the markets are not completely random.

#35     Oct 18, 2002
neksor likes this.
6. ### hit_n_run

hi,

thanks for giving us some food for headache j/k

I am papertrading it, right now. I use the donchian channel 15 and 5 for entry and exit. is the donchian channel ok? or what kind of indicator are you using for the signals?

thanks again

#36     Oct 18, 2002

well i guess a typical, egoistical ET member at this point, would private message you, acracy and ask whatever questions they had, etc. But I won't do that. I want you to stay on the forum, partciularly on this Strategy Testing thread and continue helping all struggling traders here by sharing your insights. Your contributions are hands down the best in this thread. I (and I'm sure more than a few others) will deeply regret if you choose to leave. Please ignore the cynics, and keep on helping out!

#37     Oct 18, 2002
8. ### hit_n_run

agree 100% and I would like to ask acrary -

#38     Oct 19, 2002
9. ### stu

Well strange as it may seem I too would like those who find the need or time to be bothered in the first place to post info on any subject to stay the course and explain and answer the questions and criticisms which will inevitably arise.

I do not see how it can "help struggling traders " to simply post an academic statement then run a mile as soon as the first skeptical comment arrives. Doing that just satisfies the cynics and supports their assertions.

A robust system or method which can be openly discussed will be enhanced and strengthened by query and questioning. Phrases like"... discussions of measuring an edge by using conditional entropy and probability " are the emperor's clothes if they can't be disseminated. The understanding that the author may be trying to get across, may not be understood without a more complete explanation arrived at from questioning and yes...some (constructive) criticism. Sometimes such examination is an essential part of getting a point across, and may reveal aspects that have been previously misunderstood. Critics around here are soon dispelled with a straightforward response.

A little patience with the skeptics can pay off but if folks are so precious that a little pressure frightens them away then I wonder if you would not just be absorbing all the valuable stuff along with the downsides and or b/s and ending up again being more confused as a struggling trader than you were before. Unless of course one prefers just to accept that as something sounds technical it must be good.

A very good point hit_n_run .

What would that reason be ?
Both on the positive side (to help others and develop a method) and on the 'negative' side (a weblink to an article on Andrew W. Lo's new book ??)

#39     Oct 19, 2002
10. ### Girlpower

I agree entirely with the sentiments about staying. Your posts, Acrary, have already modified and enhanced my thinking tremendously.

I've been reading through the archives of this list since I joined looking for gems of wisdom and ideas that work. Even taking a small sample and testing your approach laboriously by hand using a relatively small sample and many hours pouring over it has shown me that you are very right. I don't have the technology to do it large scale over reams of data, but I will certainly be investing in it and developing more having read these posts.

Perhaps the doubters might also try things out and study them rather than debating it or throwing stones. If an idea works and makes money then it is worth doing. If if doesn't work and make money then it isn't worth following after establishing that. If the doubters don't take the time and trouble to test an idea and work it out (especially when it clrearly works for someone else) then they lose out big time.

Having something that not only works consistently, but works much better than 90% of random (there will always be some flukes) has to be a total gem.

I've picked up lots of ideas here that I hadn't thought of for myself, and I intend to test them all to see how they work for me and if they don't, work out why and then try to improve/modify them so that they do.

Natalie

#40     Oct 19, 2002
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