Thanks to everyone for their great feedback. You see, Prof, I am not sorry to be so open and sincere - out of 20 replies I only had to put one guy on my ignore list (the one who asked me if I was stupid). I think this forum (the Automated Trading section) is great. In the past 7 years all I got is great help from the people here, with coding, strategies, and psychological. Few superficial posts with smilies (they're all in the "Trading" section), few people making fun... I think it's been very convenient to be sincere. There's a great quality of people in here. But remember my original question: how is it possible for the little guys to make money with trading systems? Why isn't the case of what everyone around me says: if it were possible, everyone would do it, so it cannot be possible... And also: do you feel guilty about making money without working?
"God thinks money is bad, so if he existed he would destine me for punishment for trying to make money" I have no clue where you got that misinformed idea.
Mostly correct. The key concept to what you're saying is that the most important aspect of trading is how to handle the trades that go against you. Adding to losing positions isn't always the best option but it's a very good one much of the time since the odds become highly in your favor. However, certain outlier situations put the odds against you seriously. The secret, if there is any, is to build simple strategies and then study all the situations where it fails to work so you can build in filters and triggers. You have the idea similar to my trading. The trick is to use different parameters during up trends, versus down trends, and chop, versus sideways markets. Frankly, it makes it a lot easier to have a system that allows running completely separate strategies on the same symbol. That's why I built TickZOOM originally. That way you can setup non-correlating strategies with rules that for different market conditions. It's easy on TickZOOM but you make a tiny error in thinking you can never lose if you have a 24 hour cap. On any market, you're right, the price will zig zag at least some during the day. But it won't always reverse enough by days end to be profitable if you double every 3 hours. There are always outlier days. Again the trick is to study those days and see the patterns on how to filter them. And of course, set some limits so that you're protected from any catastrophic outlier. If you truly automated then you will find that the emotional aspect is only slightly less with automation and primarily depends on how much you "watch" your automated system. When you "watch" it too closely, it's easy to get nervous and pull the plug just as much as with a manual system. But if you go about your job and life and only check it once a week or so, then you'll be better off. And just like discretionary, your position relative to your account size and overall net worth will have a big impact on how emotionally attached you get and how much you feel the need to "watch". Less is more. You'll find through testing that doing this based on time like 3 hours, 6 hours, etc. could be a major mistake. Doing it based on price levels away from the entry price as the fundamental strategy is more practical. That makes the the time interval variable. Wayne
It's a mindset that gets learned. Many people make money "without working" so to speak. Perhaps their income comes from real estate or holding assets that generate a return. A large number of people receive retirement benefits, pensions, annuities and other ways of living without directly working for the money. The difference is that most of those people feel they "earned" the money by paying into SS or an annuity, by working for their pension, etc. and my feel unable to work as much any more due to age or infirmity or they may have been raised in a family with this type of income so they grew up expecting this. The emotional difficulty in making big returns in trading is that we forget we "earned" that money by working (as you said) 10 years of research and studying to make that money. If you focus on the sweat and tears, books, software, time on forums, fighting the current of nay sayers for 10 years then you might realize you definitely earned it. People always feel a void when they have all their material needs met. You hear it all the time from financially successful people. There are famous quotes from Rockefeller, Perot, and many others that say that money doesn't bring happiness. Many people get to that point and find that they have a "spiritual" need. In other words, they need contentment that comes from non-physical or material pursuits. That's why a majority of truly rich people like the Gates, Rockefeller, and others set up foundations for philanthropy. As the Bible says, "there is more happiness in giving than receiving". That's simply a fact of life. Interestingly, effectively serving or giving to others to achieve "happiness" can be a challenge. Merely writing a check to a charity usually won't make you sleep any better at night. It's normally only when you personally get involved in helping people that you feel the joy of giving. If you only "receive" and never "give" that can generate feelings of guilt which stem from greed. Frankly, if you research and get personal experience you'll find that while giving to others will increase your happiness, people still feel an emptiness. That emptiness or void comes from having time on their hands to think about bigger questions like, "what's the meaning of life?" Now that they have succeeded at having time to really enjoy life people become increasingly concerned about fatality from old age, ill health, relationship problems and even how short life is due to inescapable death. I wouldn't bring the next point up except that you yourself mentioned the advantages of being atheist. Whatever your religion, atheist or otherwise, the fact is that the questions, "why are we here?", "Why do so many people suffer all their lives and die?" "What happens after death?" "Is there really a God who cares?" demand answers. Most religions fail to answer these questions satisfactorily which leads people to atheism. They reason that if a God existed he wouldn't allow all the suffering in the world. Unfortunately, just like trading, there are tons of people and countless religions ready to discourage, and nay say that answers even exist or else offer misleading or entirely false answers. If you're reading this, ask yourself, do you really have good answers to any of those questions? Most likely not. There are people who have found satisfying answers and enjoy life very much knowing with confidence what the purpose of life is and how to find happiness. Then, in fact, it matters little how much money you have, you can enjoy life. Of course, money is useful for many things but not the necessary ingredient. In fact, much research shows that, on average, poorer parts of the world enjoy life more than the affluent. So true. I agree will all of this and, as a programmer, I'm certain I have spent countless hours on wasted dead ends. It almost seems that educations and intelligence can work against a person in trading due to the paralysis of analysis. But persistence can pays off regardless your handicaps even if you consider programming skills a handicap. Well your post is enjoyable for discussing the deeper questions of life after financial success. I can attest to the happiness that comes from volunteer work and the result of time and research to really find the answers to the meaning of life and verifying them which can be compared to "back testing" a strategy. Obviously, it's necessary to have convincing proof along with satisfying answers. Wayne
Thank you, Wayne, for your great posts (this part I wrote after reading them). I am going to reply as I read them. Thanks for the in-depth analysis of the "adding to losers" system. You confirmed to me that my estimates were close to reality. In fact, they were not correct first of all because I hadn't tested them. Also, level-based "adding to losers" makes more sense than time-based. Edbar might add something about this system, since actually he's the one who mentioned it first on this thread. Very good also your observation about "watching a system too much". It happens to me as well. Your psycho-social observations, on your second post, make a lot of sense as well, and bring great insight to this thread, that was going off-topic. You really understood the sense of this thread, and opened up and spoke sincerely, without being afraid of the "smilies" people. The ones who write one-line superficial posts and don't care to get into matters. "The emotional difficulty in making big returns in trading is that we forget we "earned" that money by working (as you said) 10 years of research and studying to make that money." It applies to me 100%. But you see, I still feel it's not really fair that a lawyer/doctor/carpenter/janitor worked as much as me for 10 years, and will work in the future, too. Whereas I can stop here, instead. So reminding myself of my past efforts and "fighting the current of nay sayers" actually only helps a little. "Many people get to that point and find that they have a "spiritual" need. In other words, they need contentment that comes from non-physical or material pursuits." Yes, I agree. I could add: Rockefeller had the opportunity of realizing that money doesn't bring happiness. Whereas the others were too busy looking for food and shelter to stop and think about whether they were happy or not.. it reminds me something I studied in a psychology class I took: http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs First you satisfy your basic needs, then you think about the rest... all according to a certain pattern. Check it out - it makes a lot of sense to me. You're not gonna worry about a girl if you dying from starvation or don't know where you're going to sleep tonight. You asked some painful questions, and brought up some disturbing points and doubts. Most things you wrote (about 90%) I was already thinking them, subconsciously, but I didn't enjoy reminding myself (like the fact that when your basic needs are taken care of, you may start thinking about death, and feel worse than before). I would say we're getting quite philosophical. So thank you, because I share that interest. To state some clear facts, though, down to earth, without getting lost in too many abstractions or theories, I would say that I clearly don't like to go to work every day. So I definitely want to make money in order to quit my job, and I think I will definitely be happier. Thanks for reading, quoting and appreciating my thoughts about the limits of knowing too much or being too ambitious (for example for programmers). In the end success is all a matter of assessing correctly how much you can achieve before giving up, and therefore also a question of discarding fights you can't win. Being so bad at programming, I discarded all the high-frequency trading strategies. Who knows, maybe programmers didn't and they wasted years on them without managing to get anything done. In that case, I saved time twice (by not learning how to program, and by now trying to build those strategies). Overall it's better to know than not to know. But it depends how much time it takes to learn, and it might make you lose focus about other useful things. It's all about... I don't know what it's all about, I have spoken enough.
...that's why I speak freely, and I am not afraid of giving away what I learned with great efforts/time. I am not afraid of giving away my secrets. Unless someone has been through everything, it will be impossible to understand what I am doing. And if they understand, it means they've been through it, and made a lot of efforts, so it's fair that they understand it. That's certainly intriguing. Care to share a secret or two?
Yes, use time zones. Certain things happen at certain times. Also, as I said in another thread, there's a tendency of the markets to go up and down, more than in trends. So take a moving average, when price is above, go short, and when price is below, go long. It's not as simple but that's the principle that rules markets: up and down. Especially on most markets: not something like the CL, GBL, or ZN. They go more straight up and straight down without as much zigzagging (that, too, could be exploited - I still haven't had time to test it). Also, there's a time in the day for trends and there's a time of the day for range. Also, there are markets that tend to have trends and there are markets that tend to have ranges. But the basic principle that guarantees that you can make money with a system is that the markets are not all the same and that they are consistently different (their behaviours are different in a coherent and constant manner). If there's a difference it can be exploited. If markets were a flat line, then we would be screwed. But since they move, and since we all agree that they are not random, then there is a way to make money. Also, a very simple advice: get an idea, see if it works, and if it really doesn't work, then the opposite will work. If you read my past posts you can find more. That's where the effort part comes in. On the other hand, there are much more talented people here (just look for those that also explain something, because some do not), and I suggest you read their posts instead of mine - I am basically a "newbie" compared to most people here. I just talk a lot, and I enjoy explaining what I understood. Because I understand it better that way, and I get more ideas as I explain things I have understood. So find talented people who also enjoy explaining things. For example, Edbar is one - read his posts in this very thread. Wayne is another one. They tell you about the "adding to losers" system -which works. (The skeptical ones won't suggest anything better - so ignore them). But to tell the truth it is easier to do everything by yourself, and to find out by yourself than to ask for other people's advice, at least for me. It takes me more effort to go through all of Edbar's posts, Wayne's and similar posts, than to look at historical data and backtests and find a way by myself. Another good (and not too tiring) way to find out what to do is to come here and say something, and these people will tell you why you are wrong. As I said, open up. Be sincere, and people here will help you. I owe this forum at least 10% of all help I ever received. The one person who helped me the most is a programmer I met on a similar trading forum, in Italian. The second person is a programmer I met while playing online risk. People enjoy helping other people, because they make progress as they explain things to others.
LOLOLOL! This is funny. What it really means is, enjoy it while it lasts. It's never this easy. Just wait until market conditions change. That will throw your method to hell and it will be back to the drawing board. I remember when I felt as though I could do no wrong and trading would always this "this easy." Boy, was I in for a rude awakening. The good news is the experience you are getting now will be very valuable and the experience that you gain when your system stops working will be <b>priceless.</b>
Well, my concept of "easy" is that I only worked on it for 12 years. I hope I am not in for any more surprises.