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SIUYA
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Posts posted by SIUYA
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great points zupcon.
I often think that either good traders dont know what particular reason is behind them making money.....rather than them willingly hiding the truth.....and maybe its a combination of many factors that is hard to pin point to just a simple entry exit rule.
No trader is likely to reveal his secret recipe especially if it seems either extemely simple - they will be thought of as redundant, or extremely off the planet - they will be thought of as a loony and easily dismissed when having a bad streak. (From memory there is an interview in Market Wizards where by a trader does not disclose too much for fear of being thought a freak)
The flipside to your post is those models that do make money in theory and yet blow up in reality.
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I tested the crap out of this several years ago. Meh. It was okay. These so called "volatility" stops are all much of a much-ness really - standard deviation, average true range, it's all just throwing in a load more stuff to worry about . . .In directional trading, any kind of hard stop introduces a non-linearity to the strategy.
Why not look at using options, hedged pairs for market-neutrality, intelligent position sizing, zero leverage to cope with the tail risk . . . Think outside the entry/exit/stop/target retail box?
Kind regards,
BlueHorseshoe
Blue - while it is just throwing more stuff at it - at least it gets people thinking more about volatility based stops IMHO.....you correctly touch on this regards position sizing etc--- problem again is that often most folks dont have large enough accounts to worry about this.
...and it does depend on the system (thanks Zdo)
Problem with the use of options is in the testing....
Personally - trailing hard stops is fine no matter what you use - so long as you have a good method for re-entry because its exactly the problem Sergso mentioned. I also wonder if trying to go both long and short introduced far more problems in such a test/system.
A lot of this boils down the differences between systematized (backtesting possible) trading and discretionary trading (only forward testing really possible - then open to scrutiny)
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Hello SIUYA:I find this sentence in your post indecipherable:
“.then if the Fed is maybe not actually printing any more money than was already in the economy as a result of the inflated balance sheets using leverage than was before.....it was merely a transfer or circulation from the banks to the Fed (- the Fed basically agreeing to underwrite the banks and the economy...instead of the banks) ”
If the Fed is not printing any money than before but just transferring it from the banks to the Fed or vice versa then what's the point ? You are back where you started. Please explain.
Henry1000
That is the point......you are back where you started....in other words is the Fed printing money or simply underwriting what was in the economy beforehand.
With the fractional reserve banking system being what it is......and the fact that Japan has tried to do the same, shows that simply transferring from businesses/private balance sheets to the Feds balance sheet does not mean that there will be rampant inflation.
All we every hear about is how the Fed is printing money and the effect it will have on inflation....and yet in this day and age - what is the difference between what we experienced with the banks creating and offering credit everywhere and everyone else for that matter when they offered credit to everyone and it was all money in digital form.
'Supposedly' people are finding it harder to get loans, businesses are struggling etc....because the banks are not lending to the real economy.....in other words. The reduction of any money previously supplied to the economy from the banks balance sheets has simply been transferred to the Feds balance sheet....hence no difference in the money in the economy - hence no real inflation from the evil Fed, hence one less reason for why gold 'must go up' as a lot of people claim.
Its simply looking a bit more at the assumption that people often make that the "fed is printing money we are all doomed".
(A bit like saying "A company is investing money - therefore it will make more money down the track" or "A company is laying people off, there will be no more jobs around again" - there are a lot of factors in play that can determine the outcome)
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What about cases that the method does not work meaning that the pullback does not happen but the stop is taken out and the market reverses to make new highs?you always need a way to re-enter. Some of the best traders i know go at the same idea a number of times- cut, cut, cut, cut - win.
Maybe not so applicable to day trading - system specific.
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That is what an article I read a couple of weeks ago stated. I'd post the link if I still had it.Fed added mortgages and treasuries to its balance sheet. So it was just asset switch. No additional money printed - digitally or otherwise.
If you find the article it would be great....its one of the things that has puzzled me for a couple of years....and the only answer people seem to give is that - the FED is printing money....without extra thought, or discussion etc. It usually is trotted out by the gold bulls....and fair enough they have to have a basis for their belief.
I have seen it all and at one stage believed it - I even helped represent a gold fund once :doh: long story.....but you know when you have a question and you just cant seem to get a satisfactory answer.
Re Gold - yep it probably will at some stage go back up to 1500-1600 as over the long term it is a reasonable inflation hedge....but it can also dislocate for a long long time. In the meantime trade it.
Bargain prices at 1200, expensive at 1300?
The more you spend the more you save! If you liked it at 1500, you must love it at 1200, and must want to take it home and make luvvvv to it all night at 900, and at 700 - you will probably want a divorce....right at the bottom.:haha:
Sergso - replacing gold.....what with - a basket of commodities. Its a tough one.
I agree in part - its another thing I have also pondered. Gold has been an inflation hedge because you cant just print more of it (yet they keep mining it), its historical uses, and its relatively easy transport, recognized around the world.....jewelry is often disguised as the way to keep wealth. (assuming all is in USD of course!)
These days, most wealth is easily transportable at the touch of a button, govts can still take away your assets of any sort (be it cash, land or gold - harder to find) - if the SHTF then gold will be back at it again....but is it really necessary given the ease of moving other assets these days.
But hey - having a job with rising wages, investing in the stock market, having a balanced portfolio, buying a house and investing in land rather than ipads and caffe lattes is not a bad way to beat inflation as well??? (Yes I know the downsides - nothing is perfect - not even gold.)
There are still not many substitutes for gold for many people - I would prefer diamonds up my asssss if i have to leave a country that a gold brick.....:haha: or diversifying with an extra passport.
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trying to mess with my prediction are you?....................
But predict or attempt to predict we must. It is the only way to make money.
thats like the paradox of fallibility - belief that we are fallible is probably wrong.
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- 12-15% per week, month, quarter, year?- Did these retirees mention the size of the capital they were trading?
1:10 leverage with $1-10 mil is probably a different expectation than 1:10 leverage with $1-10k.
The institutional mindset on leverage does tend to be much more conservative than the retail side. I suspect the large part is the starting capital. Another part is how retail sales reps advertise vs how institutional traders are recruited.
sorry...my bad. per annum.
I sometimes forget the only ones who tend to speak in % other than pa as the default are retail day traders...
These guys look to do less trades, and the ones they do have small drawdowns, good upside and are less likely to be day trading....they also generally hedge.
You are right about it being a different ball game if you have larger pots of capital....but people should also take note that often these guys have lots of trading experience, seen lots of other traders come and go, they have naturally become more conservative with their own money than with others. (and maybe so should all of us)
.....and given they are institutional and according to many - the smart guys in the room - maybe just maybe its still worth while listening to....but it certainly does not fit the sales reps, or the dreams etc.....
as i mentioned....FWIW.
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if you turn the chart to read Wind correctly , then its going backward compared to a normal pricing chart....hence when you inverse it to correct this.....Patucca must be bullish (I assume the direction is up)
As for prediction.....well. Even Patucca knows there more to it than simply looking at a chart often the chart will tell only half the story....its when the story and the chart lines up.....and when they dont then its usually best to err on the side of the what the market is actually doing as its better to make money than eventually be right but broke.
As for the SP500 - (I dont trade or look too closely at it)
I expect it comes down to some support as the mood/context/story is in a period of possible change as a result of recent Fed action, worries on corporate profits, govt talk on world taxes, China growth or not, commodities falling etc; etc.
At support good companies will likely be worth buying again...presently it appears from looking at the chart - its in the middle - never a good place to trade....and even if it rallies in the short term IMHO its entering a sell rallies, buy dips mood.
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Um .. For one it will end in a devaluation of the said money. more dollars in an economy lessens the value of those dollars. simple supply and demand. Then you factor in peoples perception of value of a currency and that affects its purchasing power. all this results in inflation of goods and services...i.e. because the currency has less value it takes more to buy the same good or service...now, unless, i suppose, they just flip the computers off and make all these digital dollars ..disappear...thus taking them off the market :rofl: :rofl:So in other words....if you see it as much the same thing.. and getting past basic economics 101.....then if the Fed is maybe not actually printing any more money than was already in the economy as a result of the inflated balance sheets using leverage than was before.....it was merely a transfer or circulation from the banks to the Fed (- the Fed basically agreeing to underwrite the banks and the economy...instead of the banks)
Hence if this is the case then there will have been no extra money printing - hence no extra inflation, and little reason for gold to rise in the future - whereas it did rise in the period of debt growth and money printing by the banks in the previous decade.
Additionally - if the Fed is acting responsibly and the banks are seen as being irresponsible then surely this increases the 'trust' in the system....because any paper currency (or any form of exchange for that matter including gold) is only worth what others trust it to be worth as a means of exchange with others.
(Where the Fed exits and sells back to the functioning economy may in fact be the next bubble we have to be more worried about)
If this is the case then the fear of printing dollars is simply that - fear.....
(Just a thought experiment )
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FWIW -
the last few weeks i have spoken to a couple of people who have recently retired from some of the larger investment banks - (and when i say retired i mean that - they have not been retrenched - they just have enough money to walk away....aged 40-50 yrs) they worked in the trading and derivatives side of their business. They all love the markets, will continue to trade and invest.....
All of them talked about various things and the one thing that struck me that they all focused on was the question - how do i get 12-15% on their money without a lot of leverage.
They are happy to use it and know when its appropriate....but their leverage numbers are along the lines of 2 to 4 times, occasionally ten times when well hedged.
When I asked them if they are interested in higher leverage with risk controls etc; they all laughed and said even if you get it right a lot its the excessive leverage that will get you in the end.
The other thing they were all very aware of is the key thing is to avoid over trading.
Different mindsets of course....but maybe there is something in that for all of us
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Zupcon - one of the problems with academic papers is that they apply the simple rules based systems that many traders look for.
So in order to test something does not work academics seem to often fall into the same trap many novice traders do.....and then hence declare it does not work....
Great if you are looking for a purely systematic system....or for laws of markets.
It does not mean a model/a structure for looking at the markets is valueless.
I think Mitsubishi is saying much the same thing as you are - there is more to it.....and simply applying X must happen when Y occurs is only the first step in trying to read a market and then manage a trade.To me using fibs gives a pretty good platform from which to view the markets ( I prefer 50%) and then you have the issues of asking - how it got there, whats the context, do i need to rush in, what happens if this occurs, when will i know I am wrong.....it gives a structure rather than just having random entries.
Now if I am wrong on this and Mit thinks there is something more mystical about it well then I need an emoticon that shows me eating a hat.....
If you find the HSBC research paper please post it (I am a bit lazy today) thanks.
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For those who like bank bashing, a good read or are simply concerned citizens.....
John Lanchester · Are we having fun yet?: The Biggest Scandal of All · LRB 4 July 2013
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Patucca - whats your view on the creation of paper money that was effectively a result of the excessive leverage from the banks etc; 2000-2007 (and still continuing....)
Given that its all just numbers in an account because the the nature of the fractional reserve banking system.....does it matter if the Fed creates it...or others create it?
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without derailing Steves thread....
remember most options traders are busy spreading their trades and hence orders on close are unlikely to get done, and spreads will blow out when the market makers cant spread, hedge or be bothered on the close....in that case futures which have a tighter spread, and is made of a larger collection of traders would be considered more reliable. This is on top of the vagaries of theoretically pricing the options in the first place.
Goes back to when the best times to trade are, and considering what the other person willing to take the opposite side is wanting to do....without compromising too much on price.
enigmatics - are you predominately trading long or short vol - trading gamma??? then maybe your best bet is to hedge yourself in the underlying?
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LOL you guys got it wrong. Imo it is a great time to buy physical gold..silver..price is great..value will probally soon (within next few months..probally within 6) start heading back up. Imo now is the time to buy...not a time for gloating..you bunch of gloaters LOL. Just remember every dog has its day...P.M., I think, will shine brightly not too long from now and you gloaters shall have a big stopper in your mouth and it will get real quiet on this thread. Except maybe ole Patuca he might just do a little gloating himself LOL...you shall see...you shall see...you shall see..:rofl: :rofl: :rofl: :rofl: :rofl: :rofl:All my b.s. opinion
A couple of things that confuse me with your response....
You say the gold bears got it wrong????? Whats it take to get it right?
You 'think'...."value will probally soon (within next few months..probally within 6) start heading back up. Imo now is the time to buy" ....why not buy in a couple of months when prices...and not value start heading up????
What about those who have got the ideas of values and prices all mixed up???
You are right.....every dog will have its day. Even a stopped clock is right twice a day....too bad its often still useless....and heaven forbid you refer to Gold as a dog!
Geez Patucca I cant wait to see when you do start gloating.....especially since you have not done any of late :doh:
Maybe just maybe - those who are not perennial bulls or bears will also make money on the upside as well....because they trade what they see and not some belief.
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Suntrader....and when all else fails.....
'its manipulated anyways'
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I'm relatively new to trading and I've found myself getting overwhelmed by the emotion of hitting the 'buy' and 'sell' button. I've been thinking lately about how brave we all are, taking on the market ourselves every day - running the risk of losing it all or experiencing the thrill of winning. Do you guys feel the same way?early on you may feel that.....
but in answer to your question...No.
Bravery is an entirely different matter and a potentially dangerous thought to acquire in trading. IMHO
you should not feel like you are running the risk of losing it all, and the thrill of winning should be more about the thrill of executing a well thought out and tested plan and seeing it work in reality.
Now some folks work well in letting their gut do the trading and working with those emotions, but FWIW I think there are very few of those types of traders that make it big ...most blow up, and those that are sucessful usually follow their gut instinct and remain way more conservative that as big swingers.
Otherwise good luck.
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If a market moves randomly it has an equal chance of moving up by the same percentage as moving down. A market that does not have an even chance of moving up than down is not random.You cannot predict a random market but you can assign probability to it.Definition of random • Statistics governed by or involving equal chances for each item:
glad you brought up definitions.....
....the are no rules of the market that mathematically state that the odds of a market move either way are equal - again - this is not like a game of chance where the outcomes are set
....momentum in financial markets is a perfect example of a phenomena that shows market moves are in fact not 50:50
.....Randomness of markets is not based on if you believe the market has an equal chance of moving one direction or the other - if you think a market is random market - again - you cannot outperform the market. Hence any strategy fundamental or technical by its definition will make no difference over the long run.
....randomness has different meanings in different fields.....your definition is not really applicable to markets because of points 1,2,3 and again your definition still simply reinforces your idea despite the evidence that each move in a market is completely independent of previous moves and has an equal chance of either direction.
......markets have a fundamental series of ranges within which they are likely to trade (particularly if you are a fundamentalist) and hence at the extremes of such moves the odds of a move in either direction are highly unlikely to be equal all the time.
......another error is people still think that the percentage moves EVEN IF GIVEN an equal chance of either direction is also equal.
eg; under your assumptions, a 50:50 chance of moving up or down by X% is the same as a 50:50 chance of moving by (X times 10%) (that would be nice!)
As 1a2b3...himself admits he views his ideas treat the markets moves as random (even if they might not be) and hence his methods....however he still applies other assumptions that refute his idea that the markets are random - he chooses which instrument to purchase and when to purchase.....that the instrument he has purchased is at some point over sold (a random market cannot be oversold without some measure of fair value (or in a dice example its long term average) and yet where is the analysis of a fair value?
In other words - randomness of the market is not the issue here and yet people continue to bring it up and try and assign percentages to it as thought ever market and everyone is under the same rules of the game.....and by its definition if you believe markets to be random you should be a passive investor.
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Of course you can give a probability to a random event. The chance a head will fall is 50%, of two heads in a row 25% of three 12.5%. It is suicide to create a system and not know its implications, probability helps assess the risk.You and I could put up a million dollars each and the person who rolls the highest of six dice wins the lot. One of us will win a random event and one of us will lose. The chance of winning is 50%. That is better odds than you'd ever get at a casino.
you miss understand me...and most people miss understand the probabilities assigned to a market v the probabilities you can assign to a event whereby you know the fixed rules of the game and possible outcomes with certainty....such as rolling a dice, dealing a card.
(Even if you could accurately measure the probabilities in a market with any certainty!)
In the markets you cannot tell this and to simply assume a 50/50 chance of a market moving up or down from any particular point is an error.
If you apply your example to the real world of the markets there are other parameters that you have to take into consideration to compare strategies.....probably one reason why a person can build a system that looses money, and yet when the system reverses its decision making processes from long to short it still causes losses.
If you take the very simplistic version of person A going long and person B going short then this is not trading or investing. Any one off transaction for any game theory, game of chance, trade or decision has very different outcomes than a series of trades..... and hence assigning probability maths to a series of events is very different.
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I am talking about the overall market not components which make up the market:The market is merely a vehicle to drive money from one trader's pocket to another trader's pocket; equal winners and equal losers in a dollar value over the long term. It moves randomly because the value of the market on any particular day is fair value and has taken in available knowledge at that point in time; the next move is unknown as the factors relating to that move have not come into play. If you have an insider knowledge of a massive terrorist attack then yes you could sell the global market before that attack and make a lot of money but without that knowledge you have no idea what event will effect the market tomorrow. The facts that change the market are random and this is what makes the market move randomly.
When you see winners you are being tricked into thinking that they are all successful traders. Try an experiment on Excel by creating 1000 different traders' accounts, randomly issue buys and sells of the dji on every day for the last twenty years. You will find some of the traders will make amazing fortunes and others hopeless losses, just like in the real world.
If you compare a random market which is created artificially with the real market you will see that they behave in the same manner; tops and bottoms, undersold, oversold, booms, crashes everything is there in the artificial market, all the technical indicators will give their readings but they mean nothing. You cannot predict either.
So why invest in the stock market? Because over the long term markets outperform inflation and good profitable companies will provide healthy dividends. Individual stocks can be assessed on their fundamentals and profits can be made by careful selection. Individual components of the overall market may take longer to react to news and quick action can lead to profitable trades. Studying the fundamentals of a company may find that a share price is too cheap or too expensive. Studying fundamentals of an individual country may show their stock market is undervalued compared to another country.
In my opinion the global market moves randomly but many of the individual components that make the global market do not and by using fundamentals great profits can and are made.
Technical analysis - is futile, it is a con, it is deceptive. Sure it appears to work for some but only because of luck.
Its the same thing.....if you think markets are random - then by definition you cant outperform them - regardless of it you think fundamental analysis OR technical analysis or both are a con or not....hence you should be a passive investor.
Even using your example many fundamental analysts dont outperform the market over the long term and is a reason why the markets are considered random. Its not just technical analysis that cant outperform.
Creating a system to outperform a random market is just an exercise in futility.
As for the strategy applied by 1a2b.... yes he needs a lot of dollars if something keeps going against him - he states he does not use leverage for this reason, but the point is still the same.....applying a lot of randomly guessed probabilities for what may or may not occur and for when they might is just guessing at best.
If a market is random - you have no way of knowing what percentages can be guessed at and if each tick is truly independent of each previous tick then if something is at $5 now then you cannot know what the percentage chance of it going to $3 is v it going to $50, or the probability of it going up 5% or 4.95% or 400% etc; etc;.....because in your example you are assuming too much.
Who is not the say the fair value of an object really is close to zero and even if it spends 20 years above zero it will ultimately end up going to zero, and what about the random effect of the actual movement itself each day, or time frame?
Which is why it is all guess work, and why many spend time trying to perfect other methods of making money assuming entering and exiting are random.....but even this then should be evened out over the long run. If you think the markets are random then you think its all down to luck for who makes money and who does not......no matter your system or how hard you work.
Plus for those who always like to pull out randomly generated markets and say - look these look like share prices therefore markets are random :doh: - well here is a news flash - the only way for this to even be considered at all valid is if every market participant made every trading decision in an equally random way and did not take into consideration their own past biases, the current news (the news may be random but the decisions based on them are clearly not) and future expectations as well as differing 'fair value' of a market. Markets dont work like that yet.
You can also do the same for landscapes High Altitude: Stock Market Trends as Realistic Mountain Ranges - information aesthetics
Or google Micheal Najjar
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Trend following no longer makes good money. Maybe a little money but not good money. Just look at the CTA indices for the last years. There is no better proof than that.BarclayHedge | Barclay CTA Index
This is sh***ty performance after 2009. S&P 500 has gone up about 120% in the same period these trend-followers have not even made CD returns. Forget about backtesting and things like that just look at the index of these CTAS. Most are following turtle-like methods. They were not able to even trend follow the S&P 500 that even a fool can buy and hold through SPY and make tons of money.
now you are just being plain ignorant/foolish/disingenuous.
Using Yahoo finance so anyone can check....
S&P 500 23 June 2008 - 17th June 2013 The return has been 24.57%
Other questions which one should take into consideration....
why only compare one equity market? Because it suits your opnion......
Are all the CTAs long term trend followers? No.....
Your data set is so selective its a joke.
Taking a period of a few years and claiming a strategy designed to be used over the long term is dead is simply one persons opinion and hence why many others are debating the issue - others have other opinions.
Maybe you should compare a basket of pure long term trend following models .... for those interested here is a very good blog written by someone who simply runs similar models and offers insights into some of the debates....
State of Trend Following in May | Au.Tra.Sy blog - Automated trading System
http://www.automated-trading-system.com/wp-content/uploads/2012/02/NewNormalization.html
There is a large range of different but similar styles, and many invest in trend following methods as their returns ARE different and are uncorrelated to a simple equity market.
The simple turtle method is simply one method.
I am a fan of trend following, but I think like many styles and strategies it needs to be understood and not just using a knee jerk selective data set to support or prove ones own beliefs.
It is not suited to everyone, its best as part of a portfolio and its likely not suited to day trading.....even though a lot of the methods/philosophies are applicable.
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Can you explain the concept correctly then so we understand it better?1....if you think markets are random you should not be adopting an active trading approach.
The whole definition of random markets revolves around the idea that you cannot outperform a market if it is random - hence you may as well adopt a passive investment approach.
2...its also pointless even trying to apply statements like this is equally likely or 30% likely to occur. Markets dont work like that and its a fools job to apply numbers. Even if a pattern were to show something like a 50:50 chance of it resulting in some outcome, the best you can get is then a 50:50 chance of that occuring and then thats all....after that the game changes. Multiplying out probabilities is deluding yourself in this instance.
3...This is not like a game where by rules govern the odds. eg; roll a dice there is 1 in 6 chance of any one number coming up, and also over the long term this will hold true. None of this is applicable to a market.
Zdo is right - you need specific strategy rules if you want to call it a strategy, otherwise its all a guess, and too often thats all most of these type of strategies are. Nothing wrong with that as you can still turn reasonable guesses into good trades depending on what happens....trade management is important.
There is nothing wrong with applying what you are doing - and not using leverage and understanding the pros and cons is important, but I think those who think its a strategy that involves an awful lot of correct instrument selection, timing and other elements that then require a lot of luck afterwards......in other words, a lot of the risk reduction is in the discretionary selection of timing that you might think.
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Why not?If prices move randomly then after each round you have a 50% chance of the share moving up 15% or down 15%. You have already proved that you can go to round four. From this point on you have a 50% chance of executing round 5, 25% executing round 6, 12.5% chance round 7, 6.25% chance round 8 and 3.15% chance round 9.
I am saying there is a 3% chance that the share will go to $3 but a 97% chance it won't.
In a random market, which I strongly believe in, the share (at whatever its value and irrespective of where it has come from) has an equal chance of moving up by x% as it does as falling by x%.
.....and there in lies why the concept of random markets is so poorly understood.
Will Gold Prices Double Five Years from Now ?
in Market News & Analysis
Posted
FWIW - a simple site i stumbled across talking about Gold and its correlation to inflation - they link to the more detailed explanation in their post.
Not sure if i agree 100% with it but its another opinion.
(Also talks about why QE wont work for those interested in the blog)
I liked the fact they dont blog every day...only when they have something to say despite it being from an academic. :haha: