>"for which you have no performance statistics (yet)."
I know I “publish” a lot through my thread…but I was speaking in general, Jules.
Of course mine may be in the bottom ten at the moment.
This may be applied as a general approach to top-performing systems that reach your criteria.
We’re not talking “blind faith”. (chuckle)
Gilbert
We have a way of misunderstanding each other… Yes, I know you were talking in general. I too. I mean that, if you (or I, or anyone else) subscribe to trading systems when they seem to be in a lucky phase, and unsubscibe later, then this strategy is a trading system too. A kind of 2nd level system, where the signals are not "buy stock X" or "sell option Y", but "subscribe to system A" or "unsubscribe to system B". For this 2nd level system we do not have performance statistics. I was not refering to your system but to this 2nd level system. Since we do not know anything about this 2nd level system, it could be better than selecting a random system, or it could be worse. How would you (or I) know?
You are right…this would be described as a system.
>How would you (or I) know?
That would be based on your criteria:
(1) Systems go thru phases.
a. Some take off substantiually right out the gate.
b. Some (most) drop substantially right out the gate.
(2) Of these, some of (a.) may exceed a ‘criterion-based’ length of continual strong growth - say, for instance 3 months while the rest drop off the list.
(3) Of (b.), some may stabilize at a preset (say 15% level) and traverse like (a.) had started off - to perhaps soon make ‘the list’.
(4) Of those that recoup (within a preset time period) their losses may continue upward for say another month - to make your A list.
Since comparatively few systems become profitable or traverse in an acceptable manner (not gambling) - your list could be refined with a secondary and tertiary set of stats - but at any given time can be refined to a top ten hot list.
Wouldn’t you like to catch the 25-75% move from the 10 best (at that time) performing systems during each month? And properly navigating slippage/execution factors and entries and exits from the systems…can’t a 75% gain from a system be monitored well-enough to successfully pull the plug on it when it reaches you stop limit (i.e. 15%)?
Your list would need to be constantly updated, but the strategy need only be modified slightly for improvement based upon the “real-life” experience.
You may not know what say 50 systems that come through your list over the weeks are currently trading, but you can monitor the “statistics”.
Hence, we take advantage by profiting off all these (albeit short) “lucky” streaks we see come and go so flamboyantly.
Gilbert
My point is that, although this 2nd level system uses statistics, we have no statistics about its performance. That is, suppose I use your rules 1 - 4, then what will the Sharpe ratio of my account be? We don’t know that. Nor do we know any other statistic about this method. So perhaps this is actually a rapidly losing method, comparable to buying high and selling low.
"If a trader buys efficient moves up and sells efficient moves down the market will be outperformed. "
Huh??? This makes no sense, even if it sounds like a poetic thing to say.
The definition of efficiency has nothing to do with "efficient moves up/down." But "it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, this means that stocks always trade at their fair value on stock exchanges, and thus it is impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. Thus, the crux of the EMH is that it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments
If you believe in the EMH, you should simply not subscribe to C2 systems, unless you see it as a game that is just fun to play, e.g. similar to going to the casino.
> your list could be refined with a secondary and tertiary set of stats - but at any given time can be refined to a top ten hot list.
Here is what he doesn’t get. You can make all the lists you want, but
that doesn’t give us any definitive predictable evidence that the systems
on the top of that list will be there tomorrow or next week. It’s a lot
like his system. He sees the market is going up so he gives it
a “green light” assuming it will be up next week. Lo and behold, the
market goes down. Just because something was up last week
doesn’t mean it will be up next.
That said, I think it is good to pursue strong trends, but look for trends
that are being confirmed. For things like the stock indexes I would
look at breadth and volume confirmations. For trading systems
look to enter on shallow equity line pullbacks as they turn up. Look
for “confirmations” like the size of the winners/losers are stable or
improving. Often times before a plunge the risk tends to expand a
bit as the trader gets over confident. And look at what he’s trading.
Are there non-confirmations in the underlying market’s trend?
For example when the BP made it’s high vs the dollar on July 24th
the BP-JY spread was already taking out the lows of the last week.
The recent highs on the Dow/SP were against waning breadth.
And finally watch out for euphoria. When the champagne corks are
popping look for the exits (not to get in). You don’t want someone
drunk on subscriber compliments trading your money.
I don’t think belief has anything to do with it. There are a large number of believers in things like Gann, Fib levels, Elliott Wave. But the fact that almost all evidence finds it wanting does not sway them. I do not trade for religious purposes, but to make money.
Almost all C2 systems seem to fail. If anything, it ALMOST proves EMH. The fact that the occasional system seems to defy probability leaves some hope. But do you see any really successful 3 year old C2 systems here?
The best description of the market seems to be “Efficient with a Drift” - ie, there is a definite trend component to some market.
But do you see any really successful 3 year old C2 systems here?
Yep, with Sharpe ratio and alpha (positive) statistically different from zero and beta less than 0.5. Also remember that 3 years ago, only about 25 systems were added to C2 per month, while that number recently peaked over 200.
>There are a large number of believers in things like Gann, Fib levels, Elliott Wave. But the fact that almost all evidence finds it wanting does not sway them.
I have used Gann successfully. Similarly, I’m sure that Fib levels and Elliott Waves would work also, if applied correctly using logic (though I did not find time to study them)…
>Almost all C2 systems seem to fail. If anything, it ALMOST proves EMH.
If a man does recognize and adhere to reality, then he can achieve his values in reality; he can and, other things being equal, he will. For the moral man, failures, though possible, are an exception to the rule. The rule is success. The state of consciousness to be fought for and expected is happiness.
You viewpoint is a “malevolent universe” premise (others have called it a “tragic sense of life”). This premise states that man cannot achieve his values; that successes, though possible, are an exception; that the rule of human life is failure and misery.
Like any consciousness creature, a man on the benevolent universe premise is well acquainted with pain. His insignia however, is his refusal to take pain seriously, his refusal to grant it significance. To him, pleasure is a revelation of reality - the reality where success is possible. But pain is merely a stimulus to corrective action, and to the question such action presupposes. The question is not “But do you see any really successful 3 year old C2 systems here?” but "What can I do to create one?"
We do not think that tragedy is our natural fate and we do not live in chronic dread of disaster [explains a character in Atlas Shrugged]. We do not expect disaster until we have specific reason to expect it - and when we encounter it, we are free to fight it. It is not happiness, but suffering that we consider unnatural.
This view of the world becomes in due course a self-fulfilling prophecy (as does its opposite). The man who refuses to blame his problems on reality thereby keeps alive his only means of solving them.
>The fact that the occasional system seems to defy probability leaves some hope.
The Truth will prevail, ultimately…
"I have used Gann successfully. Similarly, I’m sure that Fib levels and Elliott Waves would work also, if applied correctly using logic (though I did not find time to study them)…
Plenty of studies have shown them to have no benefit, so your individual testimony or belief is of little consequence. It is things like people confusing buying dips for the value of Fib levels.
If a man does recognize and adhere to reality, then he can achieve his values in reality
Again, your ethereal viewpoints demonstrate little grasp of trading.
"Yep, with Sharpe ratio and alpha (positive) statistically different from zero and beta less than 0.5. "
??? For example? I said "really successful"
"Also remember that 3 years ago, only about 25 systems were added to C2 per month, while that number recently peaked over 200."
I was trying to use a time frame that was within C2 existence space.
>Plenty of studies have shown them to have no benefit, so your individual testimony or belief is of little consequence. It is things like people confusing buying dips for the value of Fib levels.
I disagree.
>Again, your ethereal viewpoints demonstrate little grasp of trading.
And, you have mastered trading, Dr. Bizarro? LOL Your bizare theories knock mankind off the road of success and joy, and into the gutter of failure and suffering. This leads men to conclude that happiness is impossible, that life by its nature is hell.
I, in contrast, advocate an objective approach, hold that success is the rule, the natural and pleasure is moral, therefore, is not only possible, but more; it is the normal condition of man…
Market efficiency is something smart people that can’t trade had to come up with so they wouldn’t feel so dumb.
The problem with this is it then limits that persons true ability. Instead of finding good trading methodology’s they instead try to prove they are not dumb by attacking everything.
# 1 secret to developing a trading system, remove everything experts say from your thinking. This is perhaps the biggest stumbling block. If you are an expert god help you!!!
"I disagree."
The fact that you disagree with academic/institutional studies only shows you do not grasp reality. Take a statistics course, Palsun. You will not find "Palsun disagrees" as an accepted statistical measure.
"Your bizare theories knock mankind off the road of success and joy"
I would say that if you and I stood in front of 100 accepted masters of trading, that your viewpoints including that Sharpe ratio is pretty useless and that a 95% drawdown means nothing until realized, would leave you far behind me in their eyes. In fact, you would even trail bullfrogs…
" 100 accepted masters of trading "
By masters do you mean experts?
" Plenty of studies have shown them to have no benefit "
Of couse they will have no or little benifit when used as the experts tell us to use them, this is why you must throw out the experts and replace them with rational and creative thought.
Market efficiency is something smart people that can’t trade had to come up with so they wouldn’t feel so dumb.
I agree to some extent. I don’t know how this is in the US, but here I see quite some academic people who disrespect trading and in fact any commercial actitivity. So probably there is some bias if they do research about it.
Also, the belief of a random market is much more widespread than the academic community. I think it existed already long before the EMH, based on, for example, the Dutch tulip mania bubble in the 17th century.
This being said, it seems fairly obvious to me that the EMH must be true to a great extent, say at least 99%. It it quite unlikely that you will find a stock priced at $1 today when it is predictable that it will be worth $50 tomorrow. If that was easy, then everybody would be rich, which is impossible.
Also, if anyone beliefs that the EMH is completely nonsense, then please explain why the performance statistics in the beginning of this thread go to 0.
So as an elegant, idealized model, that describes almost all data, I believe the EMH is adequate. The question is if it also applies to the last 1% or 0.1% or 0.01% or…, i.e. if there can be exceptions. Obviously it will be extremely difficult to prove or disprove that. It is futile to have a discussion about that on a forum. It will largely be dominated by beliefs that people have a priori.
My belief is that small, temporary market inefficiencies exist in some markets, and that some smart people are able to find them on a consistent basis (i.e. with more chance than random). Otherwise I would not trade.
>The fact that you disagree with academic/institutional studies only shows you do not grasp reality. Take a statistics course, Palsun. You will not find "Palsun disagrees" as an accepted statistical measure.
All these academicians/institutionalists are to qualify as productive, they must in proceed in due course to the next step. They must give their discoveries some form of existence in physical reality and not merely in their consciousness - usually by writing treatises or delivering lectures.
An academician/institutionalist may not care themself to carry the process of embodiment further. Life in the ivory tower, however, is not a license to disdain "the practical world." In particular, it is not a license to turn a discovery over promiscuously to all comers, regardless of its harmful potential and of their character and purpose. To a mind that cannot grasp this, such as yours, is tantamount to abetting the worst elements of mankind in their work of destruction. For details, one may read the story of Project X in Atlas Shrugged.
A treatise or lecture, however brilliant, is not an end in itself. The mind-body integration required by productiveness is not complete until the knowledge is turned into some form of material wealth. In this step, too, specialization is typically involved. The most important performers of this crucial feat are the traders.
There is no dichotomy between "pure" science and "gadgets." Science is related to technology as theory is to practice; as philosophy is to life; or as mind is to body. In all these cases, the first apart from the second is purposeless; the second apart from the first is impossible.
>I would say that if you and I stood in front of 100 accepted masters of trading, that your viewpoints including that Sharpe ratio is pretty useless
I never said that Sharpe Ratio is pretty useless. To a mind that does not grasp the concept of a Sharpe Ratio, such as yours, one form of evaluative subjectivism is to judge other systems while upholding no explicit moral principles, either because one has never bothered to consider the subject or because one repudiates all moral absolutes. A judge of this sort, just like you, praises or condemns as a matter of whim; he thus discards both justice (reliability) and practicality. Their verdict is detached from the actual nature and deserts of the individual system that is being judged; as a result it is useless as a guide to action.
>and that a 95% drawdown means nothing until realized, would leave you far behind me in their eyes.
LOL. To a mind that does not grasp the concept of a drawdown, such as yours, all losses (real-ized and un-real-ized losses) are drawdowns, just as all men are animals…
>In fact, you would even trail bullfrogs…
You do not even qualify for the status of a bullfrog, but only that of a vegetable…
> The fact that you disagree with academic/institutional studies only shows you do not grasp reality. Take a statistics course, Palsun.
Would you mind showing links to these studies? Have you reviewed
them? Have you read Prechter enough to understand his application of EW and Fibonacci and compared those studies to Prechter’s technique? FWIW, Prechter (a fairly academic guy in his own right) was the #1 independently ranked newsletter writer for about 12 years (circa 1977-1989). He also blew away the competition in a real money trading trading contest. He used Elliott and Fibonacci to make real money in real time and not for three years or five years, but for 12 years. How’s that for an “academic study”? Yeah, yeah, he fell in love with the bear market idea in the 1990’s after his semi retirement in 1989, but it doesn’t wipe out his 12 year reign.
FWIW, I don’t trade Elliott or Fibonacci, but I note them. A 1.618
extension of June ES decline is 1458. I know there is “no support
in a bear trend”, but the bounce from there was worth 15 ES points
and helped provide a short term profit taking target if you were short.
