BTW, I think even systems that do work are vulnerable to the emotion
and inexperience of the user/owner. How many "good" systems on C2 prior to May 10th would still be good if they had read and understood and believed this:
(What) caused most futures traders to lose money:
http://www.deccapital.com/50tradingrules.htm
"6. They fail to pre-define risk, add to a losing position, and fail to use stops.
7. They frequently have a directional bias; for example, always wanting to be long.
8. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market on too short a timeframe."
"If you believe in Random Walk, why do you trade? Why would you bother to spend so much time and effort here? Why are you going to offer your own system? "
I think I actually said I believe in Random Walk with a drift (trend), Seasonal & intermarket influences. That markets also exhibit a fractal/cyclic tendency is also quite credible.
I always appreciate your inputs, because you appeal to evidence and testing of reality.
I kind of miss the posts of Randy May - someone who offered clear analysis and testing of some systems.
I am not sure how seriously to take the positive results though for some . For example, the energy futures were displaying nearly universal profitability across most TA indicators, but that has tanked over the last few months. Anytime there are number series, probability alone dictates that some will be profitable and some negative. I consider the overall performance (across indicators) as more telling. If these standalone indicators were profitable on the whole, then one would expect most futures to show overall positive performance. Unfortunately, they havent done so the last 1-2 years of measurements.
"Do you know what an ADX measures"
obviously. Wilder’s invention, to measure the strength (or lack) of trend
Right, so in and of itself the ADX doesn’t even tell you to be long
or short, much less when to pull the trigger. “ADX signals” in and
of themselves can’t be looked at as a “system”.
Thank you.
Still curious though, how can you write off several million% over
a 16 year period to "drift (trend), Seasonal & intermarket influences…"
Moreover, the Schwartz story shows a guy losing, finding "it" and
then kicking ass. His trading style was very short term, not seasonal,
and only occasionally "intermarket". His track record spaned 10
years in a public forum of bull, bear, and flat markets. Do you think
there is an 800% a year "drift"? More like a Tsunami in my book.
" I am a strong believer in the updated Random Walk theory - that markets are "random" but with a drift (trend) component "
Random walk is nothing more than chaos, From chaos, always will come order. Anyone in the fog can not see the order. One must first remove the fog to see the order in price movement.
The "Technical Analysis" you refer to is part of the fog.
The real indicators are waiting to be discovered, but once they are known to all, they to will become the fog.
"The real indicators are waiting to be discovered, but once they are known to all, they to will become the fog. "
That is correct. It is all about finding inefficiencies. But when broadly known, they usually dissipate.
Makes me wonder why people think that the logic of black box systems should be "fully disclosed." What kind of knucklehead would tell others how his discoveries work?
I think that a careful leveraging system on the S&P, using significant compounding, only investing during the known ("seasonal") period of November to May (when pretty much all stock market gains occur since about 1945), and in concert with the fact that most gains occur during the 6-7 days around the end of each month, using good stops, could probably approximate or exceed the 800% gains over a 16 year period.
"I think that a careful leveraging system on the S&P, using significant compounding, only investing during the known (“seasonal”) period of November to May (when pretty much all stock market gains occur since about 1945), and in concert with the fact that most gains occur during the 6-7 days around the end of each month, using good stops, could probably approximate or exceed the 800% gains over a 16 year period."
Let me just share the facts. The “16 year” track record belonged to Ed S. and was 250,000% including withdrawals in a real money account, over a million% accounting for withdrawals. I’ve talked to Ed,
he trades just about everything except the S&P and stock indices. So
much for seasonals in the stock market in his case.
Buzzy wrote a book and spelled out his method. He’s a pure technical
trader and a scalper. His method has little or nothing to do with seasonals.
I’m not one of these folks with the put up or shut up rant, but it does seem an obvious question given your persistent cynicism about system performances: if you think you could make 800% a year using seasonals why are you looking to pay someone else for another method
that you have no faith in?
"The "Technical Analysis" you refer to is part of the fog.
The real indicators are waiting to be discovered, but once they are known to all, they to will become the fog."
Bingo! The nature of the game is winner takes all, or at least most,
of the money. By definition when the "secret" becomes common knowledge that game is already over.
This applies to fundamentals as well. Remember the first day of
the first Iraq war? The day before that marked the highs in crude oil
at that time.
Sorry, I meant to refer to the 10 year period, rather than the 16 year period, with the 800%. When Marty Schwartz averaged 800% a year, over a ten year period, in real money public contests
On the face of it, I cannot speak for how any one trader does with incredible streaks. Given that the annual performance of CTAs that are published, and that places like Striker and Robbins keep publishing systems results, as well as C2, Timertrac, Hulberts, FuturesTruth, Timer Digest, and others cover huge numbers of publishers and advisors, this is an extreme rarity to attain greater than a couple hundred percent a year.
Most of the incredulous runs I have seen, like Larry Williams taking the starting pot (it is 15K minimum now) up over a million in a year (and who still has the going away record at the Robbins contest), usually spring from zealous overtrading/leveraging, and not hitting the killer pothole en route…
I dont remember the exact title, but someone published a futures book to the effect of how he lost a million dollars in trading. This seems more the norm.
I think many people start out hoping for hundreds of percent annual return, but after awhile, are satisfied just to learn and make good returns. What each person seeks, whether just to outperform the market, make some spending money, make a living, or swing for the fences is something each person needs to decide.
As for other systems, this is my main forte. I have examined, followed, studied, subscribed to, or otherwise scrutizined somewhere between 800 and 1500 systems, advisories, black box systems, newsletters, chatrooms, websites, educational/training materials, etc. It is probably fair to say I have spent at least 2000 -3000 hours down this path. A lot of it was early on, so you learn over time.
After awhile, they all look the same. They are cant miss wonders, that either are selling something that used to work, never worked, or are the results of alternate-world backtesting. Some advisors are outright crooks/con artists, some are convinced they have the holy grail, some deceive themselves into thinking they have mastered the world of trading because of their 2 years of study in the field.
Every now and then, a system falls upon 1 or 2 real market inefficiencies or other slant on the market, and have something of value. Trying to find these systems is like sifting for gold in the Klondike. And generally, I find these few systems tend to stop working some months down the road. The value is in milking the cow before it goes dry. This is one of my main approaches.
At this point, I have found 1-2 C2 systems with a lot of promise, and a couple outside C2 the same. However, I am following a few others that may have potential, as I expect the current ones to dry up at some point. Which systems these are I do not care to disclose. A lot of blood and sweat goes into the process of separating out the true winners, and I don’t plan to give this away.
But I will say that I see a lot of value, when I find a “top-performer” on C2, and then watch it for awhile, to see if it continues, or goes into cardiac arrest (the “gee, I subscribed to a system and it went into drawdown” comment I keep seeing). Often that is because the system is at the top of the pile due to the fact that SOME systems have to be there by simple probability. SOMEONE has to be in the top 5. But if they continue this for a few months beyond first discovery, that means much.
It is interesting that I am around a 750 rating, without ever making a trade. Since the highest I have seen is around 995 or so, that tells me that 75% of the advisories seem to underperform the market.
>It is interesting that I am around a 750 rating, without ever making a trade. Since the highest I have seen is around 995 or so, that tells me that 75% of the advisories seem to underperform the market.
Na, it’s not telling you a thang (except that you are basing some
of your conclusions on something less than fact):
“Posted: Victor gui (C2 Rating: 6)
When: 6/13/06 (11:47)
Systems: Victor daytrading”
"Win % 100.0%
Cumu $ $60"
Victor’s system is “100% right”, has a profit, and his rating is 6…
This has been beaten to death, and Matthew has said the ratings were
funky. Since you’ve done your homework on C2 (you were posting on the ratings thread!), why would knowingly you use this bad data to make your point?
"On the face of it, I cannot speak for how any one trader does with incredible streaks. Given that the annual performance of CTAs that are published, and that places like Striker and Robbins keep publishing systems results, as well as C2, Timertrac, Hulberts, FuturesTruth, Timer Digest, and others cover huge numbers of publishers and advisors, this is an extreme rarity to attain greater than a couple hundred percent a year."
No doubt it’s a rarity, but I suspect he had the freedom of not worrying
about OPM, the NFA, the CFTC, etc. I’m not sure how you can point to
10 and 16 year track records as “streaks”. Anyway, my point in mentioning them is that they refute the random walk. I don’t think you
can get lucky for sixteen years.
I share some of your cynicism, and I respect your wariness regarding track records, but I find your perspective inconsistent at times. You attack a system with a max DD of 9%, tout one with 30% DD’s, talk about how rare 100’s of % performance is, and then say 800% is doable
off the simple “sell in May and go away” cliche.
" my point in mentioning them is that they refute the random walk. " The existence of the occasional overachiever, fat tails, and other evidence rendered the pure Random Walk Theory a fool’s errand a long time ago.
Random Walk with a drift is not the same as Random Walk. Anymore than Efficient Market is the same as Relatively Efficient Market. The evidence both in testing, and other methods, strongly suggests that markets seem to behave as essentially random (chaotic, whatever), but with a definite trend aspect. A search on Random Walk with a Drift will bring up a large number of hits, theories, abstracts, whatever.
But the existence of periodic market inefficiencies is what makes trading worthwhile. Some people definitely locate a vein, and do well mining it. Many of these inefficiencies, such as the January effect, tend to go away its public discovery. No worse nightmare to a trader with a real advantage, then to have EVERYONE know about their "discoveries"
Streaks in the same way as calling a team that wins a large number of championships over a long period of time, such as the Yankees, tend to go on. Or dynasty… I dont think the word is limited in its usage. I suppose the Dinosaurs had a good streak, for the Triassic, Jurassic and Cretaceous 
800% was doable in the past, like a 10 or 16 year high-profitability period as you had mentioned. There is not guarantee that these traders could reproduce this starting from scratch today (June 13, 2006). They may or they may not. I would give them about as much chance as the seasonal nature of the stock market. it is doable, but some years it evaporates. Up until this year, physical and other commodities have been relatively seasonal. THe past 12 months of climbing commodities prices (sugar, gold, oil, etc.) has swamped this effect (as can be seen in the website records of seasonal trading advisors).
"Anyway, my point in mentioning them is that they refute the random walk. I don’t think you can get lucky for sixteen years. "
Actually, it is not hard to get lucky for way more than 16 years. Even ignoring using the best time of year or month, anyone using stock futures or options (whatever leveraged stock investment) could simply leverage and hold on the market, if done at the right time.
And using fixed fractional or fixed ratio, it is quite possible to drive the returns into the millions of percent on pure “lucky timing”, by simply looking at the past. For example:
The year is 1945, the war is almost over, and Matthew’s C2 is there, but in tabloid form. 500 people (call it the “C2 advisors” set) decide to make a killing in the markets
So each year on January 1st, 5 people plow into the market in leveraged form:
1945: One uses 3x leverage, one uses 4x leverage, one 5x, one 6x and one 7x. Following a 50-50 blend of Fixed Ratio and Fixed Fractional, they keep this up until broke, or reach 100,000% return, and then stop.
1946, 5 new people start, same leverages, same rules.
This keeps up until approx 1995, when the last of the 500 have entered the market.
There is no thinking involved. The rules are followed 100%
Yes most of them may run into the ground, but following these rules, a few of them will reach the 100,000 percent return. But I would also point out, the Nov to May and end of month favorable return periods have been known for a long time, and this only makes the chances of people reaching it that much better.
This is a simple graph of DJ prices from 1900 forward:
http://www.stockcharts.com/charts/historical/djia1900.html
(Yes I know index futures are relatively recent, but there have been stock options and other methods that could substitute, for quite a while. This is only for demonstration purposes.)
Being in at the right time on the gold boom to $800 or other commodities at other times could also have success.
"Actually, it is not hard to get lucky for way more than 16 years. Even ignoring using the best time of year or month, anyone using stock futures or options (whatever leveraged stock investment) could simply leverage and hold on the market, if done at the right time. "
Really?
Just let me know when that time machine is perfected Biff. Don’t need this trading stuff. We can just spend a few days at Del Mar checking out the cool ladies in fancy hats, soaking some rays, drinking Margaritas and hitting one trifecta after another.
Anyway, without the time machine, what keeps you from buying in 1929,
September 1987, or Jan. 2000?
"The year is 1945, the war is almost over, and Matthew’s C2 is there, but in tabloid form. 500 people (call it the “C2 advisors” set) decide to make a killing in the markets."
Geez, we have the chart, why not buy in 1942? Or better yet the 1932 lows? See, the thing is, way back then they weren’t “lucky” enough to have the other half of the chart…or your time machine.
And you might have needed to cash out in the 30’s to buy bread or something even if you “bought low” in 1925. Hey, but by 1950 your
C2 rating would be back in the black!
Don’t need luck. The point was that people with incredible multi-year returns in the past are not the definitive proof against Random Walk (with a drift.).
The point was, that out of a universe of 500 people, it can be recreated through blind timing. Many would hit rocks, but a few could have done the same thing. So whether a couple of people had 800% annual returns or other (in the past), similar returns over similar periods of time can be recreated without skill. There are thousands of industry professionals, so a few can wander through a long time period with superlative returns.
This does not prove that these people were not onto something, but neither does the existence of several with such returns disprove Random Walk with a drift (trend, actually)
And where is Marty and the Doc with that DeLorean?
"And where is Marty and the Doc with that DeLorean?"
The question is when are they?
Maui circa 1968-1969-1970.
seems like 1955 was a big year. My favorite scene was the Texaco, where 4 attendants in white came up to service the car pulling in…
If good service at a service station is your criteria 1955 is your year.
Good music, small crowds, great place, good times: West Maui before the invasion.
