All Systems Are Predictive

[meanreversion]

So you live in a world of make believe about system traders.Override systems because you believe in discretion to select markets, if selection is wrong then reselect,and if wrong again reselect etc etc etc etc etc etc

Don't know why this complete novice has no clue.

I never change automated systems ,nor do I interfere with them.They are good systems, therefore your systems must be real crap to need changing,tweaking and optimising for different conditions, and discretion needs to be applied regularly.

I don't know why people bother with forums novices.

Yup. You're the knowledgeable chap who started a thread recently by stating that "we all know trading systems fail in the end".

But not your systems. You have 44 of them which you will never alter in any way, and they will not fail in the end.

Either you are

a) a sad little pen1s who likes winding people up or
b) a clueless moron

Which one is it?

 

[oildaytrader]

Yup. You're the knowledgeable chap who started a thread recently by stating that "we all know trading systems fail in the end".

But not your systems. You have 44 of them which you will never alter in any way, and they will not fail in the end.

Either you are

a) a sad little pen1s who likes winding people up or
b) a clueless moron

Which one is it?

Everyone can make up their ownd minds about the real clueless moron.

 

[meanreversion]

Everyone can make up their ownd minds about the real clueless moron.

Wow, you argue like a 5 year old, it's quite amazing actually.

 

[meanreversion]

Let me guess, you're going to reply "We all know who the 5 year old is".

?

 

[HowardCohodas]

Howard, if I were you, I wouldn't bother arguing with DT.

1. He knows a lot more than you
2. He's stubborn and won't let things rest

1. We'll see.
2. I resemble that remark.

 

[MrGecko]

∫(Random Entry + Money Management) gives an E(X) > 0 is a brain fart, as far as your account is conerned, of Darwinian proportion.

 

[oildaytrader]

Wow, you argue like a 5 year old, it's quite amazing actually.

The biggest problem with systems is people can not follow their systems, the worst thing anyone can do is to interfere with a system and try and outguess when to apply it and when not to apply it.A good system should not require any discretionary manipulation, one should be able to apply it in all market conditions,it should be robust enough to survive difficult adverse conditions without any manual interference.

Look at the example of a Jeweller with an Alarm system.Due to false alarm triggers in the middle of the night , and getting called out in middle of night , Jeweller decides to use discretion and stops using the alarm at night.Do you see the problem if he gets robbed at night.

Trading is about the unknown , traders using discretion with system application are not able to follow their own systems.

 

[HowardCohodas]

Actually - it is only by misunderstanding the markets that you could say that this was theoretically possible. As was stated, the markets are like a bucket. Money goes in, more money cannot come out.

Looks like a Nobel Prise coming your way.

Howard – you were asked to be specific. The random entry myth will be debunked here if you provide the details of that system.

Several years ago, (9, I think) I did some work on this myself. I did not come up with this idea on my own and cannot recall where I heard about it. Lately, the work of Dr. Van K. Tharp is also available.

On other threads you claim to only believe proper scientific studies but in this one – anecdotal evidence “leads you to believe”…

Clever editing is not a way to make your point. I used the conjunctive "and" before the sentence fragment you cited.

You and I both know this is predictive. You are selling time BUT there are prices at which you will lose money. Your Iron Condor makes money if the price stays within a certain range. So – by placing such a trade, you are predicting that the price will stay within that range. This is a predictive strategy.

This is not the entire story of the strategy I developed which uses credit spreads and aims to form Iron Condors when market conditions permit. When an IC is formed, if the underlying trends "normally," I still make a profit. Sometimes even more of a profit than if the market just moves sideways. I believe I showed an actual example of that in another thread. If the market moves dramatically, then defensive actions come into play.

“Max Loss Occurs When Price of Underlying >= Strike Price of Long Call OR Price of Underlying <= Strike Price of Long Put”

This is making a prediction Howard. To claim otherwise would be ludicrous.

Whether you are making money from lack of volatility, lots of volatility, direction or whatever - you are still predicting that will happen.

Too many people believe they don't have to make a call...

Your are not saying anything I did not already say in the post you are replying to. However, you are carrying the idea of prediction to an absurd end. I don't see where your definition has any practical value. Reread the "quibble" part of my post.

What I am "predicting" is that I can take action as appropriate, not the direction of the market. If you feel that this limited view of predicting wins your argument, then good on you.

 

[HowardCohodas]

∫(Random Entry + Money Management) gives an E(X) > 0 is a brain fart, as far as your account is conerned, of Darwinian proportion.

Test it before you dismiss it or denigrate it.

I had the same a priori impression that you have, however testing it myself convinced me otherwise.

 

[Hilarymannah]

Mechanical trading can be taught,...discretionary trading can't,......go figure ! : )

 

[forker]

Mechanical trading can be taught,...discretionary trading can't,......go figure ! : )

I'll sell you a discretionary trading course for only £599.95

 

[Hilarymannah]

funny forker !!,........ : )

 

[Trader333]

it is only by misunderstanding the markets that you could say that this was theoretically possible

......and it is only by misunderstanding my post that you could have made this comment. I am saying that the stock market is effectively set up as a ponzi scheme. Its success depends on continuous economic growth and an ever growing population. If that were the case then "in theory" it would be possible to sell on stocks to the next generation at a higher price than they were purchased. Of course I know that this is not the case and I was not saying that it was and it is more akin to a poker game where if someone is up there has to be a loss incurred elsewhere.


Paul

 

[meanreversion]

I am saying that the stock market is effectively set up as a ponzi scheme. Its success depends on continuous economic growth and an ever growing population.

Fractional reserve banking necessitates the continuous creation of new money, in order to pay back the interest on the old money. Money supply must always go up, and default occurs if it doesn't, by definition.

Central banks are now creating money to replace that "destroyed" by asset price (real estate) reduction, and this will lead to inflation - it's the only politically palatable option for escaping this moutain range of debt.

I reckon stocks could do well in that environment, irrespective of the overall growth rate.

 

[Chartsy]

yer' a trend follower aren't you meanie?

 

[MrGecko]

......and it is only by misunderstanding my post that you could have made this comment. I am saying that the stock market is effectively set up as a ponzi scheme. Its success depends on continuous economic growth and an ever growing population. If that were the case then "in theory" it would be possible to sell on stocks to the next generation at a higher price than they were purchased. Of course I know that this is not the case and I was not saying that it was and it is more akin to a poker game where if someone is up there has to be a loss incurred elsewhere.


Paul

Fiat currency, innit. Unless you wanna organise a coup d'état, that is.

 

[DionysusToast]

Looks like a Nobel Prise coming your way.


Several years ago, (9, I think) I did some work on this myself. I did not come up with this idea on my own and cannot recall where I heard about it. Lately, the work of Dr. Van K. Tharp is also available.

The Van Tharp/Tom Basso test of trading a random entry system was a trend following system.

It works like this.
- get in with a stop
- trail your stop to take advantage of trends.

The key is that you need the trending periods to be long enough for the winners to outstrip the losers + fees. The markets need to trend much more than 20% for this to occur in the tests I did on this same system. The results are probably on this site somewhere.

This type of system is predictive in that it can only be succesfully applied to markets that you predict will trend. I think BSD pointed out that the weekly DAX has had this characteristic for the past 20 years.

Now - for the random entry in a 20% trending market system that escapes your mind for the time being, I find it hard to believe that this is possible without increasing risk to cover the losers. In any case, by definition, this is a system that makes money if a market trends more than 20% of the time. Therefore, you would trade it on a market you think will have those characteristics - it is predictive.

Now - what would happen if hundreds of thousands of people all decided to trade randomly in a market to take advantage of that 20% trending period ? The outcome would be that the market would no longer trend 20% of the time. It would whip around as people are putting in random trades all over the place. This outcome is inevitable. This is an aspect of the markets people need to understand.

Clever editing is not a way to make your point. I used the conjunctive "and" before the sentence fragment you cited.



This is not the entire story of the strategy I developed which uses credit spreads and aims to form Iron Condors when market conditions permit. When an IC is formed, if the underlying trends "normally," I still make a profit. Sometimes even more of a profit than if the market just moves sideways. I believe I showed an actual example of that in another thread. If the market moves dramatically, then defensive actions come into play.



Your are not saying anything I did not already say in the post you are replying to. However, you are carrying the idea of prediction to an absurd end. I don't see where your definition has any practical value. Reread the "quibble" part of my post.

What I am "predicting" is that I can take action as appropriate, not the direction of the market. If you feel that this limited view of predicting wins your argument, then good on you.

You have confused "Directional" and "Predictive".

Statisitical Arbitrage is a non-directional strategy which in it's simplest form is trading mean reversion between 2 correlated markets. Although not directional, it is profitable when the pairs revert to their prior correlation and it makes a loss when they do not. To trade this method succesfully, you need to be able to make good judgement calls on which markets/when markets will revert.

Options strategies can be made to take advantage of no move or any move but in both cases, you need to make a call on which you think will occur.

This is not a stretch of the word predictive. This is simply what predictive trading is.

 

[DionysusToast]

......and it is only by misunderstanding my post that you could have made this comment. I am saying that the stock market is effectively set up as a ponzi scheme. Its success depends on continuous economic growth and an ever growing population. If that were the case then "in theory" it would be possible to sell on stocks to the next generation at a higher price than they were purchased. Of course I know that this is not the case and I was not saying that it was and it is more akin to a poker game where if someone is up there has to be a loss incurred elsewhere.


Paul

All players cannot make money. In theory, in practice.

 

[HowardCohodas]

The Van Tharp/Tom Basso test of trading a random entry system was a trend following system.

It works like this.
- get in with a stop
- trail your stop to take advantage of trends.

We are in violent agreement.

The key is that you need the trending periods to be long enough for the winners to outstrip the losers + fees. The markets need to trend much more than 20% for this to occur in the tests I did on this same system. The results are probably on this site somewhere.

I can't confirm or deny your assertion. I used historical data, not data manufactured to have a 20% trending component. I used data on several heavily traded stocks and on several indexes. I did not create a metric to estimate the percentage of time the trading vehicle was trending.

I can't be more specific until my archeological dig uncovers this material long buried under work done since then.

This type of system is predictive in that it can only be succesfully applied to markets that you predict will trend. I think BSD pointed out that the weekly DAX has had this characteristic for the past 20 years.

Now - for the random entry in a 20% trending market system that escapes your mind for the time being, I find it hard to believe that this is possible without increasing risk to cover the losers. In any case, by definition, this is a system that makes money if a market trends more than 20% of the time. Therefore, you would trade it on a market you think will have those characteristics - it is predictive.

I did not pick the stocks or the indexes on any measure of its trending percentage as I did not use any metric to measure it. I used several years of data to cover more than one market cycle. Once an exit was triggered I made another random choice of going long or short, so I was always in. That means that it is possible that I was long, I was stopped out either as a stop loss or a trailing stop, and I could re-enter in the same direction.

Now - what would happen if hundreds of thousands of people all decided to trade randomly in a market to take advantage of that 20% trending period ? The outcome would be that the market would no longer trend 20% of the time. It would whip around as people are putting in random trades all over the place. This outcome is inevitable. This is an aspect of the markets people need to understand.

I haven't thought on this, so I don't have a thoughtful response.

You have confused "Directional" and "Predictive".

I still do not see how the distinction you are making has any practical use for a trader, newbie or seasoned.

Statisitical Arbitrage is a non-directional strategy which in it's simplest form is trading mean reversion between 2 correlated markets. Although not directional, it is profitable when the pairs revert to their prior correlation and it makes a loss when they do not. To trade this method succesfully, you need to be able to make good judgement calls on which markets/when markets will revert.

No immediate thoughts on this assertion.

Options strategies can be made to take advantage of no move or any move but in both cases, you need to make a call on which you think will occur.

I do not make a call in the sense that I look at charts, identify support and resistance, or use any other predictive tools. I did admit, in my "quibbles" section, that there is some directional information in the credits available and the probability of touching estimate for the spreads I trade.

This is not a stretch of the word predictive. This is simply what predictive trading is.

Forgive my obtuseness, but it appears you are trying to make a distinction without any practical difference.

A good teacher, when asked the same question a second time, answers differently, not louder. I hope I resemble that remark.

 

[Shakone]

Dionysus if you there are enough trends (or they last long enough), we can make money with a trailing stop.

If there are enough periods of consolidation in a range, can we make money by exiting towards the extremes of the range? If not why not?