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Ok, very quickly before I forget (bath tub intuition). Refer to wikipedia for my definitions of "ideal arbitrage" and "statistical arbitrage".

Ideal arbitrage makes sense.
Immediate gain: you grab it. Can't argue against this.

Statistical arbitrage is nonsense.
My delusional system was indeed "statistical arbitrage", but whereas in forex the nonsense is revealed (while trading two different futures, you're actually only trading the relationship of one future to the other), in stocks and other securities the nonsense escapes you, so you might start trading a system that you think is "magic", but that's nothing but a relationship between the two stocks (only, unlike for forex, such product does not exist). In the end, you just end up spending a whole lot of money on commission and spread costs, without getting extra edge because of it. Only since it's so complex, you might not even realize it. All done with this crap for good.
 
Tonight my parents were here. My dad and I were talking about politics as usual, and then my mom started talking with us, not seriously as we were, but superficially as she always does. The conversation turned into a superficial conversation, and my dad, as always when this happens, started joking, something that makes me uncomfortable, because I take his jokes as a lack of respect. What bothered me the most is when he made fun of me, talking with my mom, because my cousin and I consider him and his brother negative and pessimists, always predicting the worst catastrophes no matter what we are talking about (I mentioned this in another post). Just this, that I had joined my parents to talk seriously, and that he now was making fun of me, made me so upset that I got up and left, came to room, and locked myself in, as usual. I mumbled something, saying that my mom was talking nonsense and he was talking by himself, but basically, I only realized hours later, I was upset because he wasn't taking me seriously. That's a problem with my dad: he hasn't treated me with enough respect until now, so anything close to lack of respect drives me mad nowadays. I am also hypersensitive to criticism, especially if it's coming from him. I've taken enough **** from this man. Interacting with him makes me act disproportionately, irrationally, angrily, excessively, bitterly, heatedly, uncontrollably and so much unlike me.

The only thing I regret is that I wasn't focused and calm enough to realize what was bothering me and telling him so. Hopefully, little by little, I'll get closer to understanding it and then making him understand. Next time I gotta make sure I don't blame my mom for being superficial, but I only blame him for joking around, and after that, I get up and leave. That way he'll stop. But he should know by now that I never enjoyed his jokes.

The truth is that if he's still so unpleasant to me is that he lacks the sensitivity and the caring about others necessary to modify his behavior. My dad is pure ****. I'll never get tired of saying this. He's crap. His only quality is that he can work reliably. As a human being he is total crap: nonexistent. He makes it a pleasure to be away from him. I don't remember in my life ever missing my parents. That's how one, a guy like me, turns into being a narcissist. He has to give himself all the things he wasn't given by his parents.
 
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Hey, I don't like very much how this guy talks but I'll have to admit that, despite that, he's saying wise things. Not the usual psychological stuff. This lesson seems to be about discretionary trading based on statistical data and backtesting. This could be reasonable, even though it's not what I do. He does sell stuff, and has a web site, but he's making sense with the stuff he says, and furthermore, this is not the normal stuff you hear from the usual trading coaches. The best thing is the summary at the end of the lesson: I skipped to that, a few minutes into the video (when he was talking about "mercedes benz"), because if you hear him talk, you'll miss his points: either because he's not good at synthesis or because someone else has written the summary at the end of the lesson. This video belongs to a series of videos suggested by counterviolent.

 
Hey Travis where is this thread going - far too much talk no trading. Silly girl just placed order to buy cable at Fridays close with 50 stop. Gotta be a winner.
 
Hey, that's funny. I thought it was my journal. Besides, some people are liking it.
 
WHY ARE PEOPLE SELLING THEIR SYSTEMS? DO THEY WORK?

Triggerfish said:
The problem I see is there are opportunities every day in the markets but not everyone can take advantage of it, some will fail where others will win because everybody has a different perspective to the markets. This leads me to the trading robot, it is after all, a trading system designed by someone, if it works, why would one sell it? they would be better using it to make money instead. Maybe the system does not work? It could be just a selling pitch after all to make money unless one can use it for say a week to try it out, if it doesn't work, its not worth the money. The product should be guarantee to make money but we all know what the answer to this question is.
To prove it, one has to use it to determine its success but usually one cannot use it before it is bought, so if you were to buy it to test out, the seller would have achieved its aim and you would be left with it to test out, you will then discover the answer which you already know the answer.
Click to expand...

I know you didn't write it here on my journal but on this thread, but I'll reply here so to keep my wisdom all together, in one place. I copied it here because it's an intelligent question (because I asked it before). I'll now proceed to take a bath, after reading your question, and then come back and reply to it.

[...bath...]

Some quick thoughts while I dry off, and then I'll write more from work.

By what you said, even though you skipped a few logical steps (in the sense that you didn't write them down), you seemed to reach the conclusion that robots are better because in our minds we might be unable to pick the right opportunities among the many opportunities we get every day. I agree, as far as my case, I reached the same conclusion. There are other people who wrote on this journal who managed to learn to pick the right opportunities and be successful at discretionary trading.

So you now are thinking of automated trading. And you say: if these programs work, why are they selling them? It's the same exact question I ask myself all the time. I am not sure that all those selling the programs are charlatans. I am sure that some of them are, but I am not sure that all of them are. Then the question is: why would you sell it if you can simply make money by using it yourself? But we can't ask that question until we know if and who is not a charlatan. For sure we can say that some people are teaching (not selling systems) discretionary trading, on the internet and on web sites, simply because they enjoy teaching. They've got the money and they now are bored and many of us enjoy teaching: I am one of those people for example (even though I don't have money yet). So I can relate to people teaching and therefore I think there are traders out there that are actually teaching profitable discretionary methods. Only I still do not know if there are traders who sell profitable automated systems and then I'd like to know why as well.

I'll write more when I'll get to work.

[...getting dressed and going to work...]

Ok, back. We were saying... yes, I still do not know if there are traders who sell profitable automated systems, and then why. The question I'd first raise is: doesn't selling your system make it less profitable? I would say yes. But then others might even argue against it. The reason is this: you sell your system, and then whereas buying at x opportunity was convenient, with many more people doing the same thing you're doing prices will rise, and it will become less convenient. This is basically the only reason why I am not selling my systems even though many people advised me to do so, but then again it was people who are not experts in this field. Besides, I rarely follow other people's advice anyway.

DO NOT SELL YOUR SYSTEM IN ALL CASES...
I think that ultimately you should - in all cases - neither sell your systems nor invest other people's money and for the same reason: if your systems (and you) are not profitable, then you shouldn't be ripping people off, whereas if your systems (and you) are profitable, then you shouldn't let other people take profits from you (either by following your same signals on their own, or by making you follow your own signals with their capital, when they give you their capital to invest).

...BUT YOU COULD BE DESPERATE FOR CAPITAL
On the other hand, I do realize there is one big problem that might make me do otherwise one day, or that at least has tempted me in the past to act otherwise and that problem is undercapitalization. For example, I remember one day I was on another forum and I was so undercapitalized (I had a few thousands of dollars) that some guy sent me a private message and told me that he had a company and if I gave him my systems he'd use them and give me part of the profit. Ah ah... I believed him and sent him all my systems - that thank god weren't as good as they are today - and he replied to me that they were no good basically, and disappeared thereafter. That's one case when despair made me act like a total idiot. Hopefully that guy was in good faith and never used my systems, but I have some doubts about it. It's possible that he used them and even sold them. Oh man... what an idiot I was. However, when you have no money it's as if you had nothing to lose, and you say to yourself: "what do I have to lose? If I don't take this opportunity I'm going to be broke anyway...", and then you grab the opportunity. These people, if they are in bad faith, are really callous.

CONCLUSION: SHOULD YOU BUY THESE SYSTEMS? NO, BUT LONG ROAD AHEAD
Conclusion and back on the topic. The real question, originally, seemed to be just this: should one take the chance of buying one of these systems they are selling? My answer, as a system developer, would be quick: not at all, build it yourself.

Then, the next thing I realize is that obviously no one can do that right off the bat, even if they were programmers, which is rarely the case with traders, but which is often the case with automated traders. And this leads me to my next recommendation: become a programmer, like I did. I taught myself vba. You can do the whole thing in a few years.

But that of course discourages almost everyone, because no one will accept to do something that is not immediate. And I didn't do so myself. I thought profit was always around the corner, and that's what kept me working for 12 years: each time I thought I was this close to making it. And finally I would say that I've made it (even though I almost don't have any money yet) and I have to thank for this my delusional state of mind which has made me think that my success was around the corner despite the fact that it still hadn't happened after 1 year, 2, 3, 4, 5... 12. It's really amazing.

So, back to the point: very rarely someone will accept to undertake a task that will require years to complete. And as I said I succeeded because I was delusional enough to think every day for 12 years that I would have been profitable starting today. So my conclusion regarding automated trading is the same that I draw in my profile's "Favorite Trading Tip", that is you have to be an obsessive-compulsive narcissistic delusional maniac in order to do it:

Favorite Trading Tip
For discretionary trading you need first of all a specific and rare emotional balance, which is very hard to develop if you don't already have it. Hard work is not enough and may even hurt you (overtrading). For automated trading instead, the first thing you need is hard work, whereas your emotional balance won't matter or may even hurt you: being an obsessive perfectionist is a requirement. Most people are not balanced enough to be profitable at discretionary trading, nor are they imbalanced enough to be profitable at automated trading.
Click to expand...

You have to be delusional enough to think that it's easy and that god has chosen you to be the one who will make it happen, and then you have to be enough of a maniac to actually make it happen, little by little, all by yourself. Once you see your objective clearly (making it happen), it will come all by itself. You will work incessantly for it to happen. But regular people have many other interests in life, and will lose focus. They won't be focused enough to make it happen. On the other hand, if you are a programmer, and you are very very smart, then you could even make it happen without renouncing your regular life for a few years like I did - I didn't have a life to begin with, and that helped. But in this field, things and meanings get reversed. "Loner" is good. "Social" and "popular" are bad: these things lead to wasting your time, and not getting things done. That's why I am not wasting any time trying to please the crowd and making this journal as personal as possible: I don't want to attract the regular people, because those people will never be any good at automated trading. If anything, I'm trying to scare them away by writing these long, original, personal and artsy posts of mine (which without any doubt they call "weird", because to them everything is either "weird" or "cool"). They'd be wasting my time and their time anyway.

THE POWER OF THE STEP BY STEP APPROACH
It's amazing how easily things get done with the step by step approach. Even this post: if you told me that I had to write a paper in (voluntary) reply to your post, I would have answered "no way, I am not gonna do it". But, little by little, I ended up writing an essay. Long, precise, logical, well-structured. It has been a lot of work, but I've done it without feeling almost any fatigue. In the same way, if you had told me, 12 years ago, that I would have done all this work (testing, automation, etc.) to achieve profitability and still would not have had a fortune, then I would turned it down and said "no way, too much work, not worth it". But I thought it was easy and so I embarked on it. Then, once you start, it's harder to say "not worth it", because you feel that if you stop you'll throw away all your past efforts (therefore the more you work the harder it is to quit, especially if you feel the objective is getting closer to being reached).

I CAN'T LIE, OR RATHER: I'M INTO THE HABIT OF TELLING THE TRUTH
So maybe instead of telling you the truth, and discouraging you by saying you have a "LONG ROAD AHEAD", I should have told you "it's easy" and "you'll be done in no time", but I can't lie, I can't bluff and I can hardly even just hide the truth. That's what I've been taught, I can't undo it, also because I believe it's good. Telling the truth is good, honesty is good. Anyway, the consequence of this is that I am not the most motivating person. Often, when I say "you have a long road ahead", I also add "you might as well quit from the start so you won't waste any efforts uselessly". Yes, because most people are going to quit anyway, so they should save themselves a year or a few months of efforts. That's what usually happens: people say "good, I am going to do what you did", and then they cop out of it, one way or another.
 
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I am living the best two weeks of my entire work career since I am still all alone in this awesome double turned single. I am so happy. I can't believe they're letting me stay here all by myself. Wow, people must really love me.
 
But not everything is perfect. For example the switchboard operator is a whore. During lunch time, because I work even while others go to lunch, after one call, she stopped replying to me, until I called her from the phone of a colleague and she immediately replied and I told her "ok... so now you reply, huh? Why aren't you answering my calls?". Then I went back on my phone and called her and she replied she'd been there replying to people all the time, and said there must have been some malfunctioning. So I had to apologize, even though I do believe she's a whore, because she was actually laughing on the phone almost. That whore...

But maybe i am just nervous or looking for people to argue with. I think it's because I have nobody to complain about anymore, ever since I've been working in a single room. Yeah. I remember in situations like these I usually start harassing someone I bought stuff from on ebay who hasn't sent it as soon as he received my payment. I just bought a laptop and my payment went through: what is guy waiting for to tell me that he got the money? Let's check my email, for the twentieth time in the last few hours. No, nothing yet. That *******...
 
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Back home. Short on the EUR, because it just can't rise any further. If it does, I'll go short 2 contracts, and then 3, and then 4... adding one contract every 30 extra ticks.

I know I will make money today because first of all it's risen too much, and second of all because I am upset and the market owes me some form of compensation for my mood, which is low right now due to the argument with that switchboard operator. And yes, sure enough, I am making money from the start, which can only mean one thing: the market loves me and thinks that I am a just person, and that the switchboard operator is a whore.
 
Now, what kind of money will make me feel good enough to forget about that whore? 375. That will be my compensation. So I will place a take profit... how about less? No, that's good. I will place a take profit 30 ticks below my entry.

And now I will go for my second bath today. Bath is good, because it keeps me from jumping out of the window. When I am underwater, I feel safe, and the hot water makes me less active, relaxed, and it could keep me from overtrading or overthinking. But I can't bring my computer in the bath tub, so it works even better.

My next concern is what if I get ripped off, and that guy I paid doesn't send me the laptop? I think I'll worry about this incessantly from now till the moment I get the computer.
 
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Why are people selling their systems? Do they work?

travis said:
WHY ARE PEOPLE SELLING THEIR SYSTEMS? DO THEY WORK?
Click to expand...

Very good presentation Travis, it good to debate yourself the various issues that you have to confront so that it will be less difficult when you face the real sale.

I have a six pages of a short presentation, in the last page I demonstrated how technical analysis (or tools from computer) can help a guy to make the decision to get out of the position after a big run-up.
In the chart I pointed out that the prices kept going up after the one-day huge move, but the volume is tappered off, which is called prices & volume diversion by technical terms, it's a signal that a reversion was imminent, I pointed that Slow Stochastic was crossing down by these signals in a very good timing, MACD crossing (sell signal) came at a later time and traders would have seen their gains evaporated if traders rely on MACD for the sale.

My analysis to call for price of the stock was ready to fall down was correct, and the indicators that I used and presented were all man-made. It can be programmed the same way John Bollinger designed the Bollinger Bands to recognize the various stock patterns and characters so that traders who are willing to learn can get an edge over those who don't , it's the same way to look at candlestick technique.

Well, I'll send you my little presentation.

Cheers,

SC
 
Thanks for the feedback. I'm glad you appreciated my long post: I enjoy reasoning out loud. However, as I said, I don't plan on selling anything.

The original point of that post was to address the question "should one buy other people's systems?" and my conclusion was "no, build one yourself, but you have a long way to go". But before that, I asked myself "should I sell it?" and replied "no, whether it works or it doesn't, you shouldn't sell it".

The reasoning backing my conclusions, and the summary of everything, is that it's not convenient to sell your systems if they work, and it's not honest to sell them if they don't work. That's why I wonder whether it's convenient to buy them, because I don't think it makes sense to be selling profitable systems (unless I am wrong about my assumption that spreading your system diminishes its edge), so the only people selling them might be the dishonest ones. And that's why my conclusion was to advise that member to build one himself.
 
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PART C: THE USE OF A COMBINATION OF TECHNICAL TOOLS FOR TIMING THE BUY AND SELL OF HOT STOCKS
The use of Slow Stochastic and MACD signals to maximize the trading gain
With modern technological tools, traders can make the buys and sells on a timely manner. The criticism that the signals from technical analysis tend to be late. Yes, it would be totally true if only 50-day moving average, or MACD was used as a single tool for stock selection in the good old days.
Nowadays, traders can use the combination of various tools such as: In the example below, MACD and Slow Stochastic signals guided the traders to a good buying point. However, the sell should follow the more responsive Stochastic signal to preserve the gains the traders “recognized” from the hot trade. Thanks for the modern technology, these technical tools are free to use and easy to learn.
DPTR32.gif

Chart C1: DPTR 6-month daily chart with 50-SMA
1/ Stochastic gave a buy signal first

2/ MACD also gave a buy signal one day later

3/ Bullish sentiment with the MACD confirmation, prices started to move, volume picked up. In the next 2-trading days, prices increased to $2.28 & $3.03 and daily volumes increased to 11 & 64 MM. Prices kept moving up (4A) 5 of the next 6 trading days to $4.25 (See 4a) but the volume kept decreasing (4B). Since volume did not go up to follow the prices, we have a situation where technical analysts called: Price volume diversion and the effect is a price reversion is imminent.
Stochastic gave a signal to sell (5A) on Sept 15 when traders could unload their position at around $3.75 a share. Those who waited for MACD signal to sell (5B), it occurred later at the close of Sept. 21 where the traders could unloaded the shares for around $2.00 which meant most of the gain from the run-up was evaporated.

A person with some basic technical trading skills would have sold DPTR at the first signal that came up which is Stochastic signal due to the warnings of the price and volume diversion, also the gain of more than 100% in such a short period is another good reason for the traders to take the first exit. MACD has a weakness due to its nature as a trend follower. If there is a full automatic trading system, the computer would have programmed to use the Stochastic sell signal for the sale execution.

The general rule of technical analysis is traders should rely on more than one indicator to make the trading decision. While traders could be more safe to wait for the MACD bullish signal to place the trade, but waiting for MACD sell signal is always late, and follow Stochastic for selling signal is more proper.
 
Wow, a lot of work went into your post. I don't know anything about the subject you cover, so I won't dare to comment. Hopefully other readers will have an informed opinion. I've just read here that you're studying for the CMT exam, so congratulations for all your hard work. As Ali G would say: respek, man.

 
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I am always in my single room, and quite happy about this. I almost feel too happy, with nothing to complain about. This happiness is becoming unbearable: I am becoming frustrated with this happiness. Maybe because happiness means freedom from problems, but freedom from problems also means boredom, and boredom means frustration.

Yesterday, to compensate, I got into a fight with the switchboard operator, who wasn't answering the phone (not to me for half an hour, but when I called her from a different phone she answered immediately, that whore). It is better to be frustrated and argue with the switchboard operator than to be bored maybe.

Today, I am so happy and without problems... or rather "so bored and without problems"... that I am looking for other people's problems to worry about. Isn't that what everyone does when they've got everything under control and say "now I want to give something back"? They're bored and are so used to working, that not doing anything makes them feel uncomfortable, and they'd rather work for free. Their "generosity" derives from boredom then. I've often felt like that.

Anyway, I was looking for other people's problems, and I think I have found a person with problems I could worry about: one of these days I'll treat to lunch this new friend of mine. A few months ago I met this intern, who does very good fundamental analysis on Italian stocks and is also profitable with it (simple and yet comprehensive analysis, based on standardized parameters that measure a company's health), but as usual, just like me, he is undercapitalized. He is supposed to be here for 6 months, and then maybe hired, but he got into an argument with his boss, who called him an idiot and told him to look for another job because he won't be hired at the end of these 6 internship months.

I am a bit upset about this (not too much though, because basically I only care about myself) because I think the most unfair and low thing for a boss is to disrespect someone in a position as weak as an intern. If someone's weaker I am always on their side: even if he were Adolf Hitler. Besides he called him an idiot in front of everyone else. Also, this guy disrespects his employees on a regular basis. If he did that to me, I would certainly not accept it. I have never been afraid of being fired, actually they'd do me a favor. Ah ah... once someone gave me too much work, a real bad ass manager, and I told him "yes, I'll come to your room in a bit", but then I got so upset for being taken advantage of, being given the most burdensome work (excel-related work) by everyone, even by other offices and bosses that weren't my own, that I just got up and left, without even turning off my computer: I just took off and went home, and didn't show up until three days later. And then I didn't even get in trouble for it - wow, what a totally amazing, excellent discovery!
 
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Wow, I thought I was running out of ideas for posts, but I just came across, I don't remember how (oh yeah, I was looking for more Jesse Livermore videos) this totally amazing excellent discovery: Fap Turbo and the Forex Critic guy, and I have to say both may not be actually be about a scam but something that works, despite appearances. This post right here is very related to my earlier post:
WHY ARE PEOPLE SELLING THEIR SYSTEMS? DO THEY WORK?

Here's the Forex Critic guy's web site, beware definitely a salesman but not necessarily a scam:
http://www.forexcritic.com/Click-Here/

Here's a video from his web site (he talks about a comparison of forex robots he made):

Charlatan or honest guy? The guy seems like he knows what he's talking about, unlike those folks in the second advertisement, below, but like them, he seems to advertise the same product and definitely makes money by doing so. So I don't have an answer. As I said earlier, I always recommend to build your own system. Also, all these people seem to be just salesmen, but still I cannot rule out that these robots being sold work. I'd like to know your opinions. If you are very skeptical, you'll at least have fun (I couldn't help giggling a little, despite the fact that I tried to not have prejudices) watching this video below:

http://www.metacafe.com/watch/3010793/forex_trading_system_fapturbo

http://www.fapturbo.com/
http://www.ivybot.com/
http://forex-megadroid.com/

Whether these are scams or not, this marketing phenomenon cannot be ignored by us automated traders, because one day these robots could change the markets (whether they work or not).

Here's some useful and related EliteTrader.com's threads:
Is Fap turbo for real?
Automated trading - Megadroid
programmable FX platforms?
Foreign Exchange Robots?
Anyone tried Forex Lexus?

I'll come back here and read them whenever I'll be at work with nothing to do, like a pleasant pastime.

The way I see it right now is as follows, but I will be wrong about something for sure. These people programming these robots on sale are "rogue automated traders", in other words: automated traders who didn't make it, didn't manage to make money with their systems, do not trust their own systems with their own money, and want to make something out of all their (unsuccessful) work and out of their over-optimized systems. They get together with someone else who has some capital and marketing skills and market their product, and sell it as we see in the above advertisement, which pretty much shows, in itself, by hiring all these non-believable actors, that the product is a scam (otherwise they wouldn't need to pay people to lie).


Because the world is round, it turns me on. Because the wind is high, it blows my mind. Love is old, love is new. Love is all, love is you. Because the sky is blue, it makes me cry.
 
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