So where do you make YOUR money?

[bedsit]

Why do you think your system is not workign well at the moment?

I wish I knew. It seems there is a competition which country is going to devalue their currency the most.

 

[bedsit]

I wish I knew. It seems there is a competition which country is going to devalue their currency the most.

'Group of 20 finance ministers and central bankers vowed Saturday to avoid "competitive devaluation" of their currencies while curbing their external imbalances.'

They may stop it - who knows.

 

[kongming208]

This is an interesting discussion. I've always thought of entry and exit as two halves of a same coin, and mathematically similar.

Let's pretend for the moment that I'm managing two funds (I wish ). The first is
a conservative fund that is mostly cash/treasury bills, and the second is a
long-term investment fund that tries to beat the S&P 500 by a couple of points a year.

Let's say all of a sudden, my crystal ball gets suddenly bearish. In my mostly cash
fund, I might decide to short the S&P 500 index (entering into a short position). In my
index-like fund, I might sell some or all of my shares and convert my position to
cash, which means I'm exiting my long position.

To me, the trade in the first fund seems mathematically the same as the trade in
the second fund. It's just that I've superimposed a long-position on the second fund
so that the entry looks like an exit and the exit looks like an entry.

That's the way I tend to see things, but maybe that's just me.

 

[meanreversion]

This thread is pretty good, but very hard to find!

Random entry - I've coded up a random entry system. And it makes money. I took the Turtle rules and modified it a little.. if the trend is up, flip a coin and if it's heads, then buy. If tails, do nothing. Repeat the next day until you're in a trade.. then ride it using the lower 10 day channel until it gets stopped. The day after being stopped, toss a coin as to whether to trade, and so on.

This system makes money over a 5-10 year time span. I played with it for a few days.. it was fun clicking on the backtest button (I use Amibroker) and seeing a different result come up each time.

Compared to the non-random Turtle method, it wasn't as profitable. But it still made good coin, significantly more than, for example, J Meriwether has made for his clients over the years.

But here's the rub. What person will ever trade a random entry system? It's bananas. I think that all I really proved was that trends have existed over the last decade and if you had stayed on board long enough, you would have made money (I used 10 markets, a mix of FX and commodities).

I'll tell you why NO-ONE trades a random system, even if they can be profitable. The hardest part with trading a purely mechanical system is following the rules without fail. This means taking the 5th buy signal after the 4 previous buy signals all lost money. It's very hard to do, but you'll find that skipping signals over time will almost certainly lose money (provided the system is relatively robust).

Now, if you are trading a RANDOM entry system and 4 buy signals in a row lose money, I guarantee that on the 5th buy signal, you will think "what the **** am I doing" and stop trading the system. In other words, it's significantly harder/impossible to stick to a random system than a non-random one.

 

[MrGecko]

Random entry - I've coded up a random entry system. And it makes money. I took the Turtle rules and modified it a little.. if the trend is up, flip a coin and if it's heads, then buy. If tails, do nothing. Repeat the next day until you're in a trade.. then ride it using the lower 10 day channel until it gets stopped. The day after being stopped, toss a coin as to whether to trade, and so on.

Mate, that is far from a random entry system, isn't it. I can count 4 "if's".

 

[wackypete2]

you will think "what the **** am I doing"

I say that every morning when I open my platform....but then I proceed to trade anyway. Go figure.

Peter

 

[meanreversion]

Mate, that is far from a random entry system, isn't it. I can count 4 "if's".

Yes, good point. I found that by taking out the trend filter, the returns dropped dramatically, e.g. from 15% pa to 5% pa.

I kind of lost interest at that point as I was never going to trade a random system anyway, but the two points I took away (and this applies to mechanical systems in general) are a) the trend is your friend and b) run winners/cut losers.

Both these things are counter-intuitive to human instinct. For example, I have known a few prop traders who would be living in much larger houses if they hadn't spent their entire careers trying to be short JGBs. After all, who doesn't want to pick the high of a bubble? Furthermore, wanting to be right as frequently as possible is a strong human emotion or bias, which leads to taking profits too soon (hey, I was right!) and running losses for too long (I can't be wrong on this trade, it will come back).

I'm fairly certain I had this exact discussion on t2w about a year ago. I forget who the other participants were, but I have to say I'm finding this website to be very circular now.. feelings of deja vu abound..

 

[Prawnsandwich]

Its not a great proposition in the first place is it ? - trying to differentiate between entry and exit and which is more important. Both are important. As is trade management. Entry and stop placement define initial risk, and potential risk reward.

Exit is all about letting winners run, cutting losers quickly and / or exiting when the trade is not doing what you expected.

It all needs to be got right.

 

[meanreversion]

Prawn, have you heard of Gerald Ratner?

 

[Prawnsandwich]

Prawn, have you heard of Gerald Ratner?

Yep, but thats not it....

 

[DionysusToast]

Yes, good point. I found that by taking out the trend filter, the returns dropped dramatically, e.g. from 15% pa to 5% pa.

I kind of lost interest at that point as I was never going to trade a random system anyway, but the two points I took away (and this applies to mechanical systems in general) are a) the trend is your friend and b) run winners/cut losers.

Both these things are counter-intuitive to human instinct. For example, I have known a few prop traders who would be living in much larger houses if they hadn't spent their entire careers trying to be short JGBs. After all, who doesn't want to pick the high of a bubble? Furthermore, wanting to be right as frequently as possible is a strong human emotion or bias, which leads to taking profits too soon (hey, I was right!) and running losses for too long (I can't be wrong on this trade, it will come back).

I'm fairly certain I had this exact discussion on t2w about a year ago. I forget who the other participants were, but I have to say I'm finding this website to be very circular now.. feelings of deja vu abound..

There's people on here that claim to have EXPERIENCE of trading random entry systems.

Like you say - they are either nuts or bulls....

 

[thelerner]

ok, so I'm a bit grumpy this morning

Hands up those who make money on their entry. No-one? Thought not because your money comes from your exit

So why is everything about entry, entry, entry with relatively little about exit. After all, there's many a good trader who have shown that they can make money on random entries, but I've not heard of any who have succeeded with random exits.
jon

I agree even to the random part. The reason why the chimp with the dart beats most of us is because he is passively stupid. With books, charts and theories, we are actively stupid and that hurts us in the long run.

I remember talking to my accountant about investments and commenting how much I like Vanguard Health Care MF, it was a 2 bagger for me. He on the other hand hated it and had lost 30% on it. The kicker is we'd both bought it at the same time. This happens all the time to essentially every stock. Its all in the exit. Okay mostly in the exit.


my 2 cents, 3 minute comment

Michael

4 more cents, 3 more minutes

It occurs to me. A chimp throwing one dart is random, a chimp throwing 500 is an index. You have 1,000s of people buying index funds today. Are they akin to chimps throwing alot of darts?

Beyond random buying and intelligent selling strategy is money management, diversification (ie throwing at different board) etc. Random buying can be done at times when winds are favorable.

 

[DionysusToast]

I agree even to the random part. The reason why the chimp with the dart beats most of us is because he is passively stupid. With books, charts and theories, we are actively stupid and that hurts us in the long run.

This.

 

[the hare]

There's people on here that claim to have EXPERIENCE of trading random entry systems.

Like you say - they are either nuts or bulls....

No, just profitable because we understand some fundemental truths about markets that you dont understand, and will never understand because you think in a completely different mode.

 

[DionysusToast]

No, just profitable because we understand some fundemental truths about markets that you dont understand, and will never understand because you think in a completely different mode.

And quite typically on teh interweb, you are not able to actually put together a rational argument when you have a poke at someone.

If you'd like to debate a specific issue, please go ahead and start.

Or you could post more empty statements and get recommendations from empty heads.

Whatever floats your boat.

 

[Shakone]

It is usually pointless to engage in a rational debate with you DT. You get annoyed, and then change the argument to something it wasn't about.

Someone will discuss whether with a random time of entry, or a fixed time and random direction can be profitable, and explain to you clearly, that a good trader could just exit trades he thought were bad soon after entry, and keep those he thought were good, and he'd make money. You can't find the flaw in this, so you then state that isn't random at all. But that wasn't the debate. It is random ENTRY that was being discussed, not random strategy - just entry. Then you start calling people monkey's, empty heads, stupid etc. all because you tried to change the argument, and it didn't work.

Lets try one more time.

Someone on a thread a while back told you about a person that enters based on coin flips and makes a profit. Your response was

This is not at all remarkable. The problem is that the explanation is beyond the grasp of most people.All systems compose of many parts. The edge of a system can exist in any of those parts. In fact - give me a system with multiple parts and I can move your 'edge' from one part to another.

So an edge can exist in any part, and you can in fact move the edge about. Therefore you could have an edge just in exits. Now if that edge is sufficiently strong, then with a random entry, you will make money, because your 'edge' is in the exit. That's all there is to it. And what's more you agreed it is possible. Your own words.

Now you can say, that relies on a trend for example. Well maybe so, but there are two ways of looking at that.
1) trends exist in various markets often enough for us to consider that a property the market has, and so we can make money with a random entry system in the long term
2) trends are not well defined. Essentially there is no trend, there is just movement, and yes the coin flip system requires price to move for you to make money.

In summary, your own words are that, someone can make a profit from coin flipping for direction and managing it appropriately, and that not only is this possible, but actually "not at all remarkable", and relies on a feature of the market. Why on earth you need to insult people left right and centre because people have told you this very same thing (just in a different way), I don't know...

 

[thelerner]

Sometimes we exaggerate to show a point. But is there agreement on this?:

Novices think its about picking the right stock/option/commodity.

Experts know its about money management and exit strategy.



Also I gotta ask, DT when you wrote "This"
Quote:
Originally Posted by thelerner View Post
I agree even to the random part. The reason why the chimp with the dart beats most of us is because he is passively stupid. With books, charts and theories, we are actively stupid and that hurts us in the long run.

DT: 'This.'

Did 'This' mean deep thought provoking - or stupid Rookie crap?

 

[DionysusToast]

In summary, your own words are that, someone can make a profit from coin flipping for direction and managing it appropriately, and that not only is this possible, but actually "not at all remarkable", and relies on a feature of the market. Why on earth you need to insult people left right and centre because people have told you this very same thing (just in a different way), I don't know...

I am not sure why you feel insulted, this is merely debate.

You did imply that you had traded a random entry system and you had to backtrack from that somewhat so your bruising in that respect is self inflicted.

The above quoted statement is correct. The concept of coin flip & trailing stop is THE SAME as a 'bet' that markets will trend. There are options strategies that do the same thing. Now - take a look at Citigroup chart, this coin flip strategy would absolutely fail here because the trending periods are not sufficient.

Now - a monkey could enter at random & you could apply a trailing stop BUT a monkey could not identify a market that will trend, which you would have to do in order to make this 'random' system work.

So - if random entry now means that you need to first pick a market that you believe will trend over the trading period, then it is not reall random. You have merely stretched a point to give a system the appearance of randomness to someone that delves no deeper.

 

[DionysusToast]

thelerner.

"This" = agreement.

 

[jessicayip]

This is the thing I have been worrying about for years!

Why people around me made great progress and good fortune~but me? When and from where can I really make my money? I will work it out very soon.