So where do you make YOUR money?

[DionysusToast]

You want random?

At 09:23 (CET) tomorrow Thursday December 9th. Go short EURCAD.

Use a stoploss equivalent to 50% of the max-min of prior 11 bars.

Exit at 14:34 (CET).

I leave it to others equally fuggin amazed at the capcity of some to endlessly debate hypotheticals while seemingly unable to realise there is nothing stopping them rolling their sleeves up and getting stuck into the empiricals.

Load an excel spreadhseet with randoms for FX pair or instrumernt to trade. Time to enter. Direction. Prior number of bars to calc 50% of stoploss. Time to exit. All random. Do it for a few weeks.

Let us know how you get on.

Done it with backtesting tools.

Wouldn't do it with real $$ as it's a net losing system.

 

[Shakone]

I doubt that he has no appreciation of it Howard. More likely he already knows the importance full well, and sees that this type of argument never gets anywhere, since there are too many loose terms such as a system that "works", and is "random entry", which different people will have their own definitions and then argue their own side, and then in the end nothing is achieved or settled.

 

[Shakone]

Done it with backtesting tools.

Wouldn't do it with real $$ as it's a net losing system.

Awesome! You managed to do it on December 9th. Can I have your charts for tomorrow, that would really help my PnL

 

[DionysusToast]

This whole discussion is absolute horse poo.

Random or random entry, call it what you want, it's a silly endless discussion with little to no point as no-one will ever trade this way.

Random b0ll0cks more like.

Exactly - because it's a cop-out.

It's also one of those clever statements non-traders like to spew out on trading forums, despite it being nonsense. They then descend into - "can't reveal my edge" when asked to show how this works.

The internet is a place where nonsense, repeated over time becomes conventional wisdom.

I dislike this stuff as it midleads newbies. I dislike much conventional wisdom when it is just regurgitated drivel of this sort.

Mind you - it does have to be said, there are a lot fewer people banging the 'money management' drum nowadays.

 

[HowardCohodas]

I doubt that he has no appreciation of it Howard. More likely he already knows the importance full well, and sees that this type of argument never gets anywhere, since there are too many loose terms such as a system that "works", and is "random entry", which different people will have their own definitions and then argue their own side, and then in the end nothing is achieved or settled.

Among those that already accept the result, the argument is almost always about details that are irrelevant to the core point.

Among those who are not convinced or have never been presented with the idea that money management is a core part of successful trading, the result is a powerful motivator to pay more attention to it.

I indulge in discussions with the former group here, because it is fun. I present the ideas to the second group because it is one of the keys to their success.

 

[HowardCohodas]

Mind you - it does have to be said, there are a lot fewer people banging the 'money management' drum nowadays.

Do you believe that this is a good thing?

 

[DionysusToast]

The purpose of the experiment and the discussions is not that anyone would trade this way. The key point is to emphasize money management as a core component of trading success. That, in and of itself, is an extraordinary result given the number of traders who ignore this valuable concept.

It is unfortunate that you have no appreciation for this worthy concept.

The problem is that Van Tharp set out to prove something and that clouded his interpretation of the results.

All that has been proved with Van Tharp is that you can ride a trend with a trailing stop. That you can effectively have a system and within that system, you can move the edge from the entry part of the system to another part.

The system is still a trend following system, needs way more than 20% trending market and therefore still leaves you with the conundrum of which market to apply it to and when.

People on forums like to take the results and say "see - you can just trade at random and money management will do everything for you". This is akin to saying that you need no skills to trade - just a coin to flip and a magical money management system. Such a system of money management does not exist.

If you were to apply random entry to a ranging market - you would need to employ a totally different money management system.

All we have is a system whereby if you can call future market conditions, you will make money.

The way this is spun on teh interweb as the mythical money management mantra is retarded.

 

[Shakone]

Dionysus finds it ridiculous that random entry can be profitable. To me the really exceptional statement is the converse. To put it in another way, that no matter where you find yourself entered into a trade, and no matter what exit strategy you use, you're not going to be able to get an edge via that exit strategy. Furthermore, since this applies to random entry, it follows then that it applies at all points in time. That's quite astounding and hints that exits aren't very important, which is contrary to my experience. But anyway...

 

[DionysusToast]

Do you believe that this is a good thing?

Of course.

The less nonsense spoken, the more chance newbies can actually learn something here.

Too many people are looking for absolution from putting in effort into trading. The Money Management Myth offers absolution but does not deliver.

Of course money management is important - how could it not be?

The problem is, like all nonsense - this myth has grown over time and turned into a 4 headed monster which needs to be slayed.

Bottom line - if you are trading outright positions & you can't figure out when and in which direction to enter - money management will not make up for that. Ever.

 

[HowardCohodas]

The system is still a trend following system, needs way more than 20% trending market and therefore still leaves you with the conundrum of which market to apply it to and when.

The way this is spun on teh interweb as the mythical money management mantra is retarded.

You continue to state something as fact that is contrary to my experience. Neither of us will shake the other of our convictions, so it will have to wait until I find my experiments or I redo them. Then one of us will be vindicated, unless ...

I am a strong advocate of money management for newbees. It is easy to teach. If that makes me retarded, so be it.

 

[DionysusToast]

No-one is saying money management isn't important Howard.

The fact remains, it's not the magic bullet some people make it out to be.

Given any trading system and a competent mathematician, you will be able to move the 'edge' from one part of the system to another. This proves nothing about anything, other than systems can be modified in such a way.

The fact that unprofitable traders come here & claim that they could trade randomly and make money 'if they wanted to' but can't put details here 'because it's a secret' IS retarded.

Random entry + money management = losing money
Profitable system = making money
Profitable system + good money management = making more money

 

[DionysusToast]

You continue to state something as fact that is contrary to my experience.

Put the system up & we will examine it.

Otherwise, we may as well discuss the impact different brands of coffee have on trading.

 

[Shakone]

Given any trading system and a competent mathematician, you will be able to move the 'edge' from one part of the system to another. This proves nothing about anything, other than systems can be modified in such a way.

Explain something for me. If an edge can be moved to exit, what does that mean? Does that imply that you are saying with a non-edge entry, you can still have an edge overall, because your edge is in the exit. So what is a non-edge entry?

The fact that unprofitable traders come here & claim that they could trade randomly and make money 'if they wanted to' but can't put details here 'because it's a secret' IS retarded.

So is your statement now that, Van Tharp, plus whoever did the 'original' experiment in market wizards, several people in this thread (and other threads) who you have no idea whether they are profitable or not, are all unprofitable, simply because they disagree with you, and think this can be done? I think some people have explained to you how it could be done, and your response was that it only worked under certain conditions or that it wasn't really random. Is there any benefit in arguing the point further. Whatever edge you have ALWAYS only works under certain conditions. It is a moot point.

 

[DionysusToast]

The fact is Shakone that people are making spurious claims in an attempt to prove a point.

The point they are trying to prove is that money management can make a system with negative expectency profitable.

Of course, the people trying to prove this end up 'copping out' with statements like "it would reveal my edge" when all it does is reveal their lack of experience.

Note that IMO Howard hasn't copped out and is one of the few on the other side that hasn't.

Now - if you take a SYSTEM with a positive expectency, then of course you can move the pieces around.

This is not what Van Tharp set out to do - he set out to prove a system with negative expectency could be made good with money management. He inadvertently (?) created a trend following system which he also inadvertently (?) tested only on markets that trended.

In short - it's a fudge.

 

[Shakone]

With all due respect DT, you're not answering the question. What is a non-edge entry? And if your edge is in the exit, can this non-edge entry combined with the 'edge exit' be turned into a profitable system? And if not, then how can you ever say the edge was in the exit? If it can, then why is a random entry not a non-edge entry? And apologies for so many questions

This is the crux of it. It is all well and good saying who is and isn't experienced/profitable/a moron etc. None of these things you really know. And all of them are irrelevant to the issue at hand.

Nan-in, a Japanese master during the Meiji era (1868-1912), received a university professor who came to inquire about Zen.

Nan-in served tea. He poured his visitor’s cup full, and then kept on pouring.

The professor watched the overflow until he no longer could restrain himself. "It is overfull. No more will go in!"

"Like this cup," Nan-in said, "you are full of your own opinions and speculations. How can I show you Zen unless you first empty your cup?"

 

[TheBramble]

Money Management

A generic catch-all that gets bandied about as one of, if not THE key factor in successful trade execution and management.

What is it?

Actually gentlemen (and ladies?) I'm going to copy & paste this to a new thread as there may be some who are interested in the topic wouldn't necessarily come to this thread.

I'll come back and edit with the link once I've created it.

mods: I know this constitutes a double-post. but would appreciate you leaving this as a marker for those interested in this 'side issue'. LOL.

edit: new thread can be found here http://www.trade2win.com/boards/pla...ment/111224-money-management.html#post1348802

 

[Hotch]

The point they are trying to prove is that money management can make a system with negative expectency profitable.

Random entries doesn't not mean you have negative expectancy/no edge.
Random exits doesn't not mean you have negative expectancy/no edge.

Random exits AND random entries means you have negative expectancy/no edge.

Anyway, to answer the question, I make most of my money on the pool table down the pub


EDIT: Toast, what conditions would you want to put on such a system of random entries. What's wrong with it trend following, or are you inferring that it won't work over the long term and was a cherry picked result? If you lay down the challenge I'm sure someone will talk it up.

 

[DionysusToast]

Hotch

There is nothing wrong with trend following.

There is something wrong with creating a trend following system, only testing it on trending markets and then claiming that it is a panacea for judging direction in systems that trade outright positions.

The spirit of the study, the spirit of the myth is that you can trade outrights without giving a hoot about being in the right direction or not.

This is not, nor will it ever be true.

Of course, we can talk semantics if you like - but I'll leave you to test it on your own account if you actually believe in this.

DT

 

[meanreversion]

This is the random entry system that I coded up a while ago (decide for yourself if you consider it to be random).

For 10 markets, apply a simple trend filter to each one to know whether to look to go long or short (this filter is just the difference of a short term and long term moving average)

On day 1, toss a coin. If the filter is long, and the coin is heads, buy at the close of the day. If the coin is tails, do nothing and wait until tomorrow before throwing again.

The initial stop is 1 ATR away. The trailing stop is the 20 day highest high (for short position)/lowest low band (for long position). The stop is always the closer of the initial 1 ATR point and the relevant band.

After trade is stopped out, wait until the following day and then flip a coin, and repeat process.

This system made decent returns on the markets which I had pre-selected. However, when I repeated the experiment without the trend filter, the results were poor. Furthermore, the system WITH trend filter didn't work particularly well on other markets. Having spent half a day coding this up and testing, I then stopped as I didn't see much value in continuing.

Now, who thinks this is a random entry system, and what conclusions or otherwise might you draw from this, which are different from those which DT has already eloquently presented?

 

[meanreversion]

The purpose of the experiment and the discussions is not that anyone would trade this way. The key point is to emphasize money management as a core component of trading success. That, in and of itself, is an extraordinary result given the number of traders who ignore this valuable concept.

It is unfortunate that you have no appreciation for this worthy concept.

I simply LOVE being lectured to by someone who has been trading for less than half a year.. top condescension Howard :cheesy: