Cutting Edge Methodologies.

[SOCRATES]

Twice in one day I have found myself agreeing with him, I must be ill

well nearly

Any method that can be wrote down and implemented by someone with less knowledge and understanding and requiring no discretion is a system. if its a good system it will produce profit and must I would have thought be judged to contain an Edge. How long the Edge would last if the system is widely used I suppose depends on

well I for one dont know :?:

I have explained in a previous post what a systm is. In all other respects your statements are correct, except that if an edge existed in a system to the exclusion of any further input, then just because that particular system exists, the edge would automatically make itself available to everyone who used it, which does not seem to be the case.

I was told if you can"t write your method down with exact entry and exit conditions, stop placements etc You have not got a method

The difficulty is that circumstances and conditions change, and this serves to mask everything and affects perception. Therefore it seems as if different methods are required to deal with different scenarios, but in fact one single method that works can be adapted and modified to cope with playing fields that are tilted this way and that suddenly, that serve to baffle and confuse.

A case in point is how the great majority of traders will see a scenario and have completely opposite viewpoints with regard to it. Both cannot be right.

The method must be built on a sound foundation (known verified facts)

I use the word must (I require it or I will not pursue it further)

Thats all I know :| or think I know :?:

Enlighten me

.

 

[SOCRATES]

Socrates, I commend you for starting something interesting that could become a great DIALOGUE. What I'm saying is; I'd like to see you enter into the reasoned debate on the subject instead of your usual 'no that's way off the mark' comments to people's responses. You are asking others to comment and reply to what you've started here so the least you can do is give clear, concise thinking of your take.

Anyway for what it's worth my thinking....

The markets are a living breathing changing organism. They change by the minute depending on the 'players'. There is news, fundys, technicals, etc, etc. You just have to see what's unfolding in front of your eyes. (Let's not get started on the 'everything is known in advance debate!)

All three things are important from your question;
1- method (system , edge, whatever it's called; your advantage). You have to have something that works more often than it doesn't.
2/3- Application of the method and applicant are pretty much together. Pull the trigger when X happens. Are you in control of yourself enough to apply the method/ system/ edge. Get out when Y happens. It's about expecting something to happen and dealing with the outcome should it happen or not happen.

What you have said above is all semantics at the end of the day and I don't believe a system is necessarily inert.

Got the makings for great debate here.... come on lads get stuck in.

I agree, and that is exactly what I am saying.

 

[SOCRATES]

Db

To start this off I will attempt a definition and perhaps Socrates would provide his own definitions.

Forget about the systems, is it the method, the application of the method, or the applicant of the method ?

System - easiest to use an oft-quoted simple example as an illustration. (it doesn't really matter what this is). Record moving average of a price over time and compare current price to the moving average
Method - buy when current price crosses MA to the upside and sell when it crosses MA to the downside
Application of the method - Produce chart showing MA and price. Create alert if Price crosses MA. Go to broker's screen, enter and submit order in a timely fashion
Applicant of the method - Skill-set - is applicant able to run the charting software properly ? Does he know how to place appropriate orders correctly ? Does he have any psychological hang-ups preventing the order placement.

I am aware that this is a very simplistic and very mechanistic definition, but it might act as a skeleton that could be fleshed out.

Charlton

Actually, it is not a bad start but this is a deep topic that many people are fascinated with and deserves prolongued and open discussion with as many viewpoints as possible. Very good post.

 

[SOCRATES]

That is responsible for the results? hmm are we looking to pin it down to the definitive singular reason for the outcome of the results? If yes I'd say the individual is responsible (applicant of the method), he or she governs the choice, including, the method, the application of it and even him herself.

What choice should the individual make with regard to selecting or developing his method, the application of it and himself ?

what are the choices available?

Is the applicant aware that he is (or can be ) Free to choose ?

That is part of where the dilemma is contained, the matter of choice.
No one in his right mind is going to set out to do the wrong things and lose money, yet the market contains contradicting views, and not all of them are right, is what I have said above.

if there was no choice, or rather, that the possibility of choice did not exist, as an expression of free will, and everyone was forced somehow to do the right thing, all the time, in the absence of choice, then there would be no market, and that cannot be.

 

[SOCRATES]

kevin21 demonstrated this. He and his dad use/d the exact same indicator based system. He kept winning and his dad kept losing....

You see ? That is exactly what I mean.

 

[SOCRATES]

Forget about the systems, is it the method, the application of the method, or the applicant of the method ?

There are many systems out there that produce profitable results, but not profitable for all the traders using them. They in their minds are using exactly the same system or method, but the difference here is the applicant of the method. Here in lies an opportunity to personalise any system to suit ones own personality.

This is where the system fails. I think the method exists within the system as a series of rules or procedures. I think it is all about 'getting the ducks in the right order' that will determine whether a method is followed correctly or not.

You will know where I am coming from. The fly in the ointment may be the matter of choice and the expression of free wil that gets in the way. Additionally if it were only one duck it would be simpler, but when you add several ducks and they have to be got in the right order and there is only one chance, then the problems arise.

 

[SOCRATES]

The system is both the application and the applicant. The only way to work towards achieving efficient execution of the method is through continuous accurate measurement to see where the aplication is impacted by the applicant. Results can be quite alarming.

When people tell me they have developed a system that shows great consistent returns over x months/years of backtesting but they have not yet traded it with real money, my main concern is not that the system may fall apart due to changes in the markets price characteristics but rather that the developer will be unable to follow the system. I think it is like investing in a start up business. You invest in the person rather than investing in the idea.

By market price characteristics I take it you mean price action over a period of time for a specific instrument that has a particular footprint, is that so ?

If that is the case, additionally there is the difficulty that if the mood changes and the direction of progress is clouded by the change in mood, then by the time the idea is implemented for real it may be the wrong time, or too late, or too early again.

 

[toro168]

"Forget about the systems, is it the method, the application of the method, or the applicant of the method ?"

Take the finest & best eg.: camera / F1 racing car / cricket bat / building materials / garden etc etc and then use the finest & best techniques. You will end up with results spanning fantastic to rubbish. The variable is the user. I rest my case.

so you don't rest your case ?

 

[SOCRATES]

I think I agree with Gamma here. All three - and it becomes increasingly hazy as you move along the trio.

One can draw up a crystal clear method. Applying that method is less clear due to: slippage; liquidity; temporary and brief excursions of bid or offer to trigger level; more signals than margin; etc; etc and that haziness then involves the intervention of the applicant where personal frailties can turn the haziness into a veritable fog.

good trading

jon

Yes exactly, and what happens is that it may be very difficult to detect the fog while it is enveloping and for this reason absolute pragmatism is required to avoid this very real danger. The other thing is there are two additional dilemmas. The first is to have the will to resist entering a scenario that is not clear and the second is to recognise it is not necessary to be in the market all the time, but only when the odds are clearly in the favour of succeeding without question. Now, it is a natural reaction to feel bored or even guilty at self imposed inactivity, but it is just as important and relevant as being in the market at the right time and in the right direction.

 

[SOCRATES]

Actually I think the systems should be added to this as well, through inadequate back testing. For many, it doesn't matter how good the application is by the applicant, they never evaluated drawdowns and margin requirements, focussing solely on pips produced and ignoring money management. They only consider highs/lows for the day and not what order they came in and for those spreadbetting ignore what happens in out of market hours. Many fail to take account of slippage and spread. So they try to implement a system that can never work.

But it all comes down to the applicant in the end. He's the one with the idea for a system, whether he fails to adequately analyse the system before implementation or whether he doesn't implement the plan properly, you follow it all back to the grey matter in his head.

Yes of course, something only works if it works, and trying to persist and to force something that does not and can not work is madness.

You will be alarmed to hear I once met a fund manager with responsibility for millions who based all his decisions on sun spot activity.

We all know that sun spot activity impacts on the earth's magnetic field and on weather but how magnetism and weather are related to price activity I have yet to fathom as they cannot possibly be related.

 

[Splitlink]

But was he any good at what he did?

Split

 

[Crap Buddist]

mmmm, with the sunspot activity I'm fairly sure i did hear that it can be used to predict severe weather systems, i.e storms, droughts? etc..... that will impact the earth, whether experts can then further zoom this in to regional (global) localities, i.e where orange juice crops, or soy crops and other weather sensitive commodities are positioned I dont know, but im sure theres a correlation between sunspot activity and the nasty weather that follows..... Crikey I dunno..

look here.......

HAYDON WALKER: I forecast my weather by sunspot activity/solar radiation. So that means when you have large outbreaks of sunspot activity, it affects the Earth's weather. So when you have high sunspot activity, you get good rainfall and low sunspot activity, you get drought conditions.

http://www.abc.net.au/landline/content/2006/s1729787.htm



just the first search site I clicked on , but......people some are "into it " it seems ?

 

[rols]

We all know that sun spot activity impacts on the earth's magnetic field and on weather but how magnetism and weather are related to price activity I have yet to fathom as they cannot possibly be related.[/B][/COLOR]

According to this research they are related....

....albeit in a second cousin kind of way.

 

[SOCRATES]

Unless the guy was running a fund trading weather derivatives

:-0 No, Bonds.

 

[Hoggums]

:-0 No, Bonds.

Chris Locke, a chap who commentates on CNBC often, uses solar and lunar eclipses and planetary alignments in his analysis.

I have to say though he was predicting a 20% crash in the S&P since Sept 06 - even now that has not happened. He finally changed his tune about 2-3 weeks ago and is now predicting new highs.

 

[Crap Buddist]

Chris Locke, a chap who commentates on CNBC often, uses solar and lunar eclipses and planetary alignments in his analysis.

I have to say though he was predicting a 20% crash in the S&P since Sept 06 - even now that has not happened. He finally changed his tune about 2-3 weeks ago and is now predicting new highs.

mmm, Market must be topping out now then ?

 

[ZDO]

sytem method applicant __________

re: "Forget about the systems, is it the method, the application of the method, or the applicant of the method ?"

Been gone a week – some may have said same by now but here is what I thought one night.

I can almost, but not entirely, forget about systems.
System matters – forms follow functions, etc
Staying with the 4 wheel vehicle analogy (ie no trucks or motorcycles)
if one needs to go ‘off road’ – LandRover…
if one needs to haul kids to football practice – passenger van …
if one needs to accelerate to max speed as quickly as possible - dragster

if one needs to do a gazillion kilometers by road – 300D MBZ from mid 80’s
if one needs to maximize speed and handling – Formula 1 car

Matching method to system is more significant than method alone.
Task an experienced truck driver to drive a Formula 1 car and he will actually be able to function ok ie get around the track.
Task an experienced Formula 1 driver to drive a 300D MBZ from mid 80’s a million kilometers and he, too, will be able to function ok ie go up the road.
But each will vacillate between applying his own (talent based and highly developed) methods and attempting to apply the appropriate methods for the system at hand. And the truck driver would mess up trying to take a turn like the Formula 1 driver and crash - sooner or later. And the Formula 1 driver would apply his high performance methods and break the equipment - sooner or later.

Put them side by side in two Formula 1 cars and of course the Formula 1 operator’s method is going to drive him into and out of the curves differently and leave the trucker behind. Put them side by side in two MBZ and of course the trucker is going to nurse the curves and brakes and accelerator differently and ultimately leave the Formula 1 driver behind.
So, in terms of finishing the task / course, be it driving or trading, matching method to system is very important.

Matching applicant to method is most critical. The Formula 1 driver may promise to drive the MBZ in the method appropriate to making a million kilometers, but as doing such is against his very nature, he will ultimately get a ‘charge’ (the sympathetic kind) and apply his authentic method – to the detriment of the task. The truck driver may be fascinated with the possibilities of driving hard into and out of curves, but as doing such is against his very nature, he will ultimately get a ‘charge’ (the parasympathetic kind) and settle back into his developed methods. Humans can select these identities – but selecting identities that are not in conjunction with (and they don’t even have to be antithetical to bring dysfunction, btw !) one’s true nature can only bring transient results, no matter how much will and discipline are applied. To paraphrase Z. Slavinsky
“good identities = good results
average identities = average results
poor identities = poor results.”

 

[ZDO]

Flowers for the grave of this thread

Living Congruently