Do you want my money?

[G-Man]

Although it is mentioned in most trading books, I think it takes a while for most newbie traders to realise that the most important aspect of trading is the psychological discipline required to be successful.

While it would be difficult for discretionary traders to do, I wondered if systematic rule based traders could effectively trade the system and funds of another similar style trader in order to reduce the temptation to 'tinker' with the rules. The only concern for those trading would how are they performing with regard to the strategy, and not in $ terms, watching their equity go up and down, and thinking 'Sh!t, I knew I should have come out then!'. The rules are the rules and must be obeyed.

Any thoughts?

G-Man

 

[donaldduke]

Getting someone else to execute your system is not unheard of among big traders.
If you have the money you can hire people directly to do this.
Or you can get a broker to execute your system if your account is big enough..

However at the end of the day if you have a backtested system that you are confident will make
money if followed you should be able to follow it quite easily without temptation to tinker with it.

If you find that you are tinkering with your system on a regular basis this probably means there is something wrong with it and giving it to someone else to trade wont make any difference.

 

[billgates]

IMO it's absolutely impossible.

If you have a winning strategy, you wouldn't want anyone to look at your signals. It should be easy to figure out how it works, and thus bring your competitive advantage to zero.

And if you are not sure your strategy is a winner - it is a loser.
In this case, it makes sense to hire a trader. It'll be psychologically easier to blame someone else for your losses, than yourself.

 

[FTSE Beater]

Hi G-man

I was once told something that interested me.

The idea is to 3 personalities.
The first is the one who plans the trades, right from when to enter, how and at what price. What your going to do when your in it etc.
This information is then given to person 2, who takes this information and just trades by what the information they are given - no questions, they just do it. Once the trade is complete, person 3 comes in to review person 1's performance.

For the rich, they can employ people to be person 2 & 3, but for the rest of us, we have to imagine we are the 3 people
I suppose the morale of the story, is to think about the trading process in 3 distinct sections and most importantly section 2 does not question section 1

 

[Tuffty]

Good post FTSE Beater, I also monitor number 2's performance as he can be a good or poor order enterer. He's done them round the wrong way (long rather than short) but he has made up for it on other occasions when he's got 'positive' slippage. Who reviews 3's performance?

 

[FTSE Beater]

Hi Tuffty.

Good point. I forgot about the errors that number 2 makes

Who reviews 3's performance?

That would be the big boss. Either the one the puts in the capital in the first place, or the family / bank manager :cheesy: