Profitability of System Types at Present

Discussions about the psychology of the markets and the masses as it relates to trading.
Post Reply
Chris67
Roundtable Knight
Roundtable Knight
Posts: 1052
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Profitability of System Types at Present

Post by Chris67 »

Don't know if anyone else has kept an eye on this but from what I look at it seems that the good old break-out systems are out-performing at present ?? the systems that most resigned to the scapheap - i.e nice basic break-outs are well out performing all other types of medum / lt tf systems I look at at present
Maybe its just the way I have things set up and maybe its not representative of whats really the case - but it wouldnt surprise me given the fact most seem to believe markets are too volatile / whippy for old fashioned breakouts to work now !!!!
Once again looks to me like whatever is hot is crap and whatever is cold is good !!
sluggo
Roundtable Knight
Roundtable Knight
Posts: 2987
Joined: Fri Jun 11, 2004 2:50 pm

Post by sluggo »

Suppose you believe there are 3 different "system types": good old break-out systems, and two others.

You could allocate 1/3 of your trading capital to system type #1 (good old break-out systems), another 1/3 of your trading capital to system type #2, and a final 1/3 of your trading capital to system type #3.

Now you are guaranteed to have 1/3 of your money trading whichever system type is out-performing at present. You always have a bet on the winning horse.

You could even "add a discretionary overlay" as the marketing people might say. You could adjust the capital allocations among the three system types, according to your gut feel. You might decide that you will permit yourself to vary the capital allocation to an individual system-type, between 1/6th and 2/3rds. You could give yourself permission to cut it in half, from 1/3rd to 1/6th; or, you can double it, from 1/3rd to 2/3rds.
Last edited by sluggo on Wed Aug 18, 2010 1:39 pm, edited 1 time in total.
Chris67
Roundtable Knight
Roundtable Knight
Posts: 1052
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 »

Are you sure you havent read our offering memorandum there Sluggo ?
Thats pretty much what I do - try and mix it up
Gut feel overlay - of course the best thing about having money spread over different types of systems is even if you get your gut feel wrong and dont allocate your full whack to a system that blows away - well guess what - youve still got money in a system that blows away !!! better than nothing perhaps !
nodoodahs
Roundtable Knight
Roundtable Knight
Posts: 218
Joined: Wed Aug 09, 2006 4:01 pm

Post by nodoodahs »

Chris67 wrote:...Gut feel overlay ...
My gut feeling is that I need to trade my $@^%#%&*$^ system and not (&(%$^*@# about discretion.

I've learned that my "discretion" needs to be confined to system design. :shock:
AFJ Garner
Roundtable Knight
Roundtable Knight
Posts: 2071
Joined: Fri Apr 25, 2003 3:33 pm
Location: London
Contact:

Post by AFJ Garner »

A trader well know to everyone in this small corner of the investment universe is invariably assumed to be a purely mechanical trader. A conversation with said trader and a CTA close to said trader a while ago revealed that although the trader has spent many years coding and back testing and looking at technical indicators, he in fact exercises much discretion in his trading.

Although the trader has no publicly available track record, he has lived a comfortable life over the years and is said by some of those who know him to be the best trader they have ever met.

The exercise of discretion outside of system design and portfolio choice would undoubtedly lead me to disaster. Not so for everyone it seems.
DeanoT
Roundtable Fellow
Roundtable Fellow
Posts: 52
Joined: Sat Apr 15, 2006 7:37 am
Location: Melbourne, Australia

Post by DeanoT »

AFJ Garner wrote:A trader well know to everyone in this small corner of the investment universe is invariably assumed to be a purely mechanical trader. A conversation with said trader and a CTA close to said trader a while ago revealed that although the trader has spent many years coding and back testing and looking at technical indicators, he in fact exercises much discretion in his trading.
Assuming you are referring to the trader that I am thinking of, then your comment would be consistent with these published comments:

Stick to the rules, and
Know when to break the rules.
Chris67
Roundtable Knight
Roundtable Knight
Posts: 1052
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 »

PTJ - One of best 3 Inv mngers of all time
all discretion ?
nodoodahs
Roundtable Knight
Roundtable Knight
Posts: 218
Joined: Wed Aug 09, 2006 4:01 pm

Post by nodoodahs »

From a philosophical standpoint, are there really any discretionary traders?

Or are they all just systematic traders who suffer from a lack of proper documentation?
Moto moto
Roundtable Knight
Roundtable Knight
Posts: 427
Joined: Mon Jun 01, 2009 4:12 am
Location: once again in the UK

Post by Moto moto »

nodoodahs wrote:From a philosophical standpoint, are there really any discretionary traders?

Or are they all just systematic traders who suffer from a lack of proper documentation?
I pretty much agree with this assessment. While mechanical testing may prove a concept, and pure mechanical systemised trading is a good option, it does not mean that many discretionary traders are that much further from it. They are probably just not as binary as a computer and can use a little more context - that netherworld of the brains tinkering we find so hard to pin down..... But they essentially still follow rules.

On that note I am reading a very interesting book - "Stumbling on happiness" by Daniel Gilbert - its scary how many trading related examples (with regards to how our brains work) are in there in even though its not a trading book by any means.

Also did any one read Stanley Druckenmillers letter as to why he is retiring...? A good comment on the emotional effect of drawdowns.

"While the joy of winning for clients is immense, for me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain."
while many commentators talk about the desire to play golf, the increased size, it seems that this (and we can all relate I am sure) is the decider...

can be found here http://www.ft.com/cms/s/0/6f1ca310-aaf8 ... abdc0.html
LeapFrog
Roundtable Knight
Roundtable Knight
Posts: 695
Joined: Mon May 17, 2004 4:18 pm
Location: Boston, MA

Post by LeapFrog »

Moto moto wrote:
nodoodahs wrote:From a philosophical standpoint, are there really any discretionary traders?

Or are they all just systematic traders who suffer from a lack of proper documentation?
I pretty much agree with this assessment. While mechanical testing may prove a concept, and pure mechanical systemised trading is a good option, it does not mean that many discretionary traders are that much further from it. They are probably just not as binary as a computer and can use a little more context - that netherworld of the brains tinkering we find so hard to pin down..... But they essentially still follow rules.

On that note I am reading a very interesting book - "Stumbling on happiness" by Daniel Gilbert - its scary how many trading related examples (with regards to how our brains work) are in there in even though its not a trading book by any means.

Also did any one read Stanley Druckenmillers letter as to why he is retiring...? A good comment on the emotional effect of drawdowns.

"While the joy of winning for clients is immense, for me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain."
while many commentators talk about the desire to play golf, the increased size, it seems that this (and we can all relate I am sure) is the decider...

can be found here http://www.ft.com/cms/s/0/6f1ca310-aaf8 ... abdc0.html
Good comments MM. Dan Gilbert is a very engaging thinker and his experiments yield interesting results. On a similar vain, I found this short TED talk on the "Paradox of Choice" very apropo too...

http://www.ted.com/talks/lang/eng/barry ... hoice.html
RedRock
Roundtable Knight
Roundtable Knight
Posts: 944
Joined: Fri Jan 30, 2004 3:54 pm
Location: Arizona

Post by RedRock »

LeapFrog wrote: ... very engaging thinker and his experiments yield interesting results. In a similar vein, I found this short TED talk on the "Paradox of Choice" very apropos too...
Interesting speech until he states that income redistribution will be helpful for the rich not just the poor because it will take away freedoms of choices from the rich and that will be better for them. Ridiculous.
Moto moto
Roundtable Knight
Roundtable Knight
Posts: 427
Joined: Mon Jun 01, 2009 4:12 am
Location: once again in the UK

Post by Moto moto »

RedRock - of course the government is helping you, it takes your money so you dont have to worry about it, where to invest, where to make it safe, they are much better at making choices...... or at least they appear to have no regrets in the choices they make. :)
.... thats probably because governments (and corporations and other organisations) are nothing like individuals in terms of their choice, regrets and oh.... lack of emotions and accountability.
Post Reply