I decided to override the system today

Discussions about personal psychology for the individual trader.
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sluggo
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I decided to override the system today

Post by sluggo » Tue Oct 26, 2010 8:20 am

in Cotton.

This particular system enters a trade and, if price moves in the profitable direction, then starts scaling out of the position, shedding (40% of the remaining contracts) at each successive profit target, until finally it's left with one contract. The system then holds that last contract to the bitter end (exit signal), no matter how many more profit targets are hit.

... but, I decided, not this time. Having scaled out a few times already, I'm down to one contract of Cotton. And I decided to exit that little booger today (26 Oct), in violation of the rules.

I figure there are four scenarios:
  1. I don't exit my long, and price continues to rise
  2. I exit my long, and price continues to rise
  3. I don't exit my long, and price falls
  4. I exit my long, and price falls
Scenarios 1 and 4 are free of remorse :)

Scenario 2 produces (remorse of not gathering further profit) while scenario 3 produces (remorse of seeing today's profit disappear). I decided that the remorse of scenario 3 would be more painful than the remorse of scenario 2; for me, at this particular time in this particular trade, the maximum-remorse scenario is #3. Using the minimax optimization protocol (link), I took the action which minimizes the maximum remorse. So I exited my long.

EDIT - added link to minimax
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Last edited by sluggo on Tue Oct 26, 2010 9:47 am, edited 1 time in total.

LeviF
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Post by LeviF » Tue Oct 26, 2010 9:08 am

We are system traders. There is no remorse. Its not our fault, the system told us to do it...

Why this particular trade?

RedRock
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Post by RedRock » Tue Oct 26, 2010 3:57 pm

There does seem to be an overriding sense of chaos the past week or so. Perhaps pre election constipation. In any case, as time goes on and Ive lived through a few ups and downs, I do get a sense every so often, that I should take bets off the table. Ultimately I haven't, and go through the give back phase in the name of sticking to the system. I suppose eventually I will learn to respect my gut now and then.

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Post by J D Canning » Tue Oct 26, 2010 4:32 pm

A chart such as this one, with such an obviously accelerating trend (blow off top?), makes me think once again how intellectually satisfying the chandelier stop is as an exit strategy. To me the idea of tracking the price based on the most recently achieved highs (or lows) seems to sit much better than other strategies such as breakouts or moving average crossovers. What do others think?

sluggo
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Post by sluggo » Tue Oct 26, 2010 7:30 pm

LeviF wrote:Why ?
The main reason was, it's been two or three years since my last override and I just felt like jumping the system again, simply for the hell of it. At 15 filled trades per day, one cheat per three years is an "override rate" of 85 parts per million (PPM), which would pass ISO-9000 quality-control screening.

Other, lesser, factors were (a) I am long a sizable bundle of Cotton contracts in other accounts that trade other systems, counterbalancing this little maneuver; (b) this was after all an exit and I did after all receive an exit signal, except for the special case that this happened to be the last contract remaining after multiple scaleouts; (c) What comes after "Learn the game. Learn the rules. Become an expert at following the rules. Then ... ?"

(answer: "Learn when to break the rules".)

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Post by nodoodahs » Tue Oct 26, 2010 7:39 pm

Chandeliers Vs. MA Xover Entries/Exits

Problem I have with chandeliers is, what is the re-entry rule, and what do you do with the capital? If I had a re-entry rule that made sense (to me) and tested well, I would like chandeliers better. Or, if I had a very large universe of potential trades and fixed fractional ATR-based sizing and a ranking for the trades, I could stick a chandelier on each and sell, no problemo, and just take the next available trade. If my system was bimodal for each commode, do I go short on the chandelier? Seems I need three options with that type of exit (long, short, neutral).

Personally I like "always be in the top N of rated opportunities" or "take all from this universe that meet qualifications set(A,B,...)" as both entry and exit rules, but everybody's mileage may vary.

Everyone's gotta do what they gotta do, but sluggo's decision is not for me (it's for him and he's happy with it and that is what counts). I've been in situations where something looked just parabolic and I just stuck with it and gritted my teeth for the "big give-back!" Sometimes it came and sometimes it didn't ...

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Post by LeviF » Wed Oct 27, 2010 10:17 am

sluggo wrote:15 filled trades per day...
Wow!

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Re: I decided to override the system today

Post by td80 » Wed Nov 03, 2010 9:43 pm

Bad Sluggo, Bad!

(Sorry I couldn't resist) :D

sluggo wrote:
... but, I decided, not this time. Having scaled out a few times already, I'm down to one contract of Cotton. And I decided to exit that little booger today (26 Oct), in violation of the rules.

]

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Post by gunter » Thu Nov 04, 2010 9:13 am

Price for CTZ0 at time of posting is approximately 138.

I guess this means it's scenario 2 for now, however, we never know what will happen next.

Still, I suspect you had a nice ride on this position.

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Post by alp » Thu Nov 04, 2010 7:36 pm

That's OK... It's still now time.
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nzbryant
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Post by nzbryant » Mon Nov 08, 2010 11:54 am

sluggo wrote:
LeviF wrote:Why ?
The main reason was, it's been two or three years since my last override and I just felt like jumping the system again, simply for the hell of it. At 15 filled trades per day, one cheat per three years is an "override rate" of 85 parts per million (PPM), which would pass ISO-9000 quality-control screening.

Other, lesser, factors were (a) I am long a sizable bundle of Cotton contracts in other accounts that trade other systems, counterbalancing this little maneuver; (b) this was after all an exit and I did after all receive an exit signal, except for the special case that this happened to be the last contract remaining after multiple scaleouts; (c) What comes after "Learn the game. Learn the rules. Become an expert at following the rules. Then ... ?"

(answer: "Learn when to break the rules".)
Good post Sluggo. Two key features: The main maxims, at the end, and the ISO measurement. Also the skill of thinking of your overall combination of systems.

A question: 15 fills a day?! Do you have short term systems as well as medium and long term?

sluggo
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Post by sluggo » Mon Nov 08, 2010 1:46 pm

Let
  • S = number of systems that are traded
    M = number of markets traded
    R = average number of rollover events per year, in each market traded
    D = number of trading days per year (about 262)
    H = average hold time of a trade in days, across all systems
The number of filled trades per day, due to rollovers alone, is approx (2*M*R/D).

The number of filled trades per day due to entries and exits alone, is approx (S*M/H).

The total number of fills per day, is approx (2*M*R/D) + (S*M/H).

See whether you can find plausible values of S, M, R, and H which give a total number of filled trades per day, approximately equal to 15.

(For me, R happens to equal 5.4. I trade quite a few markets that roll 12 times per year, such as the Asian stock indices at SIMEX and the energies at ICE. These shift the average higher. Currencies & bonds roll 4X/year, while carbon futures roll 1X/year)

td80
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Post by td80 » Mon Nov 08, 2010 4:27 pm

We're going to have to start calling him the executioner. That is a lot fills to deal with 262 days a year. I'm only doing around 150-200 round trips a year, although I'm certainly not trading nearly the same amount of capital or diverse set of systems (yet).

Sluggo this is starting to sound like a 3 letter word that starts with a j and ends with ob. Are you taking any vacations or are you fairly tethered in the den?

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Cotton now at 146...

Post by Mats » Thu Nov 11, 2010 11:15 am

....and the last time i did override my system was not to take trades in the US 2,5 and 10 T notes in may. I could not believe that i could earn any profit on them..

I decided to close my system in early june and go to US for vacation. I came back in august, I did find that i should take my system trades in the instruments and DID find i had forgot to to delete an stop order on Coffee and found that i earned a descent profit on that position when it was sold before delivery by my broker...

Maybe luck is something for us system traders anyway?????

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