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Who Are You Trading Against?
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Who Are You Trading Against?

  #31 (permalink)
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Itchymoku View Post
Are you serious?
Poll 1. "What is your Trading Situation?": "I am a full-time trader 32.16%" (210 votes)
Poll 2. "Describe your trading method": "Fully discretionary, no automation 66.42%" (89 votes)
poll 3. "How long have you traded?" : "Less than 1-year 8.59%" "1-5 years 52.53%" "6-10 years 14.65%" "Over 10 years 24%"
poll 4. "Which is more profitable for a normal retail trader?" : "Discretionary Trading 64.58% (62 votes)"

Statistics show that the majority of people on this forum are discretionary traders...

wow

First, and most importantly, you do realize this is severely subject to sampling bias. Second, full time does not imply profitable. "Full time" means different things to different people. I know "full time" traders who have admitted or implied their results are so-so, yet do it because they're unemployed or close to retirement. Third, as I said, a strategy that takes say 2-3 trades per week would probably need to be tested 1-2 years before we can statistically say the strategy is possible. The question "How long have you traded" doesn't ask how long professionally. Fourth, majority means over half. As of today, there are 35,838 members on this forum and you are showing me a poll of 62 votes as something worth looking at. Even if you consider the relative size of active members by observing the new members that joined this month, 860 to be exact, you're still not even close to majority.

wow..

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  #32 (permalink)
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artemiso View Post
Yes. I've posted this before and asked if anyone can tell apart the real data set and the fake one from these two:


By the way, both data sets are fake.

Can't see the pics, but good points.

A year ago I ran a simple experiment: Create brownian drift, import into NT, and do TA. You'll see all of the same TA signals and chart patterns. What does that say about TA? Why should I get a buy signal if the data is designed to 0, or worse, negative expectation?

I guess I'm not supporting algorithmic trading as much as I'm supporting quantitative analysis itt.

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  #33 (permalink)
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grimReaper View Post
I don't know how to respond to this other than to suggest that you may be underestimating the power of computer programs. I don't claim to be best programmer, but there's been many times where I thought certain things couldn't be possible (because of "human intuition"), but later realized that wasn't true.

At the end of the day, charts are all based off of each line of the tape, i.e concrete data. Charts and patterns are all abstractions of that.




Unless you have a sample size, what may be a solid methodology may not be in practice.



Because data is objective, scanning charts with your eyes is not. Trading sim can also be subject to subjectivity.



Yes, and upon adaption you backtest and cross-validate to make sure your improvements are truly improvements, not just some anomaly you noticed over some local period of time.

With all due respect, I think you might be underestimating the human brain. And you might be overestimating what YOU can achieve in terms of sophistication and complexity by programming a trading strategy. Others spend millions of dollars on bots, having the best matematicians statisticians and programmers money can buy working on them. And even they would not make the claims in terms of "set and forget" and the level of sophistication that you made.

Charts are based on tape (and book), yes, but they in turn are based on human action and programs monitored and designed yet again by humans. Research has shown that the market behaves more like an evolving ecosystem and less like the efficient market hypothesis suggests.

Is that comment on sample size meant seriously? I completely fail to see how that could be any more or less relevant to discretionary trading metrics than it is to automated ones.

Of course trading sim is subjective, as is trading live. Data however is by no means simply objective. Everything is subject to context. Objectivity is attributed to a whole lot of subjective things, I can not recall a single instance of it being the other way around.

You don't always test, sometimes you just pull the plug, that in itself can be an enormous improvement for a trading system in adverse conditions. But generally you are of course right, things get tested. This is somewhat different with discretionary trading. Here these optimisations take place in the uncontious part, they are none the less often very efficient. Although I have to admit that there are many pitfalls, actually quite similar to the problem of curve fitting a system. The human brain for example tends to put too much emphasis on recent events.
Just because you can not track development and adaption that readily does not invalidate it though.

Vvhg


P.S. I never said that automated trading can not be profitable (a claim you made about discretionary trading). I merely pointed out that the claim you made seems a bit bold in the face of overwhelming evidence against it. And I said that both approaches have their place, advantages and disadvantages. And also limits. As short response times are out of reach for discretionary trading common sense is for automated systems.

Hic Rhodos, hic salta.

Last edited by vvhg; December 26th, 2012 at 02:30 PM.
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  #34 (permalink)
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Not much to add to these fine posts. Just my 2c. Imo, I would agree today's daytrading markets are mostly HFT and electronically driven. Thankfully we still have a market and the government and SEC hasn't allowed a single corporate or national entity to monopolize a particular market. OPEC and inventories can still make massive swings in CL for example but there is still room for independent speculators. It's annoying with these HFT front-running, faux liquidity and spiky hard to read price action but there are still breakouts, retracements and price action patterns that a discretionary trader can grab an entry along for the ride. AI while having made amazing breakthroughs in the last decade or so, is still very much in its infancy. And algo and HFT trading still require monitoring. Like an Airbus jet requires monitoring even if most all stages of it's flight computer's flightplan can be autopiloted. I would agree the small trader is more likely trading against or attempting to ride the coattails of the big money entities however electronically driven , rather than against each other in today's markets. The global situation of the increasing transfer of the majority of wealth to big corporate and financial entities and the wealthy elite imo is also reflected in the divisions of market participation.


Last edited by Cloudy; December 26th, 2012 at 02:41 PM.
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  #35 (permalink)
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vvhg View Post
Is that comment on sample size meant seriously? I completely fail to see how that could be any more or less relevant to discretionary trading metrics than it is to automated ones.

Sample size is relevant to automated ones; however, years of trading performance is attainable at the click of a button, whereas years of trading performance for a discretionary system is attainable after ...years.



vvhg View Post
This is somewhat different with discretionary trading. Here these optimisations take place in the uncontious part, they are none the less often very efficient.

You can't be serious.


vvhg View Post
Although I have to admit that there are many pitfalls, actually quite similar to the problem of curve fitting a system. The human brain for example tends to put too much emphasis on recent events.

Curve-fitting can be readily detected if the strategy is automated, which is not the case when it's discretionary.

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  #36 (permalink)
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grimReaper View Post
30% index arb/misc speculators, 1% noise (few lots per day).

I'd assume this 30% is mostly composed of algorithmic trading as well?

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  #37 (permalink)
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artemiso View Post
A good algorithm should not defy your intuition. A program can land billion-dollar spacecraft in treacherous conditions hundreds of millions of miles away, where vision is not available because it takes 10~11 minutes for a light-propagated signal to return to Earth and another 10~11 minutes for a signal to be transmitted back.

You and grimReaper are making some great points, and vvhg, wldman, and others are also making some as well from the other side of the fence. Obviously there are some problems that only computers can solve (at least in a timely manner), and there are some problems that only humans can solve.

There are no doubt some trading problems which computers can solve with such a reliability as to make possible a profit over a large enough sample set. For these types of problems, computers are obviously the way to go.

But for other problems, the human brain seems the way to go. Granted, algorithms can recognize CAPTCHAs with increasing accuracy, but only a human brain (that is educated in the language and who is reasonably intelligent) can accurately decode the true meaning of this with high accuracy:

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Also, while a database of images can be logged as in the following example, in the infinite world of markets no such task can be done, thus given a random production of images, even a brute force computer approach would not truly reliably be able to detect what these images represent with the simplicity that the human brain can do much faster:

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So, while NASA used a computer probably simpler than the one in my cell phone to land on the moon over 40 years ago, this isn't the same type of problem (with fixed knowns and unknowns) as the type of problems a market presents. Still, for those types of problems that can be exploited by computers, to the bots I say more power to you!

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  #38 (permalink)
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I know a few discretionary / mechanical traders that have made a living off of trading, But I have yet to find a trader who has made a successful and consistent living off of purely automated trading. Grimreaper have you been able to make a living off of solely algorithmic trading?

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  #39 (permalink)
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artemiso View Post
and they have a misunderstanding of what constitutes "liquidity".

Liquidity is an interesting subject, and I would love to hear your thoughts on what constitutes it @artemiso.

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  #40 (permalink)
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Itchymoku View Post
I'd assume this 30% is mostly composed of algorithmic trading as well?

Doesn't say. I'm sure the index arb would be algorithmic, can't comment for the rest.


Itchymoku View Post
I know a few discretionary / mechanical traders that have made a living off of trading, But I have yet to find a trader who has made a successful and consistent living off of purely automated trading.

The majority of prop firms are algorithmic and are making money, I have yet to find a trader who has made a successful consistent living off purely discretionary trading... i.e what's your point? Speaking of which, as I mentioned in the thread, I use to play online poker, but still visit poker forums and see PnL graphs winning/losing/pro/developing players, but I'm yet to see any trader post their PnL graph on trading forums.

And I think you and vvhg are missing a point: There isn't a dichotomy of algorithmic trading and discretionary trading strategies - I'm still standing by my statement that most* discretionary trading strategy can be automated. My main point is that you are subject to invisible pitfalls not automating your strategy and doing enough statistical research. As I also said, I think I'm supporting quantitative analysis more than anything here. I could care less whether the execution discretionary or algorithmic. Automating your strategy allows you do proper statistical research, and if you not, you're exposing yourself to a lot of ...bad things.

*I'm going to cover my ass and not say "any," but you get the idea.


Itchymoku View Post
Grimreaper have you been able to make a living off of solely algorithmic trading?

By profession, I work on a trading desk. It's my first job out of college, so I'm not exactly a trader yet, but I have a general understanding of how our models work.

I write algorithmic code for index futures outside of work as a hobby. As of September, I'm currently researching and writing by own HFT/scalping programs. Needless to say, it's no a trivial task and it's a work in progress. Before that, I'd day trade using discretion. My main setups were candle sticks and trend days, but then when I automated and backtested candle sticks and learned they didn't work, I stopped. Trend days do well, but only occur a couple of times per month, and it's been months since the last once.

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