Dump it Here

[Skate]

Muddling words
I've posted about muddling words before & how they can totally change the meaning/message of what was originally intended.

Lifted from the Chartist Twitter feed (9:11 PM · Oct 9, 2022)
Negative lead from the US into the new weak.

Reminds me of this play on words
Seven days without Jesus makes one "weak".

There are so many similarities between religion & trading
In my case "I tend to pray a lot"

Skate.

 

[Skate]

"The Chartist" Twitter feed (7:52 AM · Oct 8, 2022)
The Chartist calendar year's results. (Totalling 9 months & 8 days)
Today's PnL: -7,096
Week PnL: -7,305
YTD PnL: -966,208

I like "The Chartist" positivity
With a robust and proven strategy, losing money is not a problem that needs to be solved.

Skate.

 

[Skate]

For those who are interested
Twitter is a great resource for those who want to keep up-to-date with trading news.

The Chartist Twitter feed (8:03 AM · Oct 7, 2022)
The managed account service is very close to being officially launched. This is a high-conviction, high-performance strategy that relies on dual momentum on two-time frames and in two separate equity markets.

CAGR (net of fees) +25.3% vs +8.4%
Correlation to benchmark 0.55



Displaying information in this manner is so common these days
When promoting information about a service "Backtest" results (sometimes "compounded" backtest results) are generated theoretical results only. When someone is selling a product or service they always add a disclaimer to cover their ar$e. It's all so common these days to easily gloss over all these disclaimers when making a purchasing decision. (Don't let that be you)

Please read "The Chartist" disclaimer (condensed)
"Past performance is no guarantee or reliable of future returns"
"Performance figures are NET of Harbourside Captial Management fees & commissions charged"

Skate.

 

[Nick Radge]

When someone is selling a product or service they always add a disclaimer to cover their ar$e

Because its the law. The specific wording guidelines are required by ASIC.

CAGR (net of fees) +25.3% vs +8.4%

Returns provided are real-time and validated by a third-party, namely Harbourside Capital.

 

[MovingAverage]

Because its the law. The specific wording guidelines are required by ASIC.



Returns provided are real-time and validated by a third-party, namely Harbourside Capital.

Don’t know why you’d waste your time responding to defend yourself Nick.

 

[Newt]

But, while you're are/were here - thanks Nick for your many inspiring posts here at ASF many years ago, your fantastic resources and podcasts shared with the community over many years, and the thought provoking and fantastically helpful info in your books (especially Holy Grails).

 

[qldfrog]

@Nick Radge indeed, Un-holy Grail started the whole process of systems trading for me. Kudos
I owe you a coffee if we meet along the river...

 

[rcw1]

Good afternoon
When I first saw this, rcw1 laughed and laughed... still laughing

 

[Skate]

If you don't hit the sell button you will quickly turn a trade into a long-term investment

Skate.

 

[Skate]

Skate.

 

[ducati916]

So I'm going to transfer the discussion to this thread so as not to clutter @peter2 thread:



There have been a number of discussions on 'edge' on this thread. A very important topic. In fact, probably the single most important factor or variable in trading full stop.

What is an edge?

It is a quantifiable arithmetic or mathematical certainty. 100%

It is not a 'probability'. If you are talking about probabilities, you are not actually talking about edge at all.

The issue for many/most is that edges come in 2 varieties: (a) visible and (b) hidden

An example of a visible edge: arbitrage

The backwardation in the silver market recently is an example of a 100% guaranteed profit. Buy the future, sell the spot. 100% guaranteed profit.

A hidden edge is far more difficult to find. The reason (and this is why it is often confused with a probability) is that it cannot be quantified as a 100% outcome ahead of placing the trade. It will only be known to have existed when the trade is closed.

I know that sounds a bit like gobblygook.

There exists (for an edge) a continuum: A.......Z. An edge can be calculated. So we calculate "H". If H....Z occurs we profit on an ever increasing scale the closer to Z that we get. If A.......G then we lose, on an ever increasing scale to A.

Obviously, if we can obtain the trade position at A or B, we are highly probable to have our edge be engaged and then the profit is 100% guaranteed.

Here is the thing: the continuum is consistent. It has mappable boundaries. They can be calculated ahead of time.

The difference in the use of probability is subtle, but vital.

Clearly this is simply the tip of the iceberg as far as discussion goes.

jog on
duc

 

[qldfrog]

So I'm going to transfer the discussion to this thread so as not to clutter @peter2 thread:

View attachment 148016View attachment 148015

There have been a number of discussions on 'edge' on this thread. A very important topic. In fact, probably the single most important factor or variable in trading full stop.

What is an edge?

It is a quantifiable arithmetic or mathematical certainty. 100%

It is not a 'probability'. If you are talking about probabilities, you are not actually talking about edge at all.

The issue for many/most is that edges come in 2 varieties: (a) visible and (b) hidden

An example of a visible edge: arbitrage

The backwardation in the silver market recently is an example of a 100% guaranteed profit. Buy the future, sell the spot. 100% guaranteed profit.

A hidden edge is far more difficult to find. The reason (and this is why it is often confused with a probability) is that it cannot be quantified as a 100% outcome ahead of placing the trade. It will only be known to have existed when the trade is closed.

I know that sounds a bit like gobblygook.

There exists (for an edge) a continuum: A.......Z. An edge can be calculated. So we calculate "H". If H....Z occurs we profit on an ever increasing scale the closer to Z that we get. If A.......G then we lose, on an ever increasing scale to A.

Obviously, if we can obtain the trade position at A or B, we are highly probable to have our edge be engaged and then the profit is 100% guaranteed.

Here is the thing: the continuum is consistent. It has mappable boundaries. They can be calculated ahead of time.

The difference in the use of probability is subtle, but vital.

Clearly this is simply the tip of the iceberg as far as discussion goes.

jog on
duc

But isn't an edge always based on a context, a variable context as the world is not static.
As such,can only be determined/. confirmed posteriorly .
You know that whatever trade you would have taken last year, last week using that policies/system would have had that benefit.
But in no way can you be sure using it today will reward you similarily.
My point being that even the best edge can see a change in context making it obsolete diseappear.
We in systems trading want to assume that the overall context will remain similar so that any edge perceived or true will remain.
During the last qe, everything was going up .(more or less.)
I considee any long trade during that period was already having an edge then.
a timing edge..

 

[Skate]

Clearly this is simply the tip of the iceberg as far as discussion goes.

If you are a profitable trader, I believe you have an edge
So, what is a trading “Edge” when it comes to trading & how do we go about developing a trading edge? All traders believe they have an edge or else they wouldn’t risk money trading. But depending on your definition of an edge varies from one trader to another. Simply put, you need a trading "edge" or otherwise, it's called gambling.

The most accepted definition on this forum
An "edge" is a simple process of “winning more when you win than you lose when you lose” & "letting your winners run & cut your losses short". When you do that, you tend to incur many more little losses, but since your gains are essentially unbounded, they usually make up for those many small losses & drive a profit.

Skate.

 

[Skate]

Trading is a game of probabilities
But there are ways to stack the probabilities in your favour. One of those is to "Cut your losses short & let your winners run". Just doing this one small thing stacks the probability of success in your favour & is the hallmark of all great traders. Having the ability to incur those many small losses & hold out for the big winners is solely dependent on your ability to execute your trading plan flawlessly to maintain your edge.

When your own money is on the line, trading gets very complicated, very quickly!
Whatever definition you apply to your "edge" can come in many forms but for me maintaining your edge is all about consistency of execution. It is just plain foolish to think that it is an even playing field when it comes to receiving valuable information. There is absolutely no way small traders like us have superior knowledge about a company. But the good news is technical traders don’t need an informational edge as we trade price patterns, the real driver of the markets.

Skate.

 

[ducati916]

1. But isn't an edge always based on a context, a variable context as the world is not static.
As such,can only be determined/. confirmed posteriorly .

2. You know that whatever trade you would have taken last year, last week using that policies/system would have had that benefit.
But in no way can you be sure using it today will reward you similarily.
My point being that even the best edge can see a change in context making it obsolete diseappear.

3. We in systems trading want to assume that the overall context will remain similar so that any edge perceived or true will remain.
During the last qe, everything was going up .(more or less.)
I considee any long trade during that period was already having an edge then.
a timing edge..

1. No. A true edge is quantifiable. It conforms to arithmetic or mathematical treatment. A visible edge, eg. an arbitrage is viewable and can be calculated prior to placing the trade.

A hidden edge can also be calculated prior to placing the trade. What you are working with is a variable that cycles through a range that generates a derivative price. This derivative price is then calculated into the market price. This result is your mathematical edge. If it is high you take the trade. If low, you pass.

The original comment from peter2 was in regard to a YT video and A, B and C trades. This is what the video was referencing. It most certainly was not referencing 'chart patterns'.

2. Yes you can. That is exactly the point.

3. Systems are not trading a true arithmetic or mathematical edge at all.

Systems traders are trading a money management system, nothing more.

The Chartist results caught my eye a few days ago:



This is exactly what you are talking about: the system is optimised I believe for conditions whereupon in a falling market, Central Bank intervention via increased liquidity is the underlying assumption.

Of course, currently, that is not the case. We have the opposite. CBs are withdrawing liquidity.

Now a 'true edge' (what I'm talking about) is unaffected by a fundamental change in liquidity.

jog on
duc

 

[ducati916]

1. If you are a profitable trader, I believe you have an edge
So, what is a trading “Edge” when it comes to trading & how do we go about developing a trading edge? All traders believe they have an edge or else they wouldn’t risk money trading. But depending on your definition of an edge varies from one trader to another. Simply put, you need a trading "edge" or otherwise, it's called gambling.

The most accepted definition on this forum
An "edge" is a simple process of “winning more when you win than you lose when you lose” & "letting your winners run & cut your losses short". When you do that, you tend to incur many more little losses, but since your gains are essentially unbounded, they usually make up for those many small losses & drive a profit.

Skate.

1. I agree, definitions vary widely. Which is fine. But strictly speaking, they are misguided. Most, are not trading an edge at all. They are trading a money management system.

2. Again, I agree, but incorrect. This is not a true edge.

jog on
duc

 

[Skate]

1. I agree, definitions vary widely. Which is fine. But strictly speaking, they are misguided. Most, are not trading an edge at all. They are trading a money management system.

2. Again, I agree, but incorrect. This is not a true edge.

jog on
duc

Alternative view
@ducati916 has raised an alternative view & explanation of why system traders have no mathematical edge. But the edge is the risk & money management techniques of the strategy. This has now got me thinking that the edge we think we have is really just a series of random events. Duc might be onto something here.

Are system traders fooled by the randomness?
System trading is based on a mathematical approach & my way of thinking has always been the belief that a precise mathematical coded strategy defined the edge. Also, this edge can be tested & defined through backtesting because system trading is rules-based. Having a great entry alone will not assure profitability, this is why Duc mentions money management. Now, I'm wrestling internally with the question "are system traders fooled by the randomness of the markets".

System trading is similar to buying a home
When buying a home you have a plan of what you want & what you can afford. You have a list of the requirements that the house has to meet or it's excluded from the list of candidates. It's the same with system trading, you have a plan, a list of requirements that the company has to meet or it's excluded from the list of candidates. The only difference between buying a house or a market position is that you don't have a sell strategy when buying a home whereas with trading you do.

Skate.

 

[ducati916]

1. Alternative view
@ducati916 has raised an alternative view & explanation of why system traders have no mathematical edge. But the edge is the risk & money management techniques of the strategy. This has now got me thinking that the edge we think we have is really just a series of random events. Duc might be onto something here.

2. Are system traders fooled by the randomness?
System trading is based on a mathematical approach & my way of thinking has always been the belief that a precise mathematical coded strategy defined the edge. Also, this edge can be tested & defined through backtesting because system trading is rules-based. Having a great entry alone will not assure profitability, this is why Duc mentions money management. Now, I'm wrestling internally with the question "are system traders fooled by the randomness of the markets".

3. System trading is similar to buying a home
When buying a home you have a plan of what you want & what you can afford. You have a list of the requirements that the house has to meet or it's excluded from the list of candidates. It's the same with system trading, you have a plan, a list of requirements that the company has to meet or it's excluded from the list of candidates. The only difference between buying a house or a market position is that you don't have a sell strategy when buying a home whereas with trading you do.

Skate.

1. Also addressed numerous times on this thread is/are the importance of psychological and emotional inputs to the system: ie. do not second guess the system. The system is predicated on money management. You mess with the MM and the system breaks down.

An arithmetical or mathematical edge has no emotional component, or maybe I should say a far reduced emotional component. In an arbitrage, there is no emotional component. It is a 100% outcome.

Now with a 'hidden' edge, there is a smaller emotional content. The probability, once all the calculations are completed will likely work out to a 90% probability of profit. Trust me when I say a 90% probability leaves you calm and unworried.

2. Most definitely. This year is the first year in 42 years that it truly is 'different'. Systems traders, unless they tested on data from 1940 through 1980, have not seen these market conditions. As I said, I think Mr Radge's results are a direct result of this fundamental change. We have also had this discussion: how far back to back test.

3. Now I may be mistaken here, but: systems traders (by-and-large) do not factor macro-fundamentals (or micro for that matter) into their backtests. This, for the first time in a long time is a fundamental error. A (true) quant. based edge is unaffected by this.

jog on
duc

 

[Skate]

During the last qe, everything was going up .(more or less.)
I considee any long trade during that period was already having an edge then.

You need to be a lucky trader to be profitable
@qldfrog hits on a very important theme when trading & that is trade when the market is going up & making money becomes that much easier. Luck in trading is all in the timing & that timing can be your edge.

Now with a 'hidden' edge

Defining a hidden edge
A "hidden edge" can simply be defined as being a competent trader. Those who are competent no longer need to follow a "set trading system" but patiently wait for a setup, & then take the trade. These traders are "unconsciously competent" having a hidden edge that is hard to quantify. I also believe there are many highly skilled traders on this forum who appear to trade using their so-called 'intuition', but in fact, they are applying their vast knowledge & skill to recognise low-risk, high-profit potential, trades while unconsciously applying their "hidden edge".

Skate.

 

[ducati916]

1. You need to be a lucky trader to be profitable
@qldfrog hits on a very important theme when trading & that is trade when the market is going up & making money becomes that much easier. Luck in trading is all in the timing & that timing can be your edge.



2. Defining a hidden edge
A "hidden edge" can simply be defined as being a competent trader. Those who are competent no longer need to follow a "set trading system" but patiently wait for a setup, & then take the trade. These traders are "unconsciously competent" having a hidden edge that is hard to quantify. I also believe there are many highly skilled traders on this forum who appear to trade using their so-called 'intuition', but in fact, they are applying their vast knowledge & skill to recognise low-risk, high-profit potential, trades while unconsciously applying their "hidden edge".

Skate.

1. You need to be a lucky trader to be profitable
@qldfrog hits on a very important theme when trading & that is trade when the market is going up & making money becomes that much easier. Luck in trading is all in the timing & that timing can be your edge.



2. Defining a hidden edge
A "hidden edge" can simply be defined as being a competent trader. Those who are competent no longer need to follow a "set trading system" but patiently wait for a setup, & then take the trade. These traders are "unconsciously competent" having a hidden edge that is hard to quantify. I also believe there are many highly skilled traders on this forum who appear to trade using their so-called 'intuition', but in fact, they are applying their vast knowledge & skill to recognise low-risk, high-profit potential, trades while unconsciously applying their "hidden edge".

Skate.

1. Timing can be broken down into 2 separate components: (a) macro-timing and (b) technical timing. Both can benefit from luck obviously. However (b) technical timing does not actually require any luck, only tight money management. We are back again to money management, which requires little to zero skill. What it does require is ironclad discipline over emotional responses. There is far too much focus on the former rather than the latter.

2. Set-ups are largely irrelevant. Far more important (if not trading in a true quant fashion) is again MM. Everyone has their favourite technical set-up. Why? Because you feel 'confidence' in that set-up and confidence soothes the emotional responses, which, allows better MM.

Most of Mr Skates systems have win/loss ratios hovering around 50% from memory. What is the highest system win/loss ratio on these boards? Anything sitting at 90%+?

That 'unconscious' competency is nothing more than very tight MM and potentially recognising extended moves that are ready to reverse for a period or longer. There are any number of technical indicators that can help with this. An appreciation of the macro-environment also helps. Historical experience is the third. So yes, good traders tend to be old traders almost by definition.

Can the above be defined as an 'edge'? Sure it can. Do most/many define edge this way? I'm not so sure. Reading the posts through the years and particularly on this thread an edge seems to considered a variable that can be discovered through extensive backtesting of chart patterns/indicators/exits/etc. That in my opinion is a chimera. The edge is MM. Mr Skate has demonstrated that a 50% hit rate can be very profitable with tight disciplined MM.

A true edge is not affected by a change in market environments, liquidity issues, bull/bear markets, news flow, earnings reports, etc. If anything, they are enhanced by all the above. The reason being a true edge approaches an arbitrage. An arbitrage is 100%. A good edge may be 90%.

So with the risk so low...are the returns lower? Yes they are. They are capped to an extent. They are not open ended in the same way that a mechanical system is.

Of course, at 90%, you can afford to leverage much higher than you might otherwise. But that leverage obviously increases the risk to the underlying capital, if you have it slightly off. Trade offs.

So my question is: with the current systems operating in the market (on these boards and we have seen Mr Radge's results to date) do their authors 'feel' that their initial backtested system is still appropriate for the current market conditions? That assumes a system that has been in operation prior to Jan. 2022.

jog on
duc