Thought Bubbles from the Deep

[Gringotts Bank]

imo, the winner is never random. Midi-chlorian count* determines the winner in spite of edge and the appearance of randomness and chaos. Such a phenomenon wouldn't deny the existence of an edge - like having a bigger light sabre than everyone else - but might work as an invisible 'Force'*.

*Lucas' fictional representations have lots of parallels in eastern religions and martial arts.

 

[Gringotts Bank]

Having said that, I rely on having an edge.

Who thinks the turtle trader experiment was a random outcome (same rules, different profits)? There must be a way to determine such things.

 

[DeepState]

Having said that, I rely on having an edge.

Who thinks the turtle trader experiment was a random outcome (same rules, different profits)? There must be a way to determine such things.

Did the turtle trade formulation get published? If it did, what were the roll forward results?

If a stack of people work off a single formula, and get it right, it doesn't matter whether it was only 5 people or 50 in the experiment. It was only one formula. Was the formula successful in a way which makes sense?

I imagine there are quite a lot of people who think their magic is so awesome that a protege can take it over and do really well. How come there are so few legends?

 

[Gringotts Bank]

Did the turtle trade formulation get published? If it did, what were the roll forward results?

If a stack of people work off a single formula, and get it right, it doesn't matter whether it was only 5 people or 50 in the experiment. It was only one formula. Was the formula successful in a way which makes sense?

I imagine there are quite a lot of people who think their magic is so awesome that a protege can take it over and do really well. How come there are so few legends?

I don't know if the rules were published. The point is that a bunch of people with the exact same trading rules had different results. This means that there are forces at play which determine outcomes which are beyond edge. For this example it doesn't matter if the edge was profitable or not. They were given instructions to follow the rules because the understanding was that it would be profitable.

I'm assuming the reason for different results was related to reasons such as discipline, early profit taking, holding losers etc. It proves that even of you have an edge, you may not win. Fear and greed will make you second guess the rules to your detriment most likely.

 

[skc]

Did the turtle trade formulation get published? If it did, what were the roll forward results?

If a stack of people work off a single formula, and get it right, it doesn't matter whether it was only 5 people or 50 in the experiment. It was only one formula. Was the formula successful in a way which makes sense?

Here's a site claiming to have the original turtle rule. I cannot verify that claim one was or another. But I am sure you can very easily forward test (I think it was first published around 2003) the rules on the instruments they are designed to trade.
http://www.tradingblox.com/originalturtles/system.htm

 

[tech/a]

I've got it I'll have to find it if you can't or really want it.
I know Radge has it.

 

[DeepState]

even of you have an edge, you may not win. Fear and greed will make you second guess the rules to your detriment most likely.

Pretty much agree with that entirely.

An edge is a statistical tilt. That's it. If implementation uses this tilt and adds noise, then the signal is generally diluted. However, if the fiddling represents genuine improvements, then you clearly improve probable outcomes.

With the same underlying edge, the propensity to cut position sizes after losses and add to them after gains actually diminishes the size of the edge. Depending on how large that scaling is, the hedge erodes at differing rates. This effect is pretty large and materially lifts likelihood of a permanent stop-out.

 

[systematic]

The file has changed a little in format, but the rules seem the same as when I read them eons ago.
Rules

Most people know the turtle rules as shorter-term channel breakouts. Apart from fleshing out the details to make it a complete trading system; there really wasn't much to it.

I am really stretching my memory here (and no doubt have some really interesting old files on the drive somewhere) - having lost all interest in this type of thing - but the Turtles did get the benefit of right place, right time. That's not a disparaging statement. Being in the right place at the right time is what can make a legend - nothing to sneeze at! However, yes - the system in its exact form degraded after that.

But that's to be expected with any shorter-term trading system; an edge in that arena is a moving target, keeping your local quant in a job.

 

[Gringotts Bank]

With the same underlying edge, the propensity to cut position sizes after losses and add to them after gains actually diminishes the size of the edge.

That depends on trade sequence and win rate%. But I take your point - if the turtle participants used their own discretion for position sizing, that will also affect profit. But I imagine they would have been given strict rules for this also.

 

[Portfoliobuilder]

That depends on trade sequence and win rate%. But I take your point - if the turtle participants used their own discretion for position sizing, that will also affect profit. But I imagine they would have been given strict rules for this also.

The Turtles, a very well known thoroughly dissected set of rules with money management as the most important element. Endless interviews with the originators and the students (two sets) have been published. The rules were clear and the same for all. Different students were able to follow the rules and others were hesitant. Those who followed the rules were successful and given larger amounts to trade. Several went on to long successful careers managing hedge funds with billions of dollars in assets. The futures markets of 1983 probably had fewer quantitative types, so relatively simple trend strategies could generate large profits.

The moral that I take from the story, find algorithms/strategies that work, follow your systems rules and do not try to override them with your own opinions.

 

[DeepState]

From FT this morning. I did not know the SNB was accumulating foreign reserves at this rate after breaking the peg in Jan 2015.

 

[qldfrog]

From FT this morning. I did not know the SNB was accumulating foreign reserves at this rate after breaking the peg in Jan 2015. View attachment 70247

Interesting fact but why?
Does the article specifies which currencies???

 

[DeepState]

Interesting fact but why?
Does the article specifies which currencies???

No, but the SNB holds a basket that roughly mirrors the degree of activity in the FX market. About 80% of it is in USD and EUR. This reserve accumulation comes after the SNB said it just couldn't sustain the peg due to the rate of reserve accumulation required....and yet here we are.

 

[qldfrog]

No, but the SNB holds a basket that roughly mirrors the degree of activity in the FX market. About 80% of it is in USD and EUR. This reserve accumulation comes after the SNB said it just couldn't sustain the peg due to the rate of reserve accumulation required....and yet here we are.

hum, do you think the SNB is getting readdy for a Euro crisis, after let's say a LePen victory [hardly possible in my (french born) opinion : not so much by the absence of French willing to have her elected but more by the demographics in term of ethnic backgrounds after 40 decades of "assimilation" and unrestricted immigration; the native are not numerous enough anymore]; but voting is not compulsory so surprise might happen

 

[DeepState]

Hi. Hope you can help.

I trade futures. I can access these via a futures broker (like Macquarie) or via a CFD provider (like IG).

I am interested in ensuring that my operational and credit risks are contained. These are not compensated. They may seem esoteric risks, but I assure you they are not.

In the case of Macquarie, all client assets deposited with them for initial and variation margins are pooled. That means my assets are essentially available to bail out the clearing house and Macquarie in the event a bunch of them are in arrears. I can't assess the risk as I don't know how strong the credit quality of their clients is and how all the risks are distributed. I am certainly not paid to take this risk.

In the case of IG, they have what looks to be strong client protections, yet their OTC spreads are whatever they want them to be. For the most part, these are kept competitive vs other CFD providers. However, there is nothing stopping them from nearly withdrawing from markets and triggering stops and auto close all over the place at levels which are not representative. You can take large, crystallised, losses at such times and wonder why you bottom ticked at levels outside those of the underlying market...only to be referred to the PDS where is says they can do this.

These don't feel like good choices.

Most CFD providers do not provide client protections as strong as IG does (they also pool assets and allow the broker to use these assets for their own credit support).

Does anyone know of a futures broker that offers decent client protections? Ie. my deposit account is untouched by the actions of others?

 

[Gringotts Bank]

In the case of IG, they have what looks to be strong client protections, yet their OTC spreads are whatever they want them to be. For the most part, these are kept competitive vs other CFD providers. However, there is nothing stopping them from nearly withdrawing from markets and triggering stops and auto close all over the place at levels which are not representative. You can take large, crystallised, losses at such times and wonder why you bottom ticked at levels outside those of the underlying market...only to be referred to the PDS where is says they can do this.

Trading on a bigger time frame fixes this issue, so long as you're happy to leave positions open without a stop (or a wide stop). With systems, daily timeframes tend to work better anyway, so worth considering maybe.

 

[DeepState]

Trading on a bigger time frame fixes this issue, so long as you're happy to leave positions open without a stop (or a wide stop). With systems, daily timeframes tend to work better anyway, so worth considering maybe.

Thanks GB. I am functioning on timeframes of weeks to months. The sort of stuff I am concerned about is that I set really wide stops or am otherwise only partially funded (which means they will stop me out at some level) and they basically pull markets via widening them from the normal level to nearly 100% wide and then "no market". I have seen currency spreads wobble all over the place and fairly wide spreads get hit because the underlying market makers are pulling back just when you need them to be there.

What I want is a futures broker with decent client money protections....surely there has to be one out there.

 

[DeepState]

The above is from the CMC PDS, for example. In english, it says "We reserve the right to set a price at which you will execute a stop or auto-stop, if you are not fully funded (and if you were, would you trade CFDs?), and impose losses upon you that exceed the value of assets that you have with us. We can do this whenever we want because you have signed with us."

How does such an industry exist?

 

[Trembling Hand]

Have a look at the US based futures Brokers. They have protections that you will never get in Oz.

http://www.sipc.org/

 

[skc]

In the case of Macquarie, all client assets deposited with them for initial and variation margins are pooled. That means my assets are essentially available to bail out the clearing house and Macquarie in the event a bunch of them are in arrears. I can't assess the risk as I don't know how strong the credit quality of their clients is and how all the risks are distributed. I am certainly not paid to take this risk.

This issue with pooled client funds... doesn't it applies only when the whole of Macquarie is in trouble? It'd be quite rare for MQG to ask other clients to take a haircut because some of them couldn't pay up. Chances are the bank itself will incur bad debt but clients would be made whole by funds from other parts of the institution.

Obviously MQG being a large listed entity should at least allow you to monitor the situation

In the case of IG, they have what looks to be strong client protections, yet their OTC spreads are whatever they want them to be. For the most part, these are kept competitive vs other CFD providers. However, there is nothing stopping them from nearly withdrawing from markets and triggering stops and auto close all over the place at levels which are not representative. You can take large, crystallised, losses at such times and wonder why you bottom ticked at levels outside those of the underlying market...only to be referred to the PDS where is says they can do this.

One way would be to hold enough capital in the CFD account to avoid margin calls in all possible conditions, even when the market is "withdrawn" by the CFD provide. To manage your risk, you will need a second account where you can have your stop order. If the stop is executed, you can then square up the 2 accounts when markets return to more normal conditions. Obviously this negates the benefits of leverage and exposes yourself to increased counterparty risks.