Thanks for the comment. My guess is that the +2194% was a typo, or an automated calculation error. That happens sometimes. The good news is it got fixed!
In an interview you gave several years back http://www.kjtradingsystems.com/Interview.pdf you discussed random entries. In addition, there are several "studies" floating around showing profitable results with random entries. Most of what I have seen is suspect at best, using just a handful of trades. Many of these experiments have combined a random entry with a fixed profit target equal to 2x the stop loss. I don't see how there can be any edge in this. If the entry is truly random and the profit target=stop loss, the outcome should be 50% winners/50% losers and zero profit (ignoring comm, slipp). If the profit target is set to 2x the initial stop loss, then isn't the move only 1/2 as likely to reach the profit target resulting in 33% winners/67% losers and zero profit? Wouldn't this pattern continue for any combination of fixed stop loss/profit target levels? What am I missing? Thanks
Thanks for the comment. If the entry is random, and the market is market movement is random (ie, efficient market hypothesis, or random walk), then I agree with you - there is no edge.
BUT, if you believe that there can be trends that go above and beyond the random walk theory, then the system described could make money. The edge would be in randomly stumbling across these trends, and then riding them.
I hope not, although sometimes it certainly feels random! Sometimes it is hard to say (for me, at least) that my system is good, as opposed to just lucky.
P.S. I like your blog a whole bunch. A couple of days ago I started reading it from the beginning. Some good stuff there!
Gotcha. Coincidentally, that is about how long it took me to make the jump to full time from part time. It is a tough leap to take.
For any of you thinking of going full time, my advice is to 1) have at least a handful of strategies to trade, 2) have immense discipline, because it is easy to take a lot of "sick" days with no boss, and 3) have about 2 - 3 times the amount of money you think you need in your account. Trying to make money trading, and taking money out to pay living expenses, amplifies the pressure you'll feel.
Totally agree with you on all points. For (2), when I was working in corporate world, I woke up at 7am everyday. Now, I still woke up at the same time, everyday without fail. Just turning up every day whether I like it or not.
You have to wonder how one of your competitors went from a +2194% return to below 48.8% in a single week. Yikes!
ReplyDeleteThanks for the comment. My guess is that the +2194% was a typo, or an automated calculation error. That happens sometimes. The good news is it got fixed!
ReplyDeleteIn an interview you gave several years back http://www.kjtradingsystems.com/Interview.pdf you discussed random entries. In addition, there are several "studies" floating around showing profitable results with random entries. Most of what I have seen is suspect at best, using just a handful of trades. Many of these experiments have combined a random entry with a fixed profit target equal to 2x the stop loss. I don't see how there can be any edge in this. If the entry is truly random and the profit target=stop loss, the outcome should be 50% winners/50% losers and zero profit (ignoring comm, slipp). If the profit target is set to 2x the initial stop loss, then isn't the move only 1/2 as likely to reach the profit target resulting in 33% winners/67% losers and zero profit? Wouldn't this pattern continue for any combination of fixed stop loss/profit target levels? What am I missing? Thanks
ReplyDeleteThanks for the comment. If the entry is random, and the market is market movement is random (ie, efficient market hypothesis, or random walk), then I agree with you - there is no edge.
ReplyDeleteBUT, if you believe that there can be trends that go above and beyond the random walk theory, then the system described could make money. The edge would be in randomly stumbling across these trends, and then riding them.
Kevin,
ReplyDeleteare we randomly stumbling across these trends? : )
Hi Trin -
ReplyDeleteI hope not, although sometimes it certainly feels random! Sometimes it is hard to say (for me, at least) that my system is good, as opposed to just lucky.
P.S. I like your blog a whole bunch. A couple of days ago I started reading it from the beginning. Some good stuff there!
Yo Trin Cafe,
ReplyDelete15 years of preparation! That's an awefully long time! What did you do in those 15 years?
FTS - Can you explain the 15 years of prep question? I know its not directed at me, but I don't understand it. THANKS
ReplyDeleteIn Trin's profile, he says "A guy who has been preparing to trade full time for living for the past 15 years."
ReplyDeleteGotcha. Coincidentally, that is about how long it took me to make the jump to full time from part time. It is a tough leap to take.
ReplyDeleteFor any of you thinking of going full time, my advice is to 1) have at least a handful of strategies to trade, 2) have immense discipline, because it is easy to take a lot of "sick" days with no boss, and 3) have about 2 - 3 times the amount of money you think you need in your account. Trying to make money trading, and taking money out to pay living expenses, amplifies the pressure you'll feel.
Totally agree with you on all points. For (2), when I was working in corporate world, I woke up at 7am everyday. Now, I still woke up at the same time, everyday without fail. Just turning up every day whether I like it or not.
ReplyDelete