my journal 2

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Viggo Mortensen

http://en.wikipedia.org/wiki/Viggo_Mortensen
Mortensen was born in New York City. His American mother, Grace Gamble (née Atkinson), and Danish father, Viggo Peter Mortensen, Sr., met in Norway.[1][2] His maternal grandfather was from Nova Scotia, Canada,[3][4][5] and his maternal grandmother's family was from New England.[6][7] Mortensen's family moved for a short period to Venezuela, then back to Denmark, and eventually they settled in Argentina taking residency in the Argentine provinces of Córdoba, Chaco and Buenos Aires, where he did his primary school and learned Spanish fluently...
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last 2 parcels

I have sent a videocamera to my cousin and this is just awesome:
http://www.ebay.com/itm/120744090859?ssPageName=STRK:MEWNX:IT&_trksid=p3984.m1439.l2649

28 dollars for a USB DRIVE with a good videocamera in it.

Snap1.jpg

This is a little gem. No cables, no nothing. Just a cam on a usb drive. It's just awesome. You could even pretend it's your USB drive and nothing but.

But there is one thing that is bugging me, even in the middle of august, even after getting reimbursed for the helicopter which got stolen by berlusconi, by the doorman or who knows who else.

The thing that is bothering me is this one:
http://www.ebay.com/itm/270664342148?ssPageName=STRK:MEWNX:IT&_trksid=p3984.m1439.l2649

Snasfdsdfsp1.jpg

Now this is another gem. It is a USB drive that gets sent the videos from distant camera with a transmitter. Mostly useful if the helicopter ever arrived, which it didn't.

But the problem is another one, namely that i did not get it:

Snapfgfg1.jpg

The mother ****ing parcel has arrived in Italy on August 10th, that's right. 14 days ago. And it's still sitting in the customs. Am I supposed to believe this? I even paid extra money to have it delivered to me quickly. Am I supposed to believe that my parcel has been sitting in Italy for 14 days?

Mother ****ers. I am going to ask for a refund if I still haven't received it by the end of August.

I am not complaining against the chinese or whoever is sending me these things. I am complaining against berlusconi, the doorman, and the mother ****ing dishonest italians. All these mother ****ers surrounding me and keeping my parcels from reaching my home.

There's like a wall of thieves around me, that works as a blockade on me. The police, the doorman. You never know who to suspect. Being paranoid and pessimistic in Italy is the rule. Dishonesty is very widespread.

For example, I remember the friend I was collaborating with, his name was Nicola. Crook. He wrote to me how I was doing and that I had done so much for him and that he felt indebted and wanted to return my kindness. And sure enough I knew he just wanted to ask more help and favors. So I replied like this: Great to hear from you. I've been busy and burned out from working too much (including for him). I also said that I would be available for any interaction on the phone, but not for work on trading systems. And guess what? I haven't heard from him ever since, and it's been two weeks. That's the kind of country I live in. People approach you saying they want to help you because they're indebted for what you have done for them, and instead they just want to screw you some more. I am surrounded by dishonesty.

Oh, and this guy, Nicola. If I see him on skype and I write him, he doesn't even reply. I blocked the mother ****er's email yesterday. Mother ****er...! A mother ****er and a manipulator.
 
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going home in 6 minutes

After scaling up, now we're trading silver, copper and other big futures. Enabled all contracts (instead of the mini contract) on oil as well.

Well, here's the news. Each day there's some big money being made. On the other hand, so far there's also been some huge losses. Like yesterday. Some systems made big money, and then came a Silver trade which caused a loss of 7500 dollars. Obviously that wiped all the gains from the other trades.

It will be interesting to have one good day, when there will be kicking in the balls by Silver, Oil or Copper and finally all systems will make money. We will probably have one such day, and it will be a +10 thousand dollars day. But so far, it's been days like this, in the past 2 weeks. On 3 systems we made 3 thousands, and then on another system we lost 4 thousands. So we're basically in the middle of a huge drawdown right now, by our standards. The biggest drawdown we've ever been in. We hit -11 thousands yesterday. But then today, we're at only minus five thousands. It goes like this. It's a new story, a whole different story now.
 
back home

I have to take it all back. The helicopter arrived today. Not after 5 working days, but it took over a month. Now I need to pay the fellows who have already refunded me. I already wrote them.

Also now I have to sue those other guys, whose parcel is sitting in the italian customs since August 10th.
 
bloodshed

Bloodshed from my systems. We're down 15k. Almost the max historical drawdown. Most of the losses in the last two weeks have been from Silver and Copper.
 
Re: bloodshed

Hey Travis,

I don't know wether you are able to answer the questions below ?

1. Other than the addition of extra margin since that addition to what extent is the mix of individual systems being traded (from the total portfolio of systems available) different to those traded through the last 30 day ish drawdown resulting in a new a/c high that you detailed (and we discussed) earlier in your journal ? (Ie was it a much greater number for example ?)

2. Was the new mix of systems traded as a result of a systematic/automated decision to change or still discretionary (to whatever extent?)

3. Are you able to tell what would have happened had the mix of systems being traded remained the same ?

Thanks,

BBmac.

travis said:
Bloodshed from my systems. We're down 15k. Almost the max historical drawdown. Most of the losses in the last two weeks have been from Silver and Copper.
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Damn.

1) I tried, but I have to say that I refuse to answer the first question until you make that sentence simpler, because 1) I truly don't understand what it says and 2) I don't deserve this kind of riddle, not at this time in the morning, not when it can be stated much more simply, not after being burned out due to too much work in the past few months, not considering that I make efforts to keep my sentences and language always simple and direct and coherent and logical and clear. Please translate your sentence into simple English, or please divide into smaller coherent sentences. Thank you in advance. And add some commas here and there. And don't use "a/c" or other abbreviations because it increases the chances of not being understood.

2) After our long posts, I had set out to make it all automated. But I later found that to be impossible, given my skills. So I proceeded in a discretionary way, by guesstimates, used a lot of performance metrics (mainly sharpe ratio and drawdown, in back-testing, forward-testing, with systems taken singularly and collectively). I also partly used Palisade's Risk Optimizer software (it's an add-in for excel).

3) Yes, I am absolutely able to tell what would have happened in the past two weeks had we traded the previous combination of systems, but I cannot give you the answer now because I am at the office. I will edit this post later, to add that information, at about 4 PM CET, once I get home.

In the meanwhile you could work on rephrasing your first question.

[...]

Ok, I got home and here's the answer, bbmac: +750 dollars with the other systems (previous combination). And with this one in the same period (excluding today) we lost 11,200 dollars. Damn, I wish we had scaled up two weeks later.

Now, were did we lose all this money? Here's the systems who acted in the last two weeks (excluding today):

Snap3.gif


And here's what the overall equity curve looks like:

Snap1.gif


These are the four evil guys:

HTML: 
CHF_ID_02 -3,077.32
ES_ON_02	-3,591.52
CL_ID_04	-5,808.56
SI_ID_03	-10,009.28

Is there anything I can reproach myself about these 4 guys?

Let's see.

The ES one has always been trading one contract and it has always been doing well, so that is beyond reproach. It was just bad luck and nothing else.

The CHF one. That was a mistake of mine. It doesn't have a good forward-tested record and I still included it because i trusted it. But that is only a loss of 3000 dollars. I cannot blame this bloodshed on that one mistake.

The CL one cannot be blamed because it has done excellent in both back-testing and forward-testing. So here, too, we have just been unlucky.

The Silver system also cannot be considered a mistake, because it has an excellent forward-tested performance and also an excellent back-tested performance.

So we have just been very unlucky.

 
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choosing systems: there's "directional" and "directional"

I wrote myself a note to answer question 3.

I've been thinking about something else now, a major major point.

Bad and dangerous and misleading "directional"

Gold today cost us another 5k. I am not suggesting to remove it. Gold has reversed its direction, and that sucks. So did Silver.

Now we have to say that all the systems we're trading and even just forward-testing (paper trading) have an equity line that goes up. Now. We have to say this other important fact: a lot of markets have similar lines in the last 10 years (my period of back-testing): they go up.

So, how do we know when selecting a system that the system will not stop working as soon as those markets stop going up?

We don't have that problem with Natural Gas which went up and down like crazy in the last 10 years. We don't have that problem with the stock indexes futures. Not with the currencies. But with some we do have that problem, the problem of not knowing if the system performed well because the underlying went up or because it would have performed well anyway.

But there's excel "correl" function. Even markets going up most of the time, such as Gold and Silver, have had some falls. The "correl" function, matched up against their trades, does tell us how correlated the system is to its future.

But there's yet another problem: that I am wrong. It gives me bad values for all Gold systems and all systems trading markets that went up during most of the last 10 years.

But the charts show us clearly if, as far as those brief periods when Gold and Silver went down, the systems made or lost money. So we can rely on the charts for those systems having a bad correl function value, and we can rely on all those systems having a good corel function value (which by the way goes from a value of -1 to a value of 1, and the best value would be a zero).


Almost irrelevant "directional"

At the same time, I must absolutely debunk a theory which was told to me by close collaborator: "try to create/use systems to go both long and short, rather than systems that go only long" (or only short, which is more rare).

Now this is partly a good idea, but partly it is bull****.

There can be a systems going only LONG, that makes just as much money (or more money) if its future goes down. So you must not look at the "problem" of a system being uni-directional, but at the problem of whether it makes money in the same direction as its future.

Yes, if a system goes both long and short (and obviously makes money in both directions), then we can assume that it's immune from changes in the direction of the traded future. There could be some rare cases when its long and short trades only work when the future is going up, but let's assume those cases do not happen to us.

But it is absolutely wrong to think that a LONG-only system is going to fail when its future reverses. For example, my YM_ON_01 makes just as much money if the YM is going up as if it's going down.

So my finaly summary point is this: forget looking at whether your systems go LONG, SHORT, or BOTH ways. Focus instead on what they do when their futures go down instead of up. If that doesn't cause them to be unprofitable then screw all other concerns.
 
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bbmac said:
I withdraw question 1,

Thanks

BBmac.
Click to expand...

Jesus, it's been bugging me all morning and I kept coming back to read your first question, and I finally deciphered it.

1. Other than the addition of extra margin since that addition to what extent is the mix of individual systems being traded (from the total portfolio of systems available) different to those traded through the last 30 day ish drawdown resulting in a new a/c high that you detailed (and we discussed) earlier in your journal ? (Ie was it a much greater number for example ?)
Click to expand...

Translation: how is the new combination of systems different from the previous one?

Correct? I think so.

Here's my answer. Yes, the margin available (and only presumably needed) went from 67k to 240k.

The big changes that come to my mind right away are as follows:

1) we went from roughly 25 systems to roughly 50 systems.
2) we doubled contracts (from QM to CL) on all Oil systems.
3) we added 3 mother ****ing Silver systems, which have cost us to date 15k in losses.
4) we doubled all GBL systems
5) we doubled most ZN systems
6) we added a few currencies systems
7) we focused more on performance quality than quantity (overall profit) and as a consequence margin went up much faster than drawdown, so we can now trade twice as many systems with just as much profit cushion, to cover potential drawdowns. The drawdown almost stayed the same, despite doubling up the systems/contracts. Back-tested profit instead did not double, but only increased by 65%.

If I have to see one problem with what we have done (other than being unlucky) is that we have enabled Silver, without paying much attention to whether it is influenced by the direction of silver or not (cfr. my previous post on "direction"). Indeed those 3 Silver systems by themselves roughly account for 20% of all profit and 20% of all drawdown and 20% of all margin.

To put it shortly, silver systems have caused two 7000 dollars losses in two days in a row. That's huge. If it happened another two times (and if the other systems didn't produce profit in the meanwhile), we'd get very close to blowing out the profit cushion.

Today when I get home I want to check how those 3 silver systems behave relative to where silver goes.

[...]

Ok, checked.

One of them doesn't matter because it trades rarely.

The other two are quite correlated, but only because silver happens to go up while they obviously go up (otherwise I would not have automated them as systems). In the few periods when silver falls, they do ok.

So I am ok with that choice of enabling them. The only problem is their huge leverage.
 
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Thanks for your detailed reply to my questions 1-3 in my post #2828, contained in your posts #2829 and 2832 as well as your thoughts re 'directional issues' in your post #2831.

The real question that arises is why did you change the mix of systems that had successfully ended the last period of drawdown and achieved a new account hi ? Ie why did you 'get off a winninng horse?' Notwithstanding your response contained in a previous post about the discretionary way (albeit with some methodology in the absence of any automation) choices you made to change the mix of systems, the question still remains why then ? The addition of additional margin was no real reason to do so ?

Whilst I think you can blame the resulting drawdown on bad luck I think that this is to some extent a cop out, and understandably exhausted though you are (re comments your previous posts) the longer term success and consistency of the trading of a mix of automated systems from your available portfolio will hinge to a large extent on developing an algorithm for the mechanical selection of the mix of systems/otherwise some kind of fixed methodology for doing so beyond reasonable intelligent guess work. You see in a sense without it your are not engaging in mechanical trading because as we have discussed before you are discretionarily choosing the systems that are traded, the net effect of this is that your are still in effect trading discretionarily.

The nature of the current drawdown and obvious increase in volatility of the 'new' systems mix traded will not be attractive to investors. Just the equity line chart itself tells them that something has changed and I would suggest that from my own experience such investor (s) what to see absolute returns but also consistency and pattern. I know from personal experience that it is important to do what you say you could do in the pitch - in the way you said you could do it. This said to some extent the current peak/valley drawdown reflects the greater trading volume as a result of the increase in systems traded in the 'new mix' and the available margin increase from 67-240k so drawdown as a % of avaialble margin does not look as dramatic as it does at face value. I wonder what % the total peak-valley the last drawdown was as a % of the then avaialble 67k margin compared to the current peak-valley drawdown as a % of new current available margin (24ok?)

I will give more thought to the 'directional' hypothesis you detailed in your post #2832 and respond in due course more intelligently than I could now without such thought.

BBmac.
 
Re my central point in the post above: If you accept to a greater or lesser extent that some 'star' hedge fund managers/traders are just good 'stock pickers,' the question is are they 'lucky stock pickers' or do they have a real edge that will sustain their success in the longer term. Whilst hedge funds are a relatively new industry, substantial evidence thus far points to the 'star' managers/traders mainly just being lucky as opposed to having a sustainable long term trading edge...as they come and go with alarming speed and results are generally not consistent across any extended sample in the same fund/sector.

The question is, and this is really where it is at, have you thus far been lucky with your choice of systems traded from those available or do you have a longer term edge,? because for you this is where the edge must lie - ie the edge isn't the trading systems, it is when to empoy them.

BBmac.
 
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Replying as I read.

You're welcome. Your questions are stimulating my thinking, so thanks for your questions.

What do you mean? I didn't change the winning horse... I added new systems/contracts to the existing combination, which does constitute a "new combination", but doesn't imply that the systems/contracts of the previous combination were dropped. I added new systems/contracts to further increase diversification and to increase overall profit. If I had just doubled all contracts on the previous combination, the potential drawdown would have grown faster than the potential profit.

Well, it wasn't automated but it was well thought and intelligent for sure. There's no cop out at all. I am not one who does this type of thing.

I can't do the automated selection yet, so it's better to do a manual selection done right than automated selection done wrong. I tried for many hours. If you have a simple suggestion on how to do it, let me know.

I am not trading "discretionarily", because otherwise every automated trader in the world does. Even choosing the method to automate an automated selection of systems is a discretionary choice so everything is going to end up being called "discretionary" by your book, at one point or another. But I don't agree with your book.

Of course there was increase in volatility, just as there will be an increase in gains when things will go well. If the increase in falling is less than the increase in rising, there was an improvement. According to my tests there should be an increase in the sharpe ratio, and in all those other metrics so everything should now be better.

Don't let the big drawdown mislead you. There's twice as much profit to be made from the present combination than from the previous one.

Of course you're not going to see a smooth rise now that there's more money invested and more systems/contracts traded. It's happened before on the equity line but you didn't point it out. Every time there's an increase in capital, there's also an increase in drawdown (and profit).

The new capital invested is 160k so now the big 16k fall was 10% of that. When it was 40k, the 10k fall was 25% of that. But I would not measure things this way. But you asked so I told you. So according to your reasoning we're actually doing better.

Yes, do answer about my "directional" talk, because there's no way you can disagree about that.

----

Replying to the second post.

Ah ah, no way. The edge is not in picking the good systems. If I create 120 profitable systems, I don't have to worry about picking any of them. If I traded them all with 1 contract, they still would make money, consistently. And especially after breaking my back for years building those 120 systems, there's no way I will accept being told that the systems are a minor issue, and the whole talent is in picking the right ones. I could not disagree more. You could have one guy very good at picking systems and he has a basket of 120 unprofitable systems, and he will fail no matter how good he is. Then you have another guy picking among my 120 systems, and even if he trades all of them with 1 contract, he will make money consistently. There's no way you will convince me that the talent lies in the selection skill. That one is indeed a minor issue. The big issues are having the money to invest (which I did not) and using the systems without tampering (which I wasn't able to do either). But, once again, the biggest issue of all was in creating profitable systems (and automating them).

 
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Interesting....

I am being deliberately provocative but with a purpose....On the occassions you have altered the mix of systems that have been traded, have you altered them for the same reasons/using the same rationale ? If you have not then to some extent the difference is something that you may put down to a better/more intellligent reasoning/methodology for doing so each time [and reflected in the results and growing equity line] ...but another interpretation is that it could be down to luck in the change in the rationale/methodology/reasoning for which systems to employ .

Whether it be luck ( I suspect that this not the case to a large extent,) or whether it be a more efficient better rationale/methodology for choosing the system mix traded, it still represents discretion that may or may add to the overall success of the venture over the longer term. It would not be discretionary if the rationale/methodology had and does remain constant for such a change.

Don't confuse what your 'big issues' are/were (ie 1. no having the money to invest, 2. using the systems without tampering ) and what you consider the biggest issue of all: '...in creating profitable systems (and automating them)....' with what your investor (s) may see as the biggest issue [s.]

By altering the mix of systems traded from the 120 profitable (backtested and some forward tested over x period) you are essentially trying to maximise the metrics important to you, but as no one can predict the future, ... without a rigid methodology/mechanism for doing so (changing the mix) it probably represents the single biggest Threat to the overall longer term success of your venture. (it would be interesting to hear your thoughts on what you think the Threats and Weaknesses are re your own SWAT analysis, but I understand should you not wish to publish them.)

BBmac.
 
Replying as I read and trying to keep it short.

Yes, using the same rationale (increasing sharpe ratio, profit, while keeping drawdown low).

I can't automate this and do it well, so I won't do it yet. On the other hand, since everything could be termed "discretionary", to some degree, we have to speak clearly and down to earth and say that my systems are not as automated as they could be, but we most definitely cannot say they're "discretionary". To say that they're "discretionary" would be just for the sake of arguing forever.

Hmm.

Single biggest threat yes, now that all the heavy work has been done. But that doesn't make it reasonable to say that it is the most important thing. The most important thing was creating them and it's been done. Now you can say that the most important thing that is still to be done is selecting them, and I agree. But I cannot agree if you say that what really matters is selecting the right systems rather than creating them (which is what you said in the previous post).

I don't know what SWAT is. As I said before, please don't use abbreviations, or I won't be able to understand you. A/C and now SWAT... Say SWAT again. Say SWAT again, I dare you, I double dare you, mother****er, say SWAT one more goddamn time!

 
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travis said:
I don't know what SWAT is.
Click to expand...

I suspect he's misspelled the acronym (which can't help... :confused:) and he actually meant SWOT, which stands for "Strengths, Weaknesses, Opportunities and Threats". See here: http://en.wikipedia.org/wiki/SWOT_analysis

Then again I could be wrong. ;)

Good luck getting through the drawdown. (Maybe stating the obvious but I might add: we're obviously in a very volatile period for many markets so you should expect increased volatility and drawdown from your systems even just on that basis.)
 
Yeh, Thanks to poster Wprins for the correction re SWOT (it was late Lol !) an analysis re Strengths Weaknesses, Opportunities, and Threats to any given business plan/venture.

What we can probably agree on and what I should more accurately have said in my recent posts is that the 'extra edge' from your portfolio of 120 automated profitable trading systems comes in choosing the optimum mix of them to trade at any given time ...ie this is what enhances the return over and above just letting them all trade (which presumably is the central trading edge you have developed)...to this extent - getting this decision wrong could result in a worse return/drawdown than simply just letting them all trade (if they have all proven profitable over the back [and some over the forward test] period ?)

In terms of the 'most important thing' - you are living in the past, ie the systems have been created, your most important thing has been done - now the most important thing going forward is that which we have been discussing, and the central question remains to be resolved; Even with the intelligence and thought/methodology you have brought to bear on the rationale for picking which systems to trade at any one time - are you confident you can continue to replicate this successfully over the longer term?

BBmac.
 
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