my journal 2

[Yamato]

Done with reading Expressions on wikipedia and on to:
Summation - Wikipedia, the free encyclopedia

This is going to be one tough son of a bitch. I will print it and read it on the way home.

Goddamn summation...

 

[Yamato]

Ok, so... I am having a little time. Everyone is on lunch break. So I'll start summation from here:
Summation - Wikipedia, the free encyclopedia

Summation is the operation of adding a sequence of numbers; the result is their sum or total. If numbers are added sequentially from left to right, any intermediate result is a partial sum, prefix sum, or running total of the summation. The numbers to be summed may be integers, rational numbers, real numbers, or complex numbers. Besides numbers, other types of values can be added as well: vectors, matrices, polynomials and, in general, elements of any additive group (or even monoid). For finite sequences of such elements, summation always produces a well-defined sum (possibly by virtue of the convention for empty sums).

Ok, I understood only 10% of it, but I'll keep reading.

Summation of an infinite sequence of values is not always possible, and when a value can be given for an infinite summation, this involves more than just the addition operation, namely also the notion of a limit. Such infinite summations are known as series. Another notion involving limits of finite sums is integration. The term summation has a special meaning related to extrapolation in the context of divergent series.

I didn't understand almost anything again, but I'll keep reading.

The summation of the sequence [1, 2, 4, 2] is an expression whose value is the sum of each of the members of the sequence. In the example,1 + 2 + 4 + 2 = 9.

Yes! I understand now. 1 + 2 + 4 + 2 = 9. Yes, now it makes sense.

Since addition is associative the value does not depend on how the additions are grouped, for instance (1 + 2) + (4 + 2) and 1 + ((2 + 4) + 2) both have the value 9; therefore, parentheses are usually omitted in repeated additions.

Hmm... still following to a great extent...

Addition is also commutative, so permuting the terms of a finite sequence does not change its sum (for infinite summations this property may fail; see absolute convergence for conditions under which it still holds).

Still getting it...

There is no special notation for the summation of such explicit sequences, as the corresponding repeated addition expression will do. There is only a slight difficulty if the sequence has less than two elements: the summation of a sequence of one term involves no plus sign (it is indistinguishable from the term itself) and the summation of the empty sequence cannot even be written down (but one can write its value "0" in its place).

These guys are really making fun of me, aren't they. The sum of nothing is equivalent to nothing. Yes, thanks a lot.

And here we finally get to the mother ****ing problem that's been troubling my sleep - the "summation operator Σ":

If, however, the terms of the sequence are given by a regular pattern, possibly of variable length, then a summation operator may be useful or even essential. For the summation of the sequence of consecutive integers from 1 to 100 one could use an addition expression involving an ellipsis to indicate the missing terms: 1 + 2 + 3 + ... + 99 + 100. In this case the reader easily guesses the pattern; however, for more complicated patterns, one needs to be precise about the rule used to find successive terms, which can be achieved by using the summation operator "Σ".

They say "for more complicated patterns", so it was indeed "complicated" and I am not a total idiot then, for failing to understand something complicated and even "more complicated". Good to know.

Using this notation the above summation is written as:

Ok, so finally you're talking to me. This disgusting crap above simply means the "sum of all integer numbers from 1 to 100". But then what the **** is "i". Does "i" mean "starting from...". You have to tell me.

Hmm, you're not telling me. I'll have to google it, you mother ****ers.

Ok, let's keep going just a tiny bit more:

The value of this summation is 5050. It can be found without performing 99 additions, since it can be shown (for instance by mathematical induction) that

for all natural numbers n. More generally, formulas exist for many summations of terms following a regular pattern.

Oh wow. I see the point of this, finally. So you're telling me a useful formula right there. So to get the sum of any "natural numbers" from 1 to whatever, I have to divide by two the sum of the last number with the square of itself. Great. ****ers. So this is my first formula using a mother ****ing summation operator sigma.

Now I'll need a few days to digest this material or I'll puke. But once I digest this, I might be ready to understand all these markowitz formulas which use this summation operator all the time.

Now I will immediately have to look for a manual entitled "summation operator sigma for dummies", because it's still bothering that sigma with all those things all around it. I don't like it at all.

Ok, here's the links focusing on just the summation operator mother ****er:

http://www.yongyoon.net/econometrics/summation.pdf

Summation notation

I am going to print them both, and learn them inside out, because this summation operator has been bugging me for months and I have to deal with it once and for all.

Ok, I printed them.

I'll be back, like terminator, but not before terminating the summation operator sigma.

No, wait. I need one more, a simpler one, just in case:
Summation, or Sigma, Notation



Now we're talking. They've got pictures, and they've exercises, on understanding this crap. This might a good place to study my math all over again.

Hmm, interesting. I got exercises 1, 2, 5 right, but failed 3 and 4. Even though on the exercise 5, I did not do the power of 1/2 but the power of 1/power of...

Good enough, good enough...

No, wait. One more link:
http://www.lesn.appstate.edu/olson/Proofs_Derivations_Notation/Summation Operators.doc

Now I have to go back to work and then home.

 

[Yamato]

http://geography.uoregon.edu/geogr/topics/summation.htm

Continuing from here:
Summation notation

There's conflict between manuals on whether the "n" on top of the sigma is the number of cases or the end of the series. It makes a difference. If we start with 1 on bottom, it makes no difference and number of cases is equal to the end number, because only natural numbers are considered. But if we start from 4, and have n=5, then the cases will be 2, but the end number is 5. If we start from n=0, then the cases will be 6, but the end number will be again 5.

I need to investigate on this detail.

English wikipedia doesn't say, but Italian wikipedia comes to my rescue:
Sommatoria - Wikipedia

Nel caso più generale possibile abbiamo quindi una scrittura del tipo

dove N e M sono dei numeri interi, detti rispettivamente limite inferiore della sommatoria e limite superiore della sommatoria.

"Limite superiore della sommatoria" means the "upper limit of the summation". So it is not the number of cases as they say here:
http://www.lesn.appstate.edu/olson/Proofs_Derivations_Notation/Summation Operators.doc

Then n = 5 {the number of cases}, and...

I can't believe they write a manual and confuse people, too.

Anyway, I am tired already, and I am stopping here:



This is going to be like I did for excel. I started very slowly and carefully, step by step, one small step at a time, then got obsessive with it, then I eventually aced it.

I don't need to become a nobel prize for formulas. I just want to ace the part I need for my trading. If I focus, I can do it. If I try to do everything, I will fail. I will focus as usual.

No matter how stupid I am and no matter how much I suck at math and formulas, if I really focus only the summation operator, then i will ace it.

And that's pretty much all I need for portfolio formulas. I am just going to ace what I need.

 

[Yamato]

I am looking for some math exercises:
Math Exercises

Who would have ever thought that I would have been looking for exercises, when in school I wasted years because I kept failing math classes.

Cool!

http://www.brightstorm.com/math/

They've got every single subject. I am going to check this place out, thoroughly.

Here's something on summation notation... perfect! A video:

http://www.brightstorm.com/math/alg...eries/series-and-summation-notation-problem-1


Here's another video (the other one was not on youtube):

Awesome!

I found what i needed.

After watching both videos, this is the best one:
http://www.brightstorm.com/math/alg...ries/series-and-summation-notation-problem-1/

The sound and the voice are clearer. The pace is slower. It explains the common error described in the previous post. And it explains how you read summation notation: "the sum of i squared from two to five..." (minute 2:40).

 

[Yamato]

making some progress

Now I am making progress and I got as far as "double summation". I am going to need to do some research on this because I still don't understand it, from the links I've read.

And Markowitz uses it on his second page of his paper, so I definitely need to cover this subject, too.

So, let's google it:
http://www.google.com/search?q="double+summation"

Two good links:
http://www.statpower.net/Content/310/Summation Algebra.pdf
http://people.revoledu.com/kardi/tutorial/BasicMath/Sum/Double summation.htm

Too bad it doesn't tell me where it's from, because the first pdf is very good. All I know is that it's on the website of a Psychology professor. Damn, so this means if you study psychology you need all this crap here:
http://www.statpower.net/310StatisticsHandouts.html

Good thing I studied political science. I would have never graduated otherwise. Anyway, that pdf is the best thing I ever found on summation notation, so I'm going to print it right now.

Interestingly this chapter is called "summation algebra", but... does this mean I should have studied this in elementary school? I never remember studying it. Anyway, I am now paying for not being a submissive obedient child. If they had told me... but they don't tell you. They just ask you to be obedient: nobody ever shows you what these things are for. They should tell you: you're studying this crap because that way you will be able to make money with trading, and then if you make money with trading you don't have to work. But hell no: they tell you "just study" without bothering to explain why the **** all this material is being forced into your head. Pretty disgusting. People instead should be... forget it. I don't even know anymore if being conformist is convenient or not. Maybe it is. But then you also have a lot of disadvantages. For example, skin cancer. By now, had I been a sheep, I'd have spent 20 summers lying down in the sun at the beach, and I'd be pretty much ****ed. Instead... anyway. Time to work some more (I am at the office) and then study some more.

 

[Yamato]

Holy cow! Double summation is much harder and much less intuitive than i had thought. It's a huge pain in the ass.

 

[Yamato]

I can't believe my friends from highschool got offended by me calling them "careless unreliable pigs". Yes I exaggerated, to make it sound like a joking comment, but it's the truth, and they should not worry about my language and get offended, but worry about why I think they're like that.

1) all three only told me the dates one week before arriving, whereas I had to make reservations 4 months ahead of time. Disrespect towards me.

2) the german guy, last year he invited his friend without even asking me first. Disrespect towards me.

3) the korean guy did something else.

Now they get offended because i take the liberty of complaining? Screw them.

I am glad they finally got offended. If they don't want to change their behaviour, I will keep insulting them. Now they know what it feels like to be offended.

I am tired of being a good host with unreliable exploitative free-riding guests. But since I can only be a good host, then I'll stop being a host period. And since I am such a good host that I can't even tell people not to come, I kept insulting them until they decided to not come anymore.

That's probably what I was looking for: to stop being a host.

I am sick and tired of always paying for everyone's dinner and everything else, and in return I get treated like crap, especially from the german guy. His abuses are numerous:

1) invited girl without asking me first
2) doesn't wash dishes
3) doesn't make efforts to keep the house clean and, when i work to clean up his mess, instead of helping me, he says i am obsessive
4) when we go on hikes he purposely takes different routes instead of following his tour guide, which is me
5) ... bleah...

I am just tired of being a host. I am tired of being a host in general, but even more so with careless relaxed dirty disorderly guests.

This summer i rented a house for 3 weeks and they ended up coming for 1 week, and told me their arrival dates one week before they arrived. All i said was "you careless mother ****ers, next year you will rent the house yourself", and they got offended. "Given your unreliability I won't rent the house, 4 months in advance as needed, for 3 weeks, with my own money, and pay for your mistakes". And... probably they got so offended because it's totally true.

It is indeed a powerful message to tell someone that he is a careless bum and a free-rider and that he exploits people.

Yeah. I could have easily told them, diplomatically, "next year let us try to organize the trip a little better". Instead I called them "mother ****ers" and "careless pigs", PLUS the message... and hit where it hurts.

Bleah, anyway. I wrote enough about this. Water under the bridge as usual. Actually, maybe they are water under the bridge, in the sense that they won't come back. I should customize the expression for myself into "people under bridge" because of arguing and doing away with so many people.

Let's not... not exactly "people under the bridge", because they usually come back after a while, like the women as well. Yeah. I stopped worrying about being left alone, remaining alone, a long time ago, when i realized that friends and girlfriend periodically tend to come back to me. I am not worried about being alone, and I am never alone. Pretty funny. I guess I treat people too nicely to be left alone, so occasionally i have to remind them with swears that they are not treating me as nicely, and then after a while they leave me alone and then they come back, just at the rate I want them to come back. Like the highschool friends. I can't meet them more than once a year, so I keep them under control with my insults, and get them to not like me too much.

And guess what - this is mostly unconscious. You just do it because it works. You do a lot of stuff like this, on a daily basis, that you don't even realize. You treat people differently, depending what you want from them. It is a constant manipulation of people. We're all busy doing that. And we might give a rational explanation for something we're doing, while we might be doing it exactly for the opposite reason.

For example, who knows really why I am writing this journal (stupid superficial answer: to keep track of my progress). Who knows why we help someone (stupid superficial answer: because I am generous). Who knows why we do all the other things we do during our day... my ballsack is hurting. And I am going to bed late again. Damn.

 

[Yamato]

googling "modern portfolio theory for dummies"

While being immersed into the summation notation, I decided to get back into markowitz, which i find so complex due to his formulas. So I looked on google for "modern portfolio theory for dummies", and found this:
http://www.schulmerichandassoc.com/Modern_Portfolio_Theory_for_Dummies.pdf

It might not be as good as I hoped, maybe because it is for dumber people than me. After all, I am just ignorant, rather than dumb.

I will quote the good things I am reading in it.

When you combine different assets in a portfolio, you get the average
returns from the different assets, but your risks (the variability of these
returns) tend to cancel each other out, since one asset is likely to be up
when another is down.

This is good, and a good start and it is related to what markowitz says, and to what I am interested in, but the problem that markowitz and I are aware of is the correlation between the securities (in my case the trading systems).

This is good and funny, right here:

People are often told that if they want higher returns from investing, they
should increase the proportion of stocks in their portfolio, or invest in
"aggressive growth" stocks (whatever they are).

This is like telling people to drive 100 miles per hour if they want to get
somewhere sooner. While it's possible that they will arrive faster, it also
dramatically increases the liklihood that they won't arrive at all.

There's no equivalent in my case, because I am just investing in a bunch of trading systems... wait, no: there is an equivalent. Maybe I should invest more contracts on the stable ones and fewer contracts on the unstable ones... food for thought.

That's all there is on that paper. I need to find more similar stuff. I'd rather approach this complex subject from afar and little by little.

 

[Yamato]

googling "modern portfolio theory definition"

I am slowly getting more and more acquainted with this subject. It deserves attention, and I will keep focusing on it, like a microscope.

This is one of the best so far:
Modern Portfolio Theory simplified

A useful simplification of Modern Portfolio Theory

There are a number of criticisms that can be levelled at MPT, but it would not be a good idea for you to give up on it altogether. When you strip away the over-complicated mathematics and excessive reliance on past correlations that won't hold in the future you do find that there are some very useful concepts left in there.

A book I read recently that crystallised my thoughts on the subject was The Intelligent Asset Allocator by William Bernstein. I suggest that you should probably read this book yourself, as it is not a particularly challenging book in terms of hard mathematics or anything, but does offer a fairly state of the art model for portfolio construction.

So what are the main problems with Modern Portfolio Theory? There are lots of them, but the big ones are:

• Volatility is not necessarily a particularly good measure of risk, particularly for individual assets such as shares. Even if it was a good measure of risk, volatility varies from one period to another and thus can't be anything more than a measure of risk in a historical period.
• Past correlations are largely a product of coincidence, and probably won't hold in the future. In particular, at the very time that you want your carefully designed portfolio to hold together, at the time of a great crisis, most things will suddenly become highly correlated as various sectors all move down in unison. You should not put too much faith in an "efficient" portfolio performing at all well if world markets go mad for a little while.
• Because volatility, risk and correlations do not behave in the same way from one period to another, the concept of the "efficient frontier", while apparently true, is not useful in practice. If you get a computer to chart risk and return for a variety of portfolios, you do get an upward limit on return for a given risk, that does follow the "efficient frontier" left to right convex curve. Although empirically we have found that efficient frontiers do exist, there seems to be no way of predicting in advance what asset allocations would give you a portfolio that lies on this curve. Therefore people that set a computer to carefully plot out a thousand portfolios to find which asset allocations have worked, will get one that only worked up until yesterday, and this portfolio will behave differently in the future.

Ok, so all that maths and number crunching...

I am going to have to find this book:
Amazon.com: Customer Reviews: The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk

Quoting one of the reviews:

...What the author has done is to take the most significant results from academic finance and translated them into English for the individual investor. He has done investors a great service.

This is exactly the book I need to read.

I kept googling (this time for "modern portfolio theory for trading systems") and now I am on this book:
Trading systems: a new approach to system development and portfolio optimisation By Emilio Tomasini, Urban Jaekle

I am basically reading the third section of it, on Google Books

This might be the link for the page I am reading:
Trading systems: a new approach to ... - Emilio Tomasini, Urban Jaekle - Google Books

Terrible! I don't agree with anything they're saying. In fact i have argued for weeks with other people suggesting to enable and disable systems based on moving average crossover. I disagree because there is no proof nor a way to prove that this works and even that this makes sense. You can't spend your life back-testing and then do something like this just because it feels right! Morons! I am going to stop reading this trash.



These guys probably do not do use any trading systems at all.

Yeah, what the hell... I am still reading it. Even though they are wrong on some things, they're addressing my problems 100%, even though giving the wrong answers sometimes.

Ok. Good.

I read a few pages, engrossed in them.

This has become clear to me:

1) I will not use a portfolio selection software, because I will not understand all its nuances and implications.

2) I will develop my own recipe on excel

3) I will keep reading all the literature in this field to come up with the ingredients needed for my recipe

 

[Yamato]

googling "trading systems portfolios"

trading systems portfolios - Google Search

This is it. This is the description of something close to the mistake we made:
The “Cherry Picked” Trading System Portfolio Trap | Relativity Trading System

Optimized Trading Systems Portfolios

We have talked about the dangers of optimizing trading systems (forcing trading systems to conform to historical data), but, one of the subtler forms of optimization happens with portfolio selection. This happens when trading systems are only shown tested across a handful or a small number of markets (or sometimes just one market).

The problem is that what is usually done is that most all the available markets get tested, and then only those that performed the best get shown in the portfolio. This is an enormous mistake, because the markets that performed best historically are rarely the ones that continue to be the best. What traders end up with is something that only worked well historically.

We did not end up with a portfolio of unprofitable systems. We just ended up with a portfolio that historically worked much better than we could have expected it to work in the future. Then the drawdown happened, we weren't ready, and we stopped trading. It doesn't mean the portfolio wasn't profitable. It just means we underestimated its drawdown.

Having said this, I read the rest of the article and it was only partially about our problem.

Here's some trading systems' portfolios:
Striker - Trade System Portfolio

Man, do they suck. Anyway, time to get back to my search for ingredients to be used in a recipe/formula.

Ok, one last link before getting back to Modern Portfolio Theory and my summation notation crap.

Here's the link, a pretty good one:
Cause and Effect: Understanding Correlations in Trading Systems and Portfolio Results | Mechanical Forex

It answers all the ****-suckers on this journal who told me to mess up with my systems based on the equity line:

Generally system portfolios reveal to have very strong statistical correlations when you look at the trading history which might encourage you to assume that these correlations can be exploited through modifications of your strategy’s money management. However in reality it turns out that knowledge of the future would be needed to exploit these correlations. For example many portfolios seem to have a tremendously high probability to have consecutive profitable trades but this is the case in fact because when a position reaches a profit the positions that will most likely also reach profitable outcomes have already been opened for a long time. You are therefore unable to intervene because your knowledge of correlations did not take into account the precise timing relationship between the different positions and their outcomes.

You should therefore not be tricked into believing such correlations can yield increases in profitability when in reality they are simply untradable. Many profitable strategies and portfolios which can hold several positions opened at a time generally exhibit one or more types of seemingly easily exploitable correlations which in the end turn out to be impossible to exploit due to the relationship between position opening times and the time where you know the outcome which has predictive power. As in the above example it usually happens that you know something with a high degree of certainty once something happens but when that happens the consequence is already almost entirely fulfilled (too late for you to intervene). Obviously if the finding of correlation within trading strategies and systems was so easy to find it would be terribly easy to greatly increase the potential of systems through simple manipulations of their money management.

Of course there is much more to why you should not do it than what this author said, but this is a start. Finally someone else who's intelligent, and doesn't see mirages in charts.

 

[Yamato]

web browsing the news

Such is life:
The Duchess of Alba, 85, one of Spain's richest women, is to marry again - Telegraph



She was really hot, and now everyone is making fun of her, because she's old. The same happens with actors, and everyone else. Berlusconi is now almost at that point, where people will go from idolizing him to deriding him.

Sad, sad, sad.

The idiots who are laughing should not be laughing, because they're laughing at themselves, basically. Time and glory passes for everyone. She's an idiot, too, of course, because she hasn't realized it either. The only intelligent people are those who are quiet, when they see her marriage today, because they're thinking of their own mortality.

Which reminds me of the Latin quote:
Sic transit gloria mundi - Wikipedia, the free encyclopedia

That's why Diana is so hot, because she died. If she had lived, she'd end up in seclusion, or like this other former hot princess. Same with marilyn monrore, and all the other hot actresses when they get old: 1) they die, 2) disappear, 3) get laughed at (by the idiots).

Not bad at all though, this is the way she looked at 56, in 1982:
El desnudo de la Duquesa de Alba, 30 años en un cajón - Galería de fotos - El programa de Ana Rosa - Telecinco.es

 

[Yamato]

searching for The Intelligent Asset Allocator

No ****. I spent hours looking for the book "The Intelligent Asset Allocator" on emule and on the web, as a .pdf, and could not find it anywhere.

Then I go to google books, and it is there, for free:
The intelligent asset allocator: how ... - William J. Bernstein - Google Books

The only problem is that I have to read it online. But probably there are workarounds.

Yeah. Here's what I'll do. I'll type the first few lines of the first chapter on google, and then the search results will contain the first few lines, and therefore might also contain the whole book.

"imagine that you work for your rich but eccentric uncle fred" - Google Search

Pretty cool!

Nice web site:
http://www.efficientfrontier.com/

And nice book:
http://www.efficientfrontier.com/BOOK/chapter1.htm

Damn. They only have the first two chapters.

Ok, I am taking google books route, so now I only have to worry about converting it.

Still puzzled on what to do.

Here's a good search:
http://www.google.com/search?num=10...2l7485l0l7626l10l8l0l0l0l2l218l1218l0.7.1l8l0

But I have to refine it.

Still not there. I am trying this venue now:
http://www.gooreader.com/download/

Not good either, because you have to pay for the program.

Furthermore, on google, they only have the first two chapters.

I am quitting on this thing. I can't do everything.

I need to get back to markowitz and my summation notation .pdf files.

 

[Yamato]

Things aren't going too well, today. Didn't get much done, didn't understand much of what i did, the neighbor bitch kept slamming her door endlessly today - may she die.

But I am going to trust in this song:

Judy Garland - Over The Rainbow (Subtitiles) - YouTube

She has something of norah jones. I believe that somewhere, over the rainbow, there's understanding for me. Understanding of formulas, and the markowitz mother ****er, and all his academic buddies and their summation ****ing notation.

Here's the daughter of Judy Garland:

Liza Minnelli & Pavarotti - "New York, New York" - YouTube

I have nothing against her, except that she's been singing that same song for too long.

Somewhere over the Rainbow (solo Guitar) Jose Feliciano - YouTube

What do we know about Jose Feliciano? That we like how he plays guitar... but maybe also that he's blind. If he weren't blind, we might think he's not as good a guitar player. If he weren't blind anymore, he would lose all his fame, as he would not be Jose Feliciano anymore, but just some unknown guy in the subway.

Norah Jones - Somewhere over the Rainbow - What A Wonderful World - YouTube

What do we know about Norah Jones? That she's hot. We don't know if we actually like her only because she sings well. If she were 90 years old, we might not like her as much. Feliciano instead, we know we don't like him for his looks.

I am really thinking about the princess of alba, the duchess, that lady from the previous post. Why was everyone admiring her? Because she was a princess and she was hot. Now they laugh at her. Same with Liza Minnelli, she was hot and sang well. Now it's enough with New York, New York. Why? Because she's not hot anymore. The same will happen with norah jones. She can do anything now because she's hot and sings well. When she'll just sing well, it won't be enough anymore. Same with everyone and everything. We think we admire something, whereas we're admiring something else. Like when they sell you a car, and they put a naked woman on the advertisement. You're buying the car and the naked woman... my ballsack is hurting again.

How does all this apply to me? To some degree, I just write, and this is interesting just because I write. There's nothing else but writing. But maybe when it won't be as new anymore, then I won't be as exciting and lose my 5 readers (yes, big rise in the number of readers lately). Or maybe my latent quality, the latent reason why people are reading is that I look promising, and when it will be evident that I don't deliver, then I will not be as interesting. Or maybe... who knows what else. Let's look for the simple superficial reason I usually hear: we like to hear about your progress. Well, guess what: maybe that is the latent reason I was looking for. It is not about my excellent style of writing, it is not about my trading insights, it is about people feeling sorry for me... but then again this could only happen because I was a good writer, or at least because I wrote what I thought. So there's still merit in that. And why am I writing? We don't know, but there's many reasons, given that I've written non-stop since two years ago, and over 4000 posts in these two journals.

But maybe one of the reasons is that I want to force myself to become tired of singing "New York, New York" for years. By singing my same song of "I suck at formulas" and "I am a compulsive gambler", by singing twice as much as I'd sing it on my own, I am forcing myself to grow tired of it and learn another song.

In fact I did learn another few songs:

1) more systems created
2) have practiced with non-tampered systems trading for over a year
3) have started studying money management and portfolio selection in depth

The problem for me has always been that despite my efforts I learn slowly and this is because I think I already know everything. It's hard to learn if you think you know everything. But this habit becomes deeply ingrained by being around idiots throughout your life, but that happened because I've been, in a social sense, an underachiever, so I didn't go to harvard, but to a college where there was a large number of idiots, and there I chose a major chosen by a larger number of idiots... and so on. I am completely surrounded by idiots. My mom's an idiot. She got married for her looks. Relatives are pretty stupid, too. Few scientists. Most of them are humanities, and humanities are idiots.

And then the women. Which women did I look for? The good-looking ones. But I could not get them good-looking and intelligent, nope, because I am an underachiever. So they were dumb, borderline, and good-looking. So surrounded by stupid relatives, stupid women, stupid everyone... so i ended up feeling like i was very intelligent. Seriously, even at work, I am regarded as intelligent. Maybe also pretentious but definitely intelligent, but I am positive simply because they're all so stupid that there are no doubts they think I am intelligent.

But then comes trading, and math, and summation notation, and obviously there's this whole world appearing before my eyes, a world that had been hidden for years: the world of intelligent people, all those majoring in scientific subjects. And that is when I realize how ignorant and stupid I am. But still, I cannot speed up now. It doesn't help me read math manuals any faster. Anyway, time to try and sleep, once again. It happens every day. The ****ing job forces me to keep a 24 hours schedule, whereas I'd like to stay up 24 hours and sleep 12 hours, but hell no: the neighbour bitch and all that noise, and the work schedule... it's impossible. You're forced to have 24 hours sessions in this life, and they're all very similar. "The days can go on with regularity over and over, one day indistinguishable from the next. A long continuous chain".

 

[Yamato]

Point of no return

Point of no return - Wikipedia, the free encyclopedia

The point of no return is the point beyond which one must continue on his or her current course of action because turning back is physically impossible, prohibitively expensive or dangerous. It is also used when the distance or effort required to get back would be greater than the remainder of the journey or task as yet undertaken. A particular irreversible action (e.g., setting off an explosion or signing a contract) can be a point of no return, but the point of no return can also be a calculated point during a continuous action (such as in aviation).

That's where I am with regard to trading, trading systems, automated trading systems and my career and my life. I either succeed at this or I will be a total failure. I have achieved nothing as far as my job at the bank, and expect to never achieve anything. Realizing this and having burned my bridges behind me, I should become more motivated than ever. For sure, I have always been someone who could focus on things. But now I will do it even more, because I have far exceeded my point of no return.

Origins and spread of the expression

The term PNR—"point of no return," more often referred to by pilots as the "Radius of Action formula"—originated, according to the Oxford English Dictionary, as a technical term in air navigation to refer to the point on a flight at which, due to fuel consumption, a plane is no longer capable of returning to its airfield of original takeoff.

I have already used too much fuel on this to quit now. I need to put into it enough efforts and skills to get some money out of this, or I will crash into the ground. I cannot afford to fail at trading at this point. I am well past the point of no return. If I don't succeed at this now, after all the time and efforts spent on this, I will never succeed at anything else. Now this is where lies my biggest potential. I need to focus completely on money management and make this whole thing automated, efficient, and under control.

Of course total focus doesn't exist. But I will be making extra efforts to get rid of unnecessary activities and expenses in my life. I might have to cut down on this journal a little bit. I either go all the way with formulas now, and ace the subject, or I will never solve my money management formulas. I need to get deep into this subject. It's just one small subject, it's not huge, and I have to ace it. From all points of view. I have to read up on this.

"I gotta get in shape. Too much sitting has ruined my body. Too much abuse has gone on for too long. From now on there will be 50 pushups each morning, 50 pullups. There will be no more pills, no more bad food, no more destroyers of my body. From now on will be total organization. Every muscle must be tight".

 

[Yamato]

William J. Bernstein

William J. Bernstein - Wikipedia, the free encyclopedia

Bernstein is a proponent of the equity or index allocation school of thought, believing that all equity selection strategies should be focused on allocating between asset classes, rather than selecting individual stocks and bonds, or from the timing of their sales. Bernstein's first book, The Intelligent Asset Allocator, makes this case in detail; his second book, The Four Pillars of Investing: Lessons for Building a Winning Portfolio (McGraw-Hill, 2002; ISBN 0071385290), is aimed for those less comfortable with statistical thought. It also puts asset-class returns into long-term historical perspective.

Bernstein is a proponent of modern portfolio theory, which stands in stark contrast to the view that skilled managers can succeed in picking particular investments that will outperform the market, whether through market timing, momentum investing, or finding assets whose future value have been underestimated by the market. He argues that the financial research literature shows that most return is determined by the asset allocation of the portfolio rather than by asset selection.

I've gotta find his book, The Intelligent Asset Allocator. This is it. Everything is pointing in that direction: markowitz, formulas, the way he's calling things...

Here's his web site actually (I had found it earlier but didn't realize it was his):
The Online Asset Allocator

Sadly, most investment information available on the Web falls into the category of "financial pornography"�the supposition that investing success is acheived by predicting the direction of the market and picking the right stocks. In turn, it is supposed that this can be accomplished by engaging the services of a select group of investment professionals (of which the interviewed/quoted analyst/newsletter writer is a member). Almost no electronic ink is devoted to what turns out to be the main event: asset allocation. The Web is not entirely devoid of worthwhile material. There are at least two books on asset allocation available:

• Investing for the 21st Century�An educational and entertaining investing primer by Frank Armstrong, a Miami financial advisor. Start with Chapter 22, a wonderful sendup of Lou Rukeyser. Hopefully, after reading this you'll never listen to another financial commentator. I'd strongly recommend downloading and storing the book: it's likely to appear in print soon and Frank's publisher may not take kindly to the Web version.
  
• 
  The Intelligent Asset Allocator�It's written by yours truly, so I can't impartially review it. Since its publication by McGraw-Hill, I've had to take down most of it, but the first two chapters are still on the Web.
  
  ​

Found something more of the book:
Title

I think I am starting to understand really well, even though I don't have it down to a formula yet.

Bernstein talks about how you need to balance a portfolio between asset classes. Of course in my case this translates into systems classes. I have to divide my systems into categories, depending on their behaviour, and then, just as he suggests to put a lot of money into bonds and less into some types of stocks, I should balance my portfolio of systems in the same way. The only difference will be that my systems will make much more than what these asset classes are making. In fact he aims at making 8% per year, whereas in my case it should be 10 times as much.

There's many more books, where he presents his concepts and they're mostly for free on his web site. I still have to look harder on emule, because they have to be there. I'll do it in the weekend.

It doesn't matter if a system makes less money than another. I don't have to enable all the best systems. I have to enable maybe a large quantity of systems/contracts that counter-balance the bad trades by others, and viceversa.

What I have to achieve is not a portfolio that worked well in the past, but one that will be balanced so to work well in the future. All we did until here was bruteforce optimizations to find the portfolio that worked the best in the past - that is totally wrong. What we avoided in individual systems by using the out-of-sample, we totally did wrong in the combined systems, through curve-fitting.

Anyway, this one is being a pleasure to read:
The four pillars of investing ... - William J. Bernstein - Google Books

Now I know in what area I have to wander around. I will start by taking a walk in whatever text I will feel more comfortable, and will be able to move faster. Then I will move on to the less friendly ones. I am proceeding in the right neighbourhood anyway.

 

[MajorDutch]

And then the women. Which women did I look for? The good-looking ones. But I could not get them good-looking and intelligent, nope, because I am an underachiever. So they were dumb, borderline, and good-looking.

good looking and intelligent is a rare find dude. my theory on this is that good looking women don't need to try as hard, so they don't and thus are more dumb. Best play with a straight bat and go for a 'borderline' good looking one. Remember 'nobody has ever had a w^nk over a personality mag'.

 

[Yamato]

Yes indeed. It is a rare find, but mostly because they're all taken.

I was tempted by your argument, and it could be true, but then again: beautiful women get the smart men, and maybe they become smarter because of that. But maybe I am all wrong. Forget this. Let's just say that women who think they're beautiful always keep their mouths open (not for talking, but just because they feel beautiful) and definitely look dumb. I don't even know if they are dumb. But then the beautiful women who don't keep their mouths open, they don't look dumb, but maybe they are.

Nowadays I don't know if I would assume that beautiful women are rarely intelligent. I mean intelligent women are rare, but simply because intelligent people are rare. In fact I find women to be generally more precise and meticulous than men. That's a great quality to me, because they don't break things when they're around my things. I'd rather host a woman in my house than a man. Doesn't matter whether dumb or smart, just as long as they don't damage my property.

The women with personality disorders are always available, because they go from one person to another, either leaving them or being left. There's one who's coming to visit me in a few days, and I don't know whether to be happy or worried. But I am not worried about her breaking my things. I am worried about having to take her out to dinner. I don't have any money to waste now. **** all these women who call me up to take them out to dinner. One just moved out of Rome finally. She cost me thousands of dollars in dinners throughout the last few years. With this one coming to visit me, I will not move out of the house. I will try to stay home, so there's no way to spend money. I will tie myself to a chair or lock myself in my room. Something like that. I am not stingy at all. I just don't have any money left.

 

[Yamato]

THE INVESTOR’S MANIFESTO by William J. Bernstein

I don't know how and where (for sure on his web site, but can't remember where and how), but I found the first 40 pages of a good book by this Bernstein guy:
http://www.efficientfrontier.com/files/TIM.pdf

It's not what I am used to (getting ebooks for free on emule), but, given the quality of this material, it's worth a look.

 

[Yamato]

ok, time to get started reading

Ok, I've been doing a lot of printing. All these Bernstein books are a pleasure to read, so I am going to read them.

The problems with the formulas will still remain. But as long as I am focusing on portfolio theory, then I am fine. There's no wasted time. No matter what I read. What matters now is that I become good at this without being bored, because if I ever get bored, that's when I quit, and if I quit, it's all over. Because, you see, there's a big risk I might quit studying portfolio theory out of boredom, out of ignorance and lack of understanding, and then the risk is that, if given more capital, I will invest it with rule-of-thumb unreliable methods and guesstimates (like the disaster we've done with the last portfolio of systems/contracts we enabled), and then I will just blow out accounts over and over again. It's time to take it to another level. Systems creation is over. Portfolio creation is beginning.

What do I want to learn from this last unprofitable experience? I want to lose my fear for formulas. I am going to make myself love formulas, books and portfolio theory. Because I need to.

There's guesstimates, there's rule-of-thumb methods that are useful, and I have taken them as far as I could. But, when you're trying to get your 120 systems to interact in a profitable way and get a realistic estimate of risk, and maximize their profit, then you realize that guesstimates do not work anymore. That a discretionary selection of systems/contracts is not good enough anymore.

That is, of course, if you intend to step on the gas, because if you just allocate 1 million dollars per system, then of course there are no risks of blowing out any accounts, but then 1) you won't be able to trade all the systems and 2) their profit will be so low that it won't be worth trading the systems.

 

[Yamato]

it's working

Little by little my reading skills are coming back, and so are my math skills. I am reading dozens of pages per day. I've been doing it for a week. I basically read everything I can print at work.

I hope I won't lose focus and keep doing this for a few weeks, provided that the focus stays only on portfolio selection.

I totally gave up on bernstein's Intelligent Asset Allocator. I can't believe I could not get it for free. But what matters is not reading an entire book cover to cover: what matters how I am reconstructing the puzzle in my mind. And things are getting clearer and clearer.