my journal 2

[Yamato]

damn, my dad kept popping up

He kept popping up in my room, I wonder why.

Yeah, tonight I've talked to him a bit. I went there and he was watching tv. Each time he has some disaster, an impending catastrophe to talk about.

Tonight it was about some riots we had in Rome. "Things are heating up", he said. Yeah, I remember he kept saying the banks were all going to go bankrupt two years ago but then he kept the money in the bank. It's just like saying "it's sunny outside" except he says "there's going to be an earthquake today".

 

[Yamato]

still alive, still reinstalling stuff...

Neither Vito nor other viruses killed me. I am still alive, fighting vito and reinstalling stuff on my computer.

Things at work will soon get easier for me, because starting next month my work schedule will go from 9 to 15.

Yeah, that's funny because it sounds almost like the market's schedule in CST. But I will be here in Rome, so hypothetically I'd be getting home in time to trade throughout the US session. On the other hand, I've quit discretionary trading a long time ago, and hopefully never will get back to it. It was sheer madness/persistence. I persisted at it just like I am now persisting at automated trading. But I persisted at the wrong thing. The problem was also that it is addictive.

---

Yep. And right now I am resizing partitions. Yeah, cause that pc had like 40 gigabytes so I am having a hard time dealing with it. I need a bigger data partition, but... well, I have to be really careful because i don't want to have c: too small either.

Computers are getting better and better. Yeah. Yep.

....

Other than this, today was like the end of the week so I've looked at how the systems have done and here we go, for their overall profit and their dropped/kept status:

Yeah, let's use the html tags.

System / Profit

GC_ON	2,629.18
GBL_ID	2,317.20
CL_ON_2	1,947.54 (dropped)
YM_ON	626.00
EUR_ID_5	-126.06
GBP_ID_3	-233.51 (dropped)
ZN_ON_2	-382.10
CL_ID_3	-612.34
YM_ID_2	-808.00 (dropped)
ES_ID_3	-983.00 (dropped)
ZN_ID	-1,103.69 (dropped)
GBP_ID_5	-1,396.94
ZN_ID_2	-3,499.99 (dropped)

Total Profit is roughly -1,500
Total Investment is roughly 15,000
This means in six months I lost the investors 10%.

I am not going to blame it on vito this time, like I would do for discretionary trades gone wrong.

Ok, look above: I will mark in red those... not. I will write "dropped" next to those we dropped.

Yeah, we're only trading 7 systems. But those at least are all "safe". I've dropped the amazing amount of 6 systems. That's right.

It reminds me of those movies or cartoons where you see a hot air balloon losing altitude and they start dropping sandbags, and then they start dropping precious stuff, and then eventually they want to drop some people, the heavy ones for example.

In the same way the investors might drop me soon. For now we're dropping systems. Their account is losing altitude, too, actually. We're down.

Never choose a wishful thinker as a money manager. This is what happens. Man, how easy would it have been to make 10% in six months, with discretionary trading? That much easy. Instead, with disciplined system trading I managed to lose that same amount. How? I selected the systems with great optimism and "faith in the future".

Hey, I am always pessimistic, and amazingly, when it came to picking my systems, I was totally confident and optimistic and hopeful.

Can you believe this?



Our hot air balloon is in trouble.

Or maybe I should blame it on vito. You see: my disgust for the office is mostly caused by vito. In turn that disgust made me turn to trading as the way out, and I pushed my luck in selecting systems because vito pushed me on the edge, by making my room so unpleasant. Rather than hopeful I was desperate to find a way out of the office, and that made me include more systems than I should have. As someone said in his profile on trade2win, "in trading more is less". Less systems would have made more profit.

So he should be the one paying the bill. Let's hope to commemorate his death by the end of this year. He will celebrate in the south of italy, there's a lot of people shooting guns there for new year's eve. I may get lucky.

May the new year bring us happiness and vito's death.

Have it now, Vito, because it will be your last christmas.

 

[Yamato]

Fred Astaire and Ginger Rogers isnt this a lovely day (to be caught in the rain)

http://www.youtube.com/watch?v=A8qRneq0Eo4

Isn't This a Lovely Day?

http://www.tcm.com/mediaroom/index.jsp?cid=116177

 

[Yamato]

Eva Cassidy - Kathy´s song

http://www.youtube.com/watch?v=F6WRVzwIg2o

 

[Yamato]

Doobie Brothers - Long Train Runnin'

http://www.youtube.com/watch?v=jW8tGEXP1m0

 

[Yamato]

weekly report on all forward-tested systems

I am done with the weekly report for the 64 systems. I have done it yesterday for the traded ones, and they were a failure. Now I am also done for the entire forward-tested portfolio, and they were good instead.

But let's get to the point.

Out of 64 systems being forward-tested at the moment, I only have 14 systems that I would take a bullet for. This is partly because 24 of them were created very recently and I don't have enough data to trust them yet - even though some I do trust, nonetheless, because I used the out-of-sample methodology to back-test them.

But the point is that I have been even too optimistic last week when I wrote that one third of my systems are good.

The real number of the good good systems that I would take a bullet for is less than one fourth, and they are, with their forward-tested profit and trades:

...wait, they are actually 16, but I am removing two because the YM and ES have duplicate systems (they are almost identical futures), so it is now 14 systems that I would take a bullet for, and they are:

System	FT profit	Trades	% wins	Sharpe
CL_ID_3	-90	9	56%	-0.19
CL_ID_4	858	4	50%	3.41
CL_ON_2	10,977	166	59%	1.89
CL_ON_3	8,053	25	52%	3.73
ES_ON_2	5,364	31	65%	5.33
EUR_ID_5	2,323	31	48%	2.28
GBL_ID	10,473	182	54%	2.48
GBL_ID_2	579	16	56%	1.71
GBL_ON	9,003	62	61%	4.01
GBP_ID_5	3,607	59	63%	1.94
GC_ON	6,956	88	60%	2.03
NG_ID_2	1,763	3	100%	18.52
YM_ON	4,068	126	63%	2.61
ZN_ON_2	3,299	31	58%	3.65

Yeah, I am telling you. I've got some very good stuff. The reason of my failure is, as usual, that I pushed my systems too hard, just like I pushed myself too hard as a discretionary trader.

So it is indeed true in this aspect, that you could fail in automated trading even if it sounds like everything is decided already by your computer. You can fail because not all your systems will work, and you will need to be realistic in choosing the ones to trade.

My present appraisal of only 25% of systems being worth trading is now close enough to make me a profitable trader.

The problem is that I still wonder if I will be able to trade my systems with discipline. Now I can because the investors have a symbolic share of my account so I feel I can't gamble with their money. But if I were all alone, my disgust for the daily office life would urge me to make my capital increase faster and tamper with the systems or even place discretionary trades altogether.

As time will go by, the systems being worth trading will probably rise from the present 16 (with the two extra systems being ES-YM duplicates) to over 20, being almost one third of all my systems, but right now, if I want to be realistic, the systems worth taking a bullet for are only 14 (not even 16, because the ES-YM duplicates don't work equally well), which means one fourth of all my systems. I need to keep that ratio in my head if I want to be profitable in the future.

And to think that just 6 months ago, I was expecting myself to make 100% a month with either discretionary or automated trading, and expecting ALL my systems to work perfectly.

It is really time to tell myself, as they say, "get real!". "Start acting realistically", as the dictionary says.

The fastest way to make money in the markets is to "get real", which is something I never do in my life. The first thing that comes to my mind is with women. I can't get real about women, and never have. Plus what is worse is that the ones that want me, I don't want, unless they first don't want me anymore. So basically it is a constant method to avoid all women. It would be as if, with systems, I chose only the ones that don't work, which is luckily not exactly what I do, because my search for profit is a bit more realistic than my search for women and I won't be in denial forever. I mean, it is clear that I do want profit and only profit, and there's no way around that. Whereas, with women, it's not really clear what we exactly want: do we really want a relationship? Because you know it is also a burden. But with profit, I am positive that I want profit, so this makes me want to get real about getting it. With women, I am not really sure if in reality I am not sabotaging myself so that I don't have to be stuck with a woman.

----

Anyway, these last six months have been excellent! I've opened my eyes like never before. What the investors did is - naturally - force me to trade with (their) real money a set amount of systems for a set period of time without tampering whatsoever. This has forced me to notice that things are not as rosy as I thought they were.

There's no way that my systems make 100% a month, as I have always been claiming to myself and to others. Even my small selection of systems, which supposedly were the best ones, actually lost money.

This was lesson number one.

Lesson number two is more humility.

My systems are not that good, as I said, and... the good ones are fewer than I thought. This was a lesson learned this month basically.

Lesson number three was: even I, if I am being monitored, can refrain from gambling, both on other people's account (which I knew from the start of course) and on my own account (provided there's some money from someone else who knows about trading).

The wishful thinker / gambler in me is always alive, so I have to watch out, because I could easily relapse - if these people monitoring me disappeared for example - and resume my discretionary gambling, my tampering with the systems, or my selecting systems that only work in my dreams. The wishful thinker is alive because I want out of the office badly. I am hoping to get out as fast as possible, and this affects my trading. But maybe now that I know that "less is more" and less trading by better systems brings more profit, I will maybe change my behaviours at the root. Maybe if I'll realize that non-tampered automated trading can produce profit, all my discretionary urges will stop.

But even if the gambling urges won't stop, what cannot be taken away from me is that I've seen how things can work properly: I have seen how things should be done. How systems can be run - without tampering. How they have to be selected - only if they have a good out-of-sample or a large forward-tested profit. How they have to be created - with the out-of-sample.

 

[Yamato]

Here I am, up again, and at work again.

I will now automate my last two systems, the 65th and 66th system, knowing that for every 3 systems I create two will turn out to be unprofitable or not profitable enough to be traded.

That ratio is even worse for the past, because for the systems I created up to 6 months ago, I didn't use the out-of-sample, so my out-of-sample was my forward-testing.

And now, back to work.

Tomorrow I will have to go back to the office as well, but the good news is that vito won't be there for two weeks or so. So that is like being on vacation basically, without that chimp making friends with everyone all the time, as if we were at a party and not at work. That exhausting chimp.

Actually, as I was working on it, I just noticed that it doesn't just pass the out-of-sample test, but that it does excellent at it:



The out-of-sample is actually only 4 and a half years but it seems longer because for some reason, maybe lack of early morning data, it trades more in those 4 and a half years. At any rate, the equity line says clearly that this is one of those systems that, even without forward-testing it, I would be willing to take a bullet for.

If there is one problem for this system is that, like all YM and ES systems, it trades a lot. It has a very small drawdown (1500 dollars on YM and 2000 on ES) and a very steady edge. So far so good. But its problem is that profit is small and spread costs and commissions are heavier on the YM's profit, because during the time of trading by this system, the YM has 2 ticks of spread, and this erodes 33% of its profit.

So, for ES profit is about 25k in about 10 years (trading 1 contract). This means a return of 2.5k per year, with an investment of 5k as margin. This is 50% per year, as Return On Investment. Not bad at all if you add it to all other systems.

For YM things are different. But we have to consider that it skips some trades in the first years, so I'll adjust statistics for that. Due to the larger impact of spread costs, its return is as little as 13k, but the years are a only guesstimated 7 (it trades 850 times vs 1330 of the ES), given the mentioned data hole problem (which doesn't make it any less reliable). So this will yield about 1.9k per year. And it is precisely the impact of larger spread costs. Margin is the same, actually higher, 6k. So profit is about 33% a year. Still, I'd trade them both simultaneously.

This brings the systems I'd trade (including the ES-YM duplicates) to a total of 18 on 66 I am forward-testing. As time will go by, I will probably include at least 5 more due to a longer forward-testing period and increased knowledge and reliability by the ninth wave (which are a total of 20 systems). With about 22-23 systems worth trading out of 66, I could say that one third of all my systems is worth taking a bullet for. The rest are not.

------------

Anyway, I am bound to build profitable systems, because the method is right, and it's just flat out impossible that one creates 66 systems with the right methodology (as I am doing now), and there isn't profitable ones among them. Then, all you need to do, is forward-test them and keep the ones that really work.

Obviously, if you trade all of them, indiscriminately, you could still fail. But if you use the best ones, and it's easy to spot them via forward-testing, then you can't fail. Given that you have enough capital to withstand their drawdown, which is not the case with my present account right now.

But with the investors' account this is not an issue, so it's only a matter of time before seeing profit happen. I already have discarded all the systems I would not take a bullet for.

 

[Hotch]

Good stuff. Will have to read through the whole thread now.

 

[Yamato]

Thanks for the feedback and for appreciating what I write.

 

[Yamato]

I saw Hotch's profile and somehow felt the urge to read up on Jesse Livermore again. Oh yeah, I had a doubt about the title of his book, "Reminiscences...". Then I came across the online .pdf, from wikipedia, and I read those great first few paragraphs, that take us back over 100 years. I will quote them with what they made me think about, as i re-read them now:

I went to work when I was just out of grammar school. I got a job as quotation-board boy in a stockbrokerage office. I was quick at figures. At school I did three years of arithmetic in one. I was particularly good at mental arithmetic. As quotation-board boy I posted the numbers on the big board in the customers' room. One of the customers usually sat by the ticker and called out the prices. They couldn't come too fast for me. I have always remembered figures. No trouble at all.

That is one quality I don't have. I am not that good at math. I like numbers, but I couldn't say that I am that good. I like statistics. I remember numbers, too. But I am not that good at math.

There were plenty of other employees in that office. Of course I made friends with the other fellows, but the work I did, if the market was active, kept me too busy from ten a.m. to three p.m. to let me do much talking. I don't care for it, anyhow, during business hours.

This reminded me that I am just like that, too. Especially now that I am vito in the room. For the past 6 months, I didn't do any talking at all during business hours.

But a busy market did not keep me from thinking about the work. Those quotations did not represent prices of stocks to me, so many dollars per share. They were numbers. Of course, they meant something. They were always changing. It was all I had to be interested in the changes. Why did they change? I didn't know. I didn't care. I didn't think about that. I simply saw that they changed. That was all I had to think about five hours every day and two on Saturdays: that they were always changing.

This is, very simply put, the definition of technical analysis: "I didn't care why". Another thing: I like his writing style and how it's simple.

http://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore
http://www.stockvision.org/books/Edwin_Lefevre-Reminiscences_of_a_Stock_Operator-EN.pdf

 

[Yamato]

problems with hot water not running

I am done with automating the last two systems. Now I'd like to take a hot shower, but if I can't do that because the hot water is not running, I'd rather not take a shower at all.

It sucks.

For some reason I don't feel like calling the janitor or whoever is in charge and get the water to work. I can't do it by myself either.

Tomorrow, before going to work, I'll end up taking a very cold shower. And here it's winter.

That's what I had to do last Friday.

For some reason it reminds me of that movie I saw, Becket.

I remember there was a scene, where they were on the beach, and - well, it was pathetic actually (that part of the movie sucked) - and they were meeting on the beach and they said to one another that, as Becket always said, if you put cold water on your face in the morning, you won't feel the cold during the day. In my opinion, it's the exact opposite. If i can take a hot shower, I can get through the rest of the day without minding the cold. Viceversa for the heat: if I can take a cold shower, i don't mind the heat during the summer.

Well, here they say the opposite, which makes it suck even worse:
http://www.subzin.com/quotes/Becket/68

Actually, it's a good movie besides that stuff about the cold water.

 

[Yamato]

Divide and Conquer (newsreel)

http://www.youtube.com/watch?v=TSN3RIfIIJo

Divide and Conquer (newsreel)

 

[Yamato]

Apocalypse: The Second World War

http://www.youtube.com/user/danishsalad1#g/u

Apocalypse: The Second World War

Very good documentary.

 

[Hotch]

I saw Hotch's profile and somehow felt the urge to read up on Jesse Livermore again.

Say what now?

 

[Yamato]

No, nothing... just that i was reading your profile and saw that you like Jesse Livermore's book, which made me think about it.

 

[Yamato]

Never, until the investors forced me to keep a given combination of systems and to trade them with real money for a given period of time, have I realized how good/bad my systems were and how to appraise them. Before the investors, there was just undisciplined tampering, switching of systems, placing discretionary trades... it wasn't like a laboratory setting and nothing was nearly as scientific as now.

I never expected outside influence to affect me and improve my trading so much. I was just after their capital: I just wanted people to trade my systems and give me a percentage of their gains.

Instead, I've learned about the creation, automation (on my own) and selection of systems. That alone would have made it worth it. It was a very useful experience.

It really opened my eyes regarding my wishful thinking and my delusions. At the start I was convinced that we would make about 3000 per month. Instead right now we're down 1500 after 6 months. Instead of having made 18000 in these six months, we lost 1500. This is the reality. I might have picked the wrong systems, but I was definitely engaging in wishful thinking, too. And actually that's how I picked very bad systems - I had good feelings about them.

The systems that had already proved to be good when I picked them, made about 5000 or so (still far from what i was expecting). Those that I had good feelings about, but hadn't proved to be good, lost about 6500. This is how we end up with a negative balance of 1500.

Basically I was expecting the good systems to keep on performing as well, and the so so systems to improve their performance: totally irrealistic. Instead what you can expect is the tried and tested systems to do worse, and the barely profitable systems to lose a bunch of money.

 

[Yamato]

I'll tell you more: I have learned more by being unprofitable with their account, than if I had been (lucky and) profitable on their account. And I have learned more this way, than by being unprofitable (or profitable) on my own account. Yes, but I am not just saying that I learned because they taught me - I learned even just because they forced me to keep the systems I picked, without changing anything, without tampering with them.

The markets really have a way of making sure you've learned all you have to learn: they just keep on taking your money if that is not the case. That is only true if you trade frequently of course, because if you start a long trade on stocks and hold them for five years, your learning process is much slower, in that it is a function of the quantity of trades you make rather than the amount of time you've been trading (or "holding" I should say)

 

[Yamato]

dedicating next song to my systems

I am going to look for a song to dedicate to my systems. Yeah, because they might grow to a staggering 79 before the end of the year. And then I'll really feel good about myself. Because yes, they might mostly suck, but there's definitely going to be at least a few good ones among them (and easy to identify).

Yes, this one is the most appropriate:

 

[Yamato]

Battle of Midway

http://www.youtube.com/watch?v=vi4HwxOZDJw

http://en.wikipedia.org/wiki/The_Battle_of_Midway

 

[Yamato]

insomnia, again

I still haven't found something that really works. Last night I was out of melatonin, which does help a lot. So here I am again. I just text-messaged my boss saying I can't make it today.

I was browsing and this seems helpful:
http://www.ehow.com/how_2172261_fall-asleep-mental-tricks.html

Tell yourself that relaxing rest is almost as beneficial as sleep and you don't have to stress out just because you're not asleep. There's nothing less sleep-inducing and less restful than being upset because you're awake...

However I am skeptical any of those articles will solve my insomnia problems, and if I am skeptical, they won't work for sure. In few other fields is a placebo useful as in falling asleep, but If you are skeptical placebos don't work.

Among the many pieces of advice, there was one saying to write my thoughts so here I am. This might help or it might keep me awake longer.

Problems in my head and thing keeping me awake:

1) vito is about to leave on vacation, but today is his last day, and I'd have to wish him a merry christmas as I leave. This bothers me and worries me, because it would be dishonest to wish him anything but death.

2) my parents are coming for christmas: since I won't go with them to the island, then they are coming to stay with me. This bothers me and stresses me out, because I don't get along with those two people. Especially with my father.

3) My mind is excited and tense from thinking all day about new systems, all the way up to when I had to go to sleep. This rarely fails to cause me some insomnia.

4) I've talked to my dad. Since I am not letting him talk to me about politics lately, I've talked to him about systems. His bored reaction (reaction he has about everything i say) frustrated me and is keeping me from sleeping.

5) today the plumbers are coming at 8.30 AM and this is an organizational mess, because that was the time I was supposed to get up. More worries keeping me awake.

6) Regardless of whether the plumbers fix it or not, I wouldn't be able to take a hot shower, which is why they're coming. Cold shower in winter further adds to to my stress, insomnia.

7) Another work-related problem, besides vito. The boss is going to change at the start of next year, in 10 days. Yesterday I was talking about it to the present boss, whom I like, and I asked him if this guy was nice, and his reaction ("hmm... he was nice to me...", said in a perplexed tone) is making me worry. Also he said "well, tomorrow I will introduce him to you guys so don't worry", and that's when I started worrying.

8) I have finished my days of vacation so I am frustrated that i could not take a vacation even if I wanted to. I text-messaged the boss that I am not going because of insomnia, but to count it as sickness for once. This stresses me out.

9) ...more that i am forgetting or not realizing.

10) I am feeling a slight head-ache (unusual for me) from the cold showers I've been taking.

The energy is running out.

I never thought i could last more than 5 years at this office. I've been in this bank for... 2005, 6, 7, 8, 9, 10, almost 6 years now.

It's too much. I was counting on the systems to get me out of here a long time ago.

That is what made me overtrade: my urge to make money and get out. And that's what made me lose instead, and stay longer.

The investors are doing this, both in their account and my account: they're forcing me to slow down, regardless of my urges and compulsive tendencies. This is a healthy influence, very much so. This is like a straitjacket.

And I need it. There's nothing else that could work with me. I have suicidal tendencies. In giving in to my urges to get out by trading, I prolong my stay at the office.

Let's now look at some of the positive things, since I am running out of complaints but i want to keep writing.

1) the investors said last night that they want to keep on going with me, until it will eventually work. Pretty good news, considering that we've been trading for 6 months, and now showing a loss for 1700 dollars.

2) I've created enough systems, almost approaching 80. Not automated them yet.

3) Vito is leaving for 2 weeks, which will make my stay at the office feel like a vacation.

4) Vito today was talking to someone and I overheard that he's not even hired yet. He doesn't even know if he'll stay after his internship ends in February. Greatnews. Let's cross our fingers and pray that he does not get hired. I thought he had fooled them all since a long time ago. Since he hasn't any certainty yet, it might well be because he is NOT getting hired and he has NOT fooled them all. They were being nice to him, but maybe he hasn't actually fooled them. I hope my complaint about my stuff being turned upside down (scanner, envelopes spread out all over my table) helped them open their eyes. This guy is such a fake person. I've seen him put on hold a call to his girlfriend because the boss was passing in the hallway. He even told me "you're not sly, because if you keep the door shut people won't see that you're working". To him everything is about how you appear and not how you are.

5) today there was this hot chick, who asked me if I'd go to the small office party (or whatever it's called in english). And i said "of course not, i suffer from agoraphobia - I organized my escape half an hour before that party". It was nice to get asked. I meant "yesterday" not today. This chick is hot. I'd do her any time.

6) My bank account is negative, but not so negative. I am getting double the salary for this month, so it might even go into positive.

7) Vito is going on vacation for christmas and he might die from a gunshot during the new year's eve celebrations.

I ran out. There's more bad stuff than good stuff.

The plumbers are coming. My dad is alive a kicking and busting balls.

I better fall asleep before he comes knocking on my door and telling me that I should go to work or that... some bull**** excuse to bust my balls. According to this man it's illegal to take a vacation and it's criminal to be sick. You should work yourself to death. I was born to a nazi general and to Mother Theresa. For my dad I should give my life for my country, in an effort to leave a mark in world history. For my mom, I should die for the poor or for the violent, showing the other cheek as she tried to teach me always. Die while fighting or die while getting beaten. That's my alternatives. I grew up as a child wanting to be jesus or the pope or the president. Pretty sick family. And being only child, I could not make sense out of this by talking to a brother.

We talked about positive and about negative. Or viceversa.

Let's talk about dreams, and then let's go back to sleep. It's seven thirty am. I've almost finished my half a bottle of wine.

1) I dream of moving to the island of the island:
http://maps.google.com/maps?q=41.2408,9.1577

All alone, there. No one to bother me.

2) I dream of a world without vito interns.

3) I dream of a world without nazi generals as fathers, nor mother theresas as mothers.

4) I dream of inheriting all their money. Or getting some of it while they're alive.

5) I dream of a world where I can take a hot shower.

6) I dream of a world where I can do that new chick, who asked me if I'd be at the party.

7) I dream of a world where the systems I select for trading are the ones that make money right away.

8) ... where I create 150 of them

9) ...where I resign.

10) where I fall asleep

11) where i solve... falling asleep...


i am falling asleep. I found the answer... listening to a war documentary without watching it. It really takes my mind off things.