my journal 3

[Yamato]

Yes, very wise remarks as usual. Thanks for the feedback. I agree with everything. And good luck to you as well.

I don't write much because today I have to work a little more after working very little this week due to my medical exams (which I did by using up my vacation days/hours).

 

[Yamato]

portfolio theory is a twofold problem: 1) defining and 2) scaling up/down basket

Back home. Doing good: making 500 on a couple of trades. Pretty satisfied.

Will post some more later, probably.

...

Back. The systems made 500 dollars this week. Not bad at all. They made 2000, lost 1800 yesterday, and then made 300 today.

I've been gambling-free for exactly... 8 days. It feels good.

I sensed that, had I continued, I would have blown out my account by now. So I stopped. Just in time. There was no way I could have kept up that performance.

Now I am still recovering, so I can't even look at the JPY ticker or I will relapse immediately.

...

Today I went to a two-hour-long math lesson, and obviously we went right away to the subject of portfolio theory. The engineer is talented. I told him I'll go to his lessons for two months, for a 3-hour session every week.

After an hour, while explaining where I am at, and what we need to work on, I had a major intuition.

My portfolio theory can be divided into two issues:

1) devising the formula for defining the optimal portfolio/basket of systems/contracts.
2) scaling up/down that portfolio as capital increases/decreases.

Part #2 is totally taken care of and the methodology I will use is "fixed fractional". Part #1 however, comes first, and that's where I am weak. In other words, as I explained to him, it is clear that I will keep my risk exposure fixed in percentage terms as capital increases/decreases, by increasing/decreasing the contracts allocated to the systems, but the remaining problem where I want him to help me (with summation notation, markowitz, and all the other academics who worked on it and suggested formulas and metrics) is on how we define that recipe for building the portfolio given the different characteristics of my systems in terms of:

1) size of wins/losses
2) percentage of wins/losses
3) frequency of trades

As markowitz says, our objective is to maximize return while keeping risk constant, and minimizing risk while keeping return constant. In other words, how do we go about putting together all these different systems. Up to now I've done it by guesstimates. But guesstimates can be wrong, especially when you're drunk with profit or scared stiff from losses. This is the old topic I've been discussing for months with bbmac: how to automate, via a formula, the optimal combination of systems to trade. Furthermore, even #2 is only partly solved with fixed fractional, in that it would be ideal to define more precisely, better than with guesstimates, how much capital is needed for a given combination of systems.

Once you have defined the combination of systems/contracts for a given level of capital, the rest is just fixed fractional. But that first part is a big deal and not at all granted. As the French say, "ce n'est pas évident".

idea2develop

"The Stranger" by Billy Joel- Whistle Solo - YouTube

Billy Joel - The Stranger (Live 1977) - YouTube

 

[Yamato]

The life of the automated trader is this: total boredom and emptiness.

I do nothing in the weekend. I do nothing during the week. I wait for my math class, that takes place once a week and will probably last 2 or 4 hours each time.

Boredom.

I could just peek at JPY and GBL and the others, and my boredom would be gone, with gambling. But, from this level, it is not worth it. Peeking at the markets to me is equivalent to snorting cocaine (I suppose, from what I see in the movies, like Scarface).

It is not worth it to PEEK and risk gambling my way down from the PEAK of this mountain that I've climbed:

(don't like to show the last two days, when I've lost 1500 dollars)

This altitude is the only thing separating me from my colleagues. I am far away from them, because I am on top of this mountain. I am in the same room as these animals, but my mind is elsewhere. Up in the green mountains.

However, on top of this automated mountain, if I want to stay here, things will be boring. I can feel it coming, a routine of peace of boredom.

But I do want to stay on this green mountain.

♫ Marcella Bella ♪ Montagne Verdi (SanRemo 1972) ♫ Video & Audio Restaurati HD - YouTube

...io sognavo montagne verdi.
Il mio destino è di stare accanto a te
con te vicino più paura non avrò...

I dreamed of green mountains. My destiny is to be near you, and with you near me I won't be afraid anymore.

...

I don't feel like writing any more. There are no conflicts within my mind except for boredom, which is not that frustrating.

It's just emptiness. That's what it is. I feel a lot of emptiness, and I feel that I am wasting my time. I wish I didn't have my job to go to, and I wish that I could take 10 hours of math classes every day. This really sucks. I wish I had more support from my parents in my desire to quit my job.

All these medical exams would be useless, too, if I quit my job, because the only reason for them is to have a guarantee that I am not transferred. So I wasted 3 months of work just because my parents won't let me quit my job and take their offer of 2 years of salary. And of course because I care so much about their opinions.

Boredom. Boredom.

Boredom.

And I don't smoke, and I don't drink, and I don't eat... other than a raw vegan diet. What the **** am I going to do now? What?

Wednesday morning I will turn in my medical exams to the Gestapo (medical commission). Then I am done with the medical stuff as well.

What do I do now? What do I do to keep away from gambling?

Should I gamble instead and make another few thousands?

What do I do? I am very tempted to try a trade on JPY. DANGER. I am tempted. DANGER.

Damn. I need a vacation. I will take a ship to the island. Yeah, next weekend.

Damn. I could not have resisted the medical nightmare for a week longer. Hopefully I will turn in all this medical garbage documentation and certificates, that corrupted doctors wrote for me, extorting me money for it... hopefully I will put all this behind me within 3 days. Now I know what is more disgusting than a dishonest taxi driver... a dishonest doctor. And probably even more disgusting is a dishonest judge.

Ah ah, a dishonest taxi driver, after what I've seen at these hospitals, is really a laughable matter. This experience has strengthened my resolve to stay away from doctors and hospitals. One more reason to be a raw vegan, and avoiding: restaurants, smoking, drinking.

And leave my country, or at least move back to the north.

 

[jazeonli]

The life of the automated trader is this: total boredom and emptiness.

Why don't you develop a few new strategies? Than is never boring.

 

[Yamato]

Oh, I know what you mean. But with 120 systems behind me, of which 30 excellent, I should devote my remaining energies to money management, because that is where I am lacking the most. Furthermore, every new strategy I develop requires:

1) purchasing new data (because the last ones were developed 2 years ago)
2) waiting a year of forward-testing (I do in-sample, out-of-sample, and then forward-testing on top of it)

So, you know... given where I am lacking and given the time and work involved with just creating one strategy... I'll focus on money management.

But you're right, I said I was bored. I should have added that I am bored but I don't have much more programming and back-testing energy left in me. It's too eye-consuming.

I'll wait to do more systems till when I'll quit my job.

 

[Yamato]

Yeah. I went and got a kebab. It's funny. Most people when they're depressed, they go and get drunk or do drugs, or binge eating. But if you're a raw vegan, it's enough to just do what others do every day, so I went, got a kebab, and I am satisfied. Then I came home. I realized that he probably ripped me off by one euro. This is funny, too. After getting ripped off by doctors for 400 euros, I don't think I will mind people ripping me off by one euro anymore.

Good habits are important. Because even if you stray a little bit, you're still doing extremely healthy things. Food-wise and finance-wise. I didn't buy a car for one thing. That is a healthy habit. I don't have a woman to take out. I don't have retarded friends, who go out with me and pressure me to do stupid things... another great investment.

I am free, I have extra money, I have extra time, I have... I have a lot of things that most people do not have. This is the perfect situation to blow everything with trading. It's the perfect situation to be a trader, too. It's good and bad situation at once.

You see, when you have extra money, you can trade. But when you have extra money you can afford to lose it, too, so you might not try hard enough.

If you don't have extra money, you can't afford to lose it, so you're not in the perfect situation either.

You need traders who know themselves and the markets, who know all the other things you need to know, who don't have so much money that they don't care about losing it, and don't have so little that they can't afford to lose any of it... That is an extremely difficult set of skills and characteristics to have.

 

[Yamato]

Pretty satisfied with having 3 journals in the top 10 of journals, with 1 being number 1 by both views and posts, and all 3 being in the top 10 by views and posts:



I removed those journals in between for clarity. The combined number of views is reaching 400,000.

I have been looking at these views even more often than I've been looking at my systems and my equity line and anything related to trading.

...

Today I slept well, as usual. This is something I can say as far as 2013, after having moved my bed upstairs, where there are no neighbors, in the attic.

I will go in an hour and a half to see Ratzinger's last "Angelus", the pope's weekly Sunday message to the world, from his window in Saint Peter's Square.

Last Friday I went to see Beppe Grillo's in Piazza San Giovanni in Laterano, where there was about 100 thousand people. And today I will go to see another 100 thousand people in Saint Peter Square. I would be curious to know exactly how many of those 100 thousand of Friday will be there today.

...

Other than this, I cannot say much, because I am still leading a very uneventful life. Especially since I've quit discretionary trading. Although I am allowing myself to make one stoplosslessness trade on GBL, if it ever reaches 144 and it is pretty close to it, only 40 ticks away. But that doesn't count, because you can't lose money on a trade like that.

Other than this, my next biggest thing is, after turning in the medical documentation next Wednesday, the math class of 3 hours that I have set for Tuesday March 5th, which is in about 10 days.

I might even take a bus this time. I don't know... I feel like it. It's really a waste to spend more money in taxis than what I pay to my tutor, which is what happened the last time I went there.

...

Nope, it cannot be done. I just checked and the time cost is huge: I have to take 4 different transportation means, between the office and his place: two trains and two buses. That mother ****er is 15 kilometers away from my office, and we're both in Rome. Not only would it take me close to 2 hours to get there, but I would risk getting on the wrong bus and not getting there at all. And on top of it, I would risk meeting the wrong people, and being robbed or stabbed. Bad bad choice. I will take a taxi, and I will try to maximize the hours I stay there, so not to go there too often.

If possible I will have 4-hour-long classes, each and every time. But at the very least 3 hours.

 

[Yamato]

Yeah, I went. About 100 thousand people there, as expected. Everything as expected.

Today there's general elections in Italy. Pretty important deal.

 

[Yamato]

All right, guys. I am bored. I will get back to discretionary trading, hopefully with a degree of safety to it.

I will now look not just at JPY but at all the 16 markets I am monitoring. Then I will post my latest discretionary analysis on the "index.html" file.

I am calm and I am just looking to make a few thousands with my discretionary trading, and I will plan it in advance and look for stoplossless situations.

Let's not forget that if I am at 33k and not 13k, it is because I added discretionary trading to my automated trading. Most of my profit so far has come from discretionary trading. So if I can keep calm, more profit should come from it.

And the week I took off calmed me down.

I will now look at them, after being away for over a week, and will write down immediately my first impression on a quick .txt file. Then I will edit my "index.html" and then I will post it here.

...

Ok, this is my rough draft. I'll fix it and post index.html later:

GBL

one contract short at 143.95
another contract short at 144.95
another contract short at 145.95

very promising


ZN
no action


AUD
nothing, bad


CAD
good long trade to be kept open for weeks


CHF
no action, bad


EUR
no action, average


GBP
good long trade to be kept open for weeks


JPY
good long trade to be kept open for weeks


NG
good long trade, uncorrelated to the others, almost at stoplosslessness levels, to be kept open for weeks


CL
don't touch, bad


ZC
good long trade, so so in terms of confidence


ZW
awesome long trade can only fall 2000 dollars at the most


ZS
BAD from all points of view


NQ
bad, stay way


GC
good long trade to be kept open for weeks, but not enough margin for it right now


HG
Not good, stay away

...

Ok, done:
View attachment index.html

I inserted pretty picky entries, and no stoplosses. Right, all against my discipline.

I am treating these trades as "stoplosslessness" situations. If they all happen at once, it will be better, because they will balance each other out. Except for GBP all entries are entering below where price is right now:



I am happy if I can get out of these trades with a combined profit of 5000 dollars after a week in them. And I am not expecting all of them to be triggered on Monday. Also, because I need that margin for other trades. This time I will let the systems trade as well.

Let's say that these trades are not compulsive gambling because they're LMT orders and not MKT orders. I am being quite demanding for these entries. At the same time, given that they have no stoplosses, they're not perfectly controlled situations either. This is a mix between compulsive gambling and wise discretionary trading. At any rate, most of these trades have behind them months of thinking and waiting.

GBP, been falling and observing it for weeks if not months.

CAD is a novelty but in the monthly chart it looks like it's in a tight range. GBP is beyond that range, but very overstretched.

Some of these bets could go wrong. But they're all so overstretched that even those that go in the wrong direction will not be as powerful as those that will turn around.

JPY, I've already said all about it. Still the best candidate for a bounce.

So are all the others.

But I am not allowing entries at MKT because I know how price has a habit of reaching the previous lows/highs before turning around, and I know I have a habit of anticipating the markets, being afraid of missing opportunities that are there for much longer than I think.

In other words, even if just 3 of these 7 orders get triggered in the week, I will be OK, but it is more likely that six of them will be triggered.

And if they get triggered slowly, that is fine, too, because I'll be needing all that margin for my systems anyway.

If I inserted MKT orders I would feel like a fool, like a compulsive gambler. So this time I will do things differently.

I hope to reach 40k by the end of this coming week.

At which point, I will have to take another 10-days break, because that's the way my mind works. Whether I win or lose, discretionary trading destabilizes me, and I can only analyze the markets for that long before my judgment gets corrupted by my hopes and my being in the market.

So, no matter what happens, I will let these seven orders loose, and then I'll retire for a while again.

Even right now, I have totally lost that emotional balance I had a few minutes ago. If I look at these promising markets now, I see other things, such as the need for making my LMT entries less demanding and a temptation to enter at MKT. But I know that what I saw before was the wise part of me at work. Now that mental balance is gone.

Also, I have to remember that I said I'd keep them open for a week. No quick profits. Or I'll keep them open until they reach a combined 5k, that is what I said. Guys, if I reach 40k by the end of the month, I have officially decupled my account in six months. Which would mean reaching 400k in another six months, at this rate.

All that I care is that I can afford these math classes, because if I can figure out money management, there's no stopping me. From here on, I can just use my systems - provided I figure out the right money management recipe.

Dream On [Lyrics] - Aerosmith - YouTube

 

[Yamato]

I got a hell of a deal on JPY and GBP, and on ZC. ZW, I bought at MKT, but 500 dollars higher.

I bought CAD, too, at MKT. The only thing I didn't buy at MKT is NG, because it's rising too much and because I need the margin for my Silver trade, which will probably start trading today.

 

[Yamato]

How are my trades doing an hour and a half later?

CAD, 4 ticks higher
GBP, 20 ticks higher
JPY, 6 ticks lower
ZW, 4 ticks lower
ZC, unchanged

NG and GBL no entries triggered yet (far from it)

Overall, they're doing extremely well I would say. It is rarely the case to be profitable so quickly after entering a long-term top/bottom-picking trade(s).

 

[Yamato]

Wow, these trades of mine are kicking ass. The problem is that the systems are sucking really bad. My first trade on silver could not be doing worse.

 

[Yamato]

Damn, the systems lost 1600 dollars today. 1100 on Gold and the rest on Copper. Man, do they suck!

My discretionary trades are doing fine. Too bad for NG and GC, but I had discarded them, after assessing the correct direction yesterday. GBL was almost triggered but by 20 ticks it didn't go through, and now I lost a thousand on NG, a thousand on GC, and a thousand on GBL.

My actual trades are not making money, yet not losing it either.

I am pretty sad, but there's really no gambling I can do, given that I am in so many trades already. That's a good alternative to martingale: doing a whole bunch of trades so that you have no margin left to enter other trades. Too bad, really, that I didn't start the GBL, NG and GC trades.

All right, basically the systems are sucking badly, and I am not losing much. So it was a bad day, an awful day, and I am down about 2000 dollars.

 

[Yamato]

Ok, now losing almost nothing with my own trades. The systems unfortunately lost that 1600 and that is gone, water under the bridge or however they say.

That money is gone, forget about it, travis. And it wasn't even your own fault.

The discretionary trades are very promising.

And I am done with ALL medical exams. Mother ****ing corrupt Italian doctors won't be seeing me for a long long time. Die, you mother ****ers!!!!

You nazi mother ****ers, you Gestapo mother ****ing concentration camp doctors!!!

Italian slaughterers.

**** you all.

Anyway, Doctors and their corruption is behind me. Systems and their losses are behind me.

I will go into the bath tub soon.

 

[Yamato]

Hold the line!

Love isn't always on time!

TOTO - "Hold the Line" - YouTube

Yes!

I am having fun!!!!

Yes yes yes!!!



I'll make money on every single one of my discretionary trades!!!

I am having a great great time!!!

I will make 10k on this one!!!

They're all stoplosslessness markets!

They can't go any lower/higher: JPY, CAD, GBP, ZW, ZC, NG, GBL... seven markets all on the edge of a reversal!!

Hold the line!

...

Seriously, dude. I'll make an average of 2000 on each one of these.

 

[Yamato]

Dude, I am out of JPY for one thing. I made 4000 in one day and with just 1 contract. That's almost shocking to me. Let's just forget about it, after closing it. It's water under the bridge or however they say.

So now I have just 6 more trades to go (to close). Actually only 5 because my NG discretionary trade isn't open yet (the open NG trade was triggered by the systems).

 

[Yamato]

Ok, now capital seems to be at 37k.

I almost cannot believe how good/lucky I have been. I am losing 1000 on ZW, but I am not doubling up, because that market has not achieved stoplosslessness. See, I have learned some sort of lesson. Not every lesson, but at least one of the many.

 

[Yamato]

Back at the office. I said, in the previous post, "Ok, now capital seems to be at 37k", because indeed something didn't look right. And it was the fact that GBL was showing me a gain of 1500 euros, instead of the loss of 1300 euros it was showing me yesterday. One of those bugs or similar.

Now capital is at 32k something, because GBL is even higher than yesterday. I opened a fourth contract at 144.77.

Remember, this is a stoplosslessness situation. It cannot go higher than 147.

...although for some reason that escapes me this doesn't quite agree with my analysis:
German Government Bonds 10 Yr Dbr Chart - GDBR10 - Bloomberg

I wonder if it is the results of the Italian elections that made the Bund rise so much. In that case my involvement would be twofold.

 

[Yamato]

Ok, fellas. I am back home now, reviewing the electoral results with my father... reviewing the medical exams by myself, as I'll turn them in tomorrow at 8 am. I'll go there with my freeloading friend.

Regarding my bunch of trades, I am still hanging in there, having closed only JPY, and being short on GBL with 4 contracts, and losing right now over 3000 euros, but I know that is... temporary. It will turn into a 3000 euros profit, if not more.

ZW and ZC are about to start going my way, and so are the two currency trades. All about to reverse and turn upwards. The second part of the week is usually up on these markets (and viceversa). This is also good for my bund trade of course.

 

[Yamato]

Ok, back at the office. The awful medical experience is now completely behind me. All these assholes-doctors were rude from the first till the last day of this experience. Let's try to forget it as quickly as possible.

Let's now take a look at how my trades are doing.

GBL still up there, losses near 4000 euros, but not rising any more.
CAD rising.
GBP falling even more! Bad for me, given that I am long on everything except GBL.
ZW and ZC doing great, rising.

I am going to do great provided GBL falls within the next 3 days.