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Strategies & Market Trends : NetCurrents NTCS
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To: fut_trade who wrote (8591)3/29/2002 6:08:56 AM
From: Atin  Read Replies (1) of 8925
 
> "control risk? You mean place a protective stop?"

Yes, you have to have a place where you (or your system) says "I'm wrong" and gets you out of the trade.

> "There is only one efficient way to learn from the market and that is by developing and testing trading systems. One can test a trading system on 20 years of data in a few seconds. The only way to test a discretionary trading style is by manually paper trading on live data, which will take a very long time."

You are assuming that trading is about clicking a button and leaving on vacation. A lot of trading has to do with psychology - of dealing with the whole greed/fear thing. Testing your systems is definitely going to help with controlling the greed/fear responses. I am not against testing systems - heck, I'm a serious programmer and have spent a lot of time and energy developing these. But when it comes down to it, there is a very large human component to trading because many of our competitors in the markets are human.

> "Well, some people once promoted the "Kelly" system for choosing how much of your account to trade. Works well in blackjack where the rules are fixed. But in the market, position sizing will only get you into trouble."

Excuse me? You are just plain wrong here. I cannot believe that you're saying what you just said - what are you advocating? Equal dollar amounts? Equal numbers of shares/contracts regardless of things like volatility, account size etc? Some other kind of averaging? And heck, even all that falls under position sizing. The only time you're not "using position sizing" is when you use some random number generator to come up with a position size to trade when your system gives you a signal.

You may want to move this conversation to Subject 8128 - a much more appropriate thread for ruminations on program based system trading (and at one time one of my favorite threads on SI).
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