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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (18224)	5/2/1998 2:22:00 PM
From: Tom Trader	Respond to of 50167

Hi Iqbal, thanks for your response Re models and the debate regarding the validity of trading models, I am well aware of the debate that has gone on for years regarding this. Much of what was cited in the article is valid. My own opinion is that trading models do work -- I know this for a fact because I have used the same model for over 10 years and it works in several different futures markets. I also have friends and acquaintances who use trading models for day trading as well as position trading in the futures markets and they have been successful. Also, a very successful and well known futures trader, Larry Williams (of %R fame, etc)--whose books, seminars and views--have probably had the greatest influence in my evolution as a futures trader, is a great believer in mechanical trading systems. I don't know if he still feels the same way since I have not talked to him in years. I think the real challenge is to be able to develop a stable model that is not curve-fitted. >>But the problem of such exercises is that once other people figure out the same formula -- or at least figure out that you have one and begin to copy your behavior-- then the formula quickly loses its magic. If everyone knows the precise point at which to become a seller, then who will be a buyer?<< Where the article is completely right is that if a model is used by enough people it ceases to work--or does not work as well-- for the very reasons that it mentioned. That is one of the reasons that I have declined requests to reveal the logic of the model that I use or identify the stops for taking postions until I have already done so. The other side of the coin is this: Larry Williams, once said to me --many years ago--during a discussion regarding trading systems, that in certain respects, one need not worry about others following one's system and reducing its efficacy over time. He said that he was confident that if he provided signals ahead of time and assured people that there is a strong likelihood that they will make money in the long run--they may say that they will follow the signals but when push comes to shove, they will not follow the system. They will invariably try and second-guess the system, take some signals, miss others, accelerate an exit, not use stops, etc. At that time I was successfully following a system that he sold to me -- and as he saw that I was very serious about futures trading, he encouraged me to put the effort into developing my own system/model. He said that there was a much greater likelihood of following a system if I were actively involved in developing it -- as opposed to using a system that had been developed by someone else. Iqbal -- regarding the estabishment of targets when indices/stocks reach a new high, I appreciate your explanation. Perhaps, what I will do is when next you establish a target, I will ask you how you formulated it. It may be easier to explain it at that time. I want to assure you that I am not doing this to throw it back at you, if you are wrong -- as I said previously, I have found your ability to name targets to be interesting. I constantly seek ideas to enhance my trading and I have never been able to establish a target for high something will go when it makes new highs. In fact, if you feel able to do so--based on your methodology--could you let me know in the case of DELL how much higher it is likely to go -- since it is making new highs right now. If you prefer just select another stock or index--it does not matter. Regards