just a warning that if you are optimizing a 4 or 5 parameter strategy and it's taking 24 hrs, you are probably optimizing all the parameters together. This is going to result in curve-fitting, or in other words a combo of parameters which produced great results in the past but will do dismally in the future.

when you have a lot of parameters it is best to optimize them one at a time or at most in twos. So for example in an MA crossover strategy with a stop loss, a profit target and a breakeven point, you optimize the MA crossover first, then use the optimized MA values to optimize the stoploss, then use the optimized stoploss and MA values to optmize the profit target and so on.

not only is this much faster but the risk of curve fitting is much lower.

I could show you some incredible curve-fitted charts which show a perfectly straight equity curve going up diagonally from left to right until the day after I optimized them, at which point they go straight back down again!

The few parameters the better. The state of the art in mech system is no parameters. I know that sounds crazy but it's true.

nice way to direct liquidity out of the equity market and into the futures and options markets, no?

(does this also apply to them? I'm assuming not)

the banks have a problem with their balance sheets not their cashflow

most of them are highly profitable

the problem is they are carrying toxic debt and over-leveraged

It can also mean that they are not being widely held in margin accounts.

As I understand it, IB and other brokers use shares held in margin accounts to provide to shorts. Therefore if the margin account holders sell their SKF or whatever, it reduces the float of shares that IB has available to short.

So clearly SKF is being sold hard either way, by longs liquidating their positions or shorts initiating theirs.

My solution: buy puts!

ND, this is because modern portfolio theory is based on an efficient market hypothesis which states that market timing is impossible because 'price has no memory' and price moves are serially independent.

In fact, it is trivial to show that the efficient market hypothesis is bunk (the Paulos Random Walk Index is a direct statistical measure of the serial dependency of price and is a very nice indicator in its own right) but this would invalidate a great deal of modern portfolio theory which an entire business model depends on, both in the schools and in the brokerages.

Am out of the game for the moment apart from some SKF puts but futures are up bigtime this morning. This is the first rally that has the whiff of the real thing to me. Could be a buy-the-rumour on M2M Thursday, maybe good for a run to the low-to-mid 700s, or could just bounce off that 700-705 area.

Let me be real clear -- I think we NEED to violate 670 to rally. I don't think if we violate 670 we have to rally. We could be in free fall for a while, since there is now no meaningful technical support.

have to go out now but looks to me like we are setting up for the move that I anticipated yesterday, which would be a breach of 680, wash down to below 670, and then a big upward spike. Or possibly a bounce off 680, which would be much less bullish IMO.

Yeah I meant to post about it yesterday but didn't have time.

It made that one disastrous trade based on the late-day spike, then got stopped out the next day @ 13%. Then on the next 60 min bar it got back in on the right side of the trade, which is where it is now.

It was a bad trade but I sort of forgave the strategy because it was just absolute bad luck that the 60m bar closed right on the top of the spike. If it had closed 15m earlier or 15m later it wouldn't have triggered. Normally the 60m period filters out those kind of panicky market moves, which is why it is so successful. Still, at least the 100% record is gone, which I am sort of relieved about.

That trade was doubly bad for me because it went twice as short as I intended it too, due to a setting I had wrong. I hedged it over night with ES but it still wiped out my (quite large) profits for the week.

It is now long from 227.20 and looking good.

I still have SKF in my 60m mech but it is now hedged with Apr 250 puts.

All the mechs are basically poised to go full tits long above 700.

my view: trade the tape not the news

I dunno. There are a bunch of targets. If we break though the top of the channel and keep going, they are all in play. I posted a bit about this yesterday with a price volume chart. 

I was thinking of buying April puts on SKF, SRS, FAZ etc since even if we continue to fall, once we start to rise the compounding is going to knock the stuffing out of them.

But then I looked at UYG, URE etc and thought, man these are pretty damn cheap right now.

Thoughts?

Funny... I have a bad habit of imagining what people I only know from email, or the phone, look like in real life. When I meet them, I always turn out to have been comically wrong (eg imagining dark curly hair when the person is blond and almost bald).

BUT

RP looks almost exactly  as imagined he would.

Now that is scary.

Googling for images of unSane on the internet will only get you pictures of the excellent band but if you would like a clue of the kind of person I am, you can watch one of my helmetcam videos on youtube. 

eg:

http://www.youtube.com/watch?v=6sVePjOwzHA

Spool forward to 2'30" for the scary part. Trading SKF has nothing on this.

I hedged the SKF position, which is already underwater, as I think there is a decent chance of a gap down tomorrow. If there's no gap I'll  probably unhedge it.