Posted by marketguy on 30th of Apr 2011 at 10:56 am
just because these systems have had a very high success
rate doesn't mean caution should be thrown to the wind on every
signal the systems have moving forward....ie wager only what you
can risk/lose (BELIEVE me, if ANYONE has learned a serious life
lesson since September it's "ME"). I'm looking forward to
utilizing Matt's blood, sweat and tears systems as much as the next
guy/gal but I'm also a realist and will not abandon my
own studies on the market (nor should anybody else).
I mean we need to be aware of Murphy's law, no? Without a
losing trade in 2 and 1/2 years I'd hazard a guess that:
1. it's "due" to have one or maybe even two at some
point and 2. what better time for that to happen then when
the system is launched
(believe me, me and Mr.
Murphy have become very good friends unfortunately).
Matt obviously has spent alot of time and aggrevation in
creating this and getting it out to John Q. Public vs the
criminals of Wall Street so let's make sure we are all respectful
to that fact moving forward (whether there's "immediate" success or
not).
I want to caution people in another sense. It is very easy
to muddy the waters between trading a system and trading in a
discretionary fashion. In my experience, that doesn't work.
If you start choosing which trades to take in a mechanical
system, you're doing discretionary trading, period. A
mechanical system can only work if you trade it mechanically, and
not try to outsmart it. And, to speak for myself, I'm a lot
dumber than a good mechancal system.
Having said that, mechanical systems can stop working.
That's why it's important to monitor a system, keeping a
sharp eye out for its profit curve. If it starts to curve
down significantly, it's prudent to turn the system off until the
profit curve looks healthy again.
I think the SPY system will be more stable because it is based
on a broader range of stocks.. Remember the FAS/ FAZ
system? It is only one sector.. sectors get hot
and cold and tend to wipsaw more. The point of
algyros is well taken... as if you are in a system... you can't be
in the system one day and not on the next.
I am sure Matt will appreciate that thought that being in and out
of the system is like being 1/2 pregnant....it just doesn't work
that way.. LOL
Zach, the FAS/FAZ systems use MA crossovers and/or pivots, which
essentially is momentum/breakout trading. In times of low
volatility, breakouts and breakdowns become fakeouts and fakedowns
because there is not enough momentum to create a sustained trend
(which is required to yield a profitable trade).
On the other hand, the SPY system primarily buys dips during an
overarching uptrend and shorts rips during an overarching downtrend
i.e. reversion to the mean rather than momentum.
You never know, the coding behind the SPY system *might* work
just fine for the financial sector, real estate, consumer
discretionary, Nasdaq, Russell, gold, etc, etc!
I agree with wagering only what you can risk to lose. Just treat
a system trade like your normal, discretionary position. Put into
it what you would normally put in for your other trades. Don't be
putting in 40% of your portfolio in the system trades.
As far as Murphy's law, if the system goes long on the next
pullback, it'll likely be a loser if the market does indeed top
out. I'm not saying that the market will top out. But my point is
that on the first trade of a new trend change, most of those trades
will likely be losers. That's just how it is.
I would recommend users to not expect 90% profitable trades. I'm
not expecting close to that. But why the system has had such a good
success rate is because the majority of the trades are trades that
play the current trend. When the market is in an uptrend, it'll buy
the dips. When the market is in a downtrend, it'll short the
bounces. When the market is trading in a range, it'll be quicker on
the trades. This is a formula that works well in real-life,
discretionary trading.
Matt mentioned that this system has worked very well even in the
POMO environment. The reason for that is because the majority of
the system trades during that time have been going long on the
pullbacks. The high percentage trades the last couple years has
been buying the dips.
Be careful all.....
Posted by marketguy on 30th of Apr 2011 at 10:56 am
just because these systems have had a very high success rate doesn't mean caution should be thrown to the wind on every signal the systems have moving forward....ie wager only what you can risk/lose (BELIEVE me, if ANYONE has learned a serious life lesson since September it's "ME"). I'm looking forward to utilizing Matt's blood, sweat and tears systems as much as the next guy/gal but I'm also a realist and will not abandon my own studies on the market (nor should anybody else).
I mean we need to be aware of Murphy's law, no? Without a losing trade in 2 and 1/2 years I'd hazard a guess that: 1. it's "due" to have one or maybe even two at some point and 2. what better time for that to happen then when the system is launched
(believe me, me and Mr.
Murphy have become very good friends unfortunately).
Matt obviously has spent alot of time and aggrevation in creating this and getting it out to John Q. Public vs the criminals of Wall Street so let's make sure we are all respectful to that fact moving forward (whether there's "immediate" success or not).
MG
I want to caution people
Posted by algyros on 1st of May 2011 at 01:26 pm
I want to caution people in another sense. It is very easy to muddy the waters between trading a system and trading in a discretionary fashion. In my experience, that doesn't work. If you start choosing which trades to take in a mechanical system, you're doing discretionary trading, period. A mechanical system can only work if you trade it mechanically, and not try to outsmart it. And, to speak for myself, I'm a lot dumber than a good mechancal system.
Having said that, mechanical systems can stop working. That's why it's important to monitor a system, keeping a sharp eye out for its profit curve. If it starts to curve down significantly, it's prudent to turn the system off until the profit curve looks healthy again.
This is true.. Remember the FAS / FAZ system???
Posted by zach06 on 1st of May 2011 at 03:05 pm
I think the SPY system will be more stable because it is based on a broader range of stocks.. Remember the FAS/ FAZ system? It is only one sector.. sectors get hot and cold and tend to wipsaw more. The point of algyros is well taken... as if you are in a system... you can't be in the system one day and not on the next. I am sure Matt will appreciate that thought that being in and out of the system is like being 1/2 pregnant....it just doesn't work that way.. LOL
Title: FAS/FAZ systems Zach, the FAS/FAZ
Posted by philosoraptor on 1st of May 2011 at 03:54 pm
Zach, the FAS/FAZ systems use MA crossovers and/or pivots, which essentially is momentum/breakout trading. In times of low volatility, breakouts and breakdowns become fakeouts and fakedowns because there is not enough momentum to create a sustained trend (which is required to yield a profitable trade).
On the other hand, the SPY system primarily buys dips during an overarching uptrend and shorts rips during an overarching downtrend i.e. reversion to the mean rather than momentum.
You never know, the coding behind the SPY system *might* work just fine for the financial sector, real estate, consumer discretionary, Nasdaq, Russell, gold, etc, etc!
I agree with wagering only
Posted by cw12 on 30th of Apr 2011 at 01:46 pm
I agree with wagering only what you can risk to lose. Just treat a system trade like your normal, discretionary position. Put into it what you would normally put in for your other trades. Don't be putting in 40% of your portfolio in the system trades.
As far as Murphy's law, if the system goes long on the next pullback, it'll likely be a loser if the market does indeed top out. I'm not saying that the market will top out. But my point is that on the first trade of a new trend change, most of those trades will likely be losers. That's just how it is.
I would recommend users to not expect 90% profitable trades. I'm not expecting close to that. But why the system has had such a good success rate is because the majority of the trades are trades that play the current trend. When the market is in an uptrend, it'll buy the dips. When the market is in a downtrend, it'll short the bounces. When the market is trading in a range, it'll be quicker on the trades. This is a formula that works well in real-life, discretionary trading.
Matt mentioned that this system has worked very well even in the POMO environment. The reason for that is because the majority of the system trades during that time have been going long on the pullbacks. The high percentage trades the last couple years has been buying the dips.
Amen to that!
Posted by porussagar on 30th of Apr 2011 at 12:44 pm
Amen to that!
Well spoken, thank you
Posted by rikkwan on 30th of Apr 2011 at 11:21 am
Matt doesn't need to do this for us, but he is. And that has to be respected.