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March 23, 2017

Live Tape Reading W1217

During my time away it didn’t escape my attention that you guys very much enjoyed Scott’s excerpts on tape reading. As you all know I am very much a systemic trader at this point but at the same time still enjoy following a variety of charts on a discretionary/analytical basis for three reasons: First I happen to be good at it as my thinking process follows a mixture between the analytical and the creative. Second it gives me opportunities for campaigns I would miss out on just focusing on my systems. Third reading the tape actually gives me ideas for building new automated systems. For all these reasons and more I decided to do one post exclusive to tape reading every [...]

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March 12, 2017

Trend Bending Continued

Traders are always trying to work out what happens next. But in the process of becoming convinced of something we actively block out information which doesn’t fit with our narrative. We become openly hostile to those who have an opposing view. We become biased.

It’s extremely tough to avoid this. Myself, even after 7 years in permabear recovery, I still don’t like being long stock indexes and have to force myself to take the setups as they appear. Deep inside there is a part of me that wants to see it all burned down. Taken to an extreme is the kind of idiocy you see at the slopeofhope, where the internet’s 3 remaining bears huddle together for [...]

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March 8, 2017

Learning to Read

Trying to predict what the stock market will do is for dumbasses. A proper analysis of the big name stock tippers and analysts shows that they are all significantly worse than random.

This is a spreadsheet built by Tim Knight tracking Gartman’s predictions, running at a 22% correct rate for the year. What Tim fails to mention is that his own predictions are every bit as bad.

Predicting markets sucks, and it induces a whole bunch of mental baggage where we make a prediction and all of a sudden want it to be true. We cheer it on like a horse at the track.

There is a bug in our mental wiring where we only remember the correct calls and cannot remember the [...]

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March 8, 2017

Exercises in Trading System Building – Part 1

This is Scott, I’m taking over from Mole while he gets some downtime in Tenerife this week.

I’d like to digress a little from the usual bullshit about markets (which of course I will cover), and work through the preliminary stages of working up a new system, from concept to backtesting, forward testing and optimisation. I’d also like to update you on some of the things I’ve learned since I last did a system building course for your guys in early 2014.

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Cognitive Bias Carousel
  • Herding BiasHerding Bias
    Something very interesting happened during our trip back to Valencia last Sunday. After checking our luggage and passing through the airport’s security procedures we had a … more
Does Scaling-In Work?
Live Tape Reading W1217
System Building Lessons continued
Systematic Trading Continued. Unwrapping the onion
Trend Bending Continued
Learning To Read Part 2 – The end of the trend, that was your friend, until it bends