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March 20, 2017

System Building Lessons continued

I keep getting distracted, but I’d like to move ahead quite rapidly now since Mole will be back on deck soon enough. Today’s post has enough information for you to go ahead and build working mean reversion trading systems right now, with not that much work involved.

I think we’ve covered in enough detail the idea that the best systems are based around a simple and clearly articulated idea, which can be tested for veracity.

The problem with complicated ideas is that our brains are built to believe all kinds of bullshit that isn’t true. Look at the recent election for a perfect example, we are a walking stew of cognitive biases that fuck with us [...]

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March 15, 2017

Systematic Trading Continued. Unwrapping the onion

One continual theme in my own trading is that every time I think I have it figured out – I get punched in the face with a unexpected problem. The tendency is to go more complicated, but often the solution is a degree of acceptance around the nature of the game. Sometimes my edges work, sometimes they don’t. Sometimes they stop working for long periods, 6 months or more. That’s actually ok for me, but it’s not ok for other people. The ultimate systems you choose have to suit your personality. If you cannot handle extended periods of working hard without making money (I can) then you have to retool your systems to avoid this.

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March 11, 2017

Learning To Read Part 2 – The end of the trend, that was your friend, until it bends

The textbooks would have us believe that markets are smooth and orderly. We have a nice downtrend and then when it ends we have a nice uptrend. In theory all we have to do is wait for the right time, buy, profit.

Reality is messy and choppy, and most of the time we are unsure if the old trend is in play, if we have transitioned into a trading range, or are trying to reverse. Each new bar of price action gives us critical information, until we can rule out each of these options. Eventually we get betting odds, and we bet.

Today I’d like to explore the tell tale signs that a new move has the potential to become a trend, and not just a counter trend [...]

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March 9, 2017

Exercises in System Building – Part 2

Let’s be honest. Most of us came into trading, expecting to be good at it, discovered we weren’t, and tried to fix that before we blew up our accounts. I desperately scoured the internet for people I thought knew what they were doing. When I could I reverse engineered, or learned, or stole, their “setups”. I did their courses and read their books. If we were lucky the gurus we decided to pilfer from had real stuff to steal. Sometimes I was lucky, sometimes not.

What I’m covering today is the bedrock of trading. How to know if your setup is an edge. The gurus of trading like to emphasise the mental game of trading, but without a real edge in the [...]

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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