Yiki, tashikani soodesu. You have made a valid point, as the profit have to be made somewhere and those accounts would be subject to scrutiny.
Huanyan --- In [email protected], Yuki Taga <yukit...@...> wrote: > > Huanyan, > > Splitting the trading probably won't help you. If you could identify > the weakest trades (the ones you would, perhaps, direct to brokerage > B), you would eliminate them completely. So the results over time of > split trades should approximate your overall results. And of course > if you shunt only the bad trades to broker B, then the results at > broker A are going to be even more spectacular. Brokerage A is then > going to have even more incentive to examine your play. > > There would seem to be no way to disguise your play, because you are > not a market specialist. ^_^ > > Remember, it's not the amount you win (splitting would affect this > number, but it's meaningless), but the consistency and the > methodology and the risk metrics, that will draw attention. > > One way to disguise the system itself would be to occasionally throw > in the deliberate "anti-system" trade -- a throwaway trade made on an > absolutely contrary-to-the-system basis. That might throw off a > search for your system. (Perversely, it might also win.) ^_^ But > unless you did it often enough to influence your real returns (which > you would not do, because then your returns would be negatively > affected), then it would have no value in terms of stopping someone > from shadowing you. > > I've never worried about brokers taking the other side of my trades. > I'd end up owning the companies if they did that long enough. ^_^ > But just as I assume that they look at good traders, I would assume > that they look at clueless traders (although clueless traders tend to > run out of money, so they would be limited to looking at clueless > traders that seem to have a wellspring of money somewhere to > replenish their accounts). I wouldn't mind taking the other side of > any trade made by someone with a demonstrated capacity for being > wrong. > > But I think the practices are almost impossible to stop. Brokers are > often members of exchanges (if not always), and they routinely > generate data for the exchanges (margin long outstanding and margin > short, for example). So they have at least some valid reasons for > analyzing data. > > And as I say, human beings, generally, are not going to pass up any > profit opportunities. If you are trading at *MY* firm, and you are > consistently making a pile of money, with risk metrics that I find > acceptable, I'm going to have a look at your action. A very close > look. Think of me as the camera behind the overhead mirror at > Caesar's Palace. ^_^ > > Yuki > > Saturday, June 6, 2009, 12:26:07 PM, you wrote: > > h> Interesting idea, Yuki. > > h> Can someone verify if it is a common practice for brokers to > h> investigate the performance of its clients ( of courese internally > h> and act in low profile ) and then try to figure out the > h> methodology of the successful clients ? > > h> If it is the truth, then is it advisable to split the trading > h> operation among accounts in different brokers ? > > > h> Huanyan > > > > h> --- In [email protected], Yuki Taga <yukitaga@> wrote: > >> > >> KM> Why would it be discovered? > >> > >> I would be inclined to believe that any system that is employed for > >> any reasonably lengthy period of time will be discovered. I think > >> this is particularly true now in the data processing age. Human > >> beings are, after all, human beings. And behind all the machines, > >> there are human beings. You can't trade without exposing yourself to > >> the machines (which "remember" all your trades forever) and, very > >> importantly, to the people who have access to the machines, or who > >> control the people with access. > >> > >> I don't know where this might be illegal or legal, and I'm sure it is > >> in some places and maybe isn't in others, but if I was a ranking > >> officer in a brokerage firm, you can be absolutely sure that I would > >> know exactly who my most profitable clients were over time -- using a > >> basket of metrics to look for outstanding performance that fell > >> within allowable risk parameters. And you can also be sure that I > >> would spend no small amount of time and effort trying to ascertain > >> how any sustained profitability that was in the bounds of my metrics > >> was being generated. I'd be running the data periodically. Need I > >> say more? > >> > >> If you are siphoning money out of the market on a consistent basis, > >> and doing it better than almost anyone else (basis simple RoR, better > >> risk-adjusted numbers, some the combination of the two, or whatever > >> measures you happen to be looking for), it is going to be noticed. > >> There is almost no way to get around this. Your identity can be > >> cloaked without too much trouble, but cloaking your play is much more > >> difficult -- because you have to play. Conceivably, you could break > >> your play up among several sets of machines, but if you are > >> successful enough I think your play is going to be detected. > >> > >> If you are small potatoes, you have less of a problem I'm sure. > >> Almost no problem. But if you have a system good enough to interest > >> someone else, you aren't going to remain small potatoes very long. > >> And in the meantime, you are going to be putting up some trade > >> statistics that should attract someone's attention. Let me change > >> that to *will* attract someone's attention. > >> > >> It's called the smell of money. And one of humanity's most powerful > >> olfactory capabilities is detecting that odor. > >> > >> Yuki > >> > >> Saturday, June 6, 2009, 10:32:32 AM, you wrote: > >> > >> KM> The statement, "they will be discovered and traded", contains two > >> KM> assumptions, which I find difficult to accept. > >> > >> KM> First, addressed by Brian below, it will be discovered only if it is > >> KM> used to an extreme extent. The system may, for example, just trade > >> KM> relatively small lots in large and universally held equities. One > >> could > >> KM> possibly make millions from futures and forex without effecting the > >> KM> markets one iota. Why would it be discovered? > >> > >> KM> Second, even if it were discovered and even became widely publicized, > >> it > >> KM> still might not be traded sufficiently by others to have any effect on > >> KM> its success. The system might, for example, require considerable > >> KM> patience by the trader, so much so that only a very small number of > >> KM> traders would be willing to use it. Or it could be based on some > >> theory > >> KM> that all but a few would reject, despite its effectiveness. > >> > >> KM> It's believed by many, including yours truly, the the most effective, > >> KM> low risk/reward, way to make money from the stock markets, is to write > >> KM> books and give lectures about how to make money in the stock market. > >> KM> This system has been going on for years, is well known, and so far > >> KM> appears to be quite profitable. I doubt that it will ever stop > >> working. > >> > >> KM> -- Keith > >> > >> > >> KM> brian_z111 wrote: > >> >> > >> >> > >> >> <snip> I find the statement that all trading systems stop working > >> >> eventually to be too vague.<snip> > >> >> > >> >> Howard has provided supportive arguments, to this theory, at various > >> >> times, and we can not accuse Howard of being vague or equivocating > >> >> when it comes to trading (I thank him for that). > >> >> > >> >> As I recall the basis of his view is: > >> >> > >> >> - all systems will fail eventually > >> >> - they will be discovered and traded > >> >> - trading the edge erodes the edge > >> >> > >> >> By 'erodes the edge' Howard means that if, for example, I am trading a > >> >> system and buy, at the entry signal of 100.00,, and sell on the exit > >> >> signal of 103.00, I have made a profit of 3%. > >> >> > >> >> If a lot of people start trading the same system (same market/ > >> >> timeframe etc) then the second person in will have to buy at, say > >> >> 100.01 and sell at 102.99 (because my action in buying/selling before > >> >> them moved the bid/ask (theoretically trader 2 ends up with a profit > >> >> of 2.98% , calculated on a commission free basis and so on, down the > >> >> food chain). > >> >> > >> >> According to this theory, the efficiency of the trade has been > >> >> diminished i.e. what was a 3% trade has been reduced to a <3% trade(on > >> >> average) due to other traders piling in to the trade. > >> >> > >> >> My critique of that argument is: > >> >> > >> >> - the reason why any trade (tick) is made (appears on the tape) is > >> >> unknown to us (except for our own trade) > >> >> - all ticks, other than those that are trading our system, are noise > >> >> (to us) and therefore random > >> >> - ticks associated with our trade, that are not placed by us, will be > >> >> dispersed in time, (due to the various trading time delays experienced > >> >> by individual traders).... so they will be interposed by random ticks > >> >> - in a pure market (no commissions and no manipulation of the trades > >> >> by insiders) there is a 50/50 chance that my tick (if I take the > >> >> market price) will be less than the midprice of the bid/ask when the > >> >> signal was generated at the exchange. > >> >> - my price could move away from the original midprice substantially, > >> >> in a fast market, but no one can know the reason for the fast trading > >> >> or attribute it to our system (my system only produces a buy signal > >> >> once every 2-3 days on average - fast markets happen all of the time, > >> >> when I am not trading my system, and presumably slippage is still > >> >> occurring, in other transactions, so the evidence is against the fact > >> >> that my system is the cause of slippage and fast markets). > >> >> > >> >> The exception to that is if a 'player' with a big account, relative to > >> >> the liquidity of the instrument, is also playing the same system, at > >> >> the same time, in the same market/instrument/timeframe. > >> >> > >> >> So the question is: > >> >> > >> >> - to what extent are 'big players' trading a system, in a highly > >> >> liquid instrument, with enough clout to move the market? > >> >> > >> >> - IF big players are system trading what type of system would they be > >> >> likely to play and what% of the total funds they are controlling are > >> >> they likely to risk on any single system? > >> >> > >> >> - are they likely to play with large enough sums of money to erode the > >> >> efficiency of the system they are trading? > >> >> > >> >> - IF they are playing a system, with large amounts of money, is it > >> >> likely that their system would involve entering all of that money at > >> >> the same time i.e. they would trade in such a way that they would make > >> >> an intraday splash OR are they more likely to trade systematically > >> >> over longer timeframes (that might be a reason that intraday sytems > >> >> don't get eroded as often as EOD systems ... if that claim, made by > >> >> some, is true). > >> >> - IF big players do trade in such a way that they are 'moving the > >> >> market' do you think they would be so naive that they are unaware of > >> >> this and haven't factored that in to their strategy..... if 'moving > >> >> the market' is negative to their strategy would they do that ...if > >> >> 'moving the market' is positive to their strategy are they more likely > >> >> to implement that strategy in illiquid instruments/small timeframes OR > >> >> the reverse? > >> >> > >> >> But all of that is just a nice theory. > >> >> > >> >> The best argument against any theory is evidence. > >> >> > >> >> Some forum members have listed some example trading systems that have > >> >> been published for decades AND they are still going strong AND their > >> >> performance has not 'faded in and out'. > >> >> > >> >> Anyone who wants to defend the 'trading the edge erodes the edge' > >> >> argument now needs to prove that these systems were never published > >> >> AND that after they were published they ceased to work. > >> >> > >> >> That won't be an easy task because Samantha's unequivocal example (a > >> >> 10 bar SMA on monthly data) is based on a trading idea (MA crossovers) > >> >> that has been around forever (Tomasz even ships AB with a example code > >> >> in his formula folder and the manual) and there are published studies > >> >> on the net (rigorous studies at that) that are relatively current. > >> >> > >> >> However, the more imporanat question seems to be, if these systems did > >> >> not fail, due to being published and/or traded, why didn't they? > >> >> > >> >> > >> >> --- In [email protected] <mailto:amibroker%40yahoogroups.com>, > >> >> "Leading Edge Systems" <rdcpa@> wrote: > >> >> > > >> >> > I am new to Amibroker and I have been using Howard's which I find to > >> >> be excellent, as a guide to learing AB. > >> >> > > >> >> > I find the statement that all trading systems stop working > >> >> eventually to be too vague. First "stop working" is a relative term > >> >> and would have a different meaning for each of us. Also I think > >> >> inefficiencies can come and go in cycles based on the popularity of a > >> >> particular type of trading. Once an inefficiency has been traded away > >> >> due to over-popularity, it probably will go out of fashion and then > >> >> become an inefficiency again some time in the future. All this depends > >> >> on the specifics of what we mean by "stop working" and "a system". > >> >> > > >> >> > Rich > >> >> > > >> >> > > >> >> > > >> >> > --- In [email protected] > >> >> <mailto:amibroker%40yahoogroups.com>, "samu_trading" <samu_trading@> > >> >> wrote: > >> >> > > > >> >> > > All, > >> >> > > > >> >> > > In his really good book Quantitative Trading Systems, Howard > >> >> states that all trading systems will stop working forever at some > >> >> point (because the inefficiency in the market they exploit will be > >> >> killed by everybody jumping on board). > >> >> > > > >> >> > > On the other hand you have momentum / ROC based systems working > >> >> forever now, same for trend following MA crossover systems like The > >> >> one propagated by Mebane Faber. Momentum and MA rossover > >> >> trendfollowing does seem to work "forever". > >> >> > > > >> >> > > Any comments from the gurus here? > >> >> > > > >> >> > > Thanks, Samantha > >> >> > > > >> >> > > >> >> > >> >> > >> >
