Even more so when you consider my signals to enter a trade in a given future often come from another future or price series all together...
--- In [email protected], "sidhartha70" <sidharth...@...> wrote: > > I have to say that I find this idea that brokers will work out your strategy > slightly fanciful. > > I agree & accept that if you are a consistent winner that brokerages might > try to shadow your trades... that's great as far as I'm concerned because > they simply add to your own alpha (by entering trades in the same direction > after you) not erode it. > > However, the idea that brokers are smart enough to even begin to untangle a > complex profitable strategy simply by looking at the trades is pure > imagination in my opinion. > > Again, I talk as a trader who trades a defined system on a discretionary > basis... including contingency plans for all my trades, chase plans for late > entries... I often reverse a position if I'm wrong etc...etc... > > I would wager a bunch of smart people could look at my trades for a very long > period of time and make little sense of them ... > > > > > --- In [email protected], "huanyanlu" <huanyan2000@> wrote: > > > > 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 <yukitaga@> 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 > > > >> >> > > > > > >> >> > > > > >> >> > > > >> >> > > > >> > > > > > >
