Kojak

Look upon Finance as a derivative of Economics and closer to the operational aspects of a hedge fund. If you are the Strategy kind then go for Economics and Finance if you are the hands on trader types. But this is a lousy answer. No undergraduate degree prepares you for the realities of a profession. The real answer is that it doesn't really matter. By the time you finish you may decide on a totally different line. That is what a god education is meant to do. Open your mind and realize your potential. Whatever you do, do it well. The real learning will be on the job -if you get one:crap:. Jose Kollamkulam

I think there is a theoretcal answer and an emperical answer. Or let me put it this way: The emperical question would be : Do Funds (on an average) out perform the market ? And the categorocal answer is : They do not. On an average Funds under perform the market. Always. The theoretical question is -which is the one that Siyua poses is: Can Funds (ever?) out perform the market ?. Then the answer is now a categorical: Yes, some funds have been out performing the market. And a few do it consistently. Like some hedge funds and some quant funds. The first quant fund that comes to my mind is the Rennaissance Fund See this quote:Renaissance's leading fund has returned 35%, after fees, since 1989. And D.E. Shaw & Corp., the brainchild of ex-Columbia University computer science professor David E. Shaw, with $23 billion in capital, has netted investors 21% a year for 17 years, without a single losing 12-month stretch. . That was till 2006. 2008 they hit a bad patch, but still it is still spectacular. Thare are quite a few like this -some extremely secretive. The reality is that funds management is getting extremely sophisticated and skewed with long tails. A significant aportion of the extreme portion of the "positive" tail is actually invisible to us. Jose Kollamkulam, Chennai, India

If one is judging the book then we should understand the old aphorism " To know whether an egg is good or bad you do not have to know how to lay one" . If the book is being criticized, because ultimately as a trader he was a failure, then every sports commentator or literary critic who either attempted to play or write, should be kicked out of her job. The book undoubtedly is brilliant event though it may not be completely applicable to the current markets. But that again is a point of view. The success of the book is undisputed because the market for books has decided it is a winner. It continues to sell even now. And the real icing on the cake is the fact that he writes from real experiences and very nearly being a trading success -many times . Jose Kollamkulam

I do not see the PoC (or its equivalent) to judge the skew in your charts. JPerl gave the Shapiro as a very basic filter for judging direction. We can use that or whatever we are confident about. This flexibility is what makes Jperl's Market Stats approach absolutely brilliant. Jose Kollamkulam

Day trading is far from being dead. It has just evolved to a stage where the majority of the opportunities are being seized by the more sophisticated trader. Sophistication is not just High Frequency Trading. The type of computing power we have now both in terms of hardware and software, makes it possible now, for the even the smaller trader to seize the emerging opportunities that earlier on was almost purely in the arena of the larger firms. Many of these successful opportunities are just not revealed. I deal with a Algo Platform developer who also trade their Algos. The CEO was a former student of mine , revealed that their most "mature" and most profitable strategies are not for public usage. That is the reality. On the issue of "Is Day Trading Dead" - Actually a case can be made for the converse : That trading on larger time frames have very poor Alphas. Meaning that they cannot beat the market by much -on an average. The reason I would attribute to is the emerging regime of higher volatility, across all time frames. The roots of this increased volatility lies in accelerating technological change and the faster dissemination of information, both of which will only continue to accelerate. Driving up volatility even higher. Because of this increased volatility, the longer time frame strategies of portfolio diversification and capturing the secular growth trend inherent in any economy just may not work.On the latter point,my assertion is that cycles are getting shorter and could quite easily get caught the wrong point of the cycle. Like if you had invested in Japan in the 80's. Almost the same analogy would apply for portfolio diversification. In fact I can point quite few research studies that show that while most of the traditional imperfections (like the Friday effect etc) have been arbitraged away, imperfections persists on the smaller time frames.It is my contention that the tools for seizing the opportunities in higher volatility exists.Thought is not for everyone to seize, it is there. Inshallah Jose Kollamkulam, Chennai, India

Ther way I see it there are two approaches to this this issue: You start to trade only after the PVP has stabilized to an extent, so that you know how stable the skew is. It may be after one our or two, but that is something that you have to figure out for yourself - the stability of the PVP or the skew. The other approach is to look at a longer time frame. Which means that the PVP is calculated over many days or a period larger than one day. What this period is something you have to figure out for yourself. This is useful even during periods when there are volume clusters and the PVP tends to swing between them. Taking a longer period stabilizes the skew and the probability of a good trade. Both these aspects were discussed quite well in Jerry(Jperl's) discourse. You should read it more carefully I guess. Jose Kollamkulam

..and which sectors..? Khosla Increasing Clean Technology Bet With $1.05 Billion Fund ....the times they have changed? J

..and the ramification is just this..along with the Tea Party and Occupy Wall Street revolutions, there is also a full fledged Technological revolution on, with ramifications on everyone everywhere. Traders incuded, even for us in the emerging economies. But on this site we are primarily interested in what happens to traders. Occupy Wall Street could have negative ramifications for traders across the world. Can it be offset by the positive spin-offs from the emerging Technological Revolution? I think so and in these ways: 1. The acceleration of technological change will increase volatility of cash flows to companies. Volatile cash flows imply volatile prices for the foreseeable future. The only way of addressing this, or actually seizing the opportunity emerging from this through sophisticated automatic trading systems - the algos. Which are the Algos? 2. Trading opportunities are now global. I trade the Indian Nifty Futures. The largest trading in Single Stock Futures happen in the National Stock Exchange of India. If ever there was a ban on trading in any country you could trade elsewhere quite easily. Which are the Exchanges? What instruments? 3. The emergence of the virtual trading organisation (now I will expect people to inquire about the stuff that I am smoking now :doh: ). The technological base has been set for thr re-emergence of the small artisan like trading set-ups, based on technology. This has happened in the pharmaceutical sector where the majority of the innovations actually emerges from the smaller companies. Methins we are on the verge of seeing something similar happen in trading. Au revoir, Jose Kollamkulam, Chennai, India

Am surprised that there was no response whatsoever on I consider and epochal interview. Maybe I was going a bit too ahead and have introduced it by first asking people to see this presentation first: THE DIRECTION OF INNOVATION AFTER THE FINANCIAL COLLAPSE, ICT for green growth and global development . My question still remains the same. What are the ramifications on us traders? Jose Kollamkulam, Chennai, India

Quite recently there was a very informative piece by Marc Andreesen, the founder of Netscape on the increasing dominance of software - Why Software Is Eating The World . Its a stunning article . And then Steve Jobs and Dennis Richie depart. It is the time of the Tea Party folks and even grimmer Occupy Wall Street and these techie giants seem to have departed when everything around looks so bleak, when they were most needed. But take a look at it from another perspective and things are no longer bleak. The foundation these and other techie giants laid, opens up a whole new world.This is an interview with Carlota Perez, an economist working in the area of Technology among other things on the emerging new opportunities. A very interesting interview. A world of new opportunities, in every sphere is emerging. Even trading, though it is not explicitly stated in the interview below. My query is : In trading what are the contours of the new opportunities?

If you are bullish on Gold, then according to my reasoning, you are bearish on a turnaround happening, in the foreseeable future. On the contrary, if Soros is selling Gold, is he seeing a bottoming out? Is Gold the bellwether for for the economy at large now....? Gold the Global Index??? Jose Kollamkulam, Chennai, India

[/HIGHLIGHT YELLOW] Very simply put, more than everyone else, its the tea party republicans who refuse to the radical changes that are needed. Its more difficult for them actually. Like: The need for the US not to go protectionist. It cannot take an "isolationist" stance in an increasingly intricately interdependent global economy. That would be disastrous for the US economy and the world at large. As Nouriel Roubini put it : "..... we must accept that austerity measures, necessary to avoid a fiscal train wreck, have recessionary effects on output. So, if countries in the eurozone’s periphery are forced to undertake fiscal austerity, countries able to provide short-term stimulus should do so and postpone their own austerity efforts. These countries include the United States, the United Kingdom, Germany, the core of the eurozone, and Japan. Infrastructure banks that finance needed public infrastructure should be created as well." This is definitely not in the grain of what the tea party republicans advocate. The US will have to abandon the Ponzi type of structure in its financial systems, sooner than later. Again, the US will never again have the hegemony it once had in the global economy. The US will have to compromise and sometimes even bend... tough decisions for anyone, especially the likes of the tea party republicans. But bite the bullet it must or it would be disaster for all. So it really boils down to two alternatives a) the tea party stance b) the accommodating stance. If it is the former then a double dip recession[HIGHLIGHT YELLOW] is almost a certainty and gold prices will climb even higher. If its is the latter then we will soon enough a bottoming out of the recession and then alone can we predict the peaking of gold prices Its a political decision and whatever the outcome, it will be a longish and painful grind.

....maybe its time to take a contrarian view on the US. A slim sliver of hope is the entrepreneurial dynamism which surfaces, in times of desperation. If anybody can pull that one off, it is the US of A. Not Europe. Not Japan or Germany. The spoil sport in my view would be the 'tea party' Republicans. Just a hope.....

There is another fundamental reason for the rise of Gold: Gold is an investment of last resort. In times of extreme uncertainty, at the margin, large investors necessarily move a certain portion of their investments into gold. This closely parallels the US dollar's status as a currency of last resort. When there is turmoil, investors necessarily move funds into dollar denominated securities. Ironically, this is the reason why, when the US credit rating was downgraded, the dollar climbed against every conceivable currency. More funds flew into dollar denominated securities. Another reason why Gold prices can be expected to remain buoyant is because of the increased volatility. Volatility increase can be traced to a host of reasons, oil prices, terrorism, weather and the acceleration of technological change. Once the global economy, especially the US economy starts to stabilise, you can expect a rapid drop in gold prices as money moves back into real investments. Looking at it that way, long term Gold prices are a call on the performance of the US economy. If US economic performance is in the process of bottoming out, then gold prices have peaked.

This looks to be interesting and one look forward to the more sophisticated techniques in identifying "regime change". However on the basis of the examples that you gave, it seems that it identifying a trend is easier than identifying a mean reverting period objectively. Visually it may be quite easy. Bouncing off the +70 and the -30 range is not easily identifiable. Or by the time you identify it, the regime has played itself out. Waiting to see the "pure technical analysis" way of identifying a side-wise moving regime from you, instead of the techniques like co-integration etc which are more in the realm of statistical arbitrage. Jose Kollamkulam. Chennai

Carlton, Not completely actually. You have to refine your strategy further. Your basic assumption that the underlyings will influence the price of the index, the YM (mini-dow)in this case, is 50% correct. In the sense that the Index can also anticipate the price earlier and the underlyings will adjust to the index. So it works both ways. Seizing this mis-pricing is what sophisticated traders call 'index arbitrage' . For straight forward technical analysts the trick is to identify which is leading the Index or the underlyings. Jose Kollamkulam Chennai

Automated Trading may not be possible for all trading strategies, but trading strategies can be modified to fit into the automatic trading. You can seize the advantages that an automated (or even partially automated system offers ). Like you can a) Operate in smaller time frames (any time frame actually) up to High Frequency b) Operate on a larger basket of instruments c) Have more complex strategies when the basic rule of any manual discretionary trading system would be to Keep it Simple ( and "Stupid"? "Successful" the traditional manual traders would insist. The KISS syndrome.) d) Operate beyond the limits of human endurance Like it or not Algos are taking over the world. Best to transform and become a trading cyborg early, before they run over your trading systems. People who have been trading for a longish period know how trading has changed with the introduction of automated trading systems. Like whiplashes that trips up your stop losses. Reversals at targets etc which happens at a speed that a manual trader cannot respond to. Unless of course your trading system is immune to such movements. The real issue is that with automated trading, there are opportunities that exist now that you could never dream of seizing. On a lighter vein see this Ted video: We are all cyborgs now and on a less lighter vein..this one How algorithms are taking over the world Jose Chennai

Which are the best Automated Trading Platforms for the retail trader ?

From my understanding eSignal does not have automated trading as yet, though they have been saying that they are working on it for quite some time now.The eSignal plugin will at best, allow you to make off the charts trading. Not fully automated trading. The real issue, methinks, is that the eSignal programming language EFS has to be modified considerably, if it has to become an automated trading platform. That seems to be taking time. But there are workarounds. Like you can EFS write into a text file which is directly inputted into a trading interface. If your trading strategy operates in the high frequency range meaning if milliseconds matter for you, then it may not be the best approach. Jose, Chennai

That speculators are essential for the smooth functioning of any market, is fully accepted. Take this quote from Milton Friedman and the comments: “People who argue that speculation is generally destabilizing seldom realize that this is largely equivalent to saying that speculators lose money,” he asserts, “since speculation can be destabilizing in general only if speculators on average sell when the [commodity] is low in price and buy when it is high.”1 Destabilizing speculators are an irrational bunch of people who sell commodities when they are cheap, driving prices down even lower, or buy commodities when they are expensive, driving prices up even higher. But they have to pay for their irrationality and will sooner or later lose their money. The Darwinian mechanism of the survival of the fittest kicks in and weeds them out of the market. The only speculators who can survive in a market are those who behave rationally, buying low and selling high. So markets are stable even in the face of speculation—indeed, speculation makes markets more stable, further strengthening the “invisible hand” mechanism of Adam Smith. See the full article at: Two Views of Financial Markets For most of us in the markets, this is old hat. I guess it is being raked up now, as everybody looks on the financial markets as embodying evil - and speculation is the easy fall guy. Look at it another way, any act based on information has a speculative expectation on its outcome. Speculation is that basic. The core of any financial market rests on speculation which may be long term, medium term, short term, or as is happening now -high frequency.

Are there fractals that are not derived from the Fibonacci series ? Jose

Eztraderjr A few posts earlier, 86834 points out what IMHO should be the obvious answer to your problem. Some stop losses should convert to market orders once the limit price is touched. Some trading systems do offer this facility. Jose

So very interestingly, you have hit upon substituting a stop loss with a 'hedge'. Gives me ideas. Thanks. Jose

In very active markets, where you have large players with automated systems operating, it may be good to have some additional conditions when you put a stop-loss. In these markets stop-losses are almost always triggered by the automated trading systems. You could try using 'conditional stops' which would check for a valid trigger of the stop price. A condition could be based on say, Relative Volumes.

For the Indian markets eSignal has no options data and I am using the Futures OI - the tick Bid/Ask data. It seems to be an excellent predictor. I am as you suggested looking at deriving a look at the market internals by analysing the Call and Put OI - the Bid/Ask ticks. What data source do you use for that? Jose