SIUYA

I agree thats why they are an example for discussion .....point being that so far these seem to be the only ones offered as studies for either argument. Can you furnish a published study that shows one way or the other? particularly one that backs your point of view? Same for Adrian... well then lets see the proof......and equally so, not just some "academic Propaganda" I can agree with aspects of this, but the question is still the same. If you cant/no one can beat the markets on a consistent basis - why trade? Even with your thoughts of just beating others, you may as well just borrow and invest in the market.....

I think you will find...regardless of your thoughts on others peoples mental capacities....it was not answered....plus it is a different question as to if markets are random. That is all. Discussions are discussions....if they are --" I am right you're an idiot end of story".....then despite your 30 yrs in the industry you have not learnt a thing

As I have said before.....i dont own a yacht. I work on the advice if it floats, flys or f..ks....lease it dont buy it. (I do fall down on at least one of those ) If people really do want a discussion on this....it might be worth a place just to stick interesting related articles I have set up a thread. http://www.traderslaboratory.com/forums/review-section/11420-can-funds-outperform-market.html (personally if you did not think you could beat the market - what are we doing here! This is not to say that other measures cant be used - not just returns.)

at 50 trades a year...now that you have back tested it why do you need a platform at all. It sounds like you want a cheap data source that you can test if signals have occured live. Plus at $20 per month, its unlikely to get cheaper than that for anything decent. If the system is profitable, and you cant cover $20 then I suggest you have bigger problems - like no capital.

After a few recent discussions about funds, out performance, random markets and efficient markets, rather than bog other threads down with diversions, maybe this thread could deal with the question. Can funds outperform the market? a few helpful starter packs.... http://www.hedgefundprofiler.com/Documents/154.pdf http://perspectives.pictet.com/wp-content/uploads/2011/01/Trading-Strategies-Final.pdf http://www.scribd.com/doc/31824474/Performance-and-Persistence-of-CTAs-Parametric-Evidence http://www.turtletrader.com/GL-SwissHedge.pdf http://www.intercontilimited.com/mfutsarchive/perf_persistance_in_alternate_invest.pdf I quite like the last one....but I think the conclusion will be inconclusive!

Picking this year is not very generous....what about 2008....? Also if futures are a zero sum game....then if you track everyone who trades them, of course this will occur. They will naturally underperform as a group - after fees, both theirs and the brokers. Point is we all know anything can be proven/disproved with such numbers/studies/averages. Do your CTAs all trade the same bunch of futures, are their time frames long term or short term,when did you roll those futures - are they merely continuous contracts, has this particular time frame mainly been in contango or backwardation for this period....etc; etc; So is the bench mark a fair one.... So while you would rip into someone for throwing up dubious examples.....and fair enough dont sell yourself short MM with a poor example yourself. (I thin k this is an interesting topic in itself...maybe for a completely new thread....which i will start )

Adrian.....seems like we are all on the same page. I was a little confused as was Tradezilla I think (his post #94)...plus I missed your post of "knowing when to switch it off"...sorry. I read a good quote today in the FT Weekend edition magazine..... "from an evolutionary perspective financial markets are neither efficient nor irrational - they are merely adaptive" Says it all! This was from a great article....I have a hard copy so I dont know it its live on the web, and you probably need a subscription to get it....in the paper "What makes a rouge trader?" and it discusses evolution, bird behaviour and trader behaviour.....a fantastic article if you can get it.

do or die - either that postcard/e card is pretty sick or my mind is. I immediately thought of the great cricket sledge... Glenn McGrath (bowling to portly Zimbabwean chicken farmer Eddo Brandes): "Hey Eddo, why are you so F**ing Fat?" Eddo Brandes: "Because everytime I F*** your wife, she throws me a biscuit"

It seems Adrian you build in or try to build in ALL market conditions into a model, while Tradezilla and myself turn on different methods/models. MM - punter...a great expression. Often not used in the USA but certainly used in Australia and the UK....it is a great expression for lots of different people....the punters at the racetrack, the casino, the stock market, the sporting event....

talk to your broker and platform....each may have different variations on "what it looks like" A lot will depend on this. Otherwise.....you need to learn the exact definitions/requirements/method/process for things like LIMIT, MARKET, STOP LIMIT orders.... this we can leave up to you.

1 and 3 yes....we see it the same way. Just with slight variations of wordings. 2.....I dont necessarily agree this provides a a great reason for believing the markets are not random, mainly due to survivor ship bias in managers, and the fact that maybe we have not gone through enough periods to properly test for when people come back to the mean.....plus a lot of managers change styles over time, and also change models.....this could be for another discussion..... Maybe the bullmarkets have been kind to them..... No....I just dont believe they are robust enough to set and forget. But just because I have not seen one does not mean they dont exist. Generally the ones that seem to offer it, usually have other issues or need to be tweaked. ......mildly but more experienced than you might imagine. I have seen and developed models that work in certain periods (other than market making arbitrage models etc) and get chopped in others. My conclusion is you either need human input to switch them on or off or ratchet them up or down, OR a wide spread of models that maybe diversification smooths returns, but also probably limits returns....its a trade off. so in other words the model changes and/or is not robust enough to cover all periods....OR what are true market characteristics? (maybe again a whole other new thread re curve fitting and optimization....a never ending thread for debate. I know I invest in some of them.....they have not all been doing too well of late, but I like them over the long term ...the issue is always do these get arbitraged out, or do they just work under certain market conditions. Q5...6.... we agree except the casino would probably kick you out before the end of the week. have a good weekend.

agree...then why do people require models to prove or disprove a market is random maybe I did not make myself understood in point 3....it is possible to create models that work well on randomly or non randomly created data.....it is then up to the trader to apply context and experience. As I said people who create models and then think they can just collect money I think are dreaming. (possible yes/maybe ...). why do models have to be some purist thing of being able to make money in all markets, going both long and short????? But on this point, I thought you did not believe markets are random....yet you say...."It seems to me the latter is impossible, as it has been proved many times by many people over the years" historical outcomes of a series of trades yes.....but markets are not like this. Markets are formed by prices based on human action.....not the roll of a dice....this in lies the difference. On one hand people are talking about OUTPUT, when we are in fact dealing with the INPUT. Backtested results, and trading outcomes will not give you anything more than an indication of what to expect I think I did mention that some card games may be slightly different, and are different to a coin toss, roulette etc - games of pure chance....so no we do not miss the point....and maybe if its that obvious, you could elaborate on the point in a clearer manner? Gambling is gambling, life is gambling, poker does require a skill, and most gambling analogies dont as one outcome IS independent of the previous ones. it is late Friday there so i understand if you miss that we actually agree that markets are not random....as traders can use skills to take into account context/ risk reward.. etc But the point you cannot seem to get is that of the definition of a random market. Clearly to me markets are not random - they are not made up of prices that magically appear with no context to previous prices and within a range (eg; a roulette table, or deck of cards) If markets were completely random no one would trade or exchange. One day the price would be 20cents the next day $20. Why is it you think markets are not random? Apart from saying people can make money consistently and beat the markets (and this hedge fund evidence is highly fraught with holes ) why dont you think markets are random?

Adrian....and Tradezilla....a few points I would make for the discussion.. 1.... I would suggest that talking about the markets and prices being random and then saying that trader returns are not random (in that 5% of traders consistently win) are two completely different things. We all know that you can give a bunch of traders the exact same rules and some will win some will loose......the outcomes of their returns are different to the price moves (which remain the same for all participants). So again I think that this is not the best way to approach the issue. This is the same for benchmarking.....yes it makes sense if you only trade the SP500 to benchmark your self against a buy and hold, can you outperform it, and yes it also makes sense to not pat yourself on the back when you loose 10% and the market is down 20%....unless of course you really outperform on the good up years. Again - this is a different issue. This is more an issue around the question of - am I better off just giving my money to an index fund and sitting on the beach, or is this a viable business to expend my time on. (plus there are the issues that some might say they want the lifestlye and the money while good is not key -so long as they make it) We also know there are a lot of people who cannot/will not make a sufficient return from trading as they simply dont have the capital base to do so without taking excessive risks, These promises of 100% returns - rubbish for 99% of the 5% profitable. 2....market price randomness........IMHO markets are nothing like gambling in the sense that market prices are largely dependent on other factors...humans,( context, fundamental issues, prevailing mood, emotions etc) and more so on previous prices. Whereas gambling each outcome is independent - (except maybe for some card games, and even then you require card counting, reading others etc etc) So comparing random outcomes like the toss of 50/50 coin to a market price again I think would lead to a nice theoretical PHd paper but we all know most papers consist of a lot of assumptions which a...dont exist in the real world, and b...are used to build the model on a theoretical basis in order to make it work. Plus when it comes to models....why aren't there more models that replicate and profit from gambling - the odds are clearer, the context clearer, the rules are set.....(maybe there are and they are called the casino) (not that these models are not valuable for thought and insight, but Economics is not a science) 3....when it comes to edge models and randomness....I work on the premise that the edge is not necessarily in the model but in the trader to execute, understand and implement the model, the money mgmt and trader mental toughness.....this is why the same model given to different traders gets different results. the edge may not be in the model. If trading is mainly money management and trader psychology then how many models to you see taking this into consideration. Most models work on the basis, you buy 1 you sell one. They dont allow for pyramiding, they dont allow for context, they dont allow for any discretion - they are two binary.....I am talking about the robots many talk about. (and most of these robots are done by either people who combine robots or run businesses to sell the models.....and how much discretion goes into those, how much do they possibly under perform, and yet still provide maybe an uncorrelated place for investors, and hence still perform a function as a business....who knows - again a different issue) Tradezilla mentions it in the rumpled ones thread....he provides post #1090 "All I see is levels. How do you know which side of the level have the better odds? I have not read through every post but from the earlier posts, it appears that the thesis is that there are many simple ways to get your levels to trade off, but which side should I be trading from? Is that discretional?" For me the rumpled one provides a possible good entry level - after that he basically says get what you can from it after that. Point is you are unlikely to get a computerized model that will allow you to close the garage door and come back and collect the money. You need to make inputs into that whereby you minimise the issues if you are wrong and maximise the returns (and not just give yourself the opportunity to take quick profits) when you are right. It is just that often an input into the model is the trader - their experience, their ability to know when to avoid the model, when to know when to go for it. (Soros - was clearly in the 95% who made money - and he did not think day trading was a great way to do it....but thats by the by. He had a great ability to know when to go for it, and yet minimise his losses. Paul Tudor Jones was similar.....now not everyone trades the same, or can do that....but then mabe not everybody needs to or should be...Lind Bradford Radske (as I understand it looks to put her edge into number of great entries...)again does she have a single model....no she has a series of viable patterns based on what else is happening.) Models are just that - models. There are not the real thing, they will provide a framework. But they wont often prove anything. All to often people are looking for the single indicator, the model, the ultimate money making scheme. If markets are random - the single model wont help, if markets are not random - the model will have too many inputs and these inputs will change - so a single model will not help. You know the old marble game Van Tharp uses.....what happens when the risk returns for the marbles in the bag change - only your model does not know that....but you can see it. eg; case in point EURO - would you rather be taking longs, shorts or both way bets in that at present? Tomorrow maybe different of course. (anyways...my two cents about my thought process and why I see the world the way I see it. I hope it makes sense and does not contain too many inconsistencies and things people wish to pull apart rather than discuss....because if they do, get a life.....however I am always happy/open to have my mind swayed and changed.....Plus its possibly my longest post ever)

a lot depends on the jurisdiction you are in and if you are allowed to short, allowed to short certain stocks, allowed to hit the bid....etc; When it comes to the platform you are using then the provider should tell you if there are any internal workings you require before shorting. Some places require you to register and report all short sales. Others might just allow you to borrow the stock and then just sell without any extra issues regards the actual trade. You broker should have information on all this, and if they dont - get another broker. Personally when I have shorted stock the real process is in being able to borrow the stock from your broker, ensure its a shortable stock.....and then depending on the urgency of the trade for me, I will decide whether or not to hit the bid and sell, or just sit on the offer with a limit price.

where do i say they are random? I said I dont care.....and in actual fact you can develop models that do create positive returns from random data. This is where you and others have not defined random. While you may believe that markets are not random....you are following/pushing/extending the idea that because markets are random then you may as well invest in the market and not in certain managers. Then you require the issues of benchmarking.....hence the whole waylaid thread. I am not benchmarking to a particular index so what do I care. I dont think markets are random as price points are not independent of previous prices.

personally as stated - i dont think it is relevant, I think the original poster/thread starter was more or less trying to get into the ideas of micro structure models for the market. It then became waylaid with other ideas. http://www.traderslaboratory.com/forums/beginners-forum/11394-where-would-great-place-have-discussion.html

and in the left corner we have Adrian representing some country in Europe.....and in the right corner we have MM representing another country in Europe. Lets get ready to rummmmmmmmble ding ding. The Eurozone crisis in a nutshell. Maybe you guys should just lend money to each other....

now remember Zdo, only you can help you.....if you want to get banned you must do a better job, show more discipline and focus.

the only one I really know of is nuclear phynance

to really understand it you also need to understand when certain debts mature and how much debts cost. Plus if you said to an individual you owe $1mil but neglect to add their asset part of the equation it is only half the story. Where it becomes a ponzi shceme is when people want their money back now.....and here is the rub....its not just the government running a ponzi scheme....its everyone. :doh: Funding debt and unsustainability is causing the ponzi scheme the problems.....not because of interest rates, but because of the size of the debt v the ability to repay....v the ability to repay on demand.....and the issue becomes one of the governments continuing to encourage people to invest in the same way without fixing the problems. Plus as MFG has shown all these accounts a BS anyway. If the markets are a zero sum game, then what do we have to worry about right? One person losses, another gains.

this looks what you are talking about. Personally no - I dont have a lot of interest. This is more something that some of the folks who look at ticks, delta (or their definition of it) and inventory levels....but not so much at the level of the paper. Maybe more quant driven forums look at this. SSRN-id1298338.pdf

what do you mean by "micro structure models" are you talking about tick trading, fractal analysis of markets or something similar or something completely different?

Adrian - just as an aside. While most people might agree with you and welcome heated debate, calling everyone an idiot, and having their head stuck up their arse....or equivalent will not endear you to people anywhere in the world. If in your experience everyone is beyond help, then leave them to it....dont frustrate yourself. The world always needs people to build the roads.

Cut your losses - as some people cannot seem to do - Maybe you could start another thread titled "Markets are random or not? I think this shows that despite all the presented evidence - know one really knows and "facts" can and do change depending on circumstance, tests, and what you are trying to define. It will always be argued from both ways....again depending on your perspective. Just as in physics - perspective is everything. A bit like the debate about the goldfish living in its bowl and its perspective on physics and the universe. Maybe just accept that maybe from a trading point of view it does not matter - so long as you focus on what is important as a trader......or let the discussion continue elsewhere and if anything it might show that some people are more interested in other topics that what is at hand.

It is merely an extension of what already happens. Now your broker cannot say - "call me on my mobile to discuss" Instead they will say "call John Smiths mobile to discuss", or we will go back to secret spy drops. Or if you are large enough set up accounts in Switzerland, Lichtenstein etc, use a trustee. Pay your taxes as consulting fees rather than trading profits. Buy a painting and say you found it in a garage sale, win at the casino, or just spend it when travelling using your trustee to do it all for you. If you are going to be fraudulent, you can get away with it. If you want to be fraudulent and stupid or lazy then this increases your chances of getting caught. While the minimum requirement is to keep the recordings for 6 months - why as a broker would you keep them for longer - they will only incriminate you. The expression "lets go to the tape" (and not for sport) was basically over disputed trades - these are generally rectified pretty quickly these days and so brokers dont really want to keep such conversations