Futures Arbitrage

[TradeRunner 10]

Eventually, technical analysis will probably (if it already hasn't) become a thing of the past - much like pretending to gain a fundamental edge by reading the WSJ every morning. People still do that, which tells me retail traders will be studying technical analysis for many years to come and trying to find their edge (some definitely will find an edge).

 

Hi James

 

I'm confused with your argument. First you say "...will probably become a thing of the past". It doesn't sound like you are too sure. Then you go on to say "some will find an edge". So you are saying that some people will continue to successfully use technical analysis some will not. Isn't that how it is now and will be in the future?

 

What change are you predicting and if that change has already happened can you throw up some charts that demonstrates the change?

 

TradeRunner

[james_gsx 16]

Sorry guys, I should have been more specific, my mistake.

 

I guess it's sort of difficult to clarify. You could view it the same way we view fundamentals, it's not really relevant (well, that's how most of us seem to think) when it comes to making trades.

 

Let's take a long term view of this. Right now, we can find various technical patterns - be a specific pattern like H&S or VSA - and historically they probably work. But the way major institutions (the ones we try to ride the tail for bigger profits) no longer use those same patterns. Essentially, since a firm can buy and sell within a second, that changes the game completely. My theoretical question is this, will those same technical patterns we all learned to love still be relevant in the future? Much the same as finding an edge using fundamentals in a company - the chances of you finding one will be slim - but some still do. I hope that clarifies my point. Some will adapt and find new technical advantages, and some will continue to use old practices that no longer work - just like many people try to find "value" in large cap companies like IBM. Essentially those people will be oblivious to the market changes.

 

I should also clarify my meaning of technical analysis - when I look at a shooting star, that is technical analysis. Today, trades can be done in the middle of a shooting star, or WRB, and I won't even see it on my chart. Since the trades are so fast and well managed, I probably would never pick up on the trade fast enough to make a discretionary trade. That doesn't even bring into account HFT (well maybe it sort of does).

 

I will post examples with my own charts (that can most likely be found on this site).

[DugDug 10]

James - dont worry I have have thick skin - I used to work on a trading floor and it was part of the job. And you are right about it makes the discussion interesting. (I also dont think poorly of Urma either - he is clearly good, interesting and a self confessed oldman with fantastic new ideas (from his posts), however there are always one or two little things that do get under the skin - I guess I am human (or bored)) (There are always two sides to every discussion)

 

Its interesting when people adopt the idea that so many people are doing it that it no longer works. (trend trading dies and is reborn every few years eg 2008)

That may be the case for certain arbs, and so called free money, and it seems definitely it does get harder to find the free money. However this is offset by increased liquidity. (I am old enough to remember what its like to have real gaps with nothing in between)

Does not that just mean that when everyone switches to the new ideas then the old ones will work again. (remember the new economy and the internet bubble where people thought you buy something for $1, sell it for 20cents and will make money , and that this is now the "new normal" as we are told in the media) Nothing works all the time, but certain fundamental truisms will give you greater odds of success.

 

Technical analysis is nothing more than a road map. I dont believe in all the indicators etc; this is a game of averages, and doing the same thing over and over again is where the money is made. The simple things of making more than you loose, by running profits, and cutting losses.

I know of enough people who have tested trend trading models that show that entries, patterns and the like dont necessarily make a difference. However if you can find a low risk pattern as a setup that does repeat in the right context (and the time frame suits your mentality) then great. Use it as a tool, a guide.

You dont need banks of computers to find value in instruments, or stocks, and when you hear it from someone saying this is the new thing, I think great. When I hear this is the new thing and all you oldies are idiots - I roll my eyes and think lets wait for the next black swan event. (you know the ones many quants discount as rarities - the same ones that create opportunity)

There is always value and opportunities everywhere. Ask that old dinosaur Warren B.

 

As a local/retail trader trying to compete in speed etc with computers is plain nuts - most people trading successfully seem to only trade a few times a day. The day market making firms stop making markets then you will know that the edge has gone - I remember being at Uni and told this would all be arbed out - however volumes are larger than ever and people are still doing it.

Put it another way - a bicycle may not be as efficient (or it may be) as a car, yet it still provides a good mode of transport for the individual and is a lot less maintenance.

Edited March 13, 2010 by DugDug

[thalestrader 14]

I am old enough to remember what its like to have real gaps with nothing in between

 

I am old enough to have traded the S&P's watching a 10 tic chart back when a 10 tic chart would still fit an entire day's price action on a screen without needing to scroll back to see the open! Now a 10 tick chart will fill right to left in just a matter of minutes.

 

 

Let's take a long term view of this. Right now, we can find various technical patterns - be a specific pattern like H&S or VSA - and historically they probably work. But the way major institutions (the ones we try to ride the tail for bigger profits) no longer use those same patterns.

 

But this turns technical analysis on its head, in effect putting the cart (price) before the horse (the institutions/commercials/large money traders who lead price).

 

Such institutions never used these patterns, i.e. they never made trade decisions based upon those patterns. Quite the contrary, it is only as a result of the large money's activities that those patterns are created. Far from following them, the large money makes them.

 

That is why TA works - highs and lows, lower highs and lower lows, higher highs and higher lows - are the tracks the large money leaves, not footprints that they follow (all a H&S is a an uptrend rolling over to give the first indication that the trend has changed from up to either sideways or down - it is simply tracking, i.e. following the lead of the willingness or lack thereof of the large money to bid higher or offer lower). The horse leads the cart, and we retail traders follow along and try to keep up the best we can, taking care not to get trampled when the horse decides to turn back on us, and careful not to get stampeded in a panic (and yes, the big money is human money and it does panic).

 

All UB is doing is organizing data to track the large money. Does it work? Yes. Does the small retail trader need UB's maths to compete? No. Are the indicators that ub uses that result form the programming services UB sells "technical analysis"? Yes. Do those indicators trump good old fashioned Support and Resistance? No. Like all indicators, they are designed serve to help give the trader who does ot have confidence in price alone, or in his or her ability to derive from price alone the clues necessary to that trader to support a decision to buy, sell, or do nothing. Whether or not any particular indicator succeeds in that is going to be more a function of the trader applying it than the indicator itself. In this respect, an automated system based upon those indicators is able, to some extent, remove the emotional component that frustrates most who seek to succeed as discretionary traders.

 

Let me use one of UB's indicators as an example. Here is a picture from UB's website where presumably you can purchase various indicators, have automated trade strategies coded, etc. This is a screen shot that ub has posted here at TL in the past showing what is called a "net new" indicator:

 

 

In this example (my notes are in the margins and the in-chart text and annotations are in ub's original screen capture) price has traded in a line or a rectangle consolidation. The net new buying indicator indicates that accumulation is taking place. Accumulation leads to what? Higher prices! But that is nothing new. That ub has programmed an indicator to sort and track large commercial trade from retail trade may be new in the way he has done it, but anyone who has read Baruch or Livermore or Wyckoff know that they did the same thing using nothing other than a ticker tape recording sales and size. I do not mean to take away from ub's work, but all this indicator does is resort and repackage the data in order to provide a different visual presentation of the data. This is no different than using using different sorting and grouping criteria for price, e.g. time, range, constant volume or candlestick, Renko, point & figure.

 

Have things changed? You bet they have! I thank my lucky stars every day for the rapid growth of quants and high frequency traders. I remember the days when a 60 cent rally in oil took a month, and if you caught 30 cents of you were quite happy. Yesterday I had 7 trades in oil and my average profit was nearly 60 cents. I remember when it would be unheard of for a currency to rally over 100 ticks from the Frankfurt open to the New York open only to retrace the rally and decline by half again as much by the NY close - now it happens twice each week in some form or another. So, yes, some things have changed a great deal.

 

What has not changed is support and resistance, supply and demand, buyers and sellers. The problem with those who have been seduced by what ub calls "recent advances in intelligent data mining, data processing, data visualization and higher frequency automated systems" is that they seem to have forgotten just what the source of that data is - it is buyers and sellers exchanging dollars for something that each anticipates is going to change in value, though they disagree as to the direction of the change. Buyers overcomeing sellers we call support. Sellers overcoming buyers we call resistance. If net new buying ovecomes net new selling, we anticipate upside breaks of resistance. If net new selling overcomes net new buying, we anticipate downside breaks of support. After all, in the ub chart example above, where does the entry point come from? where the stop loss? When does one take profits? While ub does not annotate the chart with such details, I would venture to say that such salient points as where to buy and where to sell come from nothing other than price and where it is in relation to S/R and what it does when it gets there.

 

While some might claim that they have discovered more intelligent processing of data prior to visual presentation, but in the end, there is nothing new under the sun. People are people, and buyers are people and sellers are people, and programmers are people too.

 

One reads in Ecclesiastes the simple enduring truth that "[o]ne generation passes away, and another generation comes, but the earth abides forever." For our purposes here, one might say that one generation of traders passes away, and another generation comes, but price action bides forever. And while the sun also rises, there is truly nothing new under the sun - just a lot more of the same dressed up a new fashion.

 

Best Wishes,

 

Thales

Edited March 13, 2010 by thalestrader

[james_gsx 16]

 

What has not changed is support and resistance, supply and demand, buyers and sellers. The problem with those who have been seduced by what ub calls "recent advances in intelligent data mining, data processing, data visualization and higher frequency automated systems" is that they seem to have forgotten just what the source of that data is - it is buyers and sellers exchanging dollars for something that each anticipates is going to change in value, though they disagree as to the direction of the change. Buyers overcomeing sellers we call support.

 

 

One reads in Ecclesiastes the simple enduring truth that "[o]ne generation passes away, and another generation comes, but the earth abides forever." For our purposes here, one might say that one generation of traders passes away, and another generation comes, but price action bides forever. And while the sun also rises, there is truly nothing new under the sun - just a lot more of the same dressed up a new fashion.

 

Best Wishes,

 

Thales

 

I actually agree with most of your post, except the first part I quoted. I don't think quants have forgotten what the source of the data is, maybe in the journey of finding a more sophisticated edge to move large amounts of money it is easy to lose sight of said "source". I wouldn't know, I don't trade billions of dollars a year and I don't design those complicated models.

 

But they also know retail traders (assuming of course, they even care about retail traders which they probably don't) look at the potential supply and demand. In fact, this is quite obvious in many "quant" strategies. I'm sure you know of them and how they work, and they are most definitely in tune with the idea of supply and demand.

 

I wanted to touch on the last part of your post, as it was something I left out but was in the back of my head. As we've all seen over the years styles come and go, trends (not price trends) change. Once it was merger arbitrage, then it was level 2 quotes, tape reading, we can name all of them. But they all change as the market becomes more complex, and that's exactly what we are seeing now - change. Of course price action will always remain relevant, but some traders will adapt and some won't. The ones who don't adapt (not saying they must become quants) will lose, just as in the past.

 

But I will make one more comment. I do find it interesting when I read quant forums there is never any talk of technical analysis, rather mostly mathematical (well, sometimes) models and programming. But when I visit a site with predominately retail traders (not this site, as this is the probably the third quant related thread I've seen here), the "flaws" of the quants are quickly shown and they revert back to their comfortable strategies. This is not a good or bad thing, just an observation that I find interesting and displays the evolution of trading. But I am glad this is one of the more intelligent forums where we can have civil conversations about this without people getting offended.

 

At the end of the day, no one is really right or wrong. It's all a means to an end, in this case profit.

[UrmaBlume 10]

But I will make one more comment. I do find it interesting when I read quant forums there is never any talk of technical analysis, rather mostly mathematical (well, sometimes) models and programming. But when I visit a site with predominately retail traders (not this site, as this is the probably the third quant related thread I've seen here), the "flaws" of the quants are quickly shown and they revert back to their comfortable strategies. This is not a good or bad thing, just an observation that I find interesting and displays the evolution of trading. But I am glad this is one of the more intelligent forums where we can have civil conversations about this without people getting offended.

 

Very well said James.

 

While this is certainly not a quant forum and is most definitely made up of mostly retail and wannabe traders, it is, thanks to James, the friendliest and most civil.

 

I too applaud the traders that can use such dated methods as candles, VSA, profiles & Wyckhoff to make consistent profits.

 

However, the fact remains that the guys that consistantly make the most from theese markets, especially in the shorter time scales, don't use any of those approaches and, in all probability, the users here that do, do so because they have no access to and are unable to engineer for themselves the more optimal trade decision support technologies and methods.

 

Almost 30 years ago I spent some weeks at Peter Steidlmayer's mini-ranch at Butte Meadows learning profile trading and profile theory. There at the same time was a friend that I still talk to today. This friend has successfully traded and operated as a trade consultant using nothing but his knowledge of makets as explained by Peter and the profile ever since.

 

This old friend has had limited access to our work and in just the last couple of months has started to ask me about price mean reversion to regression/least squared fit lines in periods of low volatility, time of day normalized volumes and buy/sell net trade calculations.

 

He has come to realize that his results are dependent on the quality of the information that supports his trade decisions (Information = Equity) and that there is quality information that is not available from the profile alone. That's progress and my bet is that his good results will get better and continue to do so as long as he continues to seek new and better information and methods.

 

While none of the software we use for trading has ever been seen by the public, some of the software we use for training the traders that operate in house and in the prop shop/hedge funds and joint trading ventures we manage has been published here and elsewhere. Some of the brightest here have used those posts to create their own versions of these tools and report positive results from their work.

 

There is a lot of very tough competition for every trading dollar and the sad fact is that the huge amount of dollars involved attracts many who will never muster up the extreme effort required to get beyond the easy and readily available explanations, technologies and methods. Even sadder is the fact that 90+% here lose and will always lose and the few that make it will make it because they did the work to get beyond what is readily available to everybody.

 

We get hundreds of requests to buy our software and they are all refused. Our posts are made to try and motivate the really smart ones to look beyond and for us to spot talent. We recently formed and registered a hybrid hedge fund/prop shop LLC and every investor and trader involved has a multi-year history of trading success, is a member here and none of them have ever posted anything.

 

If a trader's method is working, great, but he should always consider that the most important quality of any approach is that it be adaptive to change.

 

 

cheers

 

UB

Edited March 14, 2010 by UrmaBlume

[thalestrader 14]

I actually agree with most of your post, except the first part I quoted. I don't think quants have forgotten what the source of the data is, maybe in the journey of finding a more sophisticated edge to move large amounts of money it is easy to lose sight of said "source". I wouldn't know, I don't trade billions of dollars a year and I don't design those complicated models. ....

 

Perhaps you'd be more in agreement with me if I were to say that the tendency amongst the mathematically inclined is that they come to elevate the solutions their various equations derive from price, volume, time and sales data as being somehow superior to the data itself. As such, they convince themselves that the only way to succeed is if one has access to the products, sums, quotients and differences generated by their equations (I mean no disrespect to UB when I point out that such conceit is evident from the disdain that he in his posts explicitly expresses for those of us who do not agree with him).

 

As to this assumed superiority the quants have of their methods, it is demonstrably false. Both retail traders and quants are equally susceptible to immense failure. Quant funds quietly blow up everyday, right along countless retail traders.

 

You are of the opinion that the markets are becoming increasingly complex. I would agree that the markets are complex, but I would disagree that they are becoming moreso. No matter what we human creatures develop or derive in order to try to profit from speculation, it all begins with a buyer and a seller. And at that seemingly simple level is contained all the complexity of the whole.

 

What is often (I would say always) lost sight of by the modelers and algo-jockeys is that the word "markets" describes not a "thing" at all but rather it is signifies the collective activity and behavior of a crowd of people involved in a specific type of exctivity - speculative exchange. If the markets are a "thing," it is a thoroughly human thing, through and through.

 

Humans are incredibly complex. Our reality is far too complex to be modeled comprehensively. Whereas the quants seek to understand better by breaking things up and getting farther from the whole, I am of the opinion that truer understanding comes from seeking to keep things whole, and to understand the phenomena as it is, not as I would have it to be. Understanding comes not from reducing the whole to its component parts, but from observing the whole as a it comes to us naturally. I cannot deduce, much less understand a man's loves and hates, fears and hopes, from a microscopic examination of a slice of his cerebral cortex. But let me be the proverbial "fly on the wall," and observe him as he lives his life over a period of time, and I could reproduce his character through words so vividly that you too would come to know him, though you had never met.

 

In the end, no matter how one approaches these markets, the starting point is always the same. It all begins with a buyer and a seller. It is the same today as it was in the 17th century Rice exchanges in Japan. The fact that there are now more products traded, more traders trading those products, and more approaches being applied to the trading of those products has not increased the complexity or the dynamic of buyer and seller motivated largely by fear of loss and desire for gain. So while ub believes the "most important quality for any approach is that it be adaptive to change," I would say that the most important quality of any approach is that it is firmly anchored to those aspects of market action that endure.

 

As to the criticism that I am showing the flaws of the quants and reverting back to the comfortable, I think you view me unfairly. I have no doubt that some quants can use their mathematical skills to derive formulae that derive useful information from the raw stuff of the market. I am equally certain that just as the majority of retail traders never succeed as they had hoped, so too do the majority of would-be quants never achieve their dream. If anything, the difference between my post and those of ub is that while I can recognize the potential for value in a quant approach, he not only fails to see the see the same potential in an approach that uses the raw flow of the market itself, but treats those who differ in opinon from him with contempt, and in fact, he fairly seethes contempt for others using "dated" methods.

 

I have no such contempt for traders of his ilk. I simply am of the opinion their methods, on the whole, are no more or less superior to any other method that uses derivative data t support trading decisions. I also do not think that "quants" represent anything new at all. After all, what is a moving average but a "mathematical" trend line?

 

I have now been trading more than half my life, having started back in 1986. While you are convinced that things have changed irrevocably and that we are dealing with a present and future far different from an irretrievable past, I am firmly convinced, now more than ever, of nothing more than the old saw that the more things change, the more they stay the same.

 

Best Wishes,

 

Thales

[brownsfan019 17]

I do find it quite interesting that there are all these supposedly smart quant guys lurking on a forum that has little discussion on quants and they happen to work for UB. Are we really to believe that people that think what 99.999999% of the posts here are useless spend time here lurking around?

 

Why bother lurking at a forum where you have no interest in what is being discussed? That's like me lurking at a Pittsburgh Steelers forum... what a waste of time.

 

Guess the quant guys are way too advanced for my thinking. They think what we discuss here is garbage, yet they spend time here? Why?

 

As with any vendor, the proof is in the pudding. I don't believe we've ever seen 1 blotter from UB showcasing the advanced models and techniques that he and his firm employ. Or even just a live trade call - not after the fact charts. As Thales pointed out in a previous post, there's a lot of holes even in the charts that had been presented previously.

 

So until UB can offer something that us little retail guys can use, we just get to hear more and more about how wonderful UB and his firm is and how what we down here use is no good.

[UrmaBlume 10]

ISo until UB can offer something that us little retail guys can use, we just get to hear more and more about how wonderful UB and his firm is and how what we down here use is no good.

 

Funny Browns how my biggest detractors are, like you, guys that have tried to buy our stuff and been refused.

 

As to "until UB can offer something that us little retail guys can use" I know of several of the more gifted here have been able to completely reproduce some of our inidicators and those that have report positive results.

 

As I said before I post here to challenge those open to NEW ideas and to spot talent. I have had many long sessions with some of those seeking help and have even taken some of them on as traders.

 

As to being a vendor, while we have formed some hybrid hedge fund/prop shop LLCs and some joint venture trading situations we have never sold or leased any software to anybody.

 

As to posting blotters - if we ever do post anything like that it won't be an easily manipulated sheet from what might well be a simulator, it will be a statement from a broker or clearing agent.

 

Browns if you don't like me or my materail just pass it. I have not and will not ever pick on any of your thousands posts without some specific factual/objective/technical point in mind - no matter how target rich the material.

 

I don't stalk the other posters, I don't ever get personal with anyone about anything and the tone of every post I have made is more objective than subjective.

 

After more than 30 years in the markets and after our phone conversation I have my opinion of your level of market understanding and trading abilities as well as the veracity of the results you post but it I will never make it public.

 

I say again with absolutely no malice that this board is made up of mostly retail traders who lose and will always be losers in the market. Some, however, will learn, advance and make a lot of money but they are the few and at least some of them now work in one of our companies.

 

I also state as fact that the operators who make the most in these markets don't use anything that even remotely resembles the charts in real-time, VSA, Profiles, candles & Wyckhoff that are the main topics here.

 

Some here may take this statement as an insult, some may take it as a challenge, some may take it as an eye opener and some might even take it as an opportunity. The choice is yours and theirs. But it is an objective satement just as is the fact that most here don't make money and never will.

 

My posts are not addressed to those that make up over 90% of this board and make over 90% of the posts, they are addressed to the very few here who have both the will and the intellectual capital to make the breakout.

 

cheers

 

UB

[Cory2679 11]

I also state as fact that the operators who make the most in these markets don't use anything that even remotely resembles the charts in real-time...

 

Just for the record...I've been posting a lot of my charts on the real-time thread lately...I'll be the first to admit that I am not a profitable trader...just trying to learn...so please disregard my charts on that thread, as they are not relevant or representative of a profitable approach...thalestrader's charts would probably be the ones to look at.

 

Thanks,

 

Cory

Edited March 16, 2010 by Cory2679

[BlowFish 10]

UrmaBlume, I am not sure I am one of the more gifted I think AgeKay probably beat me to the punch figuring out all of your indicators. I did have a trade intensity indicator coded pdq as it was something that I had thought about independently anyway. Just saying I am not a detractor.

 

Having said that I do wish that you applied a similarly rigorous 'quantitative' approach to your forum posts as you do to your tools and trading. The trouble is that many of the posts lean far to heavily on rhetoric imho, I think you might have been quite revered in ancient Greece. :)

 

Rhetoric usually employs three audience appeals, ethos, pathos and logos.

 

Ethos - seeks to establish credibility of the speaker. One of Stiedlmeyers personal students, many years successful trading, technological superiority, many joint ventures with the great and the good etc.

 

Pathos - uses emotional appeals to influence the audiences judgement. If you use XYZ method you are likely to be a loser, only losers post here etc. Pro traders would laugh you out of the room. (I mentioned Hyperbole in another thread, I guess it would be included here).

 

Logos this is using 'logic' to construct you argument be it inductive or deductive. This is what I try to zoom in on. I am not sure what your punchline is to be honest. There seem to be a couple of logical themes but they appear to me to be non sequitors or simply irrelavant to the thread. in fact they are 'pathos' and 'ethos' dressed up as 'logos'. Having said that I do see a few of statements that appear useful (and I happen to agree with) but why obscure them with 'pathos' and 'ethos'.

 

Here's my point. Only the gullible will be seduced. Those who are not gullible but in search of knowledge will likely be confused and sidetracked. Those with the attributes you seek for partnership will probably not want to engage.

[james_gsx 16]

Perhaps you'd be more in agreement with me if I were to say that the tendency amongst the mathematically inclined is that they come to elevate the solutions their various equations derive from price, volume, time and sales data as being somehow superior to the data itself. As such, they convince themselves that the only way to succeed is if one has access to the products, sums, quotients and differences generated by their equations (I mean no disrespect to UB when I point out that such conceit is evident from the disdain that he in his posts explicitly expresses for those of us who do not agree with him).

 

As to this assumed superiority the quants have of their methods, it is demonstrably false. Both retail traders and quants are equally susceptible to immense failure. Quant funds quietly blow up everyday, right along countless retail traders.

 

You are of the opinion that the markets are becoming increasingly complex. I would agree that the markets are complex, but I would disagree that they are becoming moreso. No matter what we human creatures develop or derive in order to try to profit from speculation, it all begins with a buyer and a seller. And at that seemingly simple level is contained all the complexity of the whole.

 

What is often (I would say always) lost sight of by the modelers and algo-jockeys is that the word "markets" describes not a "thing" at all but rather it is signifies the collective activity and behavior of a crowd of people involved in a specific type of exctivity - speculative exchange. If the markets are a "thing," it is a thoroughly human thing, through and through.

 

I would be in agreement with you on most of this. A simple look over the last 20 years would show many quants disregarded the fact markets are made up of humans and markets change in such a way their models do not account for. Maybe the individual quant didn't disregard any of that, but after many people started implementing the model the basic idea was lost. Unfortunately, there is so much money being traded within these programs that now when we have a blowup it gets magnified to extremes.

 

On a more personal note, I fully agree that markets describe the activity and behavior of a crowd. In fact, I would venture as far to guess that a major flaw in risk management is the idea of human behavior - how exactly do we capture that mathematically? With new discoveries in theoretical neuroscience, we are probably getting closer to that answer. But then if that ever catches on, it is bound to blow up as well.

 

As I continue to explore this field I would be happy to share my thoughts on the board, and those who wish to participate should and those who disagree with the whole idea, well that's fine too.

 

I agree with Blowfish that many of the new members who are here to learn might be misguided and confused reading all of this. I can't say how many times that happened to me when I was starting out. I would get a groove going, only to read something more complicated then be confused the entire weekend. I really didn't care about any of this "quant" stuff until I started pursuing mathematics academically, then I realized how it was all tied in with trading.

 

Disclaimer: I am not quant at a major fund, just another individual interested in the mathematics behind these complex models. So everything I've said, may be completely wrong - I don't think it all is but I figured I should throw it out there.

[Dinerotrader 10]

As I continue to explore this field I would be happy to share my thoughts on the board, and those who wish to participate should and those who disagree with the whole idea, well that's fine too.

 

James, please do you share your experience as you explore this field. I am definitely interested in learning new trading techniques and perspectives. Just don't make the same mistakes as UB. Leave out the rhetoric so we can have an insightful quant thread that everyone can learn from.

[Cory2679 11]

James, please do you share your experience as you explore this field. I am definitely interested in learning new trading techniques and perspectives. Just don't make the same mistakes as UB. Leave out the rhetoric so we can have an insightful quant thread that everyone can learn from.

 

Dinero,

 

There are dedicated quant forums out there that may be more beneficial than a thread here for an aspiring quant (not that you necessarily are)...

 

For example...just doing a Google search, I found Quantitative Finance Forums.

 

I'm not sure which one is the "best." Someone like UB might be of some assistance there...

 

-Cory

[Dinerotrader 10]

Dinero,

There are dedicated quant forums out there that may be more beneficial than a thread here for an aspiring quant (not that you necessarily are)...

I'm not sure which one is the "best." Someone like UB might be of some assistance there...

-Cory

 

I'm not looking to become a quant guy, I just enjoy learning new things on a good forum like TL.

[UrmaBlume 10]

UrmaBlume, I am not sure I am one of the more gifted I think AgeKay probably beat me to the punch figuring out all of your indicators. I did have a trade intensity indicator coded pdq as it was something that I had thought about independently anyway. Just saying I am not a detractor.

 

Having said that I do wish that you applied a similarly rigorous 'quantitative' approach to your forum posts as you do to your tools and trading. The trouble is that many of the posts lean far to heavily on rhetoric imho, I think you might have been quite revered in ancient Greece. :)

 

Rhetoric usually employs three audience appeals, ethos, pathos and logos.

 

Ethos - seeks to establish credibility of the speaker. One of Stiedlmeyers personal students, many years successful trading, technological superiority, many joint ventures with the great and the good etc.

 

Pathos - uses emotional appeals to influence the audiences judgement. If you use XYZ method you are likely to be a loser, only losers post here etc. Pro traders would laugh you out of the room. (I mentioned Hyperbole in another thread, I guess it would be included here).

 

Logos this is using 'logic' to construct you argument be it inductive or deductive. This is what I try to zoom in on. I am not sure what your punchline is to be honest. There seem to be a couple of logical themes but they appear to me to be non sequitors or simply irrelavant to the thread. in fact they are 'pathos' and 'ethos' dressed up as 'logos'. Having said that I do see a few of statements that appear useful (and I happen to agree with) but why obscure them with 'pathos' and 'ethos'.

 

Here's my point. Only the gullible will be seduced. Those who are not gullible but in search of knowledge will likely be confused and sidetracked. Those with the attributes you seek for partnership will probably not want to engage.

 

 

BlowFish,

 

Thank you for your well intended, content rich and very well written words.

 

Also thank you for your even temper and your perpetual and continuing contribution to this forum.

 

I understand your words and I appreciate the intent behind them, but you miss the purpose of my posts.

 

When you say "Here's my point. Only the gullible will be seduced."

 

I am not trying to seduce anyone or be anybody's politically correct pal. On the contrary, I want to startle and to completely differentiate myself from what I and some other professionals view as antiquated and and less than optimal concepts and methods.

 

As to "Those who are not gullible but in search of knowledge will likely be confused and sidetracked." My belief is that those in search of knowledge are already sidetracked and confused by most of the material in such threads as charts in real time, VSA, Profiles & Wyckhoff.

 

There is a huge revolution in trading methods, the processing of market data, the application of intelligent agents and financial data visualization going on right now. It just hasn't filtered down to the level of the disucssion on this board.

 

Some of the more successful traders and developers I know believe that in a decade or so only the intellectually infirm will be looking at bars, candles and profiles. In different state of the art trading operations around the world those with the access are beginning to see applications that collect, process and present data from several different related data streams and time frames that is shown in guages, pulse bars, meters etc - some resemble the Market Heads Up Display (HUD) that I have shown here.

 

"Those with the attributes you seek for partnership will probably not want to engage." With all due respect BlowFish, that has not been the case. We have received many dozens of requests to partner, share, join, etc., from every continent on the planet except Africa and Antartica and from those we have, so far, selected less than a dozen and they now trade with/for us. I put the number of applicants that we have accepted so far at less than 5% of total applications and that seems about right.

 

Cheers

 

UrmaBlume

[Dinerotrader 10]

......only the intellectually infirm......

 

UrmaBlume

 

LOL

More of this. Love it.

 

I'll stop posting here. Sorry

[DugDug 10]

There is a huge revolution in trading methods, the processing of market data, the application of intelligent agents and financial data visualization going on right now. It just hasn't filtered down to the level of the disucssion on this board.

 

 

Urma I find everything you are saying interesting and agree with most of it, and believe that computers can definitely help us with clearer visualisation- however I guess the feeling that gets evoked from people via a few of your posts is "Sure I am happy to discuss things, but I just dont feel like being told I am a fool for my previous beliefs, ideas or for the previous tools I used because that was what was available, and if I continue to use them even if profitable I am a fool"...the first response will be emotional not rational.

(whats the old joke of NASA spending millions to design a pen to be able to write in space, when the Russians say we just use a pencil")

 

Maybe we need to use those computers to help us interact with other humans in a better way.

Startling people and telling them they are mentally infirmed or criticism just does not work.

(I know as sometimes I am guilty of it)

(Dale Carnegie "how to win friends and influence people" Chapter one - Principle one - Dont criticise, condemn or complain.)

So on that same point I should just shut up now.

[thalestrader 14]

...I fully agree that markets describe the activity and behavior of a crowd. In fact, I would venture as far to guess that a major flaw in risk management is the idea of human behavior - how exactly do we capture that mathematically?...

 

As I have said, science can determine the state of every cell, and calculate the electrical charge pulsing through every nerve, but the scientist will still not be able to speak of the hopes and dreams of the patient.

 

You might find the following book worth your time to study ...

 

Amazon.com: The Phenomenon of Life: Toward a Philosophical Biology (SPEP) (9780810117495): Hans Jonas, Eleonore Jonas, Lawrence Vogel: Books

 

We humans are wonderful creatures, and while our bodies may ultimately be known down to the nano particle, an understanding of the being an becoming of that which animates us will not be so reducible.

 

Science is itself a prejudice, and as such, a conceit. The blow ups that you note, and which you correctly predict will reoccur, happen when those who are convinced that there is no other way of knowing other than by reduction attempt to reduce the irreducible.

 

Simple folk know this to be true, and they refer to it as missing the forest for the trees.

 

 

Best Wishes,

 

Thales

[james_gsx 16]

Dinero,

 

There are dedicated quant forums out there that may be more beneficial than a thread here for an aspiring quant (not that you necessarily are)...

 

For example...just doing a Google search, I found Quantitative Finance Forums.

 

I'm not sure which one is the "best." Someone like UB might be of some assistance there...

 

-Cory

 

There are some great dedicated quant forums out there, but good luck getting them to share any strategies with you

 

I would merely share what I'm learning and communicate new ideas with forum members. I almost feel like I would be giving back in my own way, as I have learned a lot from the members here.

[UrmaBlume 10]

As an example of the application of intelligent agents to processed market data the shot below is of the last 30 minutes of trade in today's ES. Times are PST.

 

The bars are 2k volume bars. Each bar represents about one thousandth of average session volume. This makes them about 24 second bars.

 

This is an application that we use to teach "scalping with an edge."

 

The color of the bar represents the dominant bias in that particular time/volume frame. In the chart below you will see gray bars (no dominant bias), red bars (sell bias) and blue bars (buy bias).

 

The blue and red + is a recommended entry price. The small red dot is the recommended stop and the blue a good point to scalp. These are what we call TradePoints. The text defines those points for the current bar. Both the text and the TradePoint dots are automatically posted at the first tick of the bar and updated every tick. The second chart down shows a no trade recommendation.

 

The middle sub-graph shows a calculation of net new trade by commercials over a multi-session time frame.

 

The bottom sub-graph shows a collection of weighted biases from 7 different time frames. The yellow is cautionary, the red - sell bias and the blue - buy bias.

 

 

 

[Cory2679 11]

I just got a laugh out of how far the majority of the content of this thread has gotten from the original question/the name of the thread. donaldkagan, the author, hasn't even posted for over a week! :o

 

Nothing necessarily wrong with that...just made me laugh...

[james_gsx 16]

As I have said, science can determine the state of every cell, and calculate the electrical charge pulsing through every nerve, but the scientist will still not be able to speak of the hopes and dreams of the patient.

 

 

Well... not yet

 

I had an interesting discussion last night with a physicist, and we talked about the natural balance in the universe. Even concepts such as chaos are starting to find some balance and explanation through mathematics. If we are finding that, along with advances in neuroscience and balance within chaos, I would even go as far to say that the emotions behind a crowd can be explained mathematically. The trick here is getting it into a formula, and I'm not so sure that's possible.

 

But with the vast amount of program trading dominating market volume, is "emotion" really a thing of the past? Sure there is a human behind it, but how often are their emotions interfering with the models?

[UrmaBlume 10]

Well... not yet

 

I had an interesting discussion last night with a physicist, and we talked about the natural balance in the universe. Even concepts such as chaos are starting to find some balance and explanation through mathematics. If we are finding that, along with advances in neuroscience and balance within chaos, I would even go as far to say that the emotions behind a crowd can be explained mathematically. The trick here is getting it into a formula, and I'm not so sure that's possible.

 

But with the vast amount of program trading dominating market volume, is "emotion" really a thing of the past? Sure there is a human behind it, but how often are their emotions interfering with the models?

 

Very good stuff James.

 

Not too long ago I was talking to the founder of a well known, multi-billion dollar fund that is moving to full automation as fast as he can.

 

The disucssion was about the valuation of human vs bot traders. We both agreed that if a human trader who earns X is worth Y that a bot who earns X is worth 5-10 times Y just because that while they are developed by humans with emotions, hopefully the emotions don't make it into the code.

 

cheers

 

UB

[BlowFish 10]

Dinero,

 

There are dedicated quant forums out there that may be more beneficial than a thread here for an aspiring quant (not that you necessarily are)...

 

For example...just doing a Google search, I found Quantitative Finance Forums.

 

I'm not sure which one is the "best." Someone like UB might be of some assistance there...

 

-Cory

 

I am not sure which is 'best' either but Wilmott and QuantNetwork seem to be pretty popular amongst the quant community (whatever that is )