Confessions and Questions

On June 9, I went short with a position in TZA. I thought I did so according to the robot, but I may have misinterpreted the signal to short TZA as a buy TZA. In any case, I'm a rookie, so please forgive this mistake.

During this day Pascal expressed confidence that the market would move higher. Despite seeing red in TZA, I remained confident the market would move lower in the near term. I had stayed in TZA after Dr. K's signal went to cash in early June and added 20% to an already substantial gain achieved by following Morales and Dr. Kacher. Mostly in cash, I took another position in TZA on June 9 because the macro-economic situation seemed a sure drag on the market. I can't list these reasons here, but I felt that I had caught the rhythms of TZA in relation to the market and was ready to ride it for more profit.

I was also, however, excited and fascinated by the development of the robots. And I made a very good return shorting GDX literally overnight on June 7-8. I decided that I would shoulder hard into a position should the robot go to a signal of strength. I expected the next signal to be SELL. Thus, on Friday morning I was in a condition of contradictory feelings and confusion. The robot said strongly BUY but I was certain the Russell 2000 would go lower.

Friday became horrific for me because I sold the TZA for 1/10th of the profit it would have realized had I held it that day. Moreover, I sought to establish long positions without conviction. At the end of the day I felt like my weight on planet earth had disappeared, and I had become a bouncing specter. I felt this way because my rhythm in the market was lost.

I have spent this week trying to establish and hold with confidence a long position in TNA and IWM. Market makers have made some pocket change from me.

So, here comes my question (if it is that): when I examine the back test data, I see that May 2010 provides a number of examples of when the robot had picked wrongly-- moments in time when the market went lower. Since I was not a participant at that time, I can only imagine how a market can break through the last remaining supports and sink into new depths. How does one's macro understanding/interpretation of a moment affect one's ability to follow a machine?

Throughout this difficult process for me, I have read with great relish the comments of experienced hands, such as Pascal, Billy, Paul Duncan, Mike Scott, Gil Morales, Dr. Kacher, and Ian and Ron. For all this help I am tremendously grateful. But ultimately the choices are mine; the trades affect only my family; I am, at the moment I push the button, utterly alone. I also recognize that my trading decisions are affected very much by my so-called feelings—that is, by my sense of rhythm at work in the market. How do I integrate the feelings and the macro-economic insights with the commands of a robot remains perplexing to me? I can confess I'm trying to remove the feelings, but I worry to do so would leave me disconnected and aloof from the information and trends that define our time. I also worry that at the time I become comfortable with a robot determining my fortune, the market will learn to foil this sophisticated instrument and break it, as it has broken other trend systems.

So this is my confession, and these are my questions. I don’t know whether not any one can or should respond to it. But, regardless of the embarrassment, I’d like to share it. I hope to learn what others experience...

[QUOTE=nickola.pazderic;13603]On June 9, I went short with a position in TZA. I thought I did so according to the robot, but I may have misinterpreted the signal to short TZA as a buy TZA. In any case, I'm a rookie, so please forgive this mistake.

During this day Pascal expressed confidence that the market would move higher. Despite seeing red in TZA, I remained confident the market would move lower in the near term. I had stayed in TZA after Dr. K's signal went to cash in early June and added 20% to an already substantial gain achieved by following Morales and Dr. Kacher. Mostly in cash, I took another position in TZA on June 9 because the macro-economic situation seemed a sure drag on the market. I can't list these reasons here, but I felt that I had caught the rhythms of TZA in relation to the market and was ready to ride it for more profit.

I was also, however, excited and fascinated by the development of the robots. And I made a very good return shorting GDX literally overnight on June 7-8. I decided that I would shoulder hard into a position should the robot go to a signal of strength. I expected the next signal to be SELL. Thus, on Friday morning I was in a condition of contradictory feelings and confusion. The robot said strongly BUY but I was certain the Russell 2000 would go lower.

Friday became horrific for me because I sold the TZA for 1/10th of the profit it would have realized had I held it that day. Moreover, I sought to establish long positions without conviction. At the end of the day I felt like my weight on planet earth had disappeared, and I had become a bouncing specter. I felt this way because my rhythm in the market was lost.

I have spent this week trying to establish and hold with confidence a long position in TNA and IWM. Market makers have made some pocket change from me.

So, here comes my question (if it is that): when I examine the back test data, I see that May 2010 provides a number of examples of when the robot had picked wrongly-- moments in time when the market went lower. Since I was not a participant at that time, I can only imagine how a market can break through the last remaining supports and sink into new depths. How does one's macro understanding/interpretation of a moment affect one's ability to follow a machine?

Throughout this difficult process for me, I have read with great relish the comments of experienced hands, such as Pascal, Billy, Paul Duncan, Mike Scott, Gil Morales, Dr. Kacher, and Ian and Ron. For all this help I am tremendously grateful. But ultimately the choices are mine; the trades affect only my family; I am, at the moment I push the button, utterly alone. I also recognize that my trading decisions are affected very much by my so-called feelings—that is, by my sense of rhythm at work in the market. How do I integrate the feelings and the macro-economic insights with the commands of a robot remains perplexing to me? I can confess I'm trying to remove the feelings, but I worry to do so would leave me disconnected and aloof from the information and trends that define our time. I also worry that at the time I become comfortable with a robot determining my fortune, the market will learn to foil this sophisticated instrument and break it, as it has broken other trend systems.

So this is my confession, and these are my questions. I don’t know whether not any one can or should respond to it. But, regardless of the embarrassment, I’d like to share it. I hope to learn what others experience...[/QUOTE]

Thank you for sharing your experience Nickola.


If your system of analyzing the market and taking trading decisions works well, you should not change it.

The robot is a mechanical system. It works on probabilities and has a close stop loss level when initiating a position.
It is made so that you do not need to "think" too much. If you still want to make a full analysis, then the robot becomes just one of your imputs and one more source of conflict.

What you could do is try to follow the signals with a small position and compare the results to your standard trading.

Trading is a lot about confidence. If you are not confident, then you reduce position size.


Pascal

[QUOTE=nickola.pazderic;13603]On June 9, I went short with a position in TZA. I thought I did so according to the robot, but I may have misinterpreted the signal to short TZA as a buy TZA. In any case, I'm a rookie, so please forgive this mistake.

During this day Pascal expressed confidence that the market would move higher. Despite seeing red in TZA, I remained confident the market would move lower in the near term. I had stayed in TZA after Dr. K's signal went to cash in early June and added 20% to an already substantial gain achieved by following Morales and Dr. Kacher. Mostly in cash, I took another position in TZA on June 9 because the macro-economic situation seemed a sure drag on the market. I can't list these reasons here, but I felt that I had caught the rhythms of TZA in relation to the market and was ready to ride it for more profit.

I was also, however, excited and fascinated by the development of the robots. And I made a very good return shorting GDX literally overnight on June 7-8. I decided that I would shoulder hard into a position should the robot go to a signal of strength. I expected the next signal to be SELL. Thus, on Friday morning I was in a condition of contradictory feelings and confusion. The robot said strongly BUY but I was certain the Russell 2000 would go lower.

Friday became horrific for me because I sold the TZA for 1/10th of the profit it would have realized had I held it that day. Moreover, I sought to establish long positions without conviction. At the end of the day I felt like my weight on planet earth had disappeared, and I had become a bouncing specter. I felt this way because my rhythm in the market was lost.

I have spent this week trying to establish and hold with confidence a long position in TNA and IWM. Market makers have made some pocket change from me.

So, here comes my question (if it is that): when I examine the back test data, I see that May 2010 provides a number of examples of when the robot had picked wrongly-- moments in time when the market went lower. Since I was not a participant at that time, I can only imagine how a market can break through the last remaining supports and sink into new depths. How does one's macro understanding/interpretation of a moment affect one's ability to follow a machine?

Throughout this difficult process for me, I have read with great relish the comments of experienced hands, such as Pascal, Billy, Paul Duncan, Mike Scott, Gil Morales, Dr. Kacher, and Ian and Ron. For all this help I am tremendously grateful. But ultimately the choices are mine; the trades affect only my family; I am, at the moment I push the button, utterly alone. I also recognize that my trading decisions are affected very much by my so-called feelings—that is, by my sense of rhythm at work in the market. How do I integrate the feelings and the macro-economic insights with the commands of a robot remains perplexing to me? I can confess I'm trying to remove the feelings, but I worry to do so would leave me disconnected and aloof from the information and trends that define our time. I also worry that at the time I become comfortable with a robot determining my fortune, the market will learn to foil this sophisticated instrument and break it, as it has broken other trend systems.

So this is my confession, and these are my questions. I don’t know whether not any one can or should respond to it. But, regardless of the embarrassment, I’d like to share it. I hope to learn what others experience...[/QUOTE]

Are you ready to stop believing in yourself and start proving yourself?

[url]http://www.petershallard.com/self-doubt-is-useful-and-other-counter-intuitive-psychological-truths/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+PeterShallard+%28Peter+Shallard%29[/url]

Billy

Note: a cross of death appears possible in XLF!

I didn't note this the other day because the Robot is currently long, but XLF (financials) is now the primary shorting target when the Robot goes short.

This replaces XLE (energy) and could change again before the Robot actually goes short again. Rather than just but people every time my model changes a sector selection, I'm only noting the current selection when the Robot gives a new signal.

this is my set of beliefs as far as the relationship between macro events and asset prices (stock prices):
1. Predicting macro events is impossible. Majority of economists and experts in this field are unable to do so. Majority of great forecasters are close to 50% so not very far from random. In the middle of 2008 we were told that subprime did not matter, at the beginning of 2009 that the future is dire. Since really smart people can't predict the macro i don't think i can do it.
2. Direction of asset prices can not be predicted. Also the relationship between stock prices and real economy is not stable - sometimes the market leads the real economy by many months sometimes it does not. Even the best traders/investors can not predict these relationships (even Mr.Morales quoted in this thread had substantial losses in 2009 as he was not well positioned at the beginning of the bull move). Its just really, really hard to do it consistently.
3. One can try to evaluate the market in probabilities (similar to weather i guess - we don't know if it will rain but when we see heavy clouds it does make sense to take an umbrella). Mechanical system might be a great help in assessing probabilities. "Robot" seems to me an excellent system (in fact one may even argue its Sharpe ratio will have to decline in the future it's so incredibly good). It is important to remember that losses are inevitable and can not be eliminated from the system (if there is a system without the losses or with very few of them it usually means it was curve fitted). What matters most is how large the losses are in comparison with the gains. Percentage of wins to losses is secondary (it does, unfortunately affect the psychology). Since i can't control the economy or predict prices i try to focus on what i can do. Proper position sizing, minimizing loss size and not overtrading.

"...I also recognize that my trading decisions are affected very much by my so-called feelings—that is, by my sense of rhythm at work in the market. How do I integrate the feelings and the macro-economic insights with the commands of a robot remains perplexing to me?..."

The question is how accurate your sense of market rhythm is. Collect the data and analyse the win/loss ratio, and calculate the expected returns vs risk. Then you would know if your 'sense of market rhythm' is worth following.

[QUOTE=jt12;13623]What matters most is how large the losses are in comparison with the gains. Percentage of wins to losses is secondary (it does, unfortunately affect the psychology).[/QUOTE]

The three measures: Win Rate, W/L Ratio and Profit Factor can be related to each other using a formula (see: [url]http://www.priceactionlab.com/Blog/2011/04/what-every-trader-should-know-about-the-win-rate-profit-factor-and-payoff-ratio[/url]). WinRate is not necessarily secondary to W/L Ratio from the strict point-of-view of total profit generation, tho I agree with you that it's harder to follow a system with a low Win Rate.

Trader D

1. Billy's link made much sense to me. thanks again.

2. I'm trained in social analysis, music and linguistics. Cultural, social, and economic analsys makes sense to me; mathematics and programming are not my strong suits.

3. I'm very sensitive to sound.

4. I was also, at one time, a highly rated chess player-- no longer to be sure.

I have tested my ideas in paper trading, and my performance is consistently superior to my real-world trading.

I should also note that my results with Think or Swim since last year are literally zero.

On the other hand, with Vanguard's quiet grandpa technologically inferior interface, I reached over 40% in the first five and a half months of 2011.

I think some of my problem with TOS is that it overwhelms me sensually-- too much information and no real capacity, it appears, to reduce the static/noise.

Of course there are many angles from which to ponder such problems. Knowing I'm at wit's end gives me good reason to turn to a robot. Unfortunately, the robot closed me out of a good trade and told me to sit tight at the low end of a market!

many thanks,

[QUOTE=nickola.pazderic;13634]......, the robot closed me out of a good trade and told me to sit tight at the low end of a market!

[/QUOTE]

That can happen with any single trade from any trading system. When N=1, the observation is meaningless.

The relevent measurement is what the outcome would be in 20 trades and more. Based on the data, the Robot will shine.