Understanding systems…

There is no perfect trading system.

I have developed, coded, and tested literally thousands of trading systems. I am not exaggerating. They are all imperfect. Now, I would have always agreed with that on a intellectual level. But I think I did not really “get” that until I had done the work of developing these systems and tested them though various market conditions.

Now I think of systems in terms of yield. A system is not unlike a bond that has a yield that streams off of the instrument itself.

If you like things more literal. Imagine you build windmills. You can maximize efficiency of your blade shape for different speeds and frequency of winds. But one blade will not be efficient in all conditions. Just like a real wind farm, you maximize your blade shape for your prevailing wind condition. If the winds are significantly above or below that condition it is often best to just brake-stop the windmill.

System designers obsess over the shape of their blade, but they often do not think about measuring the conditions in which that blade has maximum efficiency.

Happy trading.

This is great read…

Last year a lot of people were asking if 2016 was the worst year ever. (It wasn’t.) I haven’t seen anyone making similar claims about 2017, but that doesn’t mean that this year didn’t produce its share of significant world events. It has. Below is my top ten, listed in descending order. You may want to read what follows closely. Several of these stories will continue into 2018.

https://www.cfr.org/blog/ten-most-significant-world-events-2017?utm_medium=social_earned&utm_source=tw&utm_campaign=year-end&utm_term=ten-most-significant-world-events-in-2017&utm_content=121917

Systems update…

Currently trading the Nasdaq, the Sp500, the Nikkei, the Euro, and Oil. Although you would think that the first three assets are highly correlated (they are), all three have systems that go long/short; it is quite common to be long 1 or 2 and short 1 or 2 markets. This provides necessary hedge function.

Have no opinion about the market that I’m will to trade upon. I know it is expensive and probably will get more so. I suspect next year will be at least one 10%+ decline. I’m ready to surf…