Another reason to share

Ron is an inspiring fellow trader/researcher at the MT_E_I community.
Here is an excerpt of emails exchange between me and him about sharing our knowledge and research achievement.

From: Ron Thompson
Date: Apr 30, 2007 12:35 PM
Subject: Re: a personal question about sharing
To: Darma

Darma,
Sorry this reply took so long. Let me try to answer the questions for you.

At 12:06 AM 3/15/2007, Darma wrote:

Dear Ron,
I am thankful for your sharing the bolltrader ideas and expert advisors and also your tons of contribution in the community, where I learn so much from.

You’re very welcome.

Ron, I always have this question in my head, how do you so confidently share your ideas and works to the open public ? dont you ever worried that the market will anticipate your system or trading ideas, thus making it not profitable anymore in the future ?
Thank you for your time answering my silly question.

Not silly at all!
I do in fact have some nagging suspicions that, not necessarily the market, but my broker, or rather their MT4 server actually does something like that.
I have seen just at the moment the price reaches the trigger point for BollTrade, the spreads widen by 2-3 pips. Now I don’t track support/resistance, so the spread could have gone up because of that, or even because of something that IBFX saw from the ECN that they “smoothed”.
But I just think in the long run, that there are too many people and too many trades to track a minilot and worry about it.
The other thing I count on is people. When the 1st bad trades happen, they’ll abandon the EA. If they’re using martingale, and have to use 11 lots to recover a few minilots, then they’ll abandon it. noone will stick to any one trading EA for more than a few weeks.
I, on the other hand, will stick to it. I know there is a learning curve where you have to try a lot of stuff. I’ve done that. I’ve lost a fair bit of money during the process. But as my wife says, it’s the cost of education.
I’m now funded well enough to be able to let the EA run mostly on it’s own, which many people won’t be.
The other thing that I see is that no two brokers give the same results. That puts people off too,
So as you see, I’m not too worried about a “disaster of success” because I don’t think it will happen.
One thing I just do not know is how many people are actually running BollTrade. For all I know there could be 10,000 people running it across the globe optimized to their broker making tons of money. If so, it hasn’t affected my trading at all.
Hope that explains a little

Ron

So, another reason to share.. There could be 10,000 people running our strategy across the globe, making tons of money. It won’t affect our trading at all.
Let’s share !!!!

Risenberg Research Sharing Session

Dear Researchers/Traders @ Indotraders,

I will be in Jakarta during this week.
I’m leaving Bali today, and planning to be back to the island by Saturday.
I am inviting my fellow researchers in a sharing session. I will be presenting Risenberg’s latest research on systematical trading. A volatility-exploiting trading system will be discused and disclosed to a limited number of active researchers. This is a culture we had a long time ago when the Indotraders group was founded, and I am trying to bring this back. I’m so tired of witnessing the always-want-the-easy-way newbies slamming their words in the group, attacking other members while hiding behind the anonimity of their funny email addresses. So chicken of them :p

This will be a sharing session. We will discuss the research, I will ask for feedbacks and ask for suggestions from other researchers.
This will not be a promotion / marketing event since there will be nothing to be sold or offered. My old fellows here know that I’m not that kind of a person.

Please contact me on my phone number: 081XXXXXXXX if you are interested to join the session. No want-to-be-rich-quickly type of people please !! Only fellow researchers and traders. Humble people only please. No negative-minded people who always trying to find the bad side of things like we’ve been seeing more often lately in this group. :p

The venue will be at my office at Fatmawati, probably on Friday evening, after offfice hour. Please bring your own food/drink, bring your own notebooks, pens, because I will not provide any of them, nor asking any payment for anything like they always do in seminars.

The meeting room will fit for only 5-10 people. If there are more people confirming to join, I will try finding different places otherwise I will be limiting the number of people.

This is for free. Not “shovel selling” kind of seminars, so please: no shovel seekers !!!

Rgrds,
Darma

p.s.
just in case some idiot cynical person in this group will speak, I wud like to say sorry for using English. I recently prefer to write in my blog rather then in shovel-seekers groups, and many readers of my blog dont speak bahasa.

Volatilitas, milis dan analyst

Beberapa hari lalu gue posting opini dan hasil riset gue tentang volatility di beberapa milis.
Di antaranya adalah milis Indotraders, milis AATI dan milis Berjangka.
Di milis2 itu gak ada satu pun yang menanggapi.
Apalagi di milis Berjangka yg isinya cuman caci maki menghujat dunia bursa berjangka Indonesia itu, parah banget. Boro2 ditanggapai, wong message gue kagak di-approve ama moderatornya. Karena pake english, disangka spam kali tuh, ha ha ha… Judulnya aja berjangka & derivatif, tapi isinya caci maki melulu..
Jarang ada omongan soal market di situ. Kalaupun ada, isinya tuh ramalan2 dan analisa2 market yg isinya menurut gue sih BS semua. Wong market udah gerak kok diomongin, dicari ceritanya. Dikomentarin. Buat apa. Emangnya komentar bisa dijadiin duit ? Trus kalau ada prediksi, ujung2nya biasanya tanda tanya.
Misalnya kayak gini nih para expert/analis/pakar tuh ngomongnya:
“Euro akan mencapai titik tertinggi ????”
“Terjadi bullish divergence, pound akan reversal ke atas ???”
Lha ampun, emangnya kalo pasang posisi di market bisa pakai tanda tanya ? hahahah.
Stop loss ya stop loss. Buy ya buy. Sell ya sell.
Gak bisa kalau minggu lalu bilang pound menguat, trus begitu ternyata sekarang melemah malah berbusa2 ngomong alasan fundamental kenapa ternyata melemah. Kelihatannya sih pinter, jago, ngerti soal2 gituan. Tapi sebenarnya rugi atau untung, kagak ada hubungannya ama busa2nya analisis fundamental berbuih2 itu kan. Apalagi analisa teknikal yg ujugn2nya cuman tanda tanya, ha ha ha..
“Terjadi bullish divergence, pound akan reversal ke atas ???”
cape dehhhh..

Kembali ke volatilitas..
ternyata gak banyak orang yg merasa perlu memperhatikan volatilitas.
Gak ada yg ngeh, atau emang cuman gue doang yg merhatiin volatilitas sih ?
Well, kayaknya sih bukan gue doang. At least ada researchers di BIS (Bank for International Settlement) dan Citigroup yg mikirin volatilitas.
Yah gitu deh.
By the way, kayaknya volatilitas short term di market udah mulai membaik nih.
Kita lihat aja deh perkembangan minggu ini.
Good luck to us.

Money managers are just human :p

A quite nasty but funny e-mail exchange between Daniel Loeb, a hedge fund manager who manage a $ 4+ billion fund with Alan Lewis, a British money manager. This happened after Alan sent his CV to Daniel.
Enjoy.

—–Original Message—–
From: Alan Lewis
Sent: Tuesday, March 22, 2005 11:34 AM
To: Daniel Loeb
Subject: CV

Daniel,

Thanks for calling earlier today. Enclosed is my cv for your review. I look forward to following up with you when you have more time.

Best regards,

Alan

Alan D. Lewis
Managing Director
Sthenos Capital Ltd.

—–Original Message—–
From: Daniel Loeb
Sent: 27 March 2005 23:08
To: Alan Lewis
Subject: RE: CV

what are your 3 best current european ideas?

Daniel Loeb
Managing Member
Third Point LLC

—–Original Message—–
From: Alan Lewis
Sent: Monday, March 28, 2005 1:03 AM
To: Daniel Loeb
Subject: RE: CV

Daniel,

I am sorry but it does not interest me to move forward in this way. If you wish to have a proper discussion about what you are looking to accomplish in Europe, and see how I might fit in, fine.

Lesson one of dealing in Europe, business is not conducted in the same informal manner as in the U.S.

Best regards,

Alan

—–Original Message—–
From: Daniel Loeb
Sent: 28 March 2005 09:50
To: Alan Lewis
Subject: RE: CV

One idea would suffice.

We are an aggressive performance oriented fund looking for blood thirsty competitive individuals who show initiative and drive to make outstanding investments. This is why I have built third point into a $3.0 billion fund with average net returns of 30% net over 10 years.

We find most brits are bit set in their ways and prefer to knock back a pint at the pub and go shooting on weekend rather than work hard. Lifestyle choices and important and knowing one’s limitations with respect to dealing in a competitive environment is too. That is Lesson 1 at my shop.

It is good that we learned about this incompatibility early in the process and I wish you all the best in your career in traditional fund management.

Daniel

—–Original Message—–
From: Alan Lewis
Sent: Monday, March 28, 2005 4:08 AM
To: Daniel Loeb
Subject: RE: CV

Daniel,

I guess your reputation is proven correct. I have not been in traditional fund management for more than eleven years. I did not achieve the success I have by knocking back a pint, as you say. I am aggressive, and I do love this business. I am Half American and half French, and having spent more than half my life on this side of the pond I think I know a little something about how one conducts business in the UK and Europe.

There are many opportunities in the UK and Europe, shareholder regard is only beginning to be accepted and understood. However, if you come here and handle it in the same brash way you have in the U.S. I guarantee you will fail. Things are done differently here, yes place in
society still matters, where one went to school etc. It will take tact, and patience (traits you obviously do not have) to succeed in this arena.

Good luck!

Alan

—–Original Message—–
From: Daniel Loeb
Sent: 28 March 2005 10:23
To: Alan Lewis
Subject: RE: CV

Well, you will have plenty of time to discuss your “place in society” with the other fellows at the club.

I love the idea of a French/english unemployed guy whose fund just blew up telling me that I am going to fail.

At Third Point, like the financial markets in general,”one’s place in society” does not matter at all. We are a bunch of scrappy guys from diverse backgrounds (Jewish Muslim, Hindu etc) who enjoy outwitting pompous asses like yourself in financial markets globally.

Your “inexplicable insouciance” and disrespect is fascinating; It must be a French/English aristocratic thing. I will be following your “career” with great interest.

I have copied Patrick so that he can introduce you to people who might be a better fit-there must be an insurance company or mutual fund out there for you.

Dan Loeb

Money managerrr jugaaa manusiaaaaaa.. punyaa rasaaaa punya hatiii… kekekeke

Quality is paid well (?)

Competition, as any freshman economics student will tell you, brings down prices. It works for computers and for phone calls and for cars. Why not for hedge funds? Investors have been paying the same fees since practically the dawn of the hedge fund: a 2 percent management fee plus 20 percent of profits. Now that there are thousands of funds competing for capital, why hasn’t “2 & 20” become “1 & 10” or even “0 & 5”? . Read more…

Big Dogs: Quantitative investors

One of them :
James Simons
Renaissance Technologies
Size: $24 billion
Style: Quantitative investor
Location: East Setauket, N.Y.
Former math professor is king of the “black box” investors—funds that use top-secret algorithms and invest largely by computer. Shocked peers when he set a target of $100 billion for his latest fund. Charges 5 & 44, a fee structure without peer in the hedge-fund world—but nobody’s complaining. Net worth estimated at $4 billion.
More reading.

Recreational competition

Was participating in RTFF’s contest last year.
For the contest period of 1 month, i traded the demo account for only a week.
Banked a 81% gain, i ended at the 39th position, LOL.
Sometimes helped by Meymey to maintain open trades when i can’t reach the PC. The platform is very slow, i don’t like it.

(*)

BIS report on volatility

Continuing my recent research on market volatility, i found this report from Bank for International Settlement (www.bis.org). The report can be downloaded from this link (pdf).

My observation on this change in market bahavior is confirmed in the report:

The evidence presented in this Report shows that over the period from mid-2004 to March 2006 the volatility of short-term and long-term interest rates, stocks, exchange rates and corporate spreads has been generally low relative to the previous five to 10 years in both industrial countries and emerging market economies (EMEs). However, if the sample period is extended back to the last two to three decades, for which daily data are available, other periods in which volatility reached similar low levels can be observed. The exception is represented by the volatility of short-term interest rates, which has reached its lowest level for 20 years in all the main currency areas.

Regarding the possible causes of this are:

The sharp decline of financial volatility witnessed over the last few years may have benefited from increased liquidity of financial markets. Since this concept is not easy to operationalise, it is useful to look at several indicators.
Throughout the sample the turnover of stock markets has increased considerably, and now stands almost everywhere around the highest levels since 1990. In the foreign exchange markets volumes were virtually flat over the period 2000-02, but since 2003 an upward trend has emerged.
In recent years financial innovation and the rise of new classes of financial institutions, combined with a change in the trading behaviour of traditional institutional investors, have contributed to increasing market liquidity.

And something more interesting is this part:

A key issue is whether the current low level of volatility is a permanent new feature of financial markets or only a temporary phenomenon. The results suggest that important drivers of the volatility reduction seem to be structural, and may therefore have a permanent effect on volatility.

So ? Less volatility. Smoother charts ? My quick guess is this: trend following strategy may perform better on lower timeframe.
Another good material was posted in my friend’s blog here, tittled “Market Effects of Hedge Funds”.

A dead ended discussion

A dead-ended discussion about volatility on this Elitetrader forum.
There were only me, Truestory and ElectricSavant who added to the conversation.
Hundreds of hits on that thread, but nobody replied.
Nobody really understand about the market.
LOLLLL !!!!

Me:
pardon me,
im a newbie in this forum.
does anyone notice a much smaller volatility in forex’ intraday behavior ?
when i place a 300 or 500 bar average true range on 15minute charts of eurusd, gbpusd, usdchf, usdjpy, they are declining a lot since november 2006.
what may cause this ?
is it a more stable global economy ?
more liquidity in the spot market ?
less liquidity ?
please advice.
thank you.

TrueStory:
It’s natural. Volatility goes up and down in cycles. Since November, you’re right, it has come down some, especially in certain pairs. But it will rise again as we move to new congestion levels as economies and interest rates change…

Me:
TrueStory, thank you for your relieving answer.
I run a volatility-dependent system, and I have less-frequent trades these days. I start to worry about the market, will it move more in the future, more volatility like the past time..
I’m not quite understand the correlation between market’s liquidity and volatility. There must be some correlation, but is it negatively or positively correlated ?
Thank you..

TrueStory:
I believe the relationship between liquidity and volatility is too dependent on other factors to be easily defined. It also depends on whether you’re looking at short-term or longer-term volatility.

Me:
Ive been exploiting short term volatility for mechanical system design, but has never been learning what fundamental factors do determine volatility.
Could anyone please point me where to look at this, any books or other resources ? Thank you so much.

ElectricSavant:
yeah…it’s like this…what picture am I being presented? right?

More robust but less trades

Streamlining the codes to detect low volatility pairs as I mentioned in my previous post.
The codes now is as follows:

((!prm_volatility_filter) || (val_far_atr >= prm_tp_pips*Point)) &&

The system is now more robust. Less drawdown.
But i must admit, we may expecting less frequent trades as we are now able to isolate lower probability trades and avoid trading them.
Let’s see how it’ll do this week.
Good luck to us.

Alasan fundamental

Apa sih penyebab turunnya volatilitas di market semenjak november 2006 ?
Masih inget dengan temen gue yg namanya Asrul kan ? Yup, asrul, yg gue tulis di blog post sebelumnya yg berjudul a funny friend of mine. Seperti yg gue pernah sebut sebelumnya, dia itu market master. Perilaku market udah mendarah daging bagi dia dah, ha ha ha. Pokoknya doi tuh oke banget deh.
Berikut ini diskusi gue dengan dia soal faktor fundamental yg menyebabkan menurunnya volatilitas market :

darmasdt: ini ada penurunan volatilitas di semua pairs
darmasdt: gue udah kasih filter, tapi jadinya jumlah transaksi berkurang
darmasdt: semenjak oktober november 2006
darmasdt: ada apa ya secara fundamental ?
darmasdt: kok volatilitas menurun
darmasdt: panjang bar memendek, gitu lho
darmasdt: yg tadinya dalam 1 bar 15 menit itu panjangnya 15-20 pips, sekarang ini hanya 7-8 pips
darmasdt: kenapa gitu ya as
darmasdt: ?
asrul_daf: thn 2004 kan US kena double deficit
asrul_daf: policy naikin rate sampe 14 kali…disatu sisi bagus
asrul_daf: tapi sisi satunya malah inflasinya bengkak
darmasdt: ini kelihatan perubahan signifikan, menurunnya volatilitas itu sejak november 2006
asrul_daf: 2004-05, volatiliti bagus, karena US lg jelek,,,plus minyak juga naik
darmasdt: ic
darmasdt: trus
darmasdt: akhir 2006 apa yg terjadi ?
darmasdt: ekonomi dunia stabil ?
asrul_daf: 2006 setelah greenspan turun, diharapkan tdk ada lg kenaikan rate US.
darmasdt: ic
asrul_daf: kenyataanya mau potong rate juga bernanke msh belum yakin, karena takut inflasi malah naik trs
asrul_daf: trs ekonomi duni lagi mengarah ke asia, terutama Cina
darmasdt: oke
darmasdt: thanks as
darmasdt: siip banget lu
darmasdt: 🙂
darmasdt: top abisss
asrul_daf: namanya juga gosip news
asrul_daf: gw pikir udh jln live nya dar
darmasdt: belum as
asrul_daf: kyk yg lu bilang…STS emang bgs kalo pasar US yg leading ya, kmrn pagi Asia udh gerak , byk kena SL ya STS dar.
darmasdt: filter volatility nya barus selesai tadi subuh, gue gak berani live pakai yg cuek kayak kemarin gitu, terlalu pasrah ke market
darmasdt: iya. itu dulunya belum sempurna, terlalu mengandalkan siklus itu
asrul_daf: kalo ada market yg libur, mending systemnya ga dijalanin dulu kali ya dar
darmasdt: setelah kejadian drawdown seminggu kemarin, gue baru inget, ternyata memang ada handle yg belum gue kerjain. baru selesai tadi subuh
asrul_daf: kmrn kan pasca libur pasar Eropa, paskah

Emoticon nggak tampil di copy-paste ini jadi kesannya kaku gitu. Padahal banyak icon2 ketawa, nyengir dan sebagainya, diskusi yg santai tapi oke banget deh dengan master asrul.

Penurunan volatilitas

Gue pernah tulis di blog ini tentang turunnya volatilitas di market forex majors.
Nah ternyata hal itu lah penyebab drawdown dari STS seminggu ini, dan kurang cantiknya perilaku STS di pair USDCHF dan USDJPY semenjak november 2006.
Setelah mikir-mikir dan utak-atik statistik, akhirnya gue tambahin code ini di bagian pre-trade filternya:

// these lines are to avoid trades on low volatility pairs :
((!prm_atr_far_filter) ||
(val_far_atr >= prm_tp_pips*Point+
(prm_min_vol_spare*MarketInfo(Symbol(),MODE_SPREAD)*Point)
)
) &&
// end of code to avoid trades on low volatility pairs

Dengan penambahan filter seperti ini, ternyata STS mampu menghindari banyak sekali losing trades pada saat2 volatilitas menurun. Biasanya terjadi karena gerakan market tidak cukup volatile utk meng-hit TP, keburu lari lagi jauh2 dan malah hit SL.
Hasil modifikasi ini menjadikan STS sampai pada versi vy_6, menggantikan vy_5b yg masih terlalu mengandalkan siklus historical, tapi kurang peka dengan penurunan volatilitas.
Di versi vy_6 ini, performance STS meningkat tajam, profit factor menjadi 2.0 +/- 20% di beberapa tested pair.
Hasil nggak tidur selama 3 hari ini ternyata sebanding dengan hasil yg didapat. He he he..
Capek tapi hepi. Dan seperti biasanya: Good luck to us.

Found another bug

I’m so happy when last night I found this bug (line 255):

cond_exit = COND_EXIT_BUY;
close_order(OP_BUY, MAGIC_NUMBER_SELL);

Using this MAGIC_NUMBER_SELL on the last line, has made the system unable to close the appropriate BUY trades.
Now it has been fixed to be like this:

cond_exit = COND_EXIT_BUY;
close_order(OP_BUY, MAGIC_NUMBER_BUY);

and for documentation purpose, i’ve put these additional lines:

// vy5 – fixing prm_use_calc_tp wasnt working well in vy4
// – possibility to turn off all logging
// – fixing hedge filter for sell
// vy5b- fixing prm_exit_when_opposit on buy trades was wrong, now fixed
// – putting optimized values on external parameters

These things happen often because of the the copy n paste practice on the initial development stage. It is now named as vy_5b.
I’m replacing the previous vy5 version to the trading server now.
The change will take effect from tonight.
Good luck to us.

Trade only the price

This article in Covel’s website once again shows how profitable traders/fund managers do their trading.

Despite

I met with an old pro trader yesterday in his NYC office. He runs one of the largest clearing firms on the NYMEX. He has his unique way of doing things and clearly is not a trend follower. That said, his concern about knowing how to take losses properly echoed the wisdom of Wall Street’s great trend traders. His most interesting comment was about the word “despite”. He loved to see the word. For example, if you see the talking heads saying, “Despite bad news Apple stock went higher”, he would view that as an opportunity to go long even more. Conversely, if he saw “despite good news, Apple went lower”, he would go short. He wasn’t trying to preach fundamentals or “news” reading, but just wanted to pass along his insights from the last 20 years. Sure, it was short and simple wisdom, but then again most good Wall Street wisdom is that way, the hard part as he reminded me is the execution.

A quick note: DESPITE of whatever the news and fundamentals say, they trade the price. But this doesn’t mean they use technical analysis mumbo jumbo. Not analysis. Not prediction.