Improving Market Structure - December 12, 2011

[QUOTE=nickola.pazderic;19231]I went through EV/VIT archives and found you as one of the earliest posters.

Emotional state? I'm a natural bear. So, naturally, I'm uncomfortable going long and always sell out of my positions too quickly.

I'm delighted to have a re-entry permit. But I'm thinking seriously about slapping on a TZA hedge. We might trend down, down, down in a ring of fire.

And you?[/QUOTE]

Hi Nickola,

I am quite long in the tooth at this investing game, 22 years full time, and I have been through the complete gamut of emotional experiences.

This long apprenticeship has made me VERY, VERY conscious of the value of the non-emotional signals of the Robots and reduced my own inputs to virtually nil. (I still tend to day-trade a little when I get bored, but this will have to stop !).

Hedges are for investors who lack confidence in their systems IMHO and are subject to our emotional state at the moment in time we enter them . We have stops to replace hedging.

How confident am I in the Robots ? I only trade the 3X ETF's which gives you some idea.

The most important thing I have learned in 22 years ? ALL HUMAN EMOTION MUST BE CUT FROM THE PROCESS.

In other words, I am not allowed the luxury of an opinion of the market direction. !!!!!

Trev.

(The only thing I am concerned about is that the Robots do not perform as well going forward as they have in the past but if they only perform half as well I will be very pleased) :O)

[ATTACH=CONFIG]11847[/ATTACH]

An hysterical little kitty...

[QUOTE=manucastle;19238]Hi Nickola,


(The only thing I am concerned about is that the Robots do not perform as well going forward as they have in the past but if they only perform half as well I will be very pleased) :O)[/QUOTE]

Trev,

This is my concern, too. Let me list them all in random order:

1. How could something so wonderful/good happen to me? (OK, some psychological set up that allows for child-like pleasure should it succeed).

2. I'm sure no matter what, I've missed the boat. (This is a clear anxiety that a lot of post-boomers feel. I got to Taiwan/Asia too late for the biggest growth but too early for "China", 1989).

3. If an investing system really allowed us only 20% per year, we'd probably own the stock market via compounding returns in 30 years or so. Think about that!?

4. Look at all those failing hedge funds, wouldn't they love to realize returns similar to those posted on the front of the website?

5. Morales and Kacher are setting up managed accounts. Now I know we operate in a different time frames, but aren't we filling up one side of the boat or acting like the apocryphal lemmings herding ourselves into sea?

6. The stock market is....[ATTACH=CONFIG]11852[/ATTACH]

Truly, having been an academic for years, who saved pennies and dimes under the mattress, the stock market has always seemed like one of the above. In fact, as an anthropologist I can assure everyone that belief holds up the entire edifice. For these reasons, I am a predisposed bear.

7. My spouse will run out of patience with me, and something like following will occur:

[ATTACH=CONFIG]11851[/ATTACH]


Fears. Petty fears. Nightmares even.

Perhaps all these fears stem from a simple and undeniable fact: the entire edifice is so enormous I cannot imagine it. I cannot reconcile Brussels, London, New York, Shanghai, Tokyo, New Dehli, Dubai etc... with the comfortable downstairs office where I operate. Trillions of dollars, billions of people, jillions of dreams/desires/diseases...Yet here we are.

Pascal and Billy have made this available to us. A gift to people. As Pascal writes in the book:

[I]...the stock market provides people with a simple way to take part in ...high growth sectors by investing in companies that offer solutions to...problems[/I]

This is a beautiful vision, and it sustains my hope.

[QUOTE=nickola.pazderic;19249]Trev,

This is my concern, too. Let me list them all in random order:

1. How could something so wonderful/good happen to me? (OK, some psychological set up that allows for child-like pleasure should it succeed).

2. I'm sure no matter what, I've missed the boat. (This is a clear anxiety that a lot of post-boomers feel. I got to Taiwan/Asia too late for the biggest growth but too early for "China", 1989).

3. If an investing system really allowed us only 20% per year, we'd probably own the stock market via compounding returns in 30 years or so. Think about that!?

4. Look at all those failing hedge funds, wouldn't they love to realize returns similar to those posted on the front of the website?

5. Morales and Kacher are setting up managed accounts. Now I know we operate in a different time frames, but aren't we filling up one side of the boat or acting like the apocryphal lemmings herding ourselves into sea?

6. The stock market is....[ATTACH=CONFIG]11852[/ATTACH]

Truly, having been an academic for years, who saved pennies and dimes under the mattress, the stock market has always seemed like one of the above. In fact, as an anthropologist I can assure everyone that belief holds up the entire edifice. For these reasons, I am a predisposed bear.

7. My spouse will run out of patience with me, and something like following will occur:

[ATTACH=CONFIG]11851[/ATTACH]


Fears. Petty fears. Nightmares even.

Perhaps all these fears stem from a simple and undeniable fact: the entire edifice is so enormous I cannot imagine it. I cannot reconcile Brussels, London, New York, Shanghai, Tokyo, New Dehli, Dubai etc... with the comfortable downstairs office where I operate. Trillions of dollars, billions of people, jillions of dreams/desires/diseases...Yet here we are.

Pascal and Billy have made this available to us. A gift to people. As Pascal writes in the book:

[I]...the stock market provides people with a simple way to take part in ...high growth sectors by investing in companies that offer solutions to...problems[/I]

This is a beautiful vision, and it sustains my hope.[/QUOTE]

Hi Nickola,

If I ever get too bullish I know who to contact !!!! :O)

Trev

Nickola,
The robot needs sustained up or down trends to make its largest returns. I don’t really care if we are heading into apocalypse or into a new 1982 secular bull market. I am confident that the 20 DMF and the robot will capture such trends early. I would even prefer the apocalypse and take a small loss in this choppy sideways mean-reverting environment before cashing big in a crash.
All I see in my analysis is that we are objectively closer to a rally of uncertain duration than a waterfall. All reward-risk measurements do favor the long side. I trade my plan accordingly until proven otherwise and shut off the billions of noises and emotions running on the planet.
Billy

Billy,

Thanks for the note.

In fact, I have taken this course over the past week or so. I'm only tuned into this website and Charles Kirk. His notebook alerts me with a groan, and, as you know, he is saying the same things about Mr. Market as you.

Presently, the groan alerts:

[I]Largest buy program of the day makes a final hour appearance to close us back within the range and above the 20 day support[/I]

Fears. What are these things that we cling to? Or do they cling to us? Our little ghosts. Electro-chemical impressions upon the recording apparatus called the brain. We can use them as the stuff of art and project them with our media devices, our voices, our computers, our photographic collections. and for a little while we're free.

I made my fears public to be laughed away (thanks Trev).

Be gone fear. Good riddance.

Nickola,

Try converting your stop percentages - say -2.48% into dollars and imagine: minus that amount amount in RED on your computer screen before you make the trade - if you are not comfortable with that; lower the trade amount until you are.

Another trick (if you have a good system - which you do with the Robot) is calculate the loss in dollars and consider it gone ........ you can be pleasantly surprised if the 3:1 risk/reward ration works in your favor.

greg

[QUOTE=nickola.pazderic;19252]Billy,

Thanks for the note.

In fact, I have taken this course over the past week or so. I'm only tuned into this website and Charles Kirk. His notebook alerts me with a groan, and, as you know, he is saying the same things about Mr. Market as you.

Presently, the groan alerts:

[I]Largest buy program of the day makes a final hour appearance to close us back within the range and above the 20 day support[/I]

Fears. What are these things that we cling to? Or do they cling to us? Our little ghosts. Electro-chemical impressions upon the recording apparatus called the brain. We can use them as the stuff of art and project them with our media devices, our voices, our computers, our photographic collections. and for a little while we're free.

I made my fears public to be laughed away (thanks Trev).

Be gone fear. Good riddance.[/QUOTE]

The big difference with Charles Kirk is that he is a reactive trader while we are trying to be proactive.
He knows the tricks of reactive trading well. The robot is mastering the nuances of proactive trading.
If you mix the two, you'll be confused more often than not.

About our inner fears, they must be part of our trading plan. Is the initial worst case stop loss too big for your stomach? Just bite a smaller chunk in the position and be ready for smaller thrills. That's proactive trading.
Billy

Thanks for taking the time, and I hope I didn't wear out my welcome. All the thoughts are deeply appreciated and will be subject to continuous consideration. Cheers.

The big difference with Charles Kirk is that he is a reactive trader while we are trying to be proactive.
He knows the tricks of reactive trading well. The robot is mastering the nuances of proactive trading.

If you mix the two, you'll be confused more often than not.

Billy, this last sentence is a very interesting comment and one that I hope you will flesh out over time.