January 01-31, 2017
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|Jan 14, 2017
Integrity Jump-Start Kit
I'm wondering if you can support me in getting back some integrity. Or at least a jump start.
|Thank you for raising this issue.
You might consider implementing the Integrity Jump-Start Kit for a week
to see how it goes - and then reporting back to FAQ with your
Integrity Jump-Start Kit:
1. Tell the truth.
2. Keep your agreements.
|Jan 13, 2017
i need some insights from you about your Govopoly model that is in elliptical equilibrium :
- two phases of 41 days each
- the first it your when duckweed fill the pond when exponential is leader
- the second when clear water transform the pond in a mountain
lake when logarithmic is leader and then starts from the beginning
I need some insights about this thinking in order to build a system model
|Thank you for raising these issues.
I do not know what you mean by the term, Elliptical Equilibrium.
You might consider developing some familiarity with the basic vocabulary and concepts of System Dynamics.
For example, see: https://en.wikipedia.org/wiki/
|Jan 12, 2017
Optimizing on Recent Kelly
I replicated both strategies of the Trading System Project to the penny.
I optimized the parameters of both systems for 25 commodities for the
past 27 years (1990-2016).
I back tested the Support-Resistance System with a portfolio of the 25
commodities using the optimized parameters for each.
I used 2% risk per trade, 1,000,000 dollars as starting capital and a
0.5 skid fraction for executions in the portfolio backrest.
Trading costs, fees and taxes were ignored in the test.
The results of the backrest are:
Max DD: 42.03%
I optimized the portfolio of 25 commodities using the same look-back
I took the backrest with the optimal settings (optimal: Slow=160,
Fast=110, applied on all the commodities).
All other things unchanged, the results of the backrest are:
Max DD: 34.00%
I also tested the portfolio using the Kelly criterion (K% = W-(1-W)/R)
for position sizing instead of fixed fraction.
The way I calculated K% was as follows:
a) Individual back test for each commodity, trading one contract.
b) I calculated ‘R’ from risk adjusted total profit/total loss. That
means I divided every profit and loss with the initial dollar risk of
that trade. This way I got total profit/total loss in terms (multiples)
c) I created a theoretical portfolio that trades all those products
that have positive individual K% (positive expectancy). This way the
theoretical portfolio was dynamic. As time went by it selected positive
K% products and left the ones with negative K%. All trades used one
contract as position size.
d) I calculated the portfolio K%, using all trades that were taken in
the theoretical portfolio.
I used individual optimum parameter settings (like in the first case).
I used the calculated theoretical portfolio K% as the fraction for
position sizing for the next trade in the ‘real' portfolio backrest.
As in the case of the theoretical portfolio, trades were taken only in
those commodities that showed positive individual K% in individual one
All other things unchanged, the portfolio gave the following results:
Max DD: 86.67%
*Note: the closed balance of the account suffered a drawdown greater
than 100% (103.76%) on one day. Entry signal was not issued on
day. A next day closing of another position pulled out the balance from
I tried to play with the risk parameters of this last test.
a) I weighted the portfolio K% for the next trade with the K%-s in the
individual tests, so more risk was taken for commodities performing
better in the past.
b) Tried to maximize the portfolio K% for the next trade.
c) Tried different fractions of portfolio K%.
All of the above reduced volatility, however reduced return as well,
altogether ending up with lower MAR values.
Considering the results above, I was wondering:
1) What is the difference between choosing individual optimums over
choosing a single optimum for the whole portfolio? The robustness of
the latter? Individual optimums were chosen based on robustness as well
and this way the system produces better results. Is it the trader's
2) Do you see any logical shortcomings of the way I calculated K%?
3) Does the Kelly criterion have any added value over fixed fraction
bet sizing when speaking of trading? Under ‘added value’ I mean in
terms of MAR.
Ed, thank you for your time, as always.
|Thank you for sharing
Dynamically optimizing portfolio selection on recent
performance may add considerable complexity to the system and may also risk missing moves
that sometimes arise from long-dormant instruments.
For example, your one-day 100% drawdown may indicate a glitch somewhere in your
position sizing algorithm.
You might consider taking your feelings about <searching for a perfect fit> to Tribe as an entry point.
|Jan 9, 2017
Thanks for taking the time to read this email.
I'm a 19-year old student from Canada who has been trading under my
father's tutelage for the past 4 years (both of us would consider
ourselves trend followers) with varying success.
I recently stumbled upon this video back-testing Richard Dennis' Turtle
Trading Strategy from 1983 to 2014, with the results showing poor
performance for the past 6-7 years. With my very limited understanding
of programming, the video's maker did seem to implement the
trend-following strategy correctly.
So what I'm basically trying to ask here is: Is the Turtle Trading
Strategy no longer viable today? Did the video maker not implement it
correctly? Why does trend-following as seen in the turtle strategy not
appear to "work"?
P.S. Huge fan of your excerpts in Trend Following and Market Wizards
|Thank you for raising
I wonder exactly what you mean by "viable" and how you measure viability.
You might also consider reading the article directly below.
You might consider taking your feelings about uncertainty to Tribe as
an entry point.
|Jan 9, 2017
Death of Trend Following
It gets to a point where you just have to laugh. After two years of
slow returns, the boo-birds are coming out again and investors are
pulling money out of trend following funds. November saw the biggest
monthly outflow in three years.
I’m coining a phrase for this repeated investor irrationality when it
comes to bailing out of trend following due to sluggish short-term
performance - “Same Sh--, Different Drawdown”.
Historical trend following performance speaks for itself. Saying it
doesn’t work or it’s dead means you haven’t done any research or work.
Sadly, many investors don’t do any work but simply chase short-term
Over the past couple of years, trend following has struggled so now
they’re throwing a fit and pulling money out. Forget the long-term
diversification benefits or outperformance of buy-and-hold. Short-term
performance is the only thing that matters to most people.
Fortunately, investor behavior can serve as a contrarian indicator.
Right now, I believe it’s serving us, yet again, by signaling a buying
opportunity for trend following.
Excessive Negativity Serves as a Buying Opportunity
Investors have withdrawn capital from trend following funds and have
declared it dead many times over the past 15 years: mid-2000, early
2002, mid-2004, mid-2007, early 2010, late 2012 and early 2014.
There are many examples of this before 2000, but I think you get the
point. Whenever trend following, or any other investment for that
matter, goes into a losing streak, people declare it dead and bail out
- often, right near the bottom. It’s actually hilarious to me.
Trend Following Dies
|Thank you for sharing
For additional information on this topic, you might like to see this article.
|Jan 9, 2017
I recall our talk about seducing women. I consider seduction a form of
control, since one person tries to move another person to act in a
certain way, according to his/her own interests.
And in Tribe we do not control people. I remember having a hard time
trying to integrate both.
Maybe you can share your ideas about control and seduction in a TTP
frame. As I write these lines I recall principles of Ericksonian
hypnosis (fully accepting the client and their beliefs), and Kaa the
snake from Jungle Book (trying to lunch Mowgli).
|Thank you for raising
In the TTP Intimacy-Centric model, we experience, share and receive
feelings without trying to change them.
We strive for connection, rapport and intimacy rather than for control.
In the Control-Centric model, you try to bend another person to your
will, typically through manipulation and gaining trust.
For an example of Kaa working the Control-Centric model on Mowgli, see:
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