Ed Mamula.com

It’s official. I am sick of the stresses of 24 hour trading on a short term chart. In my opinion, Tradestation is not designed with traders like me in mind. Now, if my returns had been stellar, I suppose I could soldier on…however, things have been very volatile, and when I tally everything up, I have earned roughly $5000 over the last 4 years as a systems trader. Well that beats the market, so there’s that…but then again, stuffing my money under the mattress and getting a second job at McDonalds would have been more lucrative.

Well why has currency trading been stressful while investing for retirement via an IRA seems relatively easier? I think it boils down to the idea that the strategy employed in the IRA (buy and hold) would ultimately work if given enough time. That could never be said about a short term system that could fall apart at any given time…

And so, as I was drafting some guidelines for the next iteration of my active trading, I read the Ivy Portfolio and noticed the launch of the GTAA ETF….

For the record here are those guidelines:

No leverage
No intraday trading
No drama (Usually related to gun-slinging “discretionary” trades with or without high leverage)
No monthly fees
No proprietary platforms

I have decided to use GTAA as a benchmark for my own Tactical Asset Allocation model. For now, I only have an absolute returns version of my model, and GTAA is an absolute returns fund, so the benchmark is appropriate. However, I also have my eye on the model over at MarketSci, which is likely to be geekier and more elegant than my absolute return model, but nevertheless, for now, I will be using that model as a secondary benchmark. The positions for my model for November 2010 are :

VEU / VWO

The model (if it can even be called that at this point) always purchases equal parts of the top two assets, so clearly there is some room for improvement.

To reiterate, this is never investment advice.

More to come…

I’ve always been fascinated by how many major scientific and technological advances seem to be the result of accidents or dumb luck.  The discovery of penicillin, vulcanized rubber, plastic, and corn flakes come to mind.  Please do check that link…it makes me laugh out loud.

“…

He was in the process of boiling wheat in 1894 in an attempt to create an easily digestible bread substitute when he came across a discovery that would lead to Kellogg’s Corn Flakes.

He had boiled some wheat with the intention of making dough with it and accidentally let it stand for several hours. The wheat became softened, tempered. He decided to put it through the regular rolling process anyway for baking. When he rolled it out, however, he noticed that the individual wheat berries in the mash would roll out into flat, wide flakes. He figured he’d bake them and see what happened. The result was a crisp, tasty, easy-to-eat cereal product.

”

I always like to think that if I tinker around long enough with trading systems, I”ll make a mistake that will prove to be a gold mine.

 Cable Glider is the result of adapting the Turtle System for an intraday market.  I accidentally discovered that by shifting the price channel and anticipating breakouts, the returns were massively improved.  I guess that this wasn’t an accident, but it was the result of testing some “out of bounds” parameters.

Euro Ranger has a MACD filter in it that, to this day, I have no blessed idea how I came up with it.  These types of things are usually the result of trying to fix code that doesn’t work the way that I envisioned it…meaning that I’m kind of lazy like W.K. Kellogg.

Darth Fader works very well in the natural gas market.  It’s only after I tested it there that I realized I was testing a parameter set that was taking the first available profit, and not holding for a longer period as I had originally intended.  It turns out that both methods work, but the accidental one works better.

Now surely trading systems are not rocket science, and they are nowhere near as important as antibiotics or Coca – Cola, but it sure is nice to think that if you just keep tinkering, you might one day be the one shouting “Eureka!”.