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The Day I Lost a Shit-ton of Money, Part I

ptotrading.blogspot.com

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Re: The Day I Lost a Shit-ton of Money, Part I

#71

Post by robryan »

quink wrote: post #59
notastartup wrote: post #55

Do you think technical analysis works? Look at the mountains, try drawing resistance lines, my god, you are able to predict when the mountain ridges are going to break through right past 9000! Are you Jesus?

Don't forget the magical term 'support'. Or 'Fibonacci levels'. Or 'resistance zones'. If I see another blog post by the brokerage firm I'm with about freaking 'supports' I'm going to hurl. Technical analysis puts everything from astrology through religion on to homeopathy to shame in its bullshittery. The most entertaining part is when they go on about the support levels between the currencies. "NOK-NZD is about to…

I figured that stuff was determined by looking at orders to buy at a certain price? If there is a large number of orders to buy currency at 5.30 from your example you would say that it is at least likely to stay or bounce until all the orders are run through?

Correct me if I am wrong, don't trade myself.

Re: The Day I Lost a Shit-ton of Money, Part I

#72

Post by crimsonalucard »

jqm wrote: post #63
notastartup wrote: post #55

Do you think technical analysis works? Look at the mountains, try drawing resistance lines, my god, you are able to predict when the mountain ridges are going to break through right past 9000! Are you Jesus?

If you don't think about technical analysis as charts and lines, but rather patterns or cycles of market (and human) behavior (which is of course what the charts and lines represent) you might see how technical analysis could have some validity. Are there patterns in markets? Are there patterns in crowd behavior? I think so. Others may disagree. Another point... if enough people believe and act on technical analysis…

You know what else has patterns? The weather.

Re: The Day I Lost a Shit-ton of Money, Part I

#73

Post by yummyfajitas »

AndrewKemendo wrote: post #53
consz wrote: post #16

Reading this sort of stuff from manual prop traders makes me laugh. It sounds so amateur hour. How in the world can manual traders ever compete against a short-term stat arb or HFT strategy? It just sounds like pure luck that any of them will make money. Also, is 130k really a huge loss? I run HFT strategies, and while it would definitely be a big loss even for one of my strategies, it wouldn't be a phenomenal outlie…

They aren't competing against it though, they are riding the same wave. Competition would assume that HFT's or stat arbs are market makers, doing pump and dumps, which is not the case based on HFT reserve holdings - the antithesis of arb. Is it less efficient? Yes. It is also orders of magnitude easier to get into. You need PhD mathematicians, computer scientists/engineers to build real hardcore HFT systems. The manu…

Stat arb is usually not a market maker. The simplest stat arb trade is a pairs trade, so let me use that as an example.

Suppose you do want to market make on a pair A,B. You notice they are out of whack so you open an ALO order to sell A and buy B. The market moves and both stocks go up in sync. You've now opened a short position on A with no offsetting position in B. Oops.

If you want to save part of the spread, you can often do add liquidity, then the minute you get a fill you can cancel and take liquidity on the other side.

I've tried this but I haven't made it work, though my strategies are pretty amateur (I only trade as a hobby).

Re: The Day I Lost a Shit-ton of Money, Part I

#74

Post by javert »

tjradcliffe wrote: post #36
joshu wrote: post #21

Earlier quoted context omitted.

Yeah, no. That's called anecdotes, because when you do understand probability and backtest these strategies, they are known not to work in the large. Stat arb is what happens when you actually do statistics, and these days it's got only a slim to nil advantage.

Trading is like the Israeli nuclear program: those who talk about it don't know about it, those who know about it don't talk about it. If technical analysis actually worked, you'd be able to find the "Technical Analysis Toolkit" for on GitHub, and... technical analysis would no longer work. A little bit of grepping around yields: http://ta-lib.org/ (Technical Analysis Lib). Ergo: if technical analysis ever worked (th…

An economics professor is walking down the street with a student. The student sees a $100 bill on the ground and tells the professor. The professor says, "Nonsense! If there were a bill on the ground, someone would have picked it up already!"

I actually think that in this case you are probably right, though. But I wouldn't bet my life on it.

Re: The Day I Lost a Shit-ton of Money, Part I

#75

Post by j_lev »

onetimeusename wrote: post #67

I lost a shit ton of money at the firm where I work right now almost a year ago. I wrote software that began issuing trades outside of where it was expected to and did not stop. In a panic, I forced the server it was running on to terminate its process but trades were still open in the market. They had to be manually closed. I feel sick to my stomach even writing this right now, that hour I was trying to fix the prob…

Well, for starters it sounds like you didn't act maliciously. You acted based on the sum total of your training and experience to that point. If your training or experience was lacking then this is an issue for which the company needs to take some responsibility.

Re: The Day I Lost a Shit-ton of Money, Part I

#76

Post by quink »

robryan wrote: post #71
quink wrote: post #59

Earlier quoted context omitted.

Don't forget the magical term 'support'. Or 'Fibonacci levels'. Or 'resistance zones'. If I see another blog post by the brokerage firm I'm with about freaking 'supports' I'm going to hurl. Technical analysis puts everything from astrology through religion on to homeopathy to shame in its bullshittery. The most entertaining part is when they go on about the support levels between the currencies. "NOK-NZD is about to…

I figured that stuff was determined by looking at orders to buy at a certain price? If there is a large number of orders to buy currency at 5.30 from your example you would say that it is at least likely to stay or bounce until all the orders are run through? Correct me if I am wrong, don't trade myself.

Nope, technical analysis of the usual sort doesn't look at the book at all. It just looks at the past prices and, if you're really lucky, past volumes.

Going past what's traditionally technical analysis, in that example at 5.30 it's possible that there's a wall of people. However, the trading in any intermediate currently pair between those, NOK-USD-JPY, for example, will negate that wall in no time at all for sheer volume alone and any artificially imposed walls based on this kind of numerology would be chopped down by HFTs looking for arbitrage opportunities in milliseconds.

If you're looking at a big pair like EUR-USD with a hypothetical wall at 1.25, for example, it's possible it might last for a little longer. But again, arbitrage across currency pairs - EUR-JPY-USD or EUR-GBP-USD or whatever - will wipe out any numerical niceties in marginally longer than no time at all.

That said the more TA traders are out there the more the actual investors (and with SPY having an annual volume 8.5 times its number of shares there seem to be too few of those) can get themselves a long-term good average of "Be fearful when others are greedy and greedy when others are fearful." just through regularly putting money aside and investing through dollar cost averaging in index ETFs/mutual funds.

Re: The Day I Lost a Shit-ton of Money, Part I

#77

Post by Dwolb »

peterkto wrote: post #8
jbuzbee wrote: post #4

No surprise to me that these guys win some and lose some. All they are doing is trying to predict the future of a stock with absolutely no knowledge other than a graph of price movement. If it's going down, it will continue to go down. It it's going up, it will continue to go up. It's a fools game.

Hey Jbuzbee, This is what I thought as well when I was initially introduced to the idea of technical analysis and day trading. I was very skeptical. I don't want to call myself a probability expert but after studying poker theory and reading mainstream works like Fooled by Randomness, I bought into the idea that it was just a bunch of a guys throwing darts and the "winners" whom were trying to sell all their BS were…

I feel like you're misunderstanding Fooled by Randomness. The results are supposed to look like steady gains in a tight distribution, but the super far out tails are fatter than the average person thinks. Therefore, typical traders take average risk with below average returns (relative to the risk one bears) whereas Taleb takes high risk with supremely above average returns (again, relative to the risk he bears)

Re: The Day I Lost a Shit-ton of Money, Part I

#78

Post by nandemo »

peterkto wrote: post #8
jbuzbee wrote: post #4

No surprise to me that these guys win some and lose some. All they are doing is trying to predict the future of a stock with absolutely no knowledge other than a graph of price movement. If it's going down, it will continue to go down. It it's going up, it will continue to go up. It's a fools game.

Hey Jbuzbee, This is what I thought as well when I was initially introduced to the idea of technical analysis and day trading. I was very skeptical. I don't want to call myself a probability expert but after studying poker theory and reading mainstream works like Fooled by Randomness, I bought into the idea that it was just a bunch of a guys throwing darts and the "winners" whom were trying to sell all their BS were…

> Being net positive 80% of all days traded with all your winners and losers falling in a relatively tight distribution -- luck can't create highly specific, repeated outcomes like that.

Yes, it can. E.g. you could sell deep out-of-the-money puts and collect a $1 premium day after day, say 99% of all days. Until one day a {terrorist attack in the US, humongous earthquake in Japan} happens and you lose more money than you ever made.

Re: The Day I Lost a Shit-ton of Money, Part I

#79

Post by enoch_r »

javert wrote: post #74
tjradcliffe wrote: post #36

Earlier quoted context omitted.

Trading is like the Israeli nuclear program: those who talk about it don't know about it, those who know about it don't talk about it. If technical analysis actually worked, you'd be able to find the "Technical Analysis Toolkit" for on GitHub, and... technical analysis would no longer work. A little bit of grepping around yields: http://ta-lib.org/ (Technical Analysis Lib). Ergo: if technical analysis ever worked (th…

An economics professor is walking down the street with a student. The student sees a $100 bill on the ground and tells the professor. The professor says, "Nonsense! If there were a bill on the ground, someone would have picked it up already!" I actually think that in this case you are probably right, though. But I wouldn't bet my life on it.

I love this joke, because on the surface it's making fun of economists whose theories blind them to an obvious reality. But how often does anyone actually find a $100 bill on the ground?

Re: The Day I Lost a Shit-ton of Money, Part I

#80

Post by lmartel »

javert wrote: post #70
onetimeusename wrote: post #67

I lost a shit ton of money at the firm where I work right now almost a year ago. I wrote software that began issuing trades outside of where it was expected to and did not stop. In a panic, I forced the server it was running on to terminate its process but trades were still open in the market. They had to be manually closed. I feel sick to my stomach even writing this right now, that hour I was trying to fix the prob…

Were you able to keep your job after that? (If you're willing to talk about it; if not, I understand.)

From his phrasing ("firm where I work right now") it sounds like he was :)
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