Premarket call May 08, 2011: all the precious metals up in the overnight trade

building on Friday’s momentum (or putting in the first peg of support) all the precious metals are up in the overnight trade; silver is in a perfect “max pain range compression” stage here, ready to break out of Friday’s relatively tight range in either direction with advantage

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Managed risks?

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The risks now?

• Risk of being left behind if the fear was an anomaly and there is now the mother of all buying opportunities: my strategy? Continue to trade intraday with no overnight risk, at my usual levels of risk, in large cap US companies, and broad index ETFs, in either direction based on daily directional momentum.

• Risk of being crushed in longer term positions. My strategy: honor the ruleset of ETF2, and take up to 2 signals per cycle in the mechanical ETF systems at usual risk levels.

• Combination of 1&2: this is what I ALWAYS do anyway; I conclude that the combination is robust and useful. Particularly when circumstances conspire like Wed-Fri to produce over 100R in 3 days will no overnight risk.

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Reflecting on self-directed leadership in a military college environment (an action research approach)

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The purpose of this assignment is reflect upon my learning through this course and to describe what I am doing to provide for the development of leadership capabilities in those who look to me for direction and guidance. My professional work centers on preparing Army organizational leaders for a world of complexity and uncertainty, and specifically in designing a teachable curriculum that satisfies both the accreditation system and the needs of individual students and faculty. As a result of many cycles of action research involving a variety of stakeholders, I have been designing curriculum that seeks to maximize the opportunities for student and faculty Voice in all phases of the classroom experience, including: design, preparation, delivery, assessment and follow-through. Because the strategy represents a significant shift from the traditional methodology, I am finding many leadership challenges and opportunities throughout the program. I will explore a number of important themes and strategies in this paper.

Chaos and complexity theory point towards a need for multiple points of view and an accommodating culture and practice in order to account for uncertainty in the world. Leaders set the stage for an organization that seeks to thrive under these conditions and therefore become primary leverage points in setting the conditions for success. Because our students are not objects at a distance,  not third-party objects of study but rather thinking, feeling human beings with insights and experiences and discretion, we have shifted our design team composition to include routinely groups of students in the form of focus groups and co-researchers in the action research tradition. Incorporating students in the design of lessons that will be taught that academic year represents a paradigm shift.

I am shifting our feedback system to incorporate more qualitative assessments from both faculty and students. This is a departure from our standard practice of relying exclusively on quantitative instruments. Our new feedback system for programmatic assessment is much more from the mixed methods tradition, which seems to me to be central in going forward in our efforts to understand and appreciate complexity. My intent is that the mixed methods approaches in the classroom will expose students and faculty to this methodology as a way to prepare them with a useful tool beyond the boundaries of the college environment.

I am systematically pursuing outreach and connections with faculty and curriculum designers from other teaching departments  in order to establish a network-centric approach to integrated curriculum design. This is taking the form of a leaderless, self-directed workgroup, with group norms and processes emerging to take the place of formal assigned individual hierarchical leadership. This self-directed work group presents recommendations of consensus to the traditional leadership of the College and is proving to be more and more influential with each successful project.

Because collaborative and adaptive leadership represents a shift in the cultural and operational perspective of the college, students and faculty, it is necessary to build up a resource and reference base that can be used to justify and support our inquiries. We are building a set of wiki’s and blogs that are interactive in order to prepare for our new lineup of lessons, to support collaborative learning inside the lessons dynamically, to document the results of our in class inquiry and to expand the knowledge base both for future lessons and for the field force in general. There is evidence to show that our students and faculty are getting the hang of this technique. This is reshaping the way we approach lesson preparation and our resource base and it is carrying over into our distance learning and remote site teaching strategy. Remote site teachers now have access to our growing experience base on the wiki and blog and can use that in their classroom for air where they do not possess personal experience and expertise.

Finally, I am working with interested others in formalizing our new approaches into college policy and SOP in order to lock in our games in the college’s infrastructure. Without these changes, initiatives are only as enduring as the energy of the interested parties. By incorporating them into our explicit rules and policies, we can institutionalize changes and ratchet our way towards success.

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A reflection on action research “storytelling”

What follows is a 1st person, stream of consciousness  reflection written to my mentor & committee chair.  

I describe  what it was like to record a 10 min video “telling the story” of  some preliminary findings emerging from my action research cycles into curriculum and adult learning. 

The video is hosted  at YouTube.

It will be shown at an international conference in Athens, as part of the Collaborative Action Research Network (CARN) annual conference, as part of a bundle of reports from the Future(s) of Education project, an international  participatory action research network.  

Dr Alana:  

i am just glad to get it out of my head  

i had a real out of body experience recording that one;  

i  am a very effective briefer in person, because i can read the audience pretty well.  

i have recorded hundreds of mini lectures etc for my business and for use here at the college on various topics.

i have never, ever needed more than a single take to record, decent and sometimes even inspired voice-overs  until  last night and that briefing.  

I literally needed about 30 takes to get thru it; most i stopped when less than a minute into it because the tone just didn’t feel right

 i think it has to do with being a fish out of water, and the difficulty i felt in trying to tune my story for an audience i couldn’t see, but more importantly didn’t have empathy for

because the audience characteristics still feel fuzzy to me, i couldn’t call up the right tone, voice, persona to apply  

 this caused me to have almost a split personality in the moment, when i am ordinarily dialed in

 i had a “talking part” and a “look ahead part” that is concerned with shaping the transition to the next point/slide  

but now i had a disconcerting 3rd part that was trying to anticipate the possible reactions of an unfamiliar, and hard to imagine audience  

this is what made me feel so out of sorts

 until i “wore out” the last, 3d part and was able to trust in just telling the story, and accepting the vulnerability of knowing that i couldn’t know the audience, i found i just couldn’t get thru it.  

this is the same phenomenon I spoke with Prof Mike Wesch, the digital anthropologist at Kansas State University, and world thought leader on social dynamics in social media: the camera eye represents the unlimited, unfathomable infinite future of all possible audiences across time and space who can be looking in on the “telling moment”.  

in a sense, its like coming face to face with the unblinking eye of God and wondering what she is thinking  

 it is trust that lets us get thru that moment, the accepting of vulnerability, that creates the empathy that hopefully fills the story, as told, with hope.  

that’s a clumsy way of trying to express my meaning of the risk and vulnerability to “telling” and why it can be such a powerful learning moment, and why we need to model it, embrace it, encourage it, and support it. 

Your “producer’s draft” was exactly what i needed to be able to get out of my own comfortable fishbowl; 

you gave me a bridge to the audience that i could not create on my own.  

this has become an interesting reflection to me already  

please put the video on the website, and any or all of this reflection as you deem suitable  

have a great time at the conference!

Traders roundtable discussion: the issue of optimization in research

We were having a traders’ roundtable discussion on the topic of researching potential trading systems and the issue of optimization came up. This is a very important topic for traders who want to apply a systematic approach to trading markets. Here are some of the highlights of that discussion for you to consider as you prepare your trading strategies.

Typically when we think of optimization for a trading system we are looking at a process that incorporates multiple variables, parameters with different settings possible and perhaps a number of market filters or conditions which taken together with an exit strategy give us a multitude of ways to trade a particular concept or idea.

It normally begins with an idea the trader has based on insights fromtheory or from reflective practice where he believes the system gives a persistent advantage compared to the average market return  of simply buying and holding. It is also possible however that the edge may come from a brute force data mining operation that finds a statistical edge in some combination of market conditions. In other words, the insight comes from the result of massive computations and not from an intuitive or academic insight.

In either case , what we have is a system of multiple components, each of which can vary, and on an initial pass through with middle-of-the-road parameter settings we find a persistent edge in multiple markets with a statistical significance. Human nature being what it is, we would want to start testing different parameter settings for each component in order to determine the best mix for the most robust return and to find which of the parameters seem to have the most power when it comes to influencing the results. In statistics, this general approach is called factor analysis or principal component analysis.

In theory, you would want to find the absolute maximum return by finding the absolute optimum setting for each of the possible parameters and then take that into the market to begin trading. Taken to an extreme, this can produce a phenomenon of curve fitting or over optimization. What you can end up with is a system that would be perfect for the unique set of data conditions of the test. The problem of course is that the future may not ever show you that same data set again in your over optimize system will under perform much to your surprise.

The usual response to this phenomenon is to conduct testing with out of sample data. In other words designing the system on one data set and refining it to a certain degree and then testing it on a completely new set of market data to see if the edge persists. If you were systems development practice find you always discarding your systems after the out of sample test, it probably occurs as a result of over optimization.

In practice then, we want to find the trade-off between robustness of performance in multiple market conditions with out of sample testing that yields a persistent advantage in multiple market conditions but without trying to overturn the system for ideal conditions.

A way to keep this systematic approach in tune is to continue to monitor performance in a feed-forward approach that examines actual trading results to see how the performance results compare to the test and confirmation performance curves.

The bottom line: the more you rely on automatic trading systems, the more important your research and validation process becomes since you will not be using inexperienced traders override protocol to keep you from going off the deep end.

an exercise in “sense-making”: grappling with “design” and “planning”

a number of faculty and officers gathered around a whiteboard to try to create their own practical sense of the distinction and relationship between design and planning.  The series of diagrams reflected in the image unfolded over a discussion of several hours as we tried to connect the doctrinal and scholarly terms to our own words and experiences, to forge a link of meaning between doctrine and practice.

New feature: indexed links to Youtube videos

I should have done this a long time ago. I created 2 new pages on the blog to collect an indexed list of the videos of mini-lectures for my doctoral research and my Army classroom professional stories. These will be a more organized way to layout a menu of choices for students and interested parties to view my stuff in the areas of force management and force sustainment.

I have probably a hundred refined little speeches I tend to give in various classes that reflect my best practices from my active duty service, but also some things that have emerged as refinements in the schoolhouse through engagement with the great officers who share their perspectives of the war and discuss theory and practice.

I find myself in class hurrying at times to squeeze these in, out of a sense of duty. It’s not always good pedagogy and it would be nice maybe to let the students know about them ahead of time so that we can engage in dialogues of their choosing based on their needs instead of always doing what I want to do.

Time to relinquish the mike a little more? here is a way to offer my humble “greatest hits” and let them follow their interest.

There maybe some value add for my fellow instructors too on my areas of competence, since our faculty are responsible for a wide range of areas; so wide in fact that they don’t have direct personal experience in all of the fields.

Example:our faculty teach sustainment lessons at strategic, operational and tactical levels of war; they cover maintenance, transportation, supply, medical, personal, explosive ordnance disposal, band, finance, personnel, contracting, and all elements of force management; design, plans and operations; Joint and army support operations; plus whatever their elective course specialties are. faculty development programs are an important area of concern for us.

that’s a pretty full plate, so perhaps these videos can be of some help to them as well.

Profitable ETF Trading Strategies: the power of back testing

The purpose of this article is to make the strongest case possible for back testing as a crucially important way of understanding your system. In other articles I will suggest that too much back testing is bad and that you can learn too many wrong lessons if you’re not careful. That said however, back testing is an essential part of a complete trading plan. 

Back testing can take many forms. In some cases an experienced trader who is considering an idea that is similar to previously reliable systems may only need a minimum of back testing to be convinced that idea is worth trading with live money at a reduced risk level. There is synergy in professionalism and experience that should not be neglected or underestimated. 

But even an experienced trader should carefully consider the results of a detailed backtest when taking on a new strategy or operating in a new time frame in order not to be misled by the constraints of his own experience. 

Some people are not convinced by the quality of an idea unless they see it work over multiple time frames, in multiple markets and in all different market conditions. Others are satisfied that an idea only has to work within the definable set of parameters to be tradable. 

This is a matter of personal taste since it comes down to a personal risk of capital rather than an academic exercise in the pursuit of absolute truth. Leave that for the academics. We want to make money as traders. 

Properly constructed, back testing will identify whether or not this idea has a persistent edge, and under what conditions it will manifest. By properly controlling for different parameters we can isolate those which add the most value to this particular proposition. We can test for robustness and see how sensitive the edge is to changing parameters. 

We may be able to identify specific market conditions where the edge is significant and tradable. We may be able to identify a subset of the total market trading targets in which this idea works best. 

Back testing should tell us what the win rate percentage is likely to be, the importance of slippage and commissions, the trading frequency, the maximum adverse excursion, the longest normal winning and losing streaks, and both the maximum and average wins and losses. 

One of the most important result sets for analysis is the distribution of results in the form of a frequency histogram. We would like to see a somewhat normal distribution that has most of the trades clustered around the mean and with an orderly profit tail to the right that suggests we have the possibility of large winning trades. We would also like to see a carefully controlled left tail of losses which suggests that we are able to engineer our risk carefully. 

Having this kind of data in hand allows us to determine where, when and under what conditions this idea is tradable and what the expected results should be. When we proceed into live market trading as a prototype system with much reduced real risk, we can then compare actual results with live money to backtest results to see if the trade can be managed as intended. 

Under these kinds of conditions and looking for this kind of information, back testing is an important part of the traders’ repertoire.

Profitable ETF Trading Strategies: understanding your span of control

The military describes managing current operations as command and control. One of the most important concepts in command and control is the idea of span the control.

 

Span of control describes how many simultaneous, subordinate operations you can successfully manage at appropriate level of detail given the current situation of uncertainty, stress and pressure.

When you are inside your effective span of control, it is easy for you to be aware of all the important events occurring in your environment and for you to make decisions in time to have a positive effect on the outcome.

When you are at the limit of your span of control, there is a very real sense that you are fully engaged in the current operation. You can feel the boundary condition and you may even feel a sense of being about to lose control.

 

Think of a juggler who can successfully juggle five objects at once. Managing between one and four objects represents little to no challenge beyond the normal attention to detail required for any juggling. At five, the juggler will feel a sense of total immersion and full engagement. The juggler may have difficulty looking at events or objects outside of the current field of vision. There is a feeling of total commitment in the moment and the juggler realizes he must maintain total concentration.

 

To add one more object into the mix would be to violate the juggler’s span of control, and while he may be able to maintain the flow for a few moments, there is a very real sense of being overwhelmed and slowly drifting out of control until the number of objects overcomes his skill and they all crash to the ground in rapid succession.

 

Span of control for a trader relates to how many open positions a trader can effectively manage at the peak of uncertainty and still maintain effective decision-making.

 

 Information is required to manage individual positions. When we exceed our span of control we are no longer capable of identifying required information, processing it, and acting upon it in a timely manner for best effect.

 

Therefore, it becomes very important for a trader to understand and appreciate the effect of their span of control upon trading performance.

 

 The trader may have no problems trading according to their rule set when the trade is considered independently.

When you start adding multiple trades into the mix, however, the trader may experience a breakdown in performance and mistakenly attribute it to a psychological problem, when it is simply a cognitive load issue associated with span of control. It’s not that your discipline is breaking down, it’s just that you’re trying to do too much.

 

A weight lifter who is capable of bench pressing 200 pounds, and who tries to take on 300 pounds, didn’t suddenly lose their strength and discipline;  they simply made a cognitive load error. Focus on your known capabilities under realistic constraints and behave accordingly.

 

Traders, know your limits! 

Profitable ETF Trading Strategies: can I make a living as a mechanical trader?

The short answer is: no, you cannot make a living as a mechanical trader.

In fact, you cannot make a living as any kind of trader, mechanical or otherwise.

This doesn’t mean that you are a bad person or stupid or somehow lack the qualities needed to be a success in life. It is simply a realistic appraisal of the statistics of success regarding the trading profession.

Thousands and possibly millions of people around the world have all decided one time or another to try their hand trading profession as a way of life.

They have done what you have done, which is to list their strengths and weaknesses, have some kind of market feedback to suggest to them that they could actually do this for a living, developed a plan and put it into action.

They may have received the encouragement of friends and the advice of professionals.

They may have equipped themselves with the finest hardware and software available to give them an edge.

They may have sufficiently capitalized their effort so that they can participate in markets for extended periods of time.

They researched systems that are appropriate for their personality and the kind of markets they propose to trade.

They have written business plans, rehearsed their trading strategy through simulations and prototyping with real money small position sizes.

They may have aligned themselves with a tribe of like-minded people for mutual support and multiple perspectives.

They may have equipped themselves with market insights from recognize longevity and above-average results.

They have done all of these things, and like you they have failed.

These people were not stupid, naïve, or unprofessional. They are all generally good and decent people just trying to make a living.

It’s just that the market is hard and unforgiving.

It will crush you without blinking an eye.

The guy on the other side of the trade take your money without blinking an eye no matter how unfair you feel it isor how professional you are.

He is trying to feed his family just like you were.

But you failed and he didn’t. T

he reason they succeeded and you fail, you ask?

If you fail to perform any of the good ideas earlier in this article the answer is easy. You were a naïve child unprepared for the world.

But if you were well-prepared as noted above and still feel, the answer is harder to find, and sometimes we can’t find it at all.

The market is not only stranger than we know, it’s probably stranger than we can know.

And just when you think you have it figured out after a long winning streak, and have taken on more risk than you realize because you’re hot, the new kid in town who was luckier or faster than you will take all your money and leave you crying in the street.

But maybe you are different.

Your plan is better. You are smarter. You are faster. Keep telling yourself that.

All I know is that everyone I have met who makes a living as a trader has a ruthless commitment to performance and preparation and specialization in their niche.

They are driven to succeed by an inner fire that cannot be extinguished.

They are relentless  about exploiting their edge every time they see the opportunity and they do not quit until they have the prize in hand. and then they guard it as if their life depends on it.

That is who you are trading against. 

Do yourself a favor and find an easier way to make a living.

Take care of your long-term investment through passive asset allocation.

But if you must trade, prepare yourself well and remember that you have been told.

Your results are entirely your responsibility.

Don’t ever forget that.

Now go trade.