Tribe Report

Ed,

Acknowledgement:

I feel warmth in my chest and relaxation in my shoulders. I feel a sense of deep gratitude and connection to my fellow tribe members.

Thank you.

Themes:

Likeability.

Likeability is about manipulation of others. Fear based control. My face is relaxed as I write this – no fake smile.

Thank you.

Self trust.

I take responsibility for my decisions and believe in my ability to make them.

Thank you.

Understanding of intention:

Results = intention.

Intention = results.

This is the way I create my reality.

Thank you.

Don't know:

I recognize the difference between what cannot be known, i.e. the future, and what I don't want to know.

Thank you.

Easy:

Things are not difficult. Just the feelings that come up when doing things. Everything is a little easier.

Thank you.

Awake:

I note that I can identify when I'm shutting down. The feeling comes and things seem impossible. Instead of blanking out, I stay awake, recognize the positive intention of my feeling and slide into proactive. Participation is up.

Thank you for the technology.

Thank you for PR Tribe.

Since our phone conversation early last year, I think a lot about how I can improve my trading system. During that conversation, you ask about my results since my inception. I rattle off the numbers and you tell me you have some systems that are performing better.

I recall feeling instant frustration, but then a calm and quiet confidence develops - a gentle smirk too. I think, "I can perform better; no doubt in my mind. Ed basically says he's better than me. OK fine...now how do I get better and raise my game!? How can I become a superstar and deliver extraordinary performance for my investors? How can I get to a point where Ed may consider an investment?"

Thank you for challenging me and lighting a fire under me.

Improving MAR and Copying Others

Since I start my fund business in 2011, I find myself copying the marketing pitch of other diversified trend-following CTAs. Interestingly, in doing this, my trading style also becomes a lot like theirs; I generally make and lose money when they do and our overall correlation is high.

After our conversation, I think, "How can I ever be better if I copy them even if they do have great track records and manage tons of money? How do I blow them out of the water performance-wise and attract investors who I enjoy working with? Maybe through copying, I develop more control-centric rather than intimacy-centric habits in both my trading and marketing."

When I compare myself to others (looking at their monthly performance and using comparative charts in my marketing materials), I find myself starting to copy their trading styles albeit trying to be just a little better. Realizing this just sucks the creative juices and competitive drive right out of me; it bores me to tears too.

Even if I beat them, so what? I don't feel the joy I do when create my own unique way. The copycat approach may still pay off pretty well, but making money at the expense of declining creative juices doesn't interest me. I don't want to trade monetary gain for the feelings I get when I create and think independently.

I want to create my own path and challenge myself to see how good I can get; in my case, to see if I can improve MAR and maintain it at a value of 1 over an entire career. How cool would that be!? The thought of it brings a lightness to me, I my posture improves and I take a big deep breath through my nose. I say to myself, "Let's go! Let's get to work and get f'in good!" Doing the work of designing and re-designing trading rules reminds of my baseball days where I spend hours working on a fluid and explosive pitching motion, and repeating it over and over again. I can still remember certain practice sessions and specific reps. I want to feel that "in the zone" feeling with my trading system design.

Control-Centric vs. Intimacy-Centric Marketing

The traditional marketing style disgusts me and makes me very sad. The act of saying what you have to say in order to close the sale leaves me with a horrible taste in my mouth. I scrunch my mouth together, stick my tongue out and yell "Ughhhkkk". When I think back to sitting with prospective investors taking them through some cookie-cutter pitch on the benefits trend-following, I cannot help but yell out, "Blahhh!! What a heartless and boring way to sell and communicate with people!"

Lately, as I evolve to a pure intimacy-centric approach (with no subtle touches of controlling-style language or delivery), I notice I achieve a much higher conversion rate and that I develop a deep rapport with people. These marketing meetings simply become meetings between friends who trust each other. I love this. What a cool way to live. My business and personal life start to converge.

Now I look forward to meetings. The meetings become a light-hearted, but serious conversation where we let our feelings about trend-following, performance goals and risk tolerances fly.

System Design and Collaboration

Lately I wonder about re-designing my portfolio selection and position sizing process. I wonder if I can make my current rules better. I believe I can, but I know it may take some original thinking and implementing more adaptive rules into my system.

Today, I feel my system is very basic but solid; parts of it feel static. I get itchy and restless when I believe a part of my game isn't as good as it can be; I shake my hands and feet and move around in my chair trying to get the old inferior approach off of me. Like a snake, I want to shed my skin, adapt and grow.

I wonder about a couple of things...

1) If you'd like to talk about a few trading system rule ideas I recently think about. I'm happy to send the ideas over to you first. My intention is to openly discuss ideas that can help us improve absolute and risk-adjusted returns, namely MAR.

2) If you'd like to collaborate on educational studies that show how changing different parts of a trading system changes it's basic performance (CAGR, Max DD, Std Dev), but also shows how and when it makes and loses money. My intention is show people the degree of importance portfolio selection, position sizing and trade-timing have on a system's results; traders and investors seem so hung up on only focusing on their entries and exits while disregarding the other two more important components.

Thanks.

Fractional, Variable Kelly

Hi Ed,

I wonder what you think about the idea of a fractional Kelly money management strategy where the fraction of the Kelly solution chosen is determined by the level of confidence one has in the Kelly inputs (profit factor, win rate).

The strategy would bet anywhere from a lower-bound fraction of the 'optimal' Kelly criterion solution (say, Kelly / 10) to an upperbound of Kelly / 1.

As the system gains additional confidence in the profit factor and win rates (as they organize more tightly around their averages), the Kelly fraction will be higher (approaching Kelly / 1) and when the trade performance begins to deviate from the expected averages, the Kelly value is decreased down toward the lower-bound of Kelly / 10. I think one would use a normal distribution (confidence interval or similar) to compute the deviation of the recent trades from the expected long-term mean.

This allows the operator of this strategy to bet heavily ( up to Kelly / 1) when the trade performance statistics have a low standard deviation and the averages are highly descriptive of the recent trading results and bet lighter (as low as Kelly / 10) when recent trading results have a higher devation from the expected mean.

Perhaps this is unrealistic because, as data is collected, the true system win rate and profit factor will only grow closer to its long-term, average. Never further away.

Perhaps one could simply measure 2 moving averages of trade win rate and profit factor (ex: a 50 trade average and a 250 trade average). When the fast moving average crosses over the slow moving average, the Kelly divisor is increased toward 1 (perhaps based on the distance between the averages) and as the opposite MA crossover occurs, the divisor is decreased. In a way, this would reward consistency in trade outcomes with higher bet sizes and tax inconsistent trading outcomes with lower bet sizes. It's possible that this strategy would suffer from the same disadvantages as the Sharpe ratio in that it would punish money-making chaos in the same way it punishes money-losing chaos. Perhaps it makes sense to create some skew and simply tax money-losing deviation and leave money-making deviation alone.

Regards,

Ice Man

Dear Ed,

I find this video fascinating. This man's endeavors seem in rhythm with some of your pioneering work.

http://www.vice.com/video/iceman?utm_source=vicetwitterus

Love,

Trading System Design Process

Ed,

Thank you for your support with my workshop follow up. Thanks to those who provide such useful comments and feedback.

I commit to:

"Work hard on my trading systems for three hours a day: See what feelings come up. Report ... to my support team and FAQ." This starts from Ed's comment at the workshop - approximately "Are you actually serious about trading?"

* I average about 2.1 hours per day on my trading systems for the last three months and slightly under 3 hours per day (2.879 hours) since the workshop.

* In spite of the shortfall in hours, I finish testing the software to the extent of being able to test trading strategies with all bells and whistles working (inflation adjustment, multi-currency etc). I find I get a lot done without excessively strenuous effort.

* I write the optimization code (~400 lines) and run some optimization tests. I have three tiers of tests to run: optimization every year or so, repeated optimization every year or so of a special parameter (see lambda in this article https://en.wikipedia.org/wiki/Supervised_learning) that I use to control over-fitting, and finally a roll-forward test. These layers of optimization take a while to run. If this drags on too long I plan to rent some computer time.

* I contract in late May a Golden Staph infection which resists antibiotics to a degree and which affects my vitality. It takes me a couple of months to realize I have this problem. Since then I pursue all avenues to fix the infection.

Perhaps this contributes to the shortfall in hours. Partly too, I have less coding work to do and more time waiting for tests to run and so on. I look for opportunities to overlap work.

* I simplify some of the legal structures I use and I have less overhead-work and less stress now, though I find making these changes quite stressful and time consuming.

* My other projects progress well.

Next report 10th November 2015 - in three months. I plan to continue my reports at this frequency until I have either started trading futures or I have given up.

Regards,

I wish to you a happy birthday, happiness and health to you and your beloved ones. I attach the photograph of a cake that was made for me a while ago. I thought you may like it and I wish to share it with you.

Tribe Report: Alone / Advice / Qualification

Dear Chief,

Thank you for hosting the PR. Tribe and for sharing your insights, experience and the TTP "tools" with our Tribe and the world via FAQ.

It is our last meeting of this PR Trading Tribe session. Tonight, one of the things we we work on is <alone>. The feeling of <alone> appears by way of getting into <advice>.

Tribe is especially jovial at tonight. I feel energized and and the satisfaction of nearing completion. Throughout the evening most everyone here seems more animated and energized. We laugh a lot throughout Hot Seat and Rocks Process.

Even though we are happy and laughing, we are doing serious work that is important to all of us.

Hot Seat and Tribe learns that Hot Seat has a pattern that he uses is to seek <advice> about his relationships from a group of advisors.

Initially PM encourages "qualified" advisors to give Hot Seat advice. We get into it and feel the energy of the interaction. We make no progress in addressing Hot Seat's feelings while we do <advice>. Even so, it's really easy to get into giving and receiving advice. The advice escalates into a frenzy eventually derailing Hot Seat entirely.

PM reveals that doing <advice> is a set up for Rocks Process. PM encourages us to observe the process we experience <want to give advice> as well as <need advice>.

A result that Hot Seat experiences by implementing <advice> as a way to filter and prevent direct relationships and connection with people other than his advisors is that he attracts relationships where he is emasculated and feels alone.

It takes a while for Hot Seat to get back into directly feeling his feelings. Eventually a Tribe member is able to encourage him and he finds an entry point at the top of his gut, below his ribs. He pokes himself with his fingers and grimaces. That's all it takes to get the rest of the Tribe into full on encouragement. The form and feeling develop quickly from here.

As Hot Seat cranks up the feelings he identifies the primary feeling as <alone>.

Rocks process develops and we role play the model of Hot Seat's relationship with his girlfriend and advisors.

I role play a dismissive and emasculating woman. I attempt to manipulate Hot Seat and it works. He feels lonely and I know I can do whatever I want and get what I want from him.

Hot Seat decides he want's to do it another way.

Hot seat fore-gives the <emasculation rock> and receives Heart Rock along with a particularly funny and entertaining tutorial from PM on what it is and how to use it.

The humor PM delivers with his tutorial serves as a bonding agent, it glues our attention to the process.

The Tribe is particularly attentive to the Heart Rock tutorial evening though we have heard it many, many times, it still feels fresh and exciting. We exchange glances and smiles throughout the process.

After Heart Rock, I try to manipulate Hot Seat again in role play. I can't manipulate him. He wants to relate to me and connect and appears to be qualifying me and my intensions. My game is foiled.

Hot Seat's attitude and outwardly apparent energy and demeanor change A LOT as he uses Heart Rock!

We check out in role and then as Tribe members.

At the final checkout I reflect on the last meetings and months and feel a sense of awe. My body feels settled and full, I relate to myself and others more clearly.

I feel a strong connection with others and a sense of gratitude.

I truly understand intensions=results at a gut level. I have a willingness to experience feelings and enjoy the benefit of experiencing the changes that follow willingness to feel feelings.

This knowledge and the experiences and feelings we share in Tribe are a tremendous gift.

Thank you.

Best,

Lab Report

Ed,

This is a slightly modified version of my Lab report conclusion...

Summary of 10 session San Juan Trading Tribe

As part of my application to join the Trading Tribe I write an essay titled "What I Want to Accomplish". I write this from the perspective that Trading Tribe will support me in accomplishing anything I choose, that I am likely to accomplish it. Choosing my goals is a real responsibility. The essay describes my intention to be more consistent in trading, to develop intimacy instead of control and to be Pro-Active instead of compulsive.

I reflect on my essay, on what I want to accomplish, Trading Tribe supports me in making progress accomplishing my goals. My life is fuller, I feel more secure, stable, legitimate, and committed. I am able to recognize, and acknowledge feelings like guilt, fear, and boredom, and respond Pro-Actively instead of compulsively. Life is more intimate; I am less interested in control.

Thank you Chief. Thank you Trading Tribe.

Tribe Report - Hotseat / Rocks Process

Ed,

Once again I come in HOT. The emotional ups and downs since the last Tribe meeting have been intense. I am in some pain, having been hit by a car while riding my bicycle. The drumming is intense; it has been getting more and more intense with each Tribe meeting. The drumming connects me to myself and to Tribe.

During check in I disclose, that my marathon training which had been going well has been disrupted by the accident. Also I have managed to derail my romantic relationship which had been going quite well. Chief decides that I am hot and asks me if I am willing to hear and take the advice of 3 tribe members who are in successful long term relationships. This devolves into my taking advice, and acting in real time on the advice (texting significant other during the Tribe meeting). Chief points out that my real relationship is with the advisers, not with my girlfriend.

Tribe supports me in getting into my feelings. I am slapping my hand against the floor, banging my head against the column I am sitting in front of and pushing my thumb into my stomach. Tribe supports me and guides me in amping up the feelings, making them more. Process manager instructs me to freeze. I remember this feeling. I felt this way when I was in first grade living with my father and stepmother in Brooklyn. My bedroom was tiny, and all the way at the other end of the apartment from everyone else. It was dark there, at night I felt incredibly lonely, alone.

We discuss my Father's marriage history. My mother never loved him, eventually she left him. My stepmother emasculates him. In Role Play my Father donates the rock "when lonely find a woman who will abandon you, or emasculate you" he explains that this will keep me from feeling lonely.

We Role Play. I chase an aloof uninterested woman. I feel Dirty, humiliated, like I am not showing anyone respect. The rock feels toxic, I am eager to Fore-Give the rock, I am begging process manager to let me Fore-Give it. I don't even wait for permission, I want to stop using this rock and go to Heart Rock. Chief donates a pink Heart Rock to me. He explains how it works. When I meet women, I qualify them. I find out if they are interested in the same kind of relationship I am. If they are unavailable, aloof or not interested in intimacy then I disengage.

I am hopeful I can start having truly intimate relationships now. I have confidence in Heart Rock, in TTP in Rocks Process. I am more respectful of my own self value and what I offer in a relationship.

Thank You Tribe.

Ed,

Wrong! Feels no pleasure, only disappointment... :)

Dear Ed,

I realize that I tried to summarize a quite complicated issue in a very short and direct text.

I afraid the header would be "...and still seeking perfection".

I hope to clarify my writing as follows in a new way:

* Define a simple system that opens long and short positions with 20 (say p1) days breakout, closes positions when the prices crosses 20 (say p2) day EMA.
* Obtain 5 different simple systems by giving p1 and p2 some values between 20 and 200.
* Run backtests of these 5 systems on 10 different backadjusted continuous futures contracts with 1% risk per trade (not portfolio backtest) from 1980 to today.
* Save these individual equity arrays. Total number of equity arrays is 5x20 = 100. I call each of these 100 equity arrays as "system-instrument pair".
* By 1990, we can have 10 years performances for each pair. We can measure existing drawdown, maximum drawdown, average annual return, etc.
* Run portfolio level backtests starting from 1990 and modify the signals as per the performance of the pairs. For instance, do not open a gold position based on p1=20, p2=20 system if this pair's individual drawdown is more than 20% or when it is not "trending" as per the underlying simple model. (Trend following of trend following systems)
* Set the risk per trade as 1% of equity, and total number of positions as 25 and roughly adjust the initial portfolio risk to 25%.
* Try various signal modification alternatives based on individual performances of the pairs.
* Compare the results with the simple models with 5% risk per trade and 5 positions, which makes similarly 25% initial portfolio risk.

The idea is to trade the profitable pairs while disregarding the non profitable ones.

I wonder if you find the approach meaningful.

Re: July 13, 2015 Still Seeking Perfection

Ed,

Thank you for your answer. I feel disappointment when I read your answer and also appreciate your style.

Indeed, I see that you are not close to walk forward backtesting but I just hoped a more clear answer.

Anyway, I prefer to accept your answer "as is" and ask no further questions on this topic.

Ed,

I feel nausea when I have to admit aloud that I make a mistake.

My "job" consists of making judgement calls. I encounter a situation where I have difficulty making a judgement call. I want to get a second opinion but I cannot reach anyone. I decide to go with the conservative judgement call. This decision meets heavy resistance from my customer. I feel the pit in my stomach grow heavy and thick. He has a point my judgement call seems incorrect. I finally reach a colleague who sides with the customer.

I now have to make a decision. Either remain stubborn and salvage my pride and ego because I hold the "professional" title or admit my error and risk looking incompetent and stupid.

I change my initial judgement call.

Acknowledging my error to the customer aloud brings up some interesting feelings.

I see this inability to admit my error holds me back in other areas of my life. I see myself as a stubborn person who wants to go it alone, I look at my results using this strategy and I feel if I want to change the results I currently have I must get comfortable with that heavy thick feeling.