Thanks for crushing my soul Zeno D:

Since we aren't discussing specifics, I will have to believe you.

Have you worked out how far things are likely to diverge with any confidence?

As long as you are talking centuries long moving averages, I agree. Anything shorter than 30 years can get you into trouble really fast.

And inflection points are a ton of fun, and (I'm pretty sure) required for what I do to work.

I hope you will be satisfied with "very comfortable".

I agree. Once you have a bankroll, leveraging it is just plain silly unless your goal is to get rich or die trying.

Should be obvious that I am not at all market neutral. I like the few percent head start that not being market neutral gives.

Obviously I am a big fan of checking empirical data against any ideas I might have. Things check out pretty well, but it could be that the population doesn't reflect the sample I have. Obviously, neither of us has available a true random sample that would allow vigorous statistical techniques.

I've calculated worst case scenarios, and although I could be wrong, I should be fine.

Starting toward the end of next month, my new office is in the spare bedroom. They are paying me a premium over my current salary to stop coming in. They have even arranged to move me 2,500 miles away from the office in an apparent attempt to ensure I don't show up unexpectedly.

Was worried we were hijacking this thread but either its too late or they had finished with it ...

You dont have to believe much. Plot graphs of any mean reverting trade with different initial values and you'll see the graphs converge on the same graph. The faster the MA the faster they converge. Its kinda obvious really as the MA means older information is being discounted and eventually discarded.

No. I suspect its one of the things with infinite mean. I'm following a strategy of scaling bets to bankroll size and taking losses on long divergences. That's why my wins and losses are of the same magnitude rather than always winning except for the time I go bust (If I was 21, I would go for rich or bust many times until I got there, historically would be very unlucky to ever go bust and two times would be freakish)

maybe talking at x-purposes here. My MAs are in days not years and its slower MAs that can get you into trouble.

I'm very easily satisfied. Main reason I'd like to crack this is because its there but I'm not going to risk being uncomfortable which I really dont do very well.

Yes and its that net poisition that leaves you vulnerable to a black swan. I doubt its significanrtly different to me in that respect.

You know ithat I couldn't agree more. What I like about what I'm doing (and from what I know of what you're doing the same applies) is that I was pretty convinced it would work without any data. As you know I'm dubious abuout anything that relies on data rather than concepts. The data is there to convince us that there is something wrong with the concept.

I'm in awe.

I worked in IT and always thought someone should pay me to run (with staff) an important once-troublesome system with the understanding that I had to come into work if there was a problem but otehrwise could do what I liked. Never found any takers but that's because they are too conventional to recognise what a great result this would have been for them.

We were and are, and it is and they had.

I don't know. I see it more as people continuing to fight the last war, rather than the next one.

An alternative strategy that you might want to consider is to double down on the long divergences. It has something or other to do with your "waiting always but not always waiting" thing that should work.

If it can get you into trouble, it can be profitable...

Being easily satisfied is one of the keys to winning at life.

Black swans make strategizing easy. Huge divergence from mean makes bets no brainers.

The last sentence is perfect.


Going to be living near Douglas Adams' last abode, which is nice (he had very good taste). Happy towel day, btw.

I do know an Systems Analyst / DBA who had a similar position to the one you desired (working for an internet retailer). He liked it. He then made the mistake of taking a much higher paying gig that involved the old 9 to 5++. As you know, you were just born a little too soon.

I dont get this. MAs constantly move you towards the recent figures being taken as the 'correct' ones and discard the past.

That's not an alternative that's the normal strategy. Its very seductive to Martingale when each bet is +ev but the more you martingale the smaller you have to make your early bets and you end up making small profits all the time and then blowing up. if there was a useful maximum divergence it would be different but then I would own the world anyway.

The double up once seems like a compromise but it still means betting significantly less the first time to allow another betting round when the bankroll has been reduced by the first round being underwater. Its hard to be sure but I think its a significant mistake as it gives up too much profit on the first round and there is frequently no second round.

I think you are confusing white swans with black swans.

A dangerous path to follow - you're not going to join a gym are you?

I mean that people are currently worried about "correct data" that would have worked wonderfully over the past five years rather than actual important data that will matter in the next five.

It is like betting on the next card when the person you are gambling with thinks that 10s always come after 2s. They will lay you good odds. You don't need to be able to predict the next card to make it an easy bet to make. If you lose, you can safely assume that they will offer you even better odds the next time they see a 2.

It would only be a Martingale system if your bets have an expiration date...

I avoid all bets that have one. Lots of reasons for this, but one is that it make bet sizing a bit easier.

There are possible optimizations schemes. None is perfect. All involve making small bets when the returns are likely to be small (small divergence indicates small +ev) and larger bets when the returns are likely to be large (large divergence means large +ev). Making big bets for small expected returns is not good bankroll management when the variance is huge.

I'd never get out of a good bet just because I was down a bit unless I have clear evidence that my bet would be incorrect to make today. To get out just because you are down on a bet is pretty silly when today would be a better bet than yesterday was. Of course, staying on a bet when you know something new can also be silly.

Of course, this doesn't work with dated contracts.

The Euro crisis is making the bets easy. Of course, you have to not mind sitting on the bets for a bit, and it is best if you dig a little to find the really silly ones that are likely to pay off in the next few years.

That is unlikely. I might have to try one of those "salad" things people keep talking about. I feel a bit like Gulliver here.

A much more likely demise will be that the car my boss just gave me is an automatic. I keep trying to use the clutch that isn't there which causes the car to decelerate rapidly due to the brake that is there. This causes the locals to wave excitedly at me as I come screeching to a halt on major highways.

Technically they do, doesn't make any difference in practice.

This is misleading (or incorrect). In ev terms its a mistake to close the bet as you suggest but the bet would be inccorrect to make today because of a smaller bankroll so closing it (or some of it) is necessary. Not closing is a mistake they no doubt talk about in your behavioral books.


The Euro crsis was no black swan. Black swans are unexpected.

I've watched House. Salad is deadly for people like me.

Technically it has a date, as in you will die some particular day?

No. The relative size of the bet (% of bankroll) should increase faster than the loss of bankroll. At some point the optimal bet size will be larger than your bankroll, which is solveable problem.

Not closing hoping to get back to even is talked about quite a bit as it is something that people seem to enjoy doing that is long-term silly.

The funny thing is that in the long run it will all be looked back upon as the work of Don John.

I keep hearing good things about it. I assume that it is all the work of some sort of Artiodactyla cult. "WWRD?" bracelets will be forthcoming, I imagine.

No, technically its futures contracts and they expire.

wat? I'm not qute sure what you mean but if you did this you would go bust very quickly or be in the lots of small wins followed by losing everything game. maybe you're making some dangerous assumption about the divergence distribution.

Its the slightly more subtle behavioral problem of wanting to make a profit on every significant divergence


More likely it will be looked back on with the mythical reverence of Gettysberg.

how many kids actually want to work a job?

people just want to hang out with friends, do drugs and **** women.

edit: and browse the internet, watch tv/movies, play videogames, listen to music.

I don't agree with this. In the years between 15-24 or so? Sure. Alcohol/women are priority. After that, I'd disagree.

Intelligence is the ability adapt to your environment. For an entity with goals, intelligence then allows that entity to move toward it's goals in some "increasing" sense within the constraints of it's environment. In other words, an entity displaying intelligence will have the characteristic of being better at attaining it's goals now than in was in the past, and better in the future than now. If the environment is unchanging then the entity will tend to some steady internal state that maximizes the goals in that specific environment. If the environment itself is changing then the entity must constantly adapt itself to those changes.

I am well beyond that age. The only difference is that it is now alcohol/women/offspring.

The rest is all means to the various ends.

That is kind of like saying that your wife is technically a woman.

I hope it is obvious that I am not in that particular game. Just putting a bit more in when the divergences get silly, and taking a bit off when they get silly in the opposite direction.

Of course the reason to do this is because it isn't being young or old that is the issue. It is whether or not you have enough to be comfortable.

They've done some interesting studies on what risk is in human terms. It has little to do with what finance people generally think it is. You have cleverly derived one, which is the risk of "missing out." No one likes going to a party and being the only one who missed out on the recent run up in xxx.

It might be very important in the toll on people. It is unlikely to make a whit of difference in the price of tea in China (or the price of Nestle) ten years hence.

Its just a technicality as you can just roll over the expiring contracts into new contracts. Just like the wife

It does sound reasonable, may even be reasonable but its not at all clear that it isn't of greater ev to bet the max on a strong divergence even though that means you cant add more when the divergences gets bigger. Simplicity also has huge advantages to an amateur like me.

Think longer term. One likely result is a USE and that will be a very serious player.