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《经营交易》Trading as a Business

Introduction
I started trading in the early ’70s. I was managing my little portfolio of stocks
while I attended business school. Luckily I knew an old coot named Bob who
had been trading stocks for 50 years. He advised wealthy families on their
portfolios and was the best stock picker I have ever known. He studied his
Value Line religiously and always had a stock or two in mind. We went through
the bear markets of the ’70s together and also enjoyed the early boom of the
’80s. Unfortunately, he is no longer with us.
 
Bob used to call me up and say, “Charlie, I think you ought to consider XYZ
stock. I think you ought to sell ABC and buy some of that.” I would say, “Bob
are you sure this is a good stock? Can you guarantee me that this stock will go
up?” He would always give me the same answer, “Charlie, if I knew for sure
that this stock would go up I wouldn’t be talking to you from my office in
Milwaukee. I would be calling you with my ship-to-shore phone from my 200-
foot yacht parked somewhere in the Caribbean.” I never forgot those words.
And even though Bob could have afforded to live on that yacht, his point was
well taken. There are no guarantees, we are not always right, and there is no
way to know what is going to happen to the markets in the future.
 
In the early ’80s I started to trade commodities. Like most new traders, I had no
idea what I was doing. Since I did so well in stocks (I admit it was Bob’s
tutoring), l deduced that I should be able to do as well or better in commodities.
I was wrong.
 
To find out how to trade, I went to the first Futures Symposium International,
held at the Palmer House in Chicago in the early ’80s. Jake Bernstein and Walt
Bressert put it on. It was the first event of what has now become a common
occurrence-industry experts teaching a wide variety of trading techniques
over a three-day period.
 
The instruction was fun of course, but the real action was in the booth area.
That year we saw a combination of two technologies that would forever change
the securities industry. Satellite delivery of intra-day data displayed on charts
created with the all-new personal computers. What a combination!
 
After listening to most of the speakers, I had decided that it was unrealistic to
expect to compete with traders trading daily and weekly charts. They had been
doing it for hundreds of years already. But the new technology! I realized that it
had created a level playing field. No one knew how to trade intra-day charts!
Up to now these charts had only been available to floor traders who essentially
made their own by hand. I saw a true opportunity.
 
At first, everyone thought that the way to trade intra-day was to apply the same
techniques they used on daily and weekly charts to 20-, 30- or 60-minute charts.
The cycle traders taught intra-day cycles. The Elliot Wavers taught the 30-
minute Elliot Wave. The Gann experts applied Gann Lines and Retracements to
60-minute charts. I decided to teach myself, and in 1983 I purchased one of those
new IBM PCs, bought some charting software, and started watching 5-minute
bar charts on the S&P futures.
 
I come from a manufacturing background and therefore have really always
been a system trader. My family has owned and operated manufacturing
companies since the mid-1800s. When you think about it, manufacturing is
basically setting up a manufacturing line, getting the bugs out, making it
efficient, and letting it run. If you keep your costs down, limit your scrap, and
price your product correctly you will do OK.
 
I instinctively knew that to make money trading I had to be in for the big
move. But I couldn’t figure out how to predict the big move. So I decided that
to ensure that I would be in for the big move, I would just always be in the
market. I reasoned that if I always had a position in the market I would be
guaranteed to get the big move. Bob would be rolling over in his grave! The
problem was those losses. In order to be in the market all the time it was
inevitable that I would take a string of losses when I was not in the big move.
But I speculated that losses were essentially no different than production
scrap. We had never run a manufacturing line without scrap, and I realized that
I would never trade without losses. So the losses simply became my scrap. You
can’t eliminate them but you can rig it so the scrap is minimal and a small cost
compared to the profits.
 
By hand, I back tested and developed a system to day trade the S&P futures
using 5-minute bar charts. To lower my commissions, I became an IOM
member of the Chicago Mercantile Exchange. I traded my system on and off
until the 1987 crash. I made more money than I ever dreamed I would make.
Right after the crash, the market became so disorganized I decided not to
risk any more for a while. It was time to get serious about system testing and
focus on more research.
 
I had put together a budget for doing my research, about $150,000 per year.
This was to hire a programmer, buy a mainframe, and get the data. After I put
the budget together, I saw an advertisement in a magazine for a new DOS based
program for the PC called System Writer™. For $1995, this guy Bill Cruz
said that I could test my own systems. All I needed was a PC. I called Bill and
asked him a few questions. Although I was skeptical, I purchased the program.
After all, if I could do for $1995 what I had budgeted $150,000 for, it was
worth the gamble. And Bill threw in daily data for free!
 
Needless to say, the program was all Bill said it was and more. I learned how to
program the thing using what he and his brother Ralph called Easy Language™.
After doing a lot of research on intra-day trading systems, I hit the road with Bill
Williams teaching what we called Trading as a Business seminars. My portion of
the seminar was to teach trading systems, and I disclosed the historical
performance using System Writer performance summaries. Bill taught his
indicators and had a great section on trading psychology.
 
When we did a seminar in Miami, I took the opportunity to meet Bill Cruz in
person. I asked him to come to the seminar and demonstrate System Writer.
He did, and it was a great success. This was the beginning of a long friendship.
 
Soon thereafter, Bill and Ralph asked me to edit a newsletter for Omega
Research customers who owned System Writer. We called it System Trading and
Development.  I wrote and edited a series of newsletters, which became
the basis of the seminars that I later taught with Bill and Ralph for users of
System Writer.
 
It was at this time that Bill and Ralph were getting a lot of pressure, from me and
just about everybody else in the trading industry, to develop an intra-day System
Writer. You see, we traders had to do our testing on System Writer and our intraday
trading on another computer system. I wanted to be able not just to test, but
also to automate intra-day systems on System Writer, just as I could daily
systems.
 
I remember visiting Bill and Ralph in 1989 and hearing the very interesting
story of how they were going to develop an intra-day System Writer. They had
a very difficult decision to make. Most of their competitors, they explained,
where developing programs on the UNIX® platform, and they felt some pressure
to conform. However, they had also seen a new platform, still in its development
stage, called Windows®. Bill had become convinced that Windows was going to
be big but was a little hesitant to bet the company on an untested technology. He
asked me what I thought and I told him that he had asked the wrong person. I
was into trading and knew little about computer software.
 
Then Bill wanted me to see what they had done so far. We walked into the
developer’s area (Omega Research had about five employees at this time) and Bill
pointed to a computer. He said, very proudly, “Here it is.” I looked, but I
couldn’t tell what he was pointing to. Then I saw it. A bar! One little tiny bar
with an open and a close. Not two bars, not three, not one day of 5-minute
bars, but one tiny little bar; He was so proud! I told him how great it looked,
and hoped that he might be able to get some more bars. He assured me they
would. And the rest is history.
 
That was the first bar in a program that would subsequently be called
TradeStation®, the software that changed an entire industry. Of course, in
hindsight, we know that the decision to bet the company on, Windows platform
was the right decision.
 
I had the pleasure of helping Bill and Ralph launch TradeStation with a series
of free seminars in the early ’90s. Bill and I then developed a seminar we called Trading as a Business with TradeStation.  I taught system trading and
development, Bill taught how to integrate that material with TradeStation and
effectively use the software. Bill and I taught our last seminar in 1994 and
retired back to our respective companies.
 
The Omega Research story is a great American success story. Two sons of a
Cuban immigrant develop unique trading software and build a very successful
company. Of course, now Omega Research is a public company and the
success of the company is now more widely known.
 
The success of Omega Research is mostly due to the talents of Ralph and Bill.
Bill works on the software and Ralph does the marketing. Each of them has
unique talents that are critical to the success of the product. You can have a
great product, but without great marketing and sales you won’t sell much. And
you can have great sales and marketing, but without an outstanding product
you will not be successful. Omega Research has both.
 
The other talent that Bill and Ralph have is that they have been able to attract
top management talent and build a fine company. We all know stories of
brilliant entrepreneurs who bring a great, innovative product to market but are
unable to run the company.
 
Also, Ralph, Bill and I have always agreed on one thing. TradeStation and its
predecessor System Writer are ultimately products that are about independence.
They enable the average trader to have the same system testing and·
development capabilities that are available to the well-capitalized trading
houses, at a small price.
 
And in this spirit, this book is about independence. It is about freeing yourself
from the necessity to depend on experts in the field of investing and trading. It is
about learning how to do it yourself, with the help and power of TradeStation.
The “do” in do it yourself is creating and analyzing trading systems and
techniques that make money AND sense. I emphasize the sense. When we rely
on other people to do our work, we necessarily make the assumption that they
have made sense out of what they are presenting or selling. This is a very
generous assumption. This book will help you make sense out of what is
sometimes a very non-rational activity-trading commodities and stocks.
Prologue: Where to Begin
Let’s begin with the markets themselves, and with fear and greed. We have all
heard the clichés about fear and greed. They rule the markets. In fact, that’s all
the markets are-a reflection o:6 these emotions. In order to make money
trading, you must learn to control your fear and greed.
 
Overcoming Fear and Greed
We all have to deal with our runaway emotions at various times in life, and
these emotions really begin to run away when we trade. Bill Williams used to
say in his seminars that trading was the clearest window into your own personal
psychology, clearer than any other endeavor. I think he was right.
 
UNDERSTANDING THE MARKETS
We give in to our fear when we don’t take the next trade because we’ve just
been through a string of losers and fear losing again. We give in to our fear
when we put our stop loss too close and get stopped out of a trade without
giving the trade enough room to develop. We give in to our fear when we
freeze as a trade starts to lose money, and we don’t take the exit signal because
we’re afraid of losing money.
 
We give in to our greed when we take a profit early, before the regular signal,
because we don’t want to give back any of the profits. We give in to our greed
when we trade more contracts or shares than we normally would because we
feel good about this trade.
 
So we start with the question, “How can we understand the markets?” If we
understand how they work, we can get a better understanding of ourselves, and
in turn be better traders.
 
Controlling greed takes discipline. As far as fear, Peter Steidlmayer explained
in his work with Market Profile that markets exist for one purpose and one
purpose only-they exist to facilitate trade. Facilitating trade means that the
markets will do anything they can to get individuals to participate in the market.
How they do this is through movement. Markets move up and down searching
for buyers and sellers.
 
The crucial point here is that markets must move for their survival.
Understanding this literally changed the way I thought about the markets.
Think about it. Markets have to move! This concept is major for anyone who
has had to sit through a trend-following system trading in a sideways market.
The knowledge that the market has to move eventually changes the way you
look at trading. It gives you confidence that the string of losses can’t continue
indefinitely. It eliminates the fear!
 
You see, Steidlmayer explained that if a market does not facilitate trade, it will
die. If it does not continue to bring traders in, to lure the buyers and sellers, the
market will cease to exist. And the prime directive of a market is survival. To
keep traders interested, the market has to move. It cannot remain in a small
trading range or traders will lose money, become disinterested and leave.
Eventually there will be less and less liquidity, traders will stop trading, and the
market will die.
 
I<nowing that a market must facilitate trade and move, or else die, has given me
great confidence in trading. When I am forced to trade through quiet markets, I
remember this principle. This principle has reduced my fear and increased my
confidence immeasurably.
 
SYSTEM TRADING: MAKING GOOD BUSINESS SENSE
For me, system trading is the only answer to the problem of fear and greed,
and it is the only logical way to take advantage of the concept of Market
Facilitation.
 
First, trading a system provides the discipline necessary to begin overcoming
fear and greed. Trading a system that has been back tested on historical,
quantifiable data is a major way to inject discipline into your trading and to
begin to control your fear and greed. If we think of a trading system as a small
business, we can design our business to make money based on historical
simulations. Then, our job becomes the implementation of the system rather
than the interpretation of the market. If the system loses money and busts, we
change the system. It’s a matter of good business sense.
 
Second, if we know that a market must facilitate trade to stay alive, we can
devise systems that guarantee that we will always be in for that inevitable big
move. If we know that the big move will eventually come, and devise the
system accordingly, our task becomes to minimize the drawdown (investment)
while we wait. I have never been able to predict when the market was going to
facilitate trade and get in for the big move. Instead, I have devised systems to
ensure that I will be in for the big ride and my losses will be minimized while I
wait. It’s just a matter of good business sense.
 
As a businessman, I have concluded that the only rational way to trade the
markets is to trade a system. All of the hocus-pocus about predicting when this
market will move, and how far, is just that-hocus-pocus. The people that
make the big money are the ones who don’t try to predict tops and bottoms
but who consistently take a little out of the middle. The only logical way to do
this consistently is through a well thought-out, well-designed system. It’s a
matter of good business sense.
 
THE ADVANTAGE OF TECHNOLOGY
Anyone serious about finding a profitable system should use the latest
technology and the best software available. This means learning how to use a
computer.
 
When I started trading, all historical testing had to be done by hand. This was
labor intensive and very time consuming. It was necessary to peruse charts
visually and record the simulated entries and exits by hand.
 
For intra-day charts, this process was even more time consuming-the charts
had to be printed with the indicators on them and for a significant length of
time (several months). If these indicators didn’t prove to be profitable, the
process had to be repeated for the next month with revised indicators. This
process continued month after month. It would sometimes take me three to
six months to find a system that would work under current market
conditions.
 
System Writer, followed of course by TradeStation, was the first computer
program to help eliminate this labor-intensive historical testing. Using
TradeStation to do your testing has three distinct benefits.
The first is the amount of time saved. With TradeStation on a fast PC, it’s
possible to test in 5 to 30 minutes systems that literally used to take hours or
days to test by hand. If you place any value on your time, this cost savings
alone is impressive.
 
Second, you can avoid mental mistakes. I have, in both myself and in talking to
other researchers, found a propensity for making mistakes when performing
manual historical testing. On many occasions I have found myself changing the
system midstream. I have sometimes made the assumption that of course I
wouldn’t have taken that particular trade, when the reality is I probably would
have, or of course I would have moved my stop up, when in reality I probably
wouldn’t have, and so on.
 
I can recall many situations where, when testing manually, I got different
results on different days with the same data and the same system. I was either
in a different frame of mind or in a different emotional state and actually made
different decisions on the same data!
 
A computer, however, cannot trade a system differently tomorrow using the
same parameters and data as it is using today. Its logic is consistent and can’t
play tricks on it. For historical testing, you can avoid this very real problem by
using a computer.
 
Third, you can be more creative. Rather than spend all of your time doing the
testing, you can have the computer do the testing and you can spend your time
researching new trading ideas.
 
System development is like any other business. It’s very unusual to find a
successful business where only one individual has designed the product, does the
marketing, is engaged in product development, and runs the machine to produce,
package, and ship the product.
 
It is much easier and less stressful to hire a staff to handle the paperwork and
production employees to make the product. The entrepreneur can then
spend his or her valuable time in product development and planning the future
of the company rather than running day-to-day operations.
 
In the trading business, TradeStation can be your staff and production
employees. The program is indispensable in time savings, cost savings and
individual productivity. It frees you from the repetitious side of the business so
you can spend your time on the creative side-the side that will ultimately
make you the money.
 
As the futures and securities industry continues to grow, more and more
traders will enter this business. The competition for profits will continue to
increase. For example, in the early ’80s it was very easy to make a lot of money
day-trading the S&P. I used a simple dual moving average crossover system on
5-minute bar charts. There were proportionately very few intra-day traders with
computers that were competing for profits. But since then, with the increase in
the number of traders using intra-day charts, these very rudimentary indicators
have stopped working. When everyone started using them, the profits dried up.
It is much more difficult in today’s markets to make the money that was there
in the early years. The standard indicators just aren’t that effective anymore.
 
I believe that the only rational way to be a successful trader is by using the best
software available-TradeStation-and learning to be an effective system
developer and system trader. The professional traders are all using
sophisticated computers, and most of them are now using TradeStation. The
technology resource differential of the past is now gone. An individual trader
can afford the same technology as the successful professional. The playing field
is now not resource driven but intellectually driven. Knowledge is more
important than capital.
 
Don’t Believe What I Say
The final thing I want to tell you before you delve into this book is not to
believe anything I say. Check it out for yourself. It would be a mistake for you
to accept anything I say without a complete, personal investigation, testing it for
yourself and either proving or disproving the principles and techniques that I
discuss.
 
Just because I say it doesn’t mean that it’s true. It’s what I believe to be true
and has stood the test of time for me. But I urge you to be a skeptic, to think
everything through and make sure it makes sense to you. Accept the things that
work for you and reject those that don’t.
 
The idea behind this book is to give you enough information so you can be
self-sufficient. You shouldn’t have to depend on anyone for your trading
profits. You can do this yourself.
 
So we begin with three principles. First, the market must facilitate trade to
survive; it must eventually make the big move. Second, you must be state of the
art to compete, which means using the latest PC technology and TradeStation.
Third, you can do this yourself, and you should not take what anyone says for
granted.
 
You have the tools to be independent-to do this yourself.
 
Do not believe in anything simply because you have heard it.
 
Do not believe in traditions because they have been handed down for many generations.
 
Do not believe in anything because it is spoken and rumored by many.
 
Do not believe in anything simply because it is found written in your books.
 
Do not believe in anything merely on the authority of your teachers and elders.
 
But after observation and analysis, when you find anything agrees with reason…then accept it and live up to it.
 
-The Buddha

TaaB-1

更新于 2020年7月2日

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