Black Box Chronicles – Getting Lost

I’m trapped inside a black box. I know, I was warned not to come here in the first place, told my best option was to keep it simple: trade the probabilities, let your winners run and limit your losses. It started as a simple glance, really. Then a gaze and then I took the first step into the black box. Now, I don’t know how to get out. Don’t be alarmed, I’m comfortable here. The people (creatures, really) are pretty nice so far. But I need to leave here at some point because from everyone I’ve spoken to, you can’t trade while you’re in the black box. That seems patently absurd to me since the black box is system trading, and ‘trading’ is part of system trading. Right now though, I’m not in the mood to argue. There’s some pretty cool stuff in here and interesting creatures roaming about that I’ve got to bring out.

For starters, there is enough gold in here that if I could just get a small fraction of it out, and the price of gold went to zero, I’d still be rich. I’ll worry about that later. Let me first relate the conditions surrounding my entrapment.

It started when I decided to leave the world of discretionary trading. That was a tough choice, but sometimes defining moments present themselves to you and you simply need to do what it takes to define yourself. Almost by default, system trading was the last method standing. So that’s the path I took. With system trading, I must warn you now, once you start poking around it doesn’t take long to follow so many winding paths that you can’t remember how to get back out. That’s what happened to me. My pursuit of system trading has led me into the trader’s black box. Trust me, it’s a lot more than a group of algorithms. I feel lost now, but at the same time I feel like I’m at home.

The first creature I came upon in the black box is a curious fellow. He’s a nice little man that reminds me of Yoda. I couldn’t figure out at first if he’s the janitor or actually runs the place. I’m still not sure.

So I asked him,’What is this place?’

He replied ‘It’s a black box.’

‘As in a trading black box?’

‘Yes,’ he says.

‘Where can I go to place a trade then?’ I’m feeling a little giddy at this point, like I’ve arrived by default in trader’s nirvana.

‘You can’t place a trade while you’re in the box,’ he says.

Not the answer I was expecting. It’s called system trading. And black box or no black box, there is trading in system trading.

‘Fine,’ I said, ‘then can you direct me how to get out of here?’

‘You don’t ever get out of the black box once you’ve entered it. You have to become the box.’

More bad and unexpected news. The song ‘Hotel California’ starts looping in my brain. But between you and me, I think he’s just the janitor.

I decided to keep exploring and leave this nice little man alone for awhile. So far, I’ve met many old friends whom I’ve never met in person before. Simple Moving Average is here, as is RSI, MACD and even Head&Shoulders (he’s a big fella, as one would expect). There are also these little furry balls that run around the place screaming “got to find the best parameter” in a soft, squeaky voices. They call them swarming bots. I’d like to kick one across the room, quite frankly.

I also ran into ADX. He was kind of bummed out telling me how it’s hard for him to get work lately. I promised him I’d send some work his way once I got out of the box.

Curiously, he told me the same thing as that nice little man. ‘You can’t leave the box.’

I’ll attribute that to the medication he’s obviously taking. You see, contrary to popular trading myth, there actually is emotion in the black box.

There is so much to explore in here, I’m cool with hanging out for a while. For instance, I’ve always wondered what the deal was with Fuzzy Logic. I just saw him pass by and he’s on my list of people to interview.

Yes, I realize that one can spend too much time exploring every possible trading method and form of technical analysis. After all, traders trade. We’re not perpetual students of methodologies. But since I can’t figure how to get out of this place at the moment anyway, why not spend some time enjoying myself?

On my list of places/people to see while I’m trapped in here.

1. Genetic Algorithms
2. Particle Swarm
3. Intermarket Correlation
4. Visual Basic and C# programming
5. Statistics
6. Neural Network
7. Kernel Regression
8. Fuzzy Logic

And that’s about it. After that, I’ll commit to getting out of here. I’m not too concerned about it, really. These walls are sort of fluffy. And the air is refreshingly crisp.

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2 Responses to “Black Box Chronicles – Getting Lost”

  1. manaau Says:

    With your 'wrap a bollinger around a moving average' creativity it really can be.. well, endless really. Neural nets are the real black boxes, they never tell anything but training and out of sample results, besides commanding positions, at least with most others there's a methodology to visualize. Have fun in there, and keep posting

  2. Milktrader Says:

    I'm beginning to think the black box is just in my head.

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