About Definitions

The definition pages are used to define my own terms as we use them for the purpose of discussing investment concepts and portfolio management. Most of the definitions are the unique way I (Mike Shell) define things while some terms are more general and will be sourced (like Wikipedia, Investopedia, etc.). If you reference these definitions, please source ASYMMETRY®Observations http://www.asymmetryobservations.com

One advantage of my methods of portfolio engineering is that it requires to specifically define all parts of my systems and methods. My process requires me to think deeply about what I believe and to define things. Once I have defined things, I can program my computer to do routine things for me that people would probably make errors. Even though I developed computer programs to implement a lot of my systems, the human element of what I do is the still the key competent. I tell my program what I want it to do for me – it just does what I tell it to do. For my programs and systems to get me in a positive trend in one of the 24 countries equity markets, I have to define what is “positive”, what is “trend”, and what is “market”. And, what is a “buy” and what is a “sell” and “how much”? Being able to program a computer to do these highly routine disciplined processes isn’t enough. A good algorithm (process for doing things) or system is only as good as the creator of it. A system is only robust if it is complete. And good complete system is only as good as it’s operator. A person has to be able to operate the system and execute the trades with as much disciplined as the program generates the signals for buying, selling, and sizing. I believe this is why we see good programers who can create quantitative systems that appear good in back-test, but they have no actual performance to speak of that matches it. If they have no actual performance history executing the system or strategy in actual accounts, they are either rookies with no experience or experienced with a lack of skill as an operator.

You can probably see how thinking deeply about things to define them properly is a first step to creating an asymmetric trading system designed to lead to asymmetric investment returns: where average profits exceed average losses to form an upward sloping equity curve.

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