I am Tiger Woods

Yes, I'm talking about the professional golfer. And no I'm not comparing my ability to drive 300 yards. What I have in common with Tiger is my weakness to certain indiscretions. In my case, though, the cocktail waitress is discretionary trading. I've committed myself to system trading, but over the past few months I've participated in trading based on hunches, opinions and intuition. Not exactly what a self-proclaimed system trader oughta be doing. There is a part of me that wanted this ugly truth to come out, and my subconscious has been leaving clues as a silent cry for help. Instead of leaving phone numbers on my cell phone, I left my trade history open on my screen. I cannot lay the blame with anyone but myself, I know that. And now is the time for me to come clean so I can properly seek my redemption.

System trading has a very steep learning curve, and every time I feel I've exhausted a portion of the maze, a new trap door appears. It sounds fairly straightforward. Backtest a trading system and then trade it if it looks good. But we all know backtesting is not good enough, since there is no guarantee that past market action will repeat itself in the future. So we reach the point of understanding that optimization and walk forwards (out-of-sample testing) are necessary steps to achieve a tradeable system. But every time we answer a question, several more take its place.

What is the best parameter set from optimization? What criteria or metric did you use to arrive at that answer? Are there better metrics than the one you're using? Is your system of testing statistically valid? How do you measure statistical validity?

You learn to program your system and run it through your software of choice, but then you find you need a refresher course on statistics. And then you find that all this data from your backtesting, optimization and walk-forwards is such a mess. What does one do with this data? How do we organize it? What does it all mean?

So you discover a statistical package such as R or resort to slogging around in Excel to make heads and tails from the data. You soon discover that scripting is a better approach than point-and-click, so you commit to learning more programming languages. And then to manipulate these files you discover that Notepad is a freakin joke and you start down the path of finding a robust editor, one like VIM that you need to learn what keys do what. It's like taking piano lessons halfway up your ascent to Mount Everest. Sheesh.

And then there is the matter of whether or not your trading system is based on something rational, or is just a collection of indicators pointing every which direction. Granted, walk-forwards should cull out the crazy systems from the rational ones, but now you've opened a can of worms on whether you should take a scientific (hypothesis testing) approach or an empirical (pattern finding) approach to systems.

Let's not forget that your basic system will need filters. Simply because you need to have spectacular results historically if you hope to break even in the future. This is where data mining and over-fitting usually gets people. You could conceivably look over the history of trades and find out that the largest loser was one that was taken on a Tuesday. Program your system not to take trades on Tuesdays and viola, you got a winner. Seriously, people do this sort of thing.

Valid filters include intermarket signals and neural network outputs. But now we are getting even more complicated, aren't we? What is the proper way to approach the application of neural networks and kernel regression to trading? Well, it's time for another graduate course in higher math.

You're not done though. You still need to have organizational skills of a management guru to keep track of what you did to what system and when you did it, and where you put that flippin file.

Nobody said that trading (read commitment) was easy.

And the loneliness of system trading is a problem. Everyone's trading, making money, losing small fortunes and you're going through tutorials on what the difference is between a chi-test and a t-test. The temptation is not insignificant, and I'm coming clean and admitting I've fallen prey to the lure of discretionary trading. I've talked this over with systems trading and we've decided that it's time to renew vows and press forward.

My redemption is within myself. I choose to trade a certain way and not another way. I can't blame the media (mostly because they don't pay attention to me in the first place), I can't blame my father and I can't blame system trading. I should stop with blaming altogether maybe, and just admit that I'm human and I'll do better next time. The bottom line is you need to be comfortable in your own skin.

No, I can't drive my Sasquatch 300 yards (unless the ball rolls for 50 yards). And though it's tempting to say I could drive an Escalade more than 300 yards (unlike Tiger, presumably), I'm not sure I wouldn't have crashed too if I had gotten lost in the middle of the night just outside my house. We all arrive at self-awareness in different ways. Hopefully you don't need to crash to get there.