Wu Guobin, the first trader who introduced the "self-organized criticality" of American physicist BAK et al. into financial transactions, won the 10th place in the 2nd Global Derivatives Trading Competition. This "key"? The designer of the mathematical model of Kelly equation trading told the reporter of Futures Daily about his trading career for more than 20 years.
From "temporary workers" to "experts" in financial markets
Wu Guobin worked as a decoration engineer, opened a bookstore and wrote novels in his early years. I started to contact the stock market at the age of 24. As a part-time "retail investor", he has been struggling in the stock market for many years with thousands of dollars every day and trading by newspapers and news. In 2000, Wu Guobin, who was choosing a career direction, finally decided to take stock trading as his future development direction in Soros's "The Man in front of the Curve".
A lot of study made Wu Guobin fully understand the stock market, and john mackey's words made him realize a leap from quantitative change to qualitative change: "When you enter the stock market, you will enter a field full of competition, and you will face the challenge of the most intense mind in the world. You must develop your own method, otherwise you will not be able to tell the truth from the false. "
Wu Guobin told himself that everyone needs to have their own trading system and methods, otherwise they can't tell right from wrong. So, he began to try to establish his own trading system and method.
The law of price movement, graphics is only a market phenomenon, and can not reflect the essence of the market. Therefore, he hopes to prove that this phenomenon is inevitable in theory.
Through a lot of research, Wu Guobin finally found a theory to support his conjecture-"self-organized criticality principle". According to this principle, a dynamic system has the interaction of various forces, which is a process of energy recombination. When the tissue reaches a certain point, it will produce fission or collapse, such as avalanche. This principle applies to any situation, including natural disasters, power systems and financial markets.
In his view, like the power system, the price fluctuation in the financial market also has "self-organized criticality". The price formed by a large number of interacting components will naturally develop to a critical state. Critical state is a kind of equilibrium that will be broken. When the price is in a critical state, even a small impact will produce a series of continuous directional movements, which is the trend trunk. Based on this, he designed "criticality? Kelly equation "mathematical model to capture the backbone of the price trend.
"The core of my investment philosophy is that there must be a self-organized critical state in the price. We are just looking for this critical point and trading here." Wu Guobin told the reporter of Futures Daily that the critical point is only an observation point, and only when the price exceeds the critical point can trading be carried out. The reason why the transaction exceeds the critical point is because of Bayesian theorem. "In terms of probability, there is a posterior probability. For example, at the critical point, the probability does not exist, because the probability of winning or losing is 50%. If the critical point is exceeded and the price breaks through, the posterior probability is generated. This posterior probability is above 50%, which is conducive to trading."
Excellent fund management is a necessary condition for obtaining compound interest.
On the trading strategy, Wu Guobin thinks that the most important thing is fund management, and good fund management can bring long-term compound returns.
In his eyes, he can only hold profitable positions for a long time. "Now that it has been judged that it is self-organized, it immediately produces and breaks through the critical point. If it doesn't keep moving, it must be wrong and must be cleaned up immediately. " Wu Guobin said that regarding Licang, he firmly believes that Licang will take care of himself and will hold it for a long time.
"Profits will take care of themselves" is a popular saying on Wall Street. Wu Guobin believes that long-term holding is to make profits fully increase, and he would rather withdraw his position than withdraw from the profit state easily. Returning some profits to the market is also part of the investment game.
Both the stock market and the futures market can be said to be a conventional investment game, which requires scientific methods to run calculations and "bet". For this reason, Wu Guobin introduced Kelly Equation, which is a formula to calculate the optimal capital ratio of each stage by scientific method in an investment with positive expectation, so as to maximize the capital growth rate and make the bankruptcy probability zero. Then, according to my own trading system, I made a simple improvement on Kelly formula.
For a trading signal, the system will give an "investment quota" according to its quality, and this "investment quota" is venture capital. After obtaining the venture capital, the system will calculate the investment position according to the formula. It is precisely because of such a mature trading system and scientific risk management theory that Wu Guobin has never had a "short position" in his trading career and maintained a state of sustained profitability.
"critical? Kelly mode is not a simple platform breakthrough.
When it comes to "criticism? When the mathematical model of Kelly equation is different from that of platform breakthrough trading, Wu Guobin said: "Self-organized criticality theory" is a top-down theory, and breakthrough is just a chart form without thinking. There are many price breakthroughs, but one is not necessarily a key breakthrough. "
Simply put, "the key? Kelly equation "model quantifies the cost of people holding positions in different time periods of the market;" "The' platform breakthrough transaction' itself quantifies the price." For example, people with four time periods, one represents the long-term capital holding cost, one represents the medium-term holding cost, and the other two represent the short-term holding cost and the ultra-short-term holding cost respectively. These four costs may or may not be consistent. By calculating these costs, it is found that when their organizations reach an agreement, this is the critical state. "Wu Guobin said, for example.
"Of course," critical "? Kelly equation model can establish up to eight kinds of market forces. When eight forces converge, we define it as a critical state. The consideration of' platform breakthrough' is very single. Wu Guobin also said, "Our model is to describe whether various market forces can converge at one point. If they are in a chaotic state without convergence, then they are self-organizing. "
Therefore, Wu Guobin thinks that there are only two states in the market: one is organizational state, and the other is critical state.
Expect to be a good critic? fund manager
Talking about the future, Wu Guobin told reporters that he would continue to improve Critique? Kelly equation "model. Nowadays, the global financial market turmoil has intensified, and there are fewer and fewer big markets. There are few trading signals based on the daily line every year, maybe one or two. Therefore, he hopes to shorten the trading cycle to improve the yield. According to reports, he got the trading signal of "outer disk" on the basis of 15 minutes, while "inner disk" hoped to reach 5 minutes.
Wu Guobin also has a business dream, that is to become an excellent fund manager.
"Helping others is to achieve yourself." Wu Guobin said that in terms of business value and contribution to society, when you help others, you get economic benefits, and at the same time you get recognition from others. Helping others to earn money and serve others well is based on human sociality and needs social recognition. He thinks it is very valuable to be a manager of public funds.
There are many kinds of transactions in overseas markets. The "Kelly Equation" model can be applied to almost every variety, which ensures the diversity of investment. At the same time, the interest rate in overseas markets is low, and the overseas Chinese have a strong demand for asset preservation, and the pursuit of stable income is just in line with Wu Guobin's own investment positioning.