Our major problem remains the estimation of worst case drawdown. Though we have lots of data available, we are not encountering many losing days. Of course I can estimate the loss from the standard deviation of the returns, even though we have few actual losing days. But this is a somewhat suspect approach. Our system's worse days tend to be fairly flat, while the main source of variance is upwards. This is clearly a good feature, but does make downside risk hard to assess. If we really believed the stats are correct, we could trade in quite big size. But for the moment we just need to be careful.
But one good thing in the last couple of days is that one of our markets has gone through a really wild phase. As North African nations tremble and tumble, oil is really wild. Earlier today, it experienced a 285 pts range in just 10 mins, which is higher than most day's total range. The trading systems worked fine through the day - indeed they did really well. But this has also blown out the statistics somewhat, also due to the inclusion of upside volatility. As a result, I have been reading up on various statistical methods that I could use instead of variance and standard deviation - things like semi-deviation and stats like the "Sortino ratio". But this has not been that successful so far.
My main trading-related reading remains Steenbarger's Enhancing Trader Performance. Progress on this has been slow but the book is excellent. Jerome is currently reading the prop-trading book I sent him about SMB trading.
On the other hand, I have also had a look at a book that promised much but has turned out to be completely absurd - Carr's Micro-Trend Trading. To get some feel of this absurdity, about page 80 it digresses into a discussion of how one should tithe 10% of your trading earnings. Apparently some passages from the Old testament prophet Malachi explain why this will result in your becoming even richer.
Much comment on the recent documentary about the financial crisis, Inside Job, which has just been issued in the UK. I have downloaded a copy and plan to watch it this weekend, along with a Discovery channel series about climbing Everest and some rugby.
As I write this I am listening to a superb live recording of Neil Young from 2009. A "greatest hits" type set. Most enjoyable.
Cool pictures from the Linda Rasche website of trading set ups. I am slowly working towards a 5 screen set up.