http://www.tradingeconomics.com/interest-rates-list-by-country?c=major
http://www.fxstreet.com/fundamental/interest-rates-table/
середа, 23 листопада 2011 р.
вівторок, 15 листопада 2011 р.
Trading Systems from ET
Several traders here have provided full details of how they trade: Anekdoten (http://www.elitetrader.com/vb/showt...&threadid=99283), Saliva (http://www.elitetrader.com/vb/showt...threadid=144884), SusanaDT (http://www.elitetrader.com/vb/showt...40&pagenumber=1). They've taken time to provide in great detail what they do.
Geez (http://www.elitetrader.com/vb/showt...threadid=148752) provided a journal of live calls last year demonstrating how a 1:2 risk:reward ratio using a relative strength/weakness with-trend strategy makes it possible for a 50% annual return in day trading quite likely when you follow this simplest of strategies with strong risk management. (I believe he ended the year with much greater than 50% return, but sadly his journal was spammed and he stopped posting.)
If you can read, put in some chart study and live screen time to memorize what price action patterns indicate most of the time, set rules for yourself and stick to them, you can get everything you need to be a profitable trader right here on ET for free.
Geez (http://www.elitetrader.com/vb/showt...threadid=148752) provided a journal of live calls last year demonstrating how a 1:2 risk:reward ratio using a relative strength/weakness with-trend strategy makes it possible for a 50% annual return in day trading quite likely when you follow this simplest of strategies with strong risk management. (I believe he ended the year with much greater than 50% return, but sadly his journal was spammed and he stopped posting.)
If you can read, put in some chart study and live screen time to memorize what price action patterns indicate most of the time, set rules for yourself and stick to them, you can get everything you need to be a profitable trader right here on ET for free.
Option trading-options spreads
experience is the culpit of anxiety trading.
human brain learns things by experience through association, generalization etc. driving a car most time is fun, but if you once had an accident, particularly serious one or almost killed you, you will never forget, when you pass that place again, you will pay particular attention to cars or yourself, you will be very nevous it seems you will have another one again.
trading is the same thing. when you win, you have fun. when you lose,even a small loss, next time when the similar situation occurs, you may freeze or hesitate or second guess a good trade(you do not want to get hurt again subconciously), ...
the only remedy is: accept the fact you will have losers, but do not put a too big bet enough to knock down your whole account ( a well predefined risk that you can accept or will not hurt you much, my rule is not affect my account liqidity: even I take that loss, I still can trade as usually), this will create severe anxiety. for example, a 5k account, you can take 50~100 buck loss per trade, will not have great impact on your account liqidity. if you take 1k loss, that will seriously threat your account survival.
actually, there is good trades in option with 50~100 bucks loss/risk. you just trade one lot penny option or using spread, easily limit your risk under this level. of course if you trade future, 100 bucks just several ticks, a random move will knock you out, so that is not suitable or you will be very nervous, if you are nervous, that means you lose objectivity and you can not trade that thing. take AAPL option, when you see most option price is very expensive compared to your account, but when spread strategy is employed, your risk can be easily defined to your acceptable level. spread methods is used to minimize option premium risk.
I trade future a lot, but late I found option is better. one, I can easily define my trading idea; second can clearly define my risk; third, I can adjust my size easily; fourth the most important is the leverage is far better than future, less money better reward, double/ten fold reward is easily achieved. with future, often my idea is right, but the market easily hit my stop loss ( I am right, but I lose), if I do not use stop loss, when the market trends long time against me, I lose more, so that puts me in a bad dilama: if I place a stop loss, I may lose with good idea because of market noises, if I do not place a stop loss, I may be totally wrong and lose big, so I must put a stop loss there. the stop loss thing makes me nervous, that seriously affect my trading reaction speed ( I need setups to initiate trade, not my sound judgement), for example, when in a uptrend, I bought EMA touching, but because of risk/setup definition, often I buy the thrust in order to put a stop loss (saw the low).
I normally trade ES/CL/NQ, but I found I can not easily define my risk because of volatilty, the reality is "right/wrong is vague, you can not exactly pindown where to drop/to rally". with my stop loss, I get hit easily or frequently. like this week, I saw ES has good support at 1220~1230, if I bought 1220, then use recent new low to place a stop loss, I may be stopped out at 1218.75 (former low is 1219.75). I bought 100lots of SPY 124 call with averaging price 0.93, sold at closing friday with 2.8, that is three times gain. but if I bought 9k ES, just two lot(overnight), or the best 4lot for intra-day, suppose I bought the lowest 1220, and out at friday closing 1263.75, I just net 43.75 points, or 2 times 50 and 43.75=4.5k gain, you may say ES is not risker than spy option, when you bought 9k ES not means you take 9k risk, in option 9k option may be worthless this friday (real risk),but in order to take real 9k risk in ES, you may need far larger margin (you may need trade 20lot, that needs a 100k account).
with no stop loss to consider, I am not nervious any more. I do not need frequently check the quote or worry about overnight/weekend adverse development (pay too much attention to market noises) to take my stop loss then late it is just some crap market noise. I can ignore those noises totally, focus on those good trades. I am happy. I do not over trade any more (try to recoup stop loss created loss, that greatly reduce the quality of my trades, most are impulsive, there is no sound thoughts).
http://www.elitetrader.com/vb/showthread.php?s=&threadid=230183&perpage=6&pagenumber=5
human brain learns things by experience through association, generalization etc. driving a car most time is fun, but if you once had an accident, particularly serious one or almost killed you, you will never forget, when you pass that place again, you will pay particular attention to cars or yourself, you will be very nevous it seems you will have another one again.
trading is the same thing. when you win, you have fun. when you lose,even a small loss, next time when the similar situation occurs, you may freeze or hesitate or second guess a good trade(you do not want to get hurt again subconciously), ...
the only remedy is: accept the fact you will have losers, but do not put a too big bet enough to knock down your whole account ( a well predefined risk that you can accept or will not hurt you much, my rule is not affect my account liqidity: even I take that loss, I still can trade as usually), this will create severe anxiety. for example, a 5k account, you can take 50~100 buck loss per trade, will not have great impact on your account liqidity. if you take 1k loss, that will seriously threat your account survival.
actually, there is good trades in option with 50~100 bucks loss/risk. you just trade one lot penny option or using spread, easily limit your risk under this level. of course if you trade future, 100 bucks just several ticks, a random move will knock you out, so that is not suitable or you will be very nervous, if you are nervous, that means you lose objectivity and you can not trade that thing. take AAPL option, when you see most option price is very expensive compared to your account, but when spread strategy is employed, your risk can be easily defined to your acceptable level. spread methods is used to minimize option premium risk.
I trade future a lot, but late I found option is better. one, I can easily define my trading idea; second can clearly define my risk; third, I can adjust my size easily; fourth the most important is the leverage is far better than future, less money better reward, double/ten fold reward is easily achieved. with future, often my idea is right, but the market easily hit my stop loss ( I am right, but I lose), if I do not use stop loss, when the market trends long time against me, I lose more, so that puts me in a bad dilama: if I place a stop loss, I may lose with good idea because of market noises, if I do not place a stop loss, I may be totally wrong and lose big, so I must put a stop loss there. the stop loss thing makes me nervous, that seriously affect my trading reaction speed ( I need setups to initiate trade, not my sound judgement), for example, when in a uptrend, I bought EMA touching, but because of risk/setup definition, often I buy the thrust in order to put a stop loss (saw the low).
I normally trade ES/CL/NQ, but I found I can not easily define my risk because of volatilty, the reality is "right/wrong is vague, you can not exactly pindown where to drop/to rally". with my stop loss, I get hit easily or frequently. like this week, I saw ES has good support at 1220~1230, if I bought 1220, then use recent new low to place a stop loss, I may be stopped out at 1218.75 (former low is 1219.75). I bought 100lots of SPY 124 call with averaging price 0.93, sold at closing friday with 2.8, that is three times gain. but if I bought 9k ES, just two lot(overnight), or the best 4lot for intra-day, suppose I bought the lowest 1220, and out at friday closing 1263.75, I just net 43.75 points, or 2 times 50 and 43.75=4.5k gain, you may say ES is not risker than spy option, when you bought 9k ES not means you take 9k risk, in option 9k option may be worthless this friday (real risk),but in order to take real 9k risk in ES, you may need far larger margin (you may need trade 20lot, that needs a 100k account).
with no stop loss to consider, I am not nervious any more. I do not need frequently check the quote or worry about overnight/weekend adverse development (pay too much attention to market noises) to take my stop loss then late it is just some crap market noise. I can ignore those noises totally, focus on those good trades. I am happy. I do not over trade any more (try to recoup stop loss created loss, that greatly reduce the quality of my trades, most are impulsive, there is no sound thoughts).
http://www.elitetrader.com/vb/showthread.php?s=&threadid=230183&perpage=6&pagenumber=5
NoDoji about trading plan
If you've done thorough research and backtesting, selected setups and defined trading rules based on probability offering you a statistical edge, then real-time qualitative assessments can lead to failure.
Qualitative assessments are made during the mathematical analysis phase (research and backtesting to develop the plan). The trading plan (business plan) is designed based on the quality setups you choose to trade. Because successful trading is the result of a statistical edge based on tossing the coin every time a pre-qualified setup presents, consistent profitability depends on trading all setups and managing them according to the plan.
Ask any struggling trader here who has an edge what their biggest problems are and I assure you the majority of them will fall into one of these categories: hesitating/failing to trade a setup (picking and choosing), taking profits smaller than target, moving stops to break even, moving stops further away inviting larger losses, getting impatient and jumping the gun on trades.
A proper trading plan doesn't allow allow this kind of micro-management. By trading that way, you're messing with your statistical edge. You're trading as if you believe you know what's going to happen next. You don't.
IMHO, qualitative assessments and necessary adjustments should be made at the end of the trading day, not while trading.
I'd have twice as much money in my account right now had I followed the original trading plan I developed last year without any real-time qualitative intervention on my part.
Qualitative assessments are made during the mathematical analysis phase (research and backtesting to develop the plan). The trading plan (business plan) is designed based on the quality setups you choose to trade. Because successful trading is the result of a statistical edge based on tossing the coin every time a pre-qualified setup presents, consistent profitability depends on trading all setups and managing them according to the plan.
Ask any struggling trader here who has an edge what their biggest problems are and I assure you the majority of them will fall into one of these categories: hesitating/failing to trade a setup (picking and choosing), taking profits smaller than target, moving stops to break even, moving stops further away inviting larger losses, getting impatient and jumping the gun on trades.
A proper trading plan doesn't allow allow this kind of micro-management. By trading that way, you're messing with your statistical edge. You're trading as if you believe you know what's going to happen next. You don't.
IMHO, qualitative assessments and necessary adjustments should be made at the end of the trading day, not while trading.
I'd have twice as much money in my account right now had I followed the original trading plan I developed last year without any real-time qualitative intervention on my part.
Option trader tip
I've been trading profitably for a for over 12yrs. At the beginning, was very lucky to have found a group that to be a member you had to prove consistency. Their mantra, one stock can make a living.
Today I trade only GOOG(traded POT before the 3:1 slit). This last week it had swings of 10.56, 6.11, 5.52, 7.77, 7.12, 5.82, 5.49. Using weekly options and only buying ATM(when you get good try synthetic L/S's and your ROI will skyrocket), assume you can capture 50% of each swing and with your ATM option you'd net 50% of that. So 49pts X.50 X.50 = $12.25X100= $1225 per contract, and GOOG ATM contracts average $500 over the week.
And, every turning point was a CCI divergence...it doesn't get easier than that
Today I trade only GOOG(traded POT before the 3:1 slit). This last week it had swings of 10.56, 6.11, 5.52, 7.77, 7.12, 5.82, 5.49. Using weekly options and only buying ATM(when you get good try synthetic L/S's and your ROI will skyrocket), assume you can capture 50% of each swing and with your ATM option you'd net 50% of that. So 49pts X.50 X.50 = $12.25X100= $1225 per contract, and GOOG ATM contracts average $500 over the week.
And, every turning point was a CCI divergence...it doesn't get easier than that
NoDoji about edge and confidence
05-29-11 08:30 PM
Defined a set of statistical edges, back-tested them manually, defined rules for entry/stop/target that placed the edges further in my favor (risk:reward), micromanaged the system instead of simply trusting and trading it, got really frustrated by the fact that my daily post-market analysis consistently demonstrated results 200% better (at minimum) than my discretionary results, and finally gave up trying to have 100% perfect trades and just traded the system, knowing that even the #1 team has wins, losses and ties.
As for restraint, I use a protective stop on every trade and I trade size that allows a "black swan" event to result in as much slippage as 100x my max stop loss (I believe that would be a limit down move) without reversing more than a couple months profit.
That mechanism was developed early on when I was sometimes overconfident and took on excessive risk. At that time I was not a consistently profitable trader.
When these disastrous trades were closed, I studied the charts to find clues as to why what I was so certain would happen failed to materialize. These really bad trades were all swing trades and all counter-trend; my day trading was always just fine because it either worked or didn't during the course of the day. I found I was entering a trade based on the intraday chart and price action, when my intention was to hold for a longer term move. When I studied the daily charts, I found that I was putting on these counter-trend swing trades at levels where the trend was consolidating for the next push or was showing no sign of a reversal whatsoever.
So, I wanted to learn how to be the trader on the other side of my bad trades. I wanted to be the one sitting on an unrealized gain of $2000, $4000, $6000 or more, not holding a loss that size and just hoping to get back to break even.
I learned to recognize trends and trend continuation signals (I was mistakenly interpreting these as signs of weakness in an uptrend or strength in a down trend), and eventually learned how to trade with the trend.
When you trade against a trend, you're fighting the #1 team. I imagine that's why so many traders gravitate toward this high risk tactic. It boosts our ego to try and beat the overconfident #1 team, to be able to say, "Look at these dumbasses buying way up here, I'll show them who the smart guy is."
Counter-trend, you're making the assumption you know approximately when price will turn based on indicators such as Keltners, Bollingers, stochastics, "it's too f*cking high to go any higher", etc. It can work beautifully for a long time, giving you a sense of invincibility, of having mastered the market. You come to believe that when price becomes overextended by at least X%, Y will always follow. You become so confident you put on excessive size, or continue to average down as price runs further. This is where that one bad trade can wipe out everything you've gained (or worse).
When you trade in the direction of a trend, the strongest team has your back. The moves are stronger and longer than counter-trend pullbacks, offering the opportunity for larger profits as well. The best part is the risk management. If you're positioned against the trend, price can remain overbought or oversold for days, weeks, even months before a strong pullback or a reversal occurs. This is a biggest danger of counter-trend trading. But in a trend, there are lines in the sand beyond which a trend reversal or very deep pullback is likely. You take your remaining profits (or a small loss, if you were late to the party) at these levels and wait for the next setup.
Quote from DEM BONES:
How were you able to create a healthy balance in confidence and restraint?
Defined a set of statistical edges, back-tested them manually, defined rules for entry/stop/target that placed the edges further in my favor (risk:reward), micromanaged the system instead of simply trusting and trading it, got really frustrated by the fact that my daily post-market analysis consistently demonstrated results 200% better (at minimum) than my discretionary results, and finally gave up trying to have 100% perfect trades and just traded the system, knowing that even the #1 team has wins, losses and ties.
As for restraint, I use a protective stop on every trade and I trade size that allows a "black swan" event to result in as much slippage as 100x my max stop loss (I believe that would be a limit down move) without reversing more than a couple months profit.
Quote from DEM BONES:
How did you develop a mechanism to avoid being overconfident and taking on excessive risk?
That mechanism was developed early on when I was sometimes overconfident and took on excessive risk. At that time I was not a consistently profitable trader.
When these disastrous trades were closed, I studied the charts to find clues as to why what I was so certain would happen failed to materialize. These really bad trades were all swing trades and all counter-trend; my day trading was always just fine because it either worked or didn't during the course of the day. I found I was entering a trade based on the intraday chart and price action, when my intention was to hold for a longer term move. When I studied the daily charts, I found that I was putting on these counter-trend swing trades at levels where the trend was consolidating for the next push or was showing no sign of a reversal whatsoever.
So, I wanted to learn how to be the trader on the other side of my bad trades. I wanted to be the one sitting on an unrealized gain of $2000, $4000, $6000 or more, not holding a loss that size and just hoping to get back to break even.
I learned to recognize trends and trend continuation signals (I was mistakenly interpreting these as signs of weakness in an uptrend or strength in a down trend), and eventually learned how to trade with the trend.
When you trade against a trend, you're fighting the #1 team. I imagine that's why so many traders gravitate toward this high risk tactic. It boosts our ego to try and beat the overconfident #1 team, to be able to say, "Look at these dumbasses buying way up here, I'll show them who the smart guy is."
Counter-trend, you're making the assumption you know approximately when price will turn based on indicators such as Keltners, Bollingers, stochastics, "it's too f*cking high to go any higher", etc. It can work beautifully for a long time, giving you a sense of invincibility, of having mastered the market. You come to believe that when price becomes overextended by at least X%, Y will always follow. You become so confident you put on excessive size, or continue to average down as price runs further. This is where that one bad trade can wipe out everything you've gained (or worse).
When you trade in the direction of a trend, the strongest team has your back. The moves are stronger and longer than counter-trend pullbacks, offering the opportunity for larger profits as well. The best part is the risk management. If you're positioned against the trend, price can remain overbought or oversold for days, weeks, even months before a strong pullback or a reversal occurs. This is a biggest danger of counter-trend trading. But in a trend, there are lines in the sand beyond which a trend reversal or very deep pullback is likely. You take your remaining profits (or a small loss, if you were late to the party) at these levels and wait for the next setup.
Bighog trading tips 3
From notebooks of trading tidbits collected over the years.
First one from a 1969 book on trading Commodities:
Rules can be forgotten! But once the trader has developed the ability to look at the major market symptoms and arrive at a valid judgement about it's technical health, he has (sorry, Nod, this was from 1969, ha) moved permanently into the elite group who put every confidence in skill and knowledge--- and let others depend on others and guesses and hunches.
Identify 1 or 2 tactics that consistently work, then refine them to result in highest probability within your own mindset of comfort, etc. Some of the best traders are successful because they trade only 1 strategy. You work your strat while controlling risk. Belveal, 1969.
Never SELL a dull mkt short.
You're either ahead of the mkt or you're running behind it. For most trading being late with the order can turn a possible profit into a loss. It's better to anticipate a trend change, a pivot level etc and be wrong while taking a small loss than it is to "wait" for a confirmation and be sure to have a small chance of winning. " I've never been a successful chaser of price." Kaufman
Anticipate---- Be ahead of the crowd.
The most fundamental concept is how to recognize what a chart looks like just prior to an important breakout.
When you think you can not win - you are done.
Playing defense when you should be playing offense.
You must be able to handle small losses. Losing is just part of the game.
No, no, no, NO hesitation at your numbers. It is not an option.
If winning trades should work immediately, then it must mean losers should be immediately dumped.
Is this trade you are in now getting hotter or colder? Always trade with reference points. This works within your technical tragets for a profit or a loss. Always have a worst case STOP and the only choice for the stop is to pull the trade out quicker.
STOPS are like taxi fare for a blind date. If he is a loser you can still get home safely.
First one from a 1969 book on trading Commodities:
Rules can be forgotten! But once the trader has developed the ability to look at the major market symptoms and arrive at a valid judgement about it's technical health, he has (sorry, Nod, this was from 1969, ha) moved permanently into the elite group who put every confidence in skill and knowledge--- and let others depend on others and guesses and hunches.
Identify 1 or 2 tactics that consistently work, then refine them to result in highest probability within your own mindset of comfort, etc. Some of the best traders are successful because they trade only 1 strategy. You work your strat while controlling risk. Belveal, 1969.
Never SELL a dull mkt short.
You're either ahead of the mkt or you're running behind it. For most trading being late with the order can turn a possible profit into a loss. It's better to anticipate a trend change, a pivot level etc and be wrong while taking a small loss than it is to "wait" for a confirmation and be sure to have a small chance of winning. " I've never been a successful chaser of price." Kaufman
Anticipate---- Be ahead of the crowd.
The most fundamental concept is how to recognize what a chart looks like just prior to an important breakout.
When you think you can not win - you are done.
Playing defense when you should be playing offense.
You must be able to handle small losses. Losing is just part of the game.
No, no, no, NO hesitation at your numbers. It is not an option.
If winning trades should work immediately, then it must mean losers should be immediately dumped.
Is this trade you are in now getting hotter or colder? Always trade with reference points. This works within your technical tragets for a profit or a loss. Always have a worst case STOP and the only choice for the stop is to pull the trade out quicker.
STOPS are like taxi fare for a blind date. If he is a loser you can still get home safely.
Bighog trading tips 2
Well, i like that. Congrats, when you said a consolidation is what a 'continuation" trader sees i am willing to shake hands.
My way of thinking as a trend follow person is quite simple. I see a move either way and immediately think "TREND". Ok, i see the momentum stall and usually will grab that profit with the intention to get back in with the trend because experience has taught me the odds say a continuation is in order. Since a consolidation sideways move is considered NORMAL i do not give fading a thought. Many good trends might not even show much consolidation at all, but will show a retrace. I do not consider a retrace, as long as it does not surpass 50% of the previous legs move a reversal signal where by that time many other newer players will be filled in the opposite direction and get hammered when the odds work in my favor and the trend continues on for another leg before repeating the whole process again. Yes, i do stay alert for a possible reversal signal which will nullify the TREND. But i never look to just fade a move for that singular purpose.
No signal is perfect, thats well known. As traders we find our own way. I prefer to trade with a crowd of like traders and in my world that means the odds are in my favor. If the odds were not in my favor, how else could i assume i was playing the same game? Fading seems to be a game the second stringers like to play because they have yet to fully understand the mechanics of trend following. If it works for you, so be it.
Ok, i adjusted your grade. Good answer as it will give some others fodder to consider.
PS: Cold also in Michigan, but not to bad. The Holidays are over and usually after the Super bowl is over winter gets very boring. This year we have the Winter Olympics. That will be great watching, especially here because we get Canadian TV stations also and Canada is not about bragging constantly about how fantastic their guys and gals are. American tv, even in sports is a lot of bragging up some idiot and waving the flag instead of a sporting event to enjoy.
My way of thinking as a trend follow person is quite simple. I see a move either way and immediately think "TREND". Ok, i see the momentum stall and usually will grab that profit with the intention to get back in with the trend because experience has taught me the odds say a continuation is in order. Since a consolidation sideways move is considered NORMAL i do not give fading a thought. Many good trends might not even show much consolidation at all, but will show a retrace. I do not consider a retrace, as long as it does not surpass 50% of the previous legs move a reversal signal where by that time many other newer players will be filled in the opposite direction and get hammered when the odds work in my favor and the trend continues on for another leg before repeating the whole process again. Yes, i do stay alert for a possible reversal signal which will nullify the TREND. But i never look to just fade a move for that singular purpose.
No signal is perfect, thats well known. As traders we find our own way. I prefer to trade with a crowd of like traders and in my world that means the odds are in my favor. If the odds were not in my favor, how else could i assume i was playing the same game? Fading seems to be a game the second stringers like to play because they have yet to fully understand the mechanics of trend following. If it works for you, so be it.
Ok, i adjusted your grade.
Good answer as it will give some others fodder to consider.PS: Cold also in Michigan, but not to bad. The Holidays are over and usually after the Super bowl is over winter gets very boring. This year we have the Winter Olympics. That will be great watching, especially here because we get Canadian TV stations also and Canada is not about bragging constantly about how fantastic their guys and gals are. American tv, even in sports is a lot of bragging up some idiot and waving the flag instead of a sporting event to enjoy.
Bighog trading tips 1
I would suggest sticking with the ES sim for awhile. I might also suggest you do a couple things for practice to help the confidence curve increase.
Get well acquainted with actual (sim) order placement and exit based on a liminited # of entrys based on BO's, call it trend following if that sounds better. So you now have the strategy figured out, you will trade for the gravy train runs.
Your tactics to carry out the strategy will be well worn and well used basic stuff that have been around forever. Price can only go up or down so thats your battle plan.
The beauty of the simple tactics for each daily battle mission is they work and will continue to work forever in a game of chance. Losers are expected in any battle plan. There will be no walking on rose pedels and claiming victory before the battle gets started. War is hell!!!!
Your basic tactics will include rather benign and almost automatic beginnings to get your feet wetter.
Even if you do not want to trade the +6/-6 ORB in live trading later i still would like you to do it as practice. Why?
ORB for the 1st hour is all about discipline. No discipline = NO confidence, no confidence = NO courage. It is that simple.
Trading the ORB for an hour will work on puking out losers and getting right back in to catch a possible run. The ORB will teach you to recognize whipsaws rather than just having them slap us traders around with no respect. You will learn how to avoid whipsaws by maybe waiting for the 1st hour BO if you choose, but the deal is you will learn how to avoid getting chopped up. You will learn how to stay in a "run" right off the open also.........thats the goal of the whole deal. Discipline is not only about avoiding losers, discipline is about everything in a game of chance. ORB will FORCE you to take action when it is needed, it forces you to be in the moment, it forces you to take the trade. Thats what you need, you need a SGT there yelling at you, getting on your case. "For christ sake NOD, why in the fricking hell did you hesitate at your number? Do you think the god dam mkt is going to wait for your slow butt? We expect better from you...........tomorrow you best shape up and take every signal or no weekend pass, you GOT THAT? "
You need to toughen up, you need to get serious. This is not a game of marbles in the schoolyard. (i am showing my age) This is a game that every Tom, Dick and Harriet would love to beat. You are close but have not received the cigar yet. You have a trigger problem because you have it in your head this is harder than stocks. Stocks are not the problem, the problem is fear of losing. get over that in the sim to some extent and live trading will be easier AFTER you practice the tactics.
Support, resist, retraces, hooks, reversals of the main trend thats what you want to focus on. Forget scalping for small potatoes, you can scalp all you want later after you get the confidence under control. That will come when you nail some runs like this mornings initial drop. That was the "meat" of the day. Practice discipline, practice first in a mechanical manner such as, take EVERY signal, place a rock solid STOP LOSS at 6 ticks as max and allow yourself to get out sooner but NEVER LATER. Take ALL trades, no fear, no thoughts, think it is discipline and conditioning only. It is NOT money. Practice discipline by staying in a winner, work on that , it is important, learn how to ring the register and jump right back in when the trend has not shown a reversal signal. Learn RETRACE action.......thats hugely important, most rookies view all retraces as reversals and get slapped around as soon as the prior trend continues on.
After the 1st hour ORB trade, switch to regular TA based on levels, tests etc.
You owe it to yourself to make these changes and get more discipline, pulling the trigg on signals is also discipline..............discipline to go for the brass ring, discipline to make a shitload of cash later.
Go for it.
Get well acquainted with actual (sim) order placement and exit based on a liminited # of entrys based on BO's, call it trend following if that sounds better. So you now have the strategy figured out, you will trade for the gravy train runs.
Your tactics to carry out the strategy will be well worn and well used basic stuff that have been around forever. Price can only go up or down so thats your battle plan.
The beauty of the simple tactics for each daily battle mission is they work and will continue to work forever in a game of chance. Losers are expected in any battle plan. There will be no walking on rose pedels and claiming victory before the battle gets started. War is hell!!!!
Your basic tactics will include rather benign and almost automatic beginnings to get your feet wetter.
Even if you do not want to trade the +6/-6 ORB in live trading later i still would like you to do it as practice. Why?
ORB for the 1st hour is all about discipline. No discipline = NO confidence, no confidence = NO courage. It is that simple.
Trading the ORB for an hour will work on puking out losers and getting right back in to catch a possible run. The ORB will teach you to recognize whipsaws rather than just having them slap us traders around with no respect. You will learn how to avoid whipsaws by maybe waiting for the 1st hour BO if you choose, but the deal is you will learn how to avoid getting chopped up. You will learn how to stay in a "run" right off the open also.........thats the goal of the whole deal. Discipline is not only about avoiding losers, discipline is about everything in a game of chance. ORB will FORCE you to take action when it is needed, it forces you to be in the moment, it forces you to take the trade. Thats what you need, you need a SGT there yelling at you, getting on your case. "For christ sake NOD, why in the fricking hell did you hesitate at your number? Do you think the god dam mkt is going to wait for your slow butt? We expect better from you...........tomorrow you best shape up and take every signal or no weekend pass, you GOT THAT? "
You need to toughen up, you need to get serious. This is not a game of marbles in the schoolyard. (i am showing my age) This is a game that every Tom, Dick and Harriet would love to beat. You are close but have not received the cigar yet. You have a trigger problem because you have it in your head this is harder than stocks. Stocks are not the problem, the problem is fear of losing. get over that in the sim to some extent and live trading will be easier AFTER you practice the tactics.
Support, resist, retraces, hooks, reversals of the main trend thats what you want to focus on. Forget scalping for small potatoes, you can scalp all you want later after you get the confidence under control. That will come when you nail some runs like this mornings initial drop. That was the "meat" of the day. Practice discipline, practice first in a mechanical manner such as, take EVERY signal, place a rock solid STOP LOSS at 6 ticks as max and allow yourself to get out sooner but NEVER LATER. Take ALL trades, no fear, no thoughts, think it is discipline and conditioning only. It is NOT money. Practice discipline by staying in a winner, work on that , it is important, learn how to ring the register and jump right back in when the trend has not shown a reversal signal. Learn RETRACE action.......thats hugely important, most rookies view all retraces as reversals and get slapped around as soon as the prior trend continues on.
After the 1st hour ORB trade, switch to regular TA based on levels, tests etc.
You owe it to yourself to make these changes and get more discipline, pulling the trigg on signals is also discipline..............discipline to go for the brass ring, discipline to make a shitload of cash later.
Go for it.
пʼятниця, 4 листопада 2011 р.
Trader path
Trading is hardcore......
It will test you with every new trade, every second you are in the trade......
If you want to succeed, you must do everything on your own.
Forget all the books and seminars and stuff in forums, you have learned --- and start to think for yourself and analyze the markets.
1. You must becom a scientist, to research the price behaviour.
2. you must create trading plans.
3. you must backtest your plans, with over hundreds of examles.
4. you must trade them in real time.
5. you must always learn your own rules and try to understand them.
6. you must start to trade with your own real money.
7. you must face the greed and fear, what comes, when you trade with your real money.
8. you must master the discipline quest.
9. you must train yourself everyday. pschological and strategies backtesting.
10. you must feel good about it.
11. you must understand you are now a constant money making trader.
12. you must make money and safe money.
This is hardcore !!!
If you start now, doing this fulltime, it will take you easily another 4 years.
Thats my way, its the only way.
Good luck
It will test you with every new trade, every second you are in the trade......
If you want to succeed, you must do everything on your own.
Forget all the books and seminars and stuff in forums, you have learned --- and start to think for yourself and analyze the markets.
1. You must becom a scientist, to research the price behaviour.
2. you must create trading plans.
3. you must backtest your plans, with over hundreds of examles.
4. you must trade them in real time.
5. you must always learn your own rules and try to understand them.
6. you must start to trade with your own real money.
7. you must face the greed and fear, what comes, when you trade with your real money.
8. you must master the discipline quest.
9. you must train yourself everyday. pschological and strategies backtesting.
10. you must feel good about it.
11. you must understand you are now a constant money making trader.
12. you must make money and safe money.
This is hardcore !!!
If you start now, doing this fulltime, it will take you easily another 4 years.
Thats my way, its the only way.
Good luck
четвер, 30 червня 2011 р.
Поради трейдера
Честно говоря чем дальше, тем у меня меньше уверенности в том, что я могу посоветовать что-то толковое по этому поводу (абсолютно без балды). В торговле такое море нюансов, многое настолько субъективно, что советы в основном бесполезны.
Единственные советы, которые я могу дать новичкам.
1. Поначалу торгуй только трендовые системы. Торгуя тренды отдавай себе отчет, что в долгосрочной перспективе 10-15% всех сделок будут приносить 100% прибыли.Даже самые успешные трейдеры могут сталкиваться с убытками 85% всего времени пока находятся в позиции.
2. Торгуй минимальные риски
3. Не увеличивай размер позиции если сделка прибыльная - крупнейшие крушения приходят после крупнейших успехов. Когда хочеть принять крупную позицию, подумай о драматическом сценарии развития событий.
4. Не пытайся решить финансовых проблем за счет торговли. Стабильный финансовый успех приходит как правило лет через 10.
5. Полюби небольшие убытки, за размер. Человек развивается набивая небольшие шишки, а небольшие
убытки позволяют поддерживать тонус. Упав с высоты своего роста человек не слишком рискует, слишком высокие риски могут испортить даже самую верную позицию или стратегию. Набивай шишки сам, не давая другим приложиться к твоей голове.
6. Постарайся поменьше радоваться успешным сделкам
и главное переживать из-за неудач. Для того, чтобы радоваться и расстраиваться по крупному заведи себе хобби, семью и т.д.. Лучше если хобби связано с легким физическим трудом, прогулками, спортом и другими занятиями на свежем воздухе, полезными для сердечно-сосудистой системы. Торговля исключительно эмоциональный вид деятельности, потому с самого начала нужно учится сдерживать эмоции, а не увеличивать их. Торговля не лучший способ самовыражения или вид деятельности для того, чтобы хвастаться своими успехами в кругу друзей и родственников, лучше иметь для этого другие поводы.
7. В торговле главное психология, затем риски, затем методология. Деньги делаются не из воздуха, а из собственных нервных клеток. Нервные клетки - основной ресурс персональной торговли, с самого начала думай о том, что именно его может со временем не хватить.
8. Торгуй только системы с профит фактором выше 1. Добивайся того, чтобы профит фактор был в районе 2. Следи за его динамикой. Он характеризует качество твоего бизнеса, беспокойся о его качестве.
9. Если не удалось торговать успешно - не переживай. Торговля не самое главное и не самое интересное занятие в жизни. Вероятность стать удачным трейдером не столь велика (не более 5-10%), так что не стоит излишне персонифицировать результаты.
10. Торговля как спорт - нужно подумать о последствиях и стратегии выхода. глупо и нереально торговать всю жизнь. Не допускай чтобы торговля становилась манией.
Единственные советы, которые я могу дать новичкам.
1. Поначалу торгуй только трендовые системы. Торгуя тренды отдавай себе отчет, что в долгосрочной перспективе 10-15% всех сделок будут приносить 100% прибыли.Даже самые успешные трейдеры могут сталкиваться с убытками 85% всего времени пока находятся в позиции.
2. Торгуй минимальные риски
3. Не увеличивай размер позиции если сделка прибыльная - крупнейшие крушения приходят после крупнейших успехов. Когда хочеть принять крупную позицию, подумай о драматическом сценарии развития событий.
4. Не пытайся решить финансовых проблем за счет торговли. Стабильный финансовый успех приходит как правило лет через 10.
5. Полюби небольшие убытки, за размер. Человек развивается набивая небольшие шишки, а небольшие
убытки позволяют поддерживать тонус. Упав с высоты своего роста человек не слишком рискует, слишком высокие риски могут испортить даже самую верную позицию или стратегию. Набивай шишки сам, не давая другим приложиться к твоей голове.
6. Постарайся поменьше радоваться успешным сделкам
и главное переживать из-за неудач. Для того, чтобы радоваться и расстраиваться по крупному заведи себе хобби, семью и т.д.. Лучше если хобби связано с легким физическим трудом, прогулками, спортом и другими занятиями на свежем воздухе, полезными для сердечно-сосудистой системы. Торговля исключительно эмоциональный вид деятельности, потому с самого начала нужно учится сдерживать эмоции, а не увеличивать их. Торговля не лучший способ самовыражения или вид деятельности для того, чтобы хвастаться своими успехами в кругу друзей и родственников, лучше иметь для этого другие поводы.
7. В торговле главное психология, затем риски, затем методология. Деньги делаются не из воздуха, а из собственных нервных клеток. Нервные клетки - основной ресурс персональной торговли, с самого начала думай о том, что именно его может со временем не хватить.
8. Торгуй только системы с профит фактором выше 1. Добивайся того, чтобы профит фактор был в районе 2. Следи за его динамикой. Он характеризует качество твоего бизнеса, беспокойся о его качестве.
9. Если не удалось торговать успешно - не переживай. Торговля не самое главное и не самое интересное занятие в жизни. Вероятность стать удачным трейдером не столь велика (не более 5-10%), так что не стоит излишне персонифицировать результаты.
10. Торговля как спорт - нужно подумать о последствиях и стратегии выхода. глупо и нереально торговать всю жизнь. Не допускай чтобы торговля становилась манией.
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вівторок, 21 червня 2011 р.
Trade failed patterns
Here's a working strategy, hopefully you got what it takes to execute it.
Study technical analysis, typical patterns, support, resistance, the usual stuff that people think that has an edge but really does not because it's quite random in its nature.
Study them well, as if they were your bread and butter.
Learn to spot them in charts that matter to big money, especially once they have confirmed. Don't settle with one instrument, multiply the frequency, scanning is imperative.
Now here comes the unconventional approach that will make you money provided you have the discipline for it.
You need to determine when selling will occur or when buying will occur before you commit to a position.
When you can predict that selling will occur you take a short position.
When you can predict that buying will occur you take a long position.
Next step....
What creates selling ? Longs throwing the towel.
What creates buying ? Shorts throwing the towel.
How do you determine this ?
When a conventional clean pattern on a conventional clean chart fails.
Those who bought or shorted based on the pattern must exit, throw the towel, and this type of information, is valuable as you know what they must do next, most of them will exit at market, this creates the momentum required for you to profit off your position.
Pattern conclusion is random, so fading them is no good, you must wait until the confirmed pattern fails to obtain the required information.
There you go, a working strategy posted for free, now let's see if you can execute it, that's the hard part.
Enjoy.
Study technical analysis, typical patterns, support, resistance, the usual stuff that people think that has an edge but really does not because it's quite random in its nature.
Study them well, as if they were your bread and butter.
Learn to spot them in charts that matter to big money, especially once they have confirmed. Don't settle with one instrument, multiply the frequency, scanning is imperative.
Now here comes the unconventional approach that will make you money provided you have the discipline for it.
You need to determine when selling will occur or when buying will occur before you commit to a position.
When you can predict that selling will occur you take a short position.
When you can predict that buying will occur you take a long position.
Next step....
What creates selling ? Longs throwing the towel.
What creates buying ? Shorts throwing the towel.
How do you determine this ?
When a conventional clean pattern on a conventional clean chart fails.
Those who bought or shorted based on the pattern must exit, throw the towel, and this type of information, is valuable as you know what they must do next, most of them will exit at market, this creates the momentum required for you to profit off your position.
Pattern conclusion is random, so fading them is no good, you must wait until the confirmed pattern fails to obtain the required information.
There you go, a working strategy posted for free, now let's see if you can execute it, that's the hard part.
Enjoy.
понеділок, 20 червня 2011 р.
Trading rules
1. Learn to identify the main trend and master that first
2. Counter trend trading is much more risky and requires greater skill and faster trading
3. As a guide, using a 20 ma lets you see when pa is overbought/sold. When the excursion is allowing a safe trade, look for the set up
4. Look at how pa is setting up. If the approach is messy the risk is higher.
5. Consider how long the trend has been in place. Markets need pull back breathers even in strong trends
6. Look left! How is the evidence building up that a counter is justified.
7. Learn to distinguish quality from risky set ups. It not just the pa signal but the prior movement that tells you a trade is coming
8. Make sure your trend line is well defined/confirmed
9. Multiple time frame reading will let you know if the trend stands a chance of terminating. At that point a counter trend trade can become the new trend
10. While it is a skill well worth learning, you can make all you need sticking with the confirmed trend. Counter trend is not just the opposite of trend trading - it is much more advanced
2. Counter trend trading is much more risky and requires greater skill and faster trading
3. As a guide, using a 20 ma lets you see when pa is overbought/sold. When the excursion is allowing a safe trade, look for the set up
4. Look at how pa is setting up. If the approach is messy the risk is higher.
5. Consider how long the trend has been in place. Markets need pull back breathers even in strong trends
6. Look left! How is the evidence building up that a counter is justified.
7. Learn to distinguish quality from risky set ups. It not just the pa signal but the prior movement that tells you a trade is coming
8. Make sure your trend line is well defined/confirmed
9. Multiple time frame reading will let you know if the trend stands a chance of terminating. At that point a counter trend trade can become the new trend
10. While it is a skill well worth learning, you can make all you need sticking with the confirmed trend. Counter trend is not just the opposite of trend trading - it is much more advanced
пʼятниця, 3 червня 2011 р.
USD/CHF decent opportunity to short
Yesterday evening i draw trendline on USD/CHF on H1 chart.
Today this trade worker perfectly with Reward/Risk 3:1
Today this trade worker perfectly with Reward/Risk 3:1
четвер, 2 червня 2011 р.
неділя, 22 травня 2011 р.
don't eat like a bird and shit like an elephant
Day trading is still viable if you know what you are doing.
Failed traders are either under capitalised, have unrealistic expectations, or have no market edge, or no understanding of the draw downs that may occur even with a good system..
Day traders should be looking to make annual returns in the 20% to 100% range, instead most day traders are looking to make between 200% and 1000%.
This also makes the game 10 times mentally harder than it should be, ie you will be more likely to lose discipline.
As a day trader, risk at most 0.5% of your account on each trade. You can lose 10 times in a row and still be only down less than 5% in total.
And make sure your average winner is bigger than your average loss, don't eat like a bird and shit like an elephant. And make sure you have a long term positive expectation trading method.
Failed traders are either under capitalised, have unrealistic expectations, or have no market edge, or no understanding of the draw downs that may occur even with a good system..
Day traders should be looking to make annual returns in the 20% to 100% range, instead most day traders are looking to make between 200% and 1000%.
This also makes the game 10 times mentally harder than it should be, ie you will be more likely to lose discipline.
As a day trader, risk at most 0.5% of your account on each trade. You can lose 10 times in a row and still be only down less than 5% in total.
And make sure your average winner is bigger than your average loss, don't eat like a bird and shit like an elephant. And make sure you have a long term positive expectation trading method.
пʼятниця, 15 квітня 2011 р.
WTSAO all links
http://nsxprime.com/forums/showpost.php?p=1257880&postcount=2731
http://nsxprime.com/forums/showpost.php?p=1339302&postcount=2785
http://nsxprime.com/forums/showpost.php?p=1263110&postcount=2743
http://nsxprime.com/forums/showpost.php?p=1358057&postcount=2807
http://nsxprime.com/forums/showpost.php?p=1354590&postcount=2801
http://nsxprime.com/forums/showpost.php?p=1364756&postcount=2825
http://nsxprime.com/forums/showpost.php?p=1379474&postcount=2829
http://jubakpicks.com/
http://www.aaii.com/
http://www.smallcapnetwork.com/
http://nsxprime.com/forums/showpost.php?p=1339302&postcount=2785
http://nsxprime.com/forums/showpost.php?p=1263110&postcount=2743
http://nsxprime.com/forums/showpost.php?p=1358057&postcount=2807
http://nsxprime.com/forums/showpost.php?p=1354590&postcount=2801
http://nsxprime.com/forums/showpost.php?p=1364756&postcount=2825
http://nsxprime.com/forums/showpost.php?p=1379474&postcount=2829
http://jubakpicks.com/
http://www.aaii.com/
http://www.smallcapnetwork.com/
WTSAO about stocks trading 7
I noticed that there are certain industries that are on the uptrend no matter what the overall market is doing. I run daily scans for new stocks and its a pain to find out the industry for that company.
So I went to NASDAQ to get the stock list from AMEX, NYSE, and NASDAQ. Their files contain the industry information for their stocks. StrategyDesk contains a notes column that you can store your own information.
After some digging I found that StrategyDesk stores notes information in a notes.xml file in the StrategyDesk root folder. I studied the schema and wrote some macros to create the tags the notes.xml file like. I then dumped all the information for the exchanges into an Access database table with field names that matched the notes.xml schema. I then dumped the data using the XML feature to create an XML file that was very close to the notes.xml schema.
A few seach and replaces and I now have a notes.xml file that contains the industry for almost every stock in the three exchanges. A few stocks didn't have an industry name so they will so up as "n/a".
Now when you run your screens, the notes column will pop up the industry for that particular stock. You can then group them by industry to gauge what people are interested in. This is also helpful when your managing portfolios with a large number of stocks. You can group your stocks to see which industries are doing well and which ones are no longer trending.
Attached is a notes.txt that I renamed for the attachment. Its really a notes.zip file.
1. Download file and unzip
2. Backup your current notes.xml file in the StrategyDesk root folder in case you want to back out these changes.
3. Drop the new notes.xml file in the root folder.
Now when you type in a stock or dump a list of stocks, the industry names will appear next to them when you show the notes column. A few will have "n/a" because the original file from NASDAQ didn't have that info. You can updates the notes manually for those stocks. The updated information will be added to the notes file.
(I updated the file to use the industry names from the AAII database which has more listing. This file should cover 9800+ stocks. This file is 50% larger than the previous, same zip format renamed as .txt)
After using it for a while, I noticed that sometimes StrategyDesk has problems reading the notes.xml file if the notes column gets changed manually. I'll get a parse error sometimes. It could be a buffer over run error. If I don't change the notes.xml file, everything is fine. Just keep a backup copy of the file somewhere to replace the notes.xml if it gets corrupted.
So I went to NASDAQ to get the stock list from AMEX, NYSE, and NASDAQ. Their files contain the industry information for their stocks. StrategyDesk contains a notes column that you can store your own information.
After some digging I found that StrategyDesk stores notes information in a notes.xml file in the StrategyDesk root folder. I studied the schema and wrote some macros to create the tags the notes.xml file like. I then dumped all the information for the exchanges into an Access database table with field names that matched the notes.xml schema. I then dumped the data using the XML feature to create an XML file that was very close to the notes.xml schema.
A few seach and replaces and I now have a notes.xml file that contains the industry for almost every stock in the three exchanges. A few stocks didn't have an industry name so they will so up as "n/a".
Now when you run your screens, the notes column will pop up the industry for that particular stock. You can then group them by industry to gauge what people are interested in. This is also helpful when your managing portfolios with a large number of stocks. You can group your stocks to see which industries are doing well and which ones are no longer trending.
Attached is a notes.txt that I renamed for the attachment. Its really a notes.zip file.
1. Download file and unzip
2. Backup your current notes.xml file in the StrategyDesk root folder in case you want to back out these changes.
3. Drop the new notes.xml file in the root folder.
Now when you type in a stock or dump a list of stocks, the industry names will appear next to them when you show the notes column. A few will have "n/a" because the original file from NASDAQ didn't have that info. You can updates the notes manually for those stocks. The updated information will be added to the notes file.
(I updated the file to use the industry names from the AAII database which has more listing. This file should cover 9800+ stocks. This file is 50% larger than the previous, same zip format renamed as .txt)
After using it for a while, I noticed that sometimes StrategyDesk has problems reading the notes.xml file if the notes column gets changed manually. I'll get a parse error sometimes. It could be a buffer over run error. If I don't change the notes.xml file, everything is fine. Just keep a backup copy of the file somewhere to replace the notes.xml if it gets corrupted.
WTSAO about stocks trading 6
I was doing some research last night analyzing the different strategies on AAII and seeing how they compare against the total market index.
From 1998-2010:
Buying everything in the market would return a total of 230% over that period. (Basically buying the VTI ETF).
(largest drawdown -46.3% in 2008, max monthly gain 23.9%,
max monthly loss: -22.1%)
Only the S&P MidCap 400 outperformed it with a 268%
(largest drawdown: -36.9% in 2008, max monthly gain 19%,
max monthly loss: -22.2%)
The S&P 500 and NASDAQ 100 didn't even come close to these returns.
I wanted to find out which strategy would outperform both while taking into account monthly volatility and yearly drawdown. First I ruled out any strategy that returned losses 2 years in a row and then filtered out only the ones that actually outperformed both. (There is no point following a strategy if it can't even beat a buy and hold strategy). This reduced the number of candidates strategies from 53 to 20.
Not every strategy is going to do well each year so I tried combining 2 strategies together to improve the overall result. I also used the Fairholme fund (FAIRX) as a benchmark since I think one of the best funds out there in terms of risk and reward.
I was expecting the result to be O'Neils CANSLIM strategy with another value based strategy but was somewhat surprised. The best combination turned out to be
Value on the Move (PEG w/Est Growth) + Est Rev Up +5% strategy.
The combination returned double digit returns 12 out of 13 years from 1998-2010 YTD with a 2008 drawdown of (-27.8%) outperforming the indices and the Fairholme fund. The monthly max gain was 22.3% and max loss (-22.4%). Total return: 1746%
A more conservative strategy combined the Est Rev Up+5 with the P/E Relative strategy with a better drawdown. 11 out of 13 years with double digit returns and a 2008 drawdown of (-17.1%). Monthly max gain 22.8, max monthly loss (-20%). Total return: 1616%
The Graham Defensive Investor (Non-Utility) + Est Rev Up +5% was somewhere in between in terms of performance but with superior drawdowns. 10 out of 13 years with double digit returns and a 2008 drawdown of (-25.2%). Monthly max gain 28.3%, max monthly loss (-19.5). Total return: 1626%. (This one had a lower monthly and yearly drawdown than even Buffet's strategy which returned 421% over the same period (-25.8% drawdown 2008); actually buying on relative P/E would have beat Buffet's strategy with a -15% drop in 2008 and a 636% return).
I'm not recommending anything. Just something interesting to check out.
From 1998-2010:
Buying everything in the market would return a total of 230% over that period. (Basically buying the VTI ETF).
(largest drawdown -46.3% in 2008, max monthly gain 23.9%,
max monthly loss: -22.1%)
Only the S&P MidCap 400 outperformed it with a 268%
(largest drawdown: -36.9% in 2008, max monthly gain 19%,
max monthly loss: -22.2%)
The S&P 500 and NASDAQ 100 didn't even come close to these returns.
I wanted to find out which strategy would outperform both while taking into account monthly volatility and yearly drawdown. First I ruled out any strategy that returned losses 2 years in a row and then filtered out only the ones that actually outperformed both. (There is no point following a strategy if it can't even beat a buy and hold strategy). This reduced the number of candidates strategies from 53 to 20.
Not every strategy is going to do well each year so I tried combining 2 strategies together to improve the overall result. I also used the Fairholme fund (FAIRX) as a benchmark since I think one of the best funds out there in terms of risk and reward.
I was expecting the result to be O'Neils CANSLIM strategy with another value based strategy but was somewhat surprised. The best combination turned out to be
Value on the Move (PEG w/Est Growth) + Est Rev Up +5% strategy.
The combination returned double digit returns 12 out of 13 years from 1998-2010 YTD with a 2008 drawdown of (-27.8%) outperforming the indices and the Fairholme fund. The monthly max gain was 22.3% and max loss (-22.4%). Total return: 1746%
A more conservative strategy combined the Est Rev Up+5 with the P/E Relative strategy with a better drawdown. 11 out of 13 years with double digit returns and a 2008 drawdown of (-17.1%). Monthly max gain 22.8, max monthly loss (-20%). Total return: 1616%
The Graham Defensive Investor (Non-Utility) + Est Rev Up +5% was somewhere in between in terms of performance but with superior drawdowns. 10 out of 13 years with double digit returns and a 2008 drawdown of (-25.2%). Monthly max gain 28.3%, max monthly loss (-19.5). Total return: 1626%. (This one had a lower monthly and yearly drawdown than even Buffet's strategy which returned 421% over the same period (-25.8% drawdown 2008); actually buying on relative P/E would have beat Buffet's strategy with a -15% drop in 2008 and a 636% return).
I'm not recommending anything. Just something interesting to check out.
WTSAO about stocks trading 5
or those interested in developing a simple strategy, here is one that I used in the past. It would have gotten you out of the May 2010 crash and got you back in at the bottom at the end of August 2010.
I came up with the idea when I figure traders want to get in on a strong reversal signal and like to hold onto their trades until the final end. The MACD is a lagging indicator so its perfect for those that can't let go of their stock.
I use Ameritrade so I've add the entry and exit code.
Entry: Buy when the today's MACD histogram value is greater than yesterday's; yesterday's histogram value is less than the day before and today's histogram value is greater than the the histogram value 2 days ago.
MACD[Diff,Close,12,26,9,D,2] > MACD[Diff,Close,12,26,9,D,1] AND
MACD[Diff,Close,12,26,9,D,1] < MACD[Diff,Close,12,26,9,D] AND
MACD[Diff,Close,12,26,9,D] > MACD[Diff,Close,12,26,9,D,2]
Exit: Sell when the MACD line crosses below the MACD signal line.
(MACD[MACD,Close,12,26,9,D] < MACD[Signal,Close,12,26,9,D] AND MACD[MACD,Close,12,26,9,D,1] >= MACD[Signal,Close,12,26,9,D,1])
I use DDM to test against the DOW assuming each trade is at 100 shares, with a $10 commission to buy and $10 to sell. The larger the trade, the better the results as commission doesn't eat away at it.
For 1/1/2009-12/31/2009
Profit/Loss: up 61% for the year
Winners/Losers: 5/3
Percent Winners: 62.5%
Average Trade: $195
Average Winner: $386
Average Loser: $123
Drawdown: $396
For 2010 to present you would still be on the plus side:
Profit/Loss: 3% to present
Winners/Losers: 1/3
Percent Winners: 25%
Drawdown: $370
If you add a stochastic filter, you would be up about 15% for 2010
New Entry:
MACD[Diff,Close,12,26,9,D,2] > MACD[Diff,Close,12,26,9,D,1] AND
MACD[Diff,Close,12,26,9,D,1] < MACD[Diff,Close,12,26,9,D] AND
MACD[Diff,Close,12,26,9,D] > MACD[Diff,Close,12,26,9,D,2] AND
Stochastic[StocK,14,3,1,D] < 50
% Winners: 100
Winners/Losers: 2/0 (2 trades for the year!)
There is done with no stop limits in place.
I came up with the idea when I figure traders want to get in on a strong reversal signal and like to hold onto their trades until the final end. The MACD is a lagging indicator so its perfect for those that can't let go of their stock.
I use Ameritrade so I've add the entry and exit code.
Entry: Buy when the today's MACD histogram value is greater than yesterday's; yesterday's histogram value is less than the day before and today's histogram value is greater than the the histogram value 2 days ago.
MACD[Diff,Close,12,26,9,D,2] > MACD[Diff,Close,12,26,9,D,1] AND
MACD[Diff,Close,12,26,9,D,1] < MACD[Diff,Close,12,26,9,D] AND
MACD[Diff,Close,12,26,9,D] > MACD[Diff,Close,12,26,9,D,2]
Exit: Sell when the MACD line crosses below the MACD signal line.
(MACD[MACD,Close,12,26,9,D] < MACD[Signal,Close,12,26,9,D] AND MACD[MACD,Close,12,26,9,D,1] >= MACD[Signal,Close,12,26,9,D,1])
I use DDM to test against the DOW assuming each trade is at 100 shares, with a $10 commission to buy and $10 to sell. The larger the trade, the better the results as commission doesn't eat away at it.
For 1/1/2009-12/31/2009
Profit/Loss: up 61% for the year
Winners/Losers: 5/3
Percent Winners: 62.5%
Average Trade: $195
Average Winner: $386
Average Loser: $123
Drawdown: $396
For 2010 to present you would still be on the plus side:
Profit/Loss: 3% to present
Winners/Losers: 1/3
Percent Winners: 25%
Drawdown: $370
If you add a stochastic filter, you would be up about 15% for 2010
New Entry:
MACD[Diff,Close,12,26,9,D,2] > MACD[Diff,Close,12,26,9,D,1] AND
MACD[Diff,Close,12,26,9,D,1] < MACD[Diff,Close,12,26,9,D] AND
MACD[Diff,Close,12,26,9,D] > MACD[Diff,Close,12,26,9,D,2] AND
Stochastic[StocK,14,3,1,D] < 50
% Winners: 100
Winners/Losers: 2/0 (2 trades for the year!)
There is done with no stop limits in place.
WTSAO about stocks trading 4
In my opinion nothing in this world is guaranteed. If the market tanks, companies cut back and eventually yields get hit. What about the folks that owned these companies before 2008. If you owned LINE at $40, you would have lost almost everything in 2008.
There is no question that these companies have performed well since hitting "the bottom". During recessions you would expect value based companies to be the best performing and the ones you mentioned are all somewhat value based; though LINE and KMP's potential earnings growth for 2011 are impressive at 17 and 21% with LINE outperforming the other two with stronger profit margins.
Even near retirement, I think every portfolio should have some growth companies even if its just a small percentage.
With that said, growth companies have done even better since the 2008 rebound. Since "the bottom", the tech sector has performed with Apple (AAPL) having a 376%+ return with iPOD mania (I don't own one and don't plan to; its just another toy). The "cloud computing" companies such as Rackspace (RAX) with a 625% return since 2008. In my opinion that lifted the networking sector such as F5 (FFIV) and the data warehousing (NZ). Online video has been popular with Liberty Media (LCAPA). Netflix (NFLX) has had a good run. Gold companies such as AEM have performed well (200+%) since 2008; though I try to avoid anything related to the commodities market.
I'm not one for chasing returns but if the company has good growth potential and the balance sheet looks good, why not? Find a good base entry point, and have an exit strategy. If you do that the risk is low.
There is no question that these companies have performed well since hitting "the bottom". During recessions you would expect value based companies to be the best performing and the ones you mentioned are all somewhat value based; though LINE and KMP's potential earnings growth for 2011 are impressive at 17 and 21% with LINE outperforming the other two with stronger profit margins.
Even near retirement, I think every portfolio should have some growth companies even if its just a small percentage.
With that said, growth companies have done even better since the 2008 rebound. Since "the bottom", the tech sector has performed with Apple (AAPL) having a 376%+ return with iPOD mania (I don't own one and don't plan to; its just another toy). The "cloud computing" companies such as Rackspace (RAX) with a 625% return since 2008. In my opinion that lifted the networking sector such as F5 (FFIV) and the data warehousing (NZ). Online video has been popular with Liberty Media (LCAPA). Netflix (NFLX) has had a good run. Gold companies such as AEM have performed well (200+%) since 2008; though I try to avoid anything related to the commodities market.
I'm not one for chasing returns but if the company has good growth potential and the balance sheet looks good, why not? Find a good base entry point, and have an exit strategy. If you do that the risk is low.
WTSAO about stocks trading 3
I still like some of them and do have them but others I have sold off (portions of them) to rebalance my portfolio. Sometimes I sell because I see a reversal and other times just to keep no stock larger than 10% of my total portfolio size. Rather than just give you a list of stocks, here are places that I get picks:
http://www.jubakpicks.com
http://www.aaii.com (member - its worth the $30 annual fee)
http://www.smallcapnetwork.com/
For aaii, pick a strategy that you like (buy every month and sell and rebuy the next month). Graham's strategy, Piotroski, Free Cash Flow, Foolish Small Cap 8, Magnet Simple, Tiny Titans, PEG, etc. are all great strategies that have returns 700% or more over the last 10 years. I go through all of them and then apply screener to them.
http://www.investors.com
This one is good for growth buyers with their (CAN SLIM) strategy (2000% return over the last 10 years, but when the market goes down, you need to have a good exit approach or you get killed).
Good luck
William
http://www.jubakpicks.com
http://www.aaii.com (member - its worth the $30 annual fee)
http://www.smallcapnetwork.com/
For aaii, pick a strategy that you like (buy every month and sell and rebuy the next month). Graham's strategy, Piotroski, Free Cash Flow, Foolish Small Cap 8, Magnet Simple, Tiny Titans, PEG, etc. are all great strategies that have returns 700% or more over the last 10 years. I go through all of them and then apply screener to them.
http://www.investors.com
This one is good for growth buyers with their (CAN SLIM) strategy (2000% return over the last 10 years, but when the market goes down, you need to have a good exit approach or you get killed).
Good luck
William
WTSAO about stocks trading 2
Here are some things I would recommend.
For money and risk management
"Come into My Trading Room" - Elder
(Amazon should have this)
Learning to read charts, trendlines, support/resistance, etc.
"Getting Started in Technical Analysis" - Schwager
http://www.stockcharts.com (free)
For strategies:
http://www.aaii.com ($29/yr)
http://www.investors.com (A bit more expensive but some folks love it)
For finding new stocks:
http://www.aaii.com (each strategy provides monthly picks)
http://www.stockcharts.com (has predefined scans)
http://www.barchart.com
If you interested in finding which sectors are strong and weak:
http://www.smartmoney.com/map-of-the-market/
http://bigcharts.marketwatch.com/ind...bigcharts-com/
Paper Trading
http://www.updown.com
Good luck.
William
For money and risk management
"Come into My Trading Room" - Elder
(Amazon should have this)
Learning to read charts, trendlines, support/resistance, etc.
"Getting Started in Technical Analysis" - Schwager
http://www.stockcharts.com (free)
For strategies:
http://www.aaii.com ($29/yr)
http://www.investors.com (A bit more expensive but some folks love it)
For finding new stocks:
http://www.aaii.com (each strategy provides monthly picks)
http://www.stockcharts.com (has predefined scans)
http://www.barchart.com
If you interested in finding which sectors are strong and weak:
http://www.smartmoney.com/map-of-the-market/
http://bigcharts.marketwatch.com/ind...bigcharts-com/
Paper Trading
http://www.updown.com
Good luck.
William
WTSAO about stocks trading 1
Kaz
dakt
rba
ge
gilt
Here is another screen to use:
Look for stocks that close within 20% of its high signalling that there is plenty of demand. For ameritrade, I use
(Bar[High,D]-Bar[Close,D])/(Bar[High,D]-Bar[Low,D]) < 0.20 AND
MovingAverage[MA,Volume,10,0,D] > X
I also add a 10 day moving average filter. Set the moving average X to be 10x your position size so you can get out quickly without moving the stock if it goes the wrong way.
I also fish new positions by getting a small amount (1/4 of my regular size). This way I'm forced to watch where it goes.
dakt
rba
ge
gilt
Here is another screen to use:
Look for stocks that close within 20% of its high signalling that there is plenty of demand. For ameritrade, I use
(Bar[High,D]-Bar[Close,D])/(Bar[High,D]-Bar[Low,D]) < 0.20 AND
MovingAverage[MA,Volume,10,0,D] > X
I also add a 10 day moving average filter. Set the moving average X to be 10x your position size so you can get out quickly without moving the stock if it goes the wrong way.
I also fish new positions by getting a small amount (1/4 of my regular size). This way I'm forced to watch where it goes.
понеділок, 28 березня 2011 р.
Market edges
Ok, thank you for your openess.
Answer to 1: that is correct - but there is no need to.
Answer to 2: that is correct too - fibo-hits for example occur as often as they don't in the long run, so a no-go as well (as are most indicator based occurrences).
Answer to 3: stop-hunts as they might be referred to happen as often intentionally as they happen coincidentally because of position taking that has its root in either hedges, position liqiuidation or large option related volatility.
Real inefficiencies are based on volatility breakouts, price behaviour relative to market open (in fx cash an artificial value, except sunday), and price behaviour relative to most recent high's and lows.
One other universally applicable truth about any tradable market is that large ranges (or large ranging days) are preceeded by small ranges (or small ranging days) and vice versa. That means its an occurrence you can bank on - over and over again. How you transform that into your rules (which is an indispensable process) is up to you, of course.
Daily volatility can be measured by calculating the difference between the day's high and the close. If that value increases out of recent proportion, trend changes are happening.
regards
daytrading
Answer to 1: that is correct - but there is no need to.
Answer to 2: that is correct too - fibo-hits for example occur as often as they don't in the long run, so a no-go as well (as are most indicator based occurrences).
Answer to 3: stop-hunts as they might be referred to happen as often intentionally as they happen coincidentally because of position taking that has its root in either hedges, position liqiuidation or large option related volatility.
Real inefficiencies are based on volatility breakouts, price behaviour relative to market open (in fx cash an artificial value, except sunday), and price behaviour relative to most recent high's and lows.
One other universally applicable truth about any tradable market is that large ranges (or large ranging days) are preceeded by small ranges (or small ranging days) and vice versa. That means its an occurrence you can bank on - over and over again. How you transform that into your rules (which is an indispensable process) is up to you, of course.
Daily volatility can be measured by calculating the difference between the day's high and the close. If that value increases out of recent proportion, trend changes are happening.
regards
daytrading
Targeting pips
I do not agree that pip goal has no effect on expectancy.
For equidistant 1000 pip goal, the house edge is 1 - (1000 - 2) / (1000 + 2) = 0.4%
For equidistant 100 pip goal, the house edge is 1 - (100 - 2) / (100 + 2) = 3.9%
For equidistant 10 pip goal, the house edge is 1 - (10 - 2) / (10 + 2) = 33.3%
To overcome the house edge for 1000 pip goal, our win% has to be at least 50.1%
To overcome the house edge for 100 pip goal, our win% has to be at least 51.0%
To overcome the house edge for 10 pip goal, tour win% has to be at least 60.0%
Obviously it is much easier to beat the house edge if you have greater pip goal.
For equidistant 1000 pip goal, the house edge is 1 - (1000 - 2) / (1000 + 2) = 0.4%
For equidistant 100 pip goal, the house edge is 1 - (100 - 2) / (100 + 2) = 3.9%
For equidistant 10 pip goal, the house edge is 1 - (10 - 2) / (10 + 2) = 33.3%
To overcome the house edge for 1000 pip goal, our win% has to be at least 50.1%
To overcome the house edge for 100 pip goal, our win% has to be at least 51.0%
To overcome the house edge for 10 pip goal, tour win% has to be at least 60.0%
Obviously it is much easier to beat the house edge if you have greater pip goal.
пʼятниця, 25 березня 2011 р.
Trading edge an casino
Firstly, there is a difference between 'automated' and 'mechanical' - but to answer your question about trade handling, yes, every trade is handled in precisely the same way.
When you step into a casino to play the roulette wheel, you have already lost because the casino has the statistical edge.
Good traders don't think how to beat the casino - instead they think like the casino and construct edges. Every casino 'knows' their edge even when they pay out to a great amount of people who play a little bit of 'red or black' or 'even vs uneven'.
Ultimately, the casino is in the game non stop and with the 'zero' in the wheel, the law of large numbers puts the odds in the casino's favour.
The casino uses money management as well. There is a limit to every game, hence the casino knows the maximum downside - which is always smaller than the ultimate upside.
The casino also uses risk management - for the odd clever guy who comes into the casino to count cards in black jack - if he wins too often for their taste, he will get kicked out.
The casino (like a good hedge fund) uses diversication in the portfolio. There are many games in the casino from slot machines to black jack tables to roulette etc. All have a statistical advantage over the player - some smaller some larger, but always in favour of the casino. So, even if in one night here and there, a payout happens on one of the one-armed bandits, the other games (or strategies) will cover for that (small) loss.
Even if the game looks like complete luck to the observer (like rolling dice), ultimately there is no luck involved - since bet size and rules of the game ensure that in the long run the casino wins.
Games like the ones you find in casinos have been created in the same way that modern portfolio managers create strategies with precise rules - whether those rules have more emphasize on the money management and less on the (precise) entry of a market (more discretionary one could argue) in order to catch bigger moves less often, or whether the entry and exit are precision made to capture an advantage over very many trades (throws of the dice) does really not matter and is more of an individual choice.
And yes, this is a relatively simplyfied way of explaining it - roulette probabilities are fixed for eternity unlike market behaviour (you will always find 37 numbers on the wheel, 18 red, 18 black, and one green), that is why you never see a casino go bust. In the financial markets, edges can be created but have to be carefully monitored in terms of results over time. Should results fall outside 'regular' parameters (either too negative or too positive), something might be about to change.
When you step into a casino to play the roulette wheel, you have already lost because the casino has the statistical edge.
Good traders don't think how to beat the casino - instead they think like the casino and construct edges. Every casino 'knows' their edge even when they pay out to a great amount of people who play a little bit of 'red or black' or 'even vs uneven'.
Ultimately, the casino is in the game non stop and with the 'zero' in the wheel, the law of large numbers puts the odds in the casino's favour.
The casino uses money management as well. There is a limit to every game, hence the casino knows the maximum downside - which is always smaller than the ultimate upside.
The casino also uses risk management - for the odd clever guy who comes into the casino to count cards in black jack - if he wins too often for their taste, he will get kicked out.
The casino (like a good hedge fund) uses diversication in the portfolio. There are many games in the casino from slot machines to black jack tables to roulette etc. All have a statistical advantage over the player - some smaller some larger, but always in favour of the casino. So, even if in one night here and there, a payout happens on one of the one-armed bandits, the other games (or strategies) will cover for that (small) loss.
Even if the game looks like complete luck to the observer (like rolling dice), ultimately there is no luck involved - since bet size and rules of the game ensure that in the long run the casino wins.
Games like the ones you find in casinos have been created in the same way that modern portfolio managers create strategies with precise rules - whether those rules have more emphasize on the money management and less on the (precise) entry of a market (more discretionary one could argue) in order to catch bigger moves less often, or whether the entry and exit are precision made to capture an advantage over very many trades (throws of the dice) does really not matter and is more of an individual choice.
And yes, this is a relatively simplyfied way of explaining it - roulette probabilities are fixed for eternity unlike market behaviour (you will always find 37 numbers on the wheel, 18 red, 18 black, and one green), that is why you never see a casino go bust. In the financial markets, edges can be created but have to be carefully monitored in terms of results over time. Should results fall outside 'regular' parameters (either too negative or too positive), something might be about to change.
четвер, 24 березня 2011 р.
Scalping rules from order flow trader
1. You have to be disciplined all the time. Better you enter trades with an OCO order.
Your min. risk reward ratio should be 2:1
As an scalper i'm always looking for trade setups where the risk is 5-6 pips to get 10-12pips after commission.It varies every time.
2. Don't rush. Be patient and look for opportunities. As an good trader you have to think about money. You don't want to lose it. On every trade don't risk more than 1% of your amount!
3. "High IQ".
No one can tell the future even when the IQ is 1000.Your system should be simple.Just focus on high-probability trades. Stick to your rules and plan.
4. "Clear mind and concentration".
You can trade with an clear mind when you're fearless and not greedy.That is one of the important stages in being experienced.
Wish you good luck!
Your min. risk reward ratio should be 2:1
As an scalper i'm always looking for trade setups where the risk is 5-6 pips to get 10-12pips after commission.It varies every time.
2. Don't rush. Be patient and look for opportunities. As an good trader you have to think about money. You don't want to lose it. On every trade don't risk more than 1% of your amount!
3. "High IQ".
No one can tell the future even when the IQ is 1000.Your system should be simple.Just focus on high-probability trades. Stick to your rules and plan.
4. "Clear mind and concentration".
You can trade with an clear mind when you're fearless and not greedy.That is one of the important stages in being experienced.
Wish you good luck!
http://www.forexfactory.com/showpost.php?p=2930190&postcount=7
середа, 23 березня 2011 р.
Academic research about Orders
Statistical identification with hidden Markov models of large order splitting strategies in an equity market
http://arxiv.org/abs/1003.2981
Asymetric Information and the Foreign-Exchange Spreads of Global Custody Banks
http://people.brandeis.edu/~cosler/
http://arxiv.org/abs/1003.2981
Asymetric Information and the Foreign-Exchange Spreads of Global Custody Banks
http://people.brandeis.edu/~cosler/
Mr Forex about order flow
Quote:
Originally Posted by Pdat100  In my eyes, there are actually two questions: The first is the one most dealt with here, how do we recognize the move with or without access to the tape? |
By monitoring/calculating inst. benchmarks on different time periods.
Here you can see their intentions on specific dynamic price levels.
And that is where you also want jump on.
Quote:
Originally Posted by Pdat100 And, second, once recognized (we can't know how deep is the iceberg), are we to stay out of the market or try to fade/shade - as the maneuver can sometimes be fast and sharp and other times long and persistent. Now, here's the thing, even if you recognized the iceberg, you would still need to assess its impact on price (PA). Actually I would argue that this is the more complex question. |
The procedure is:
if the institution(s) want buy f.e. the YEN and have a deadline (3 hours) for order execution, it can go like that:
enough liquidity available: normal price impact,smooth price action/impact
less liquidity: price rallys,orders get executed more often on smaller time periods
Quote:
Originally Posted by Pdat100 In fact, same goes for options expiration plays. If only one side drives the price (to or away from the strike price) that would have been easy. Alas, in practice, what you see around the strike areas is a fight between two or more elephants. How can anyone know in advance which side is to prevail? |
I don't watch options.
Quote:
Originally Posted by Pdat100 I would argue that this is the more important issue: a solid set of criteria to assess an institutional move impact on price. Are we back in VSA realm or what? |
No VSA.
You mostly don't get favorable prices because the move has already started.
http://corp.bankofamerica.com/public/public.portal?_pd_page_label=equities/ets/agencyalgo
wise stock trader about order flow
Pip, I'm a long-time stocks trader (15 years and counting). In stocks you have accurate T/S and Levels and you can use computers to quantify OF and execution/cancellation of orders. Everything is "clear" at least when compared to FX. Guess what? Stock pros have come up to all sort of gimmicks to hide their intentions in the clear and even having a L2 book, a T/S etc (and there're markets where T/S are much more accurate as well as L2 as opposed to US market), you can't be always sure what's going to happen.
The outcome is that OF-T/S-L2 has some predictive value, but that value is very limited in time and expires moments after being obtained (that is: your window lasts seconds or fractions of the second, hence the need for good execution).
What you need to do is move to the next level. You must absorb all information that is given to you and then "sync with the market". Man I know this will sound as voodoo, black-magic, witch-hunting etc to most of you, but when you get there you'll understand.
Like a pro piano player, you look at the music sheet and don't need to read each and every note. You can "feel" what the composer wanted from you: and you execute. Learn the music, forget the music, play!
Same goes for trading. You float in the ocean of information, rumors, charts etc. You must sync with this ocean. You must feel what others are doing and you must know where to put your bets to profit from other people actions. Let me say it again: You don't focus on the market. You focus on people. People generate orders. People are driven by their emotions. People use techniques to help them control their emotions, so you need to understand those techniques too.
I think this is what DS refers to when he talks about a state of mind. It's not easy to obtain and it's only partially mechanical. Some of it is on a subconscious level somewhere inside our brain (which btw is the best neural-net computer you can get). This state comes from a deep understanding of all the ingredients that make up the market. Market mechanics, order placement, S/R, and different strategies all make up for this.
So how can you do it? I can give you direction. It's not much different to what you have already read thousands of times.
Take a chart of a cross. Look at different time frames. Identify S/R levels (you don't need to draw them, just paint them in your mind). Think about M/A, Fibs, high/lows and other potential areas. Orders tend to cluster around these areas. You don't need to see orders. All you need to know is that they're there (being in the L2 book, in the brockers private books, in the heads of the traders doesn't matter... they're there even if they're hidden). Experience and knowledge can help you.
Now watch what price action is when price reaches those areas: Is there an acceleration ? Is there hesitation ? What the speed is ? What the direction is ? Is there oil poured on the fire ?
Look at different TF and try to feel what each trader might be thinking when starring at the same chart. Would they be buying ? Selling ? Panicking ? You get the idea.
That's all. KISS. Now go and profit.
http://www.forexfactory.com/showpost.php?p=3852614&postcount=902
The outcome is that OF-T/S-L2 has some predictive value, but that value is very limited in time and expires moments after being obtained (that is: your window lasts seconds or fractions of the second, hence the need for good execution).
What you need to do is move to the next level. You must absorb all information that is given to you and then "sync with the market". Man I know this will sound as voodoo, black-magic, witch-hunting etc to most of you, but when you get there you'll understand.
Like a pro piano player, you look at the music sheet and don't need to read each and every note. You can "feel" what the composer wanted from you: and you execute. Learn the music, forget the music, play!
Same goes for trading. You float in the ocean of information, rumors, charts etc. You must sync with this ocean. You must feel what others are doing and you must know where to put your bets to profit from other people actions. Let me say it again: You don't focus on the market. You focus on people. People generate orders. People are driven by their emotions. People use techniques to help them control their emotions, so you need to understand those techniques too.
I think this is what DS refers to when he talks about a state of mind. It's not easy to obtain and it's only partially mechanical. Some of it is on a subconscious level somewhere inside our brain (which btw is the best neural-net computer you can get). This state comes from a deep understanding of all the ingredients that make up the market. Market mechanics, order placement, S/R, and different strategies all make up for this.
So how can you do it? I can give you direction. It's not much different to what you have already read thousands of times.
Take a chart of a cross. Look at different time frames. Identify S/R levels (you don't need to draw them, just paint them in your mind). Think about M/A, Fibs, high/lows and other potential areas. Orders tend to cluster around these areas. You don't need to see orders. All you need to know is that they're there (being in the L2 book, in the brockers private books, in the heads of the traders doesn't matter... they're there even if they're hidden). Experience and knowledge can help you.
Now watch what price action is when price reaches those areas: Is there an acceleration ? Is there hesitation ? What the speed is ? What the direction is ? Is there oil poured on the fire ?
Look at different TF and try to feel what each trader might be thinking when starring at the same chart. Would they be buying ? Selling ? Panicking ? You get the idea.
That's all. KISS. Now go and profit.
http://www.forexfactory.com/showpost.php?p=3852614&postcount=902
Darkstar II
I'd like to try and clarify a few things...
First off, what Scotty is doing is one way to trade orderflow, but it isn't THE way. The truth is, there is no ONE way to trade orderflow.
As I've said before, orderflow trading is a mindset. The common thread that ties it all together is making decisions based on future orders. Sometimes those orders come from fundamental factors (econ reports or headlines), sometimes from technical (trend lines or fibs), sometimes there are simply no more orders to support the continuation of a trend (exhaustion).
What people like Sauron and Pip are hung up on is the fact that we have no time and sales. There is also no way of getting a brokers real time book, so they conclude that there is no way to front run big orders. They have a valid point, but they are missing the forest for the trees.
This isn't about front running (in the traditional sense). The truth is, as a retail trader there is zero opportunity to know when Toyota is going to make a block purchase of yen. So looking for a way to do it is a fool’s errand.
What’s also a fools errand is assuming that a fib or a trend line will "cause" price to do anything. All the technical patterns, tools, and indicators are arbitrary constructs humans project onto the market in an effort to understand what is likely to happen. Price doesn't give a crap about a trend line or a fib, but humans do. It's the humans acting on these patterns and indicators by placing orders that impact price.
It may seem like splitting hairs, but I can't tell you how many people genuinely think a trend line or an S&R level CAUSES price to reverse. Raise your hand if you have ever put your entry order 5 pips ahead of the trend line with your stop 5 pips beyond it. If you have you know exactly what I mean.
The flip side has a group of people who assume that fundamental factors cause prices to move. Whether its predicated on the idea that markets are efficient or that securities have some intrinsic value, I'm not sure. What I do know is that all the fundamental factors point to the euro falling, yet it's up 500 or so pips and rising.
Neither school of thought is capable of producing long term profits. I know there will be people who disagree with me on that, but I can point to the simple fact that if either were viable, someone who learned the principles out of a book would be able to instantly become profitable when trading. Even with 80k members at forex factory, I can't think of anybody who has been profitable from day one.
It takes years to learn how to trade because there is a subliminal message in the market that has to be learned from experience. Which trend line bounce should be taken and which should be skipped? What news is going to drive price through an S&R to start a trend? If you've been profitable for any length of time you know it's the trades you skip which lead to bankable profits.
The concept of order flow seeks to focus a traders attention on the subliminal message. By constantly asking yourself what is going to compel traders to enter and where, you cut right past all the TA/FA bullshit to what really matters... the orders.
Instead of trading because there is a trend line, you examine what happens to price when the trend line is reached. You figure out that 9 times in 10 price penetrates the fib level before reversing. And that price often reverses right at the point where people "should" place their stops. And that no matter what the fundamental story, if the COT is breaking records, a cataclysmic reversal is inevitable.
At the end of the day, an experienced order flow trader doesn't need to see the actual orders to know what’s about to happen. If you know why a majority of people will want to trade in the future then you can get in ahead of them and profit. It's really that simple...
First off, what Scotty is doing is one way to trade orderflow, but it isn't THE way. The truth is, there is no ONE way to trade orderflow.
As I've said before, orderflow trading is a mindset. The common thread that ties it all together is making decisions based on future orders. Sometimes those orders come from fundamental factors (econ reports or headlines), sometimes from technical (trend lines or fibs), sometimes there are simply no more orders to support the continuation of a trend (exhaustion).
What people like Sauron and Pip are hung up on is the fact that we have no time and sales. There is also no way of getting a brokers real time book, so they conclude that there is no way to front run big orders. They have a valid point, but they are missing the forest for the trees.
This isn't about front running (in the traditional sense). The truth is, as a retail trader there is zero opportunity to know when Toyota is going to make a block purchase of yen. So looking for a way to do it is a fool’s errand.
What’s also a fools errand is assuming that a fib or a trend line will "cause" price to do anything. All the technical patterns, tools, and indicators are arbitrary constructs humans project onto the market in an effort to understand what is likely to happen. Price doesn't give a crap about a trend line or a fib, but humans do. It's the humans acting on these patterns and indicators by placing orders that impact price.
It may seem like splitting hairs, but I can't tell you how many people genuinely think a trend line or an S&R level CAUSES price to reverse. Raise your hand if you have ever put your entry order 5 pips ahead of the trend line with your stop 5 pips beyond it. If you have you know exactly what I mean.
The flip side has a group of people who assume that fundamental factors cause prices to move. Whether its predicated on the idea that markets are efficient or that securities have some intrinsic value, I'm not sure. What I do know is that all the fundamental factors point to the euro falling, yet it's up 500 or so pips and rising.
Neither school of thought is capable of producing long term profits. I know there will be people who disagree with me on that, but I can point to the simple fact that if either were viable, someone who learned the principles out of a book would be able to instantly become profitable when trading. Even with 80k members at forex factory, I can't think of anybody who has been profitable from day one.
It takes years to learn how to trade because there is a subliminal message in the market that has to be learned from experience. Which trend line bounce should be taken and which should be skipped? What news is going to drive price through an S&R to start a trend? If you've been profitable for any length of time you know it's the trades you skip which lead to bankable profits.
The concept of order flow seeks to focus a traders attention on the subliminal message. By constantly asking yourself what is going to compel traders to enter and where, you cut right past all the TA/FA bullshit to what really matters... the orders.
Instead of trading because there is a trend line, you examine what happens to price when the trend line is reached. You figure out that 9 times in 10 price penetrates the fib level before reversing. And that price often reverses right at the point where people "should" place their stops. And that no matter what the fundamental story, if the COT is breaking records, a cataclysmic reversal is inevitable.
At the end of the day, an experienced order flow trader doesn't need to see the actual orders to know what’s about to happen. If you know why a majority of people will want to trade in the future then you can get in ahead of them and profit. It's really that simple...
http://www.forexfactory.com/showpost.php?p=3827892&postcount=883
Dark Star order flow
Orderflow trading in a nutshell:
1)Find the stops and fade them.
2)Find the barrier options and push into them.
3)Find pockets with a lack of open interest and gap them.
4)Find a sequence of stops spaced 10-25 pips apart and prepare to put your kids through college.
What you need? A prime broker currenex/ebs account, IFR, Oanda open interest, some friends on the inside of a large bank or brokerage, a proper understanding of risk management, and most importantly; your psychological issues completely resolved.
Its not an EA type of system. Even having the above, your still going to fail until you have developed a keen sense of the market. Intuition plays a huge part so if your stuck in the mathematical world of EA's and if-then-else logic, don't waste your time. Trading is an art, not a science.
Why am I telling you this? I really don't know, but I won't be giving you any more. Ever.
Do with it what you will.
http://www.forexfactory.com/showpost.php?p=3095398&postcount=643
1)Find the stops and fade them.
2)Find the barrier options and push into them.
3)Find pockets with a lack of open interest and gap them.
4)Find a sequence of stops spaced 10-25 pips apart and prepare to put your kids through college.
What you need? A prime broker currenex/ebs account, IFR, Oanda open interest, some friends on the inside of a large bank or brokerage, a proper understanding of risk management, and most importantly; your psychological issues completely resolved.
Its not an EA type of system. Even having the above, your still going to fail until you have developed a keen sense of the market. Intuition plays a huge part so if your stuck in the mathematical world of EA's and if-then-else logic, don't waste your time. Trading is an art, not a science.
Why am I telling you this? I really don't know, but I won't be giving you any more. Ever.
Do with it what you will.
http://www.forexfactory.com/showpost.php?p=3095398&postcount=643
the truth about profitable trading
This is my first post, and I don't foresee myself becoming a regular poster (although I wouldn't bet against it either). That said, I have learned a great deal from this place and the realizations that it has helped elucidate, that I felt it incumbent upon myself to share some of the some of my conceptual beliefs.
As with any good disclaimer, please note that these are only my views, and that many may find success or failure doing drastically different things. I am by no means making categorical statements, but merely expounding on some of my market beliefs. Some may find them trite, some may find them helpful, and some may find them ludicrous. Also, I am not interested in sharing my systems, or any of the specific methods that I use. As with most areas of life, I find it very gratifying to help steer motivated people to viable sources of information that will positively impact their learning, but very much resent doing the work for them.
I think that it is impossible to ever 'predict' the movements of the market. Its funny, when people ask me something like "what do you think the dollar is going to do in whatever period of time", I always say that I have no idea. This sometimes causes people to look at me with disbelief, presumably wondering how someone who seemingly has such impressive returns knows so little about what the market may do. Ironically, it was that very realization - and figuring out to how translate that into a practicable, mechanical format - that finally afforded the kind of profitability that I wanted. And this is a statement that many, many traders would disagree with, which is precisely why I think that the vast majority fail to make significant money, and why the analysts seem wrong nearly as often as they are right. When you first see that certain technical trading setups go a certain direction more often than not, you start to subconsciously believe that any such setup WILL or SHOULD go in that direction, instead of that it merely has a slightly higher than x% chance of going in that direction. It is a key distinction that most traders - including many great technical guys that I have known, who are able to expertly read the complexities of price movements, and who sometimes even give theoretical lipservice to these very concepts - fail to ever substantively realize, or at least effectively put into practice.
It is ultimately about ego. So many get caught up in trying to be so clever with their charts and indicators, in an effort to win all the time. I certainty did myself, revelling in my winning trades and chastising myself for the losers. "I should have seen the resistance at 1.3729, and it was obviously breaking out of the trendline, espechially when I draw it like that. How could I have missed that factor - I'll never make that mistake again." This, however, implicitly assumes you are somehow responsible for that loss; that you were somehow ever actually in control of what the market was going to do. It is a dangerous mentality to have, and one that is unfortunately born from the equally instrumental realization that you can actually make money from trading the market. I even think the basic tool of drawing a support or resistance line on a chart is potentially hazardous, as its exact placement is really so arbitrary, but once you put it there it suddenly seems so authoritative - like a constraint that you have craftily imposed upon the market. I prefer to passively OBSERVE concepts like support and resistance in the functioning of my systems, rather than trading based on my imperfect, arbitrary, and surely biased understanding of their specific placements. Unlike many traders, I don't even set targets for trades, since I believe that even that would be forecasting. I exit the trade reactively when the market tells me to. It could be at a large profit, a small profit, breakeven, or a small loss - and I couldn't care less about which one it turns out to be on any given trade; only that the statistical outcome over many, many trades is within the appropriate range. One of the shrewdest statements that I ever heard on this was that the only way to make a million dollars in trading (as opposed to investing) is to make 10 million dollars and lose 9 million dollars (in concept, at least: some of you may well be making 10 million and losing only 8, or 7, or 6.2...)
In essence, one could view this as a debate between proactive and reactive modes of thinking. In many - if not most - areas of life, proactive behaviors are rewarded. CEOs and heads of industry are generally proactive people - decision makers who exercise control over their situations and environments. It is the reactive people that society generally doesn't reward: the guy who waits for life to present him an opportunity rather than actively trying to create one. I myself am a control freak - a trait which served me well in life until I encountered the insanity of the markets. I wanted so desperately to control them - to be smart, to be right, to win, to see the complexities in a movement that others 'foolishly' missed and bask in the resulting accolades - and nearly drove myself crazy in the process. My closing advice is not to do this, although I think it is almost an inevitability of the learning process - I am forever envious of those that don't have to go through this, or who can somehow consistantly profit from it. In short, it is understanding that randomness and making money from the market aren't nearly as mutually exclusive as it would intuitively seem. To the diversified 'buy and hold' guys as to many an active trader, they are seemingly incommensurable opinions - but I have found that it is a complete surrender to the randomness of any one trade that allows for a grounded confidence in a statistically significant outcome over many instances.
As with any good disclaimer, please note that these are only my views, and that many may find success or failure doing drastically different things. I am by no means making categorical statements, but merely expounding on some of my market beliefs. Some may find them trite, some may find them helpful, and some may find them ludicrous. Also, I am not interested in sharing my systems, or any of the specific methods that I use. As with most areas of life, I find it very gratifying to help steer motivated people to viable sources of information that will positively impact their learning, but very much resent doing the work for them.
I think that it is impossible to ever 'predict' the movements of the market. Its funny, when people ask me something like "what do you think the dollar is going to do in whatever period of time", I always say that I have no idea. This sometimes causes people to look at me with disbelief, presumably wondering how someone who seemingly has such impressive returns knows so little about what the market may do. Ironically, it was that very realization - and figuring out to how translate that into a practicable, mechanical format - that finally afforded the kind of profitability that I wanted. And this is a statement that many, many traders would disagree with, which is precisely why I think that the vast majority fail to make significant money, and why the analysts seem wrong nearly as often as they are right. When you first see that certain technical trading setups go a certain direction more often than not, you start to subconsciously believe that any such setup WILL or SHOULD go in that direction, instead of that it merely has a slightly higher than x% chance of going in that direction. It is a key distinction that most traders - including many great technical guys that I have known, who are able to expertly read the complexities of price movements, and who sometimes even give theoretical lipservice to these very concepts - fail to ever substantively realize, or at least effectively put into practice.
It is ultimately about ego. So many get caught up in trying to be so clever with their charts and indicators, in an effort to win all the time. I certainty did myself, revelling in my winning trades and chastising myself for the losers. "I should have seen the resistance at 1.3729, and it was obviously breaking out of the trendline, espechially when I draw it like that. How could I have missed that factor - I'll never make that mistake again." This, however, implicitly assumes you are somehow responsible for that loss; that you were somehow ever actually in control of what the market was going to do. It is a dangerous mentality to have, and one that is unfortunately born from the equally instrumental realization that you can actually make money from trading the market. I even think the basic tool of drawing a support or resistance line on a chart is potentially hazardous, as its exact placement is really so arbitrary, but once you put it there it suddenly seems so authoritative - like a constraint that you have craftily imposed upon the market. I prefer to passively OBSERVE concepts like support and resistance in the functioning of my systems, rather than trading based on my imperfect, arbitrary, and surely biased understanding of their specific placements. Unlike many traders, I don't even set targets for trades, since I believe that even that would be forecasting. I exit the trade reactively when the market tells me to. It could be at a large profit, a small profit, breakeven, or a small loss - and I couldn't care less about which one it turns out to be on any given trade; only that the statistical outcome over many, many trades is within the appropriate range. One of the shrewdest statements that I ever heard on this was that the only way to make a million dollars in trading (as opposed to investing) is to make 10 million dollars and lose 9 million dollars (in concept, at least: some of you may well be making 10 million and losing only 8, or 7, or 6.2...)
In essence, one could view this as a debate between proactive and reactive modes of thinking. In many - if not most - areas of life, proactive behaviors are rewarded. CEOs and heads of industry are generally proactive people - decision makers who exercise control over their situations and environments. It is the reactive people that society generally doesn't reward: the guy who waits for life to present him an opportunity rather than actively trying to create one. I myself am a control freak - a trait which served me well in life until I encountered the insanity of the markets. I wanted so desperately to control them - to be smart, to be right, to win, to see the complexities in a movement that others 'foolishly' missed and bask in the resulting accolades - and nearly drove myself crazy in the process. My closing advice is not to do this, although I think it is almost an inevitability of the learning process - I am forever envious of those that don't have to go through this, or who can somehow consistantly profit from it. In short, it is understanding that randomness and making money from the market aren't nearly as mutually exclusive as it would intuitively seem. To the diversified 'buy and hold' guys as to many an active trader, they are seemingly incommensurable opinions - but I have found that it is a complete surrender to the randomness of any one trade that allows for a grounded confidence in a statistically significant outcome over many instances.
edge and luck
That is certainly a fair point. Obviously the question of what even constitutes a recovery sequence (or necessary percentage return) where you would resume live/full risk trading is debatable. Again, this will largely be an issue of risk tolerance, but one would presumably need to see a recovery that would be statistically similar to how your system would perform if your edge was still functioning. For me, I would want to see a new equity high in the paper traded results. Moreover, I would be concerned not only with the the account reaching a hypothetical new account high, but equally with the specific makeup of the trades and the time required to achieve it. All of this would be important in making a determination of whether your system was still operating with an edge.
Of course, this could take a long time, or perhaps never happen at all. If your edge had deteriorated or never existed, then you would paper trade the system into further drawdown and never trade it live again.
But, to your example, imagine that the system completely recovered on a paper traded basis - complete with every statistical verification that would give confidence that your edge was still functioning. Then imagine that when you resumed live trading you hit another drawdown that was outside of expectation. What then? Well, in that situation I would again stop at a preconceived point, and would be very weary about continuing to trade that system again. Yes, you could always reach that point of drawdown, stop live trading, paper trade a subsequent recovery, resume live trading only to have another drawdown that was statistically unsound. That system, at its most catastrophic, would have lost the trader x% from the first drawdown and a subsequent x% from the second drawdown. It would be very unpleasant, but at least it would be controlled, and certainly not catastrophic. The more conservative your risk management, the less you could potentially lose even in both drawdowns. If, say, 20% was your statistical cut off, you would lose a worst case total of 36% from your peak equity. If this occurred on day 1 (just to make the example even more improbable) you would have lost 36% of your principal, rather than merely giving back profits.
If it sounds like I am agreeing with you, it is because I am - its just that it doesn't really agitate me. Sure, it could happen, but with a good edge, a good system, enough data to formulate reasonable expectations, and conservative enough position risk, it becomes increasingly unlikely. The trader that prepares himself properly and still completely fails - having been slowly bled from unsound drawdown after unsound drawdown, only to devise new systems and have it happen all over again until he is broke - would be extremely unlucky indeed. So, there you go, you need some luck, but adequate preparation surely negates the need for a constant fixation on it. Most who fail in this industry are not like the unfortunate character I just described above; they fail for a myraid of other more inane reasons. And most that do meet those characteristics, I would imagine, haven't failed - or at least not yet...
http://www.forexfactory.com/showpost.php?p=2506456&postcount=578
Of course, this could take a long time, or perhaps never happen at all. If your edge had deteriorated or never existed, then you would paper trade the system into further drawdown and never trade it live again.
But, to your example, imagine that the system completely recovered on a paper traded basis - complete with every statistical verification that would give confidence that your edge was still functioning. Then imagine that when you resumed live trading you hit another drawdown that was outside of expectation. What then? Well, in that situation I would again stop at a preconceived point, and would be very weary about continuing to trade that system again. Yes, you could always reach that point of drawdown, stop live trading, paper trade a subsequent recovery, resume live trading only to have another drawdown that was statistically unsound. That system, at its most catastrophic, would have lost the trader x% from the first drawdown and a subsequent x% from the second drawdown. It would be very unpleasant, but at least it would be controlled, and certainly not catastrophic. The more conservative your risk management, the less you could potentially lose even in both drawdowns. If, say, 20% was your statistical cut off, you would lose a worst case total of 36% from your peak equity. If this occurred on day 1 (just to make the example even more improbable) you would have lost 36% of your principal, rather than merely giving back profits.
If it sounds like I am agreeing with you, it is because I am - its just that it doesn't really agitate me. Sure, it could happen, but with a good edge, a good system, enough data to formulate reasonable expectations, and conservative enough position risk, it becomes increasingly unlikely. The trader that prepares himself properly and still completely fails - having been slowly bled from unsound drawdown after unsound drawdown, only to devise new systems and have it happen all over again until he is broke - would be extremely unlucky indeed. So, there you go, you need some luck, but adequate preparation surely negates the need for a constant fixation on it. Most who fail in this industry are not like the unfortunate character I just described above; they fail for a myraid of other more inane reasons. And most that do meet those characteristics, I would imagine, haven't failed - or at least not yet...
http://www.forexfactory.com/showpost.php?p=2506456&postcount=578
Drawdown in MTS trading
Every trading methodology has a point where if there are x consecutive loses, the account will either be wiped out or the drawdown will be so large that the return required to recover would be unpalatable (50% drawdown requiring 100% return, for instance - although this is largely personal). As Hanover points out, the length of this potential sequence is purely a function of position risk.
Regardless, no amount of money management can prevent this unlucky series of trades; it can only decrease the probability of its occurrence. However, if one has a comprehensive understanding of their strategy - including statistical data based on a large enough sample size - it doesn't need to feel like this fearful quest to maximize profits before the impending catastrophe. For example, lets say you have a trading system, with thousands of trades worth of data, where based on Monte carlo simulations you find a 99% confidence level of not exceeding a 25% drawdown. Could you exceed 25% drawdown at any given time? Sure. Assuming that you trade your system over an infinite period of time it will almost certainly fail completely, but what is the 'likely' time frame for such a failure? Within 5 years, 10 years, 100 years? The probability, and thus the length, of a sequence necessary to destroy one's account is completely under the trader's control. At certain position sizing levels, the likelihood of it occurring within a trader's lifetime can be extremely small - at such small levels, the chance of your edge deteriorating (or your system's ability to adaptively capture it) becomes a much more likely culprit for eventual failure than that unlucky sequence...
The bottom line is that we can never deal in certainty. Anything can always happen, and things can suddenly change in unforeseen ways. This is the case with most things in life that, unlike casinos, aren't confined to static probabilities. The casino could theoretically fail if that extremely low probability (in the casino's case) losing streak was to occur; as traders, we could fail either as a result of:
1) a functioning edge but detrimental losing streak
2) no edge/diminishing edge.
What matters is that you are aware of this, and know what you would do in any potential situation. You would know that when you reach a certain drawdown level you are outside of expectation and should either stop trading completely or cut risk significantly while you continue to at least paper trade the strategy to see if it does ultimately recover. If it does, then you can resume trading; if not, thnn at least you only lost x% of your account, and hopefully achieved significant net profit regardless. Use position sizing to trade a system that has drawdown expectations that are tolerable for you; then, even if you exceed them in that catastrophic event - be it an unlucky sequence or a failed/non-existent edge - you haven't lost something that you weren't prepared to lose.
Personally, I tend to be more conservative, and like to have the probability of even a 15% drawdown be very low, but this is obviously just my comfort zone. I find it fascinating how different traders approach this question. I remember a certain fairly prominent trader on this forum who allegedly ran up an account 1000% in a year, risking - if I remember correctly - 8% on each trade. He was so immodestly certain that, based on testing, his system would continue to work - even though during testing it had some incredible drawdowns. I didn't even doubt the quality of his testing, but his certitude was ridiculous, especially after the live year. At 8% risk, you don't need THAT many losing trades to destroy you. Of course, it all crashed and burned, and his future posts were somewhat more humble.
I think that is really what Tdion is getting at: that sense of certainty that many seem to have, and how it is completely unfounded. I get that and I agree. At the same time, the hysteria surrounding luck in trading is overdone. Know what to expect as an acceptable worst-case, the likelihood of it happening, and what to do if it does happen within your trading career.
Regardless, no amount of money management can prevent this unlucky series of trades; it can only decrease the probability of its occurrence. However, if one has a comprehensive understanding of their strategy - including statistical data based on a large enough sample size - it doesn't need to feel like this fearful quest to maximize profits before the impending catastrophe. For example, lets say you have a trading system, with thousands of trades worth of data, where based on Monte carlo simulations you find a 99% confidence level of not exceeding a 25% drawdown. Could you exceed 25% drawdown at any given time? Sure. Assuming that you trade your system over an infinite period of time it will almost certainly fail completely, but what is the 'likely' time frame for such a failure? Within 5 years, 10 years, 100 years? The probability, and thus the length, of a sequence necessary to destroy one's account is completely under the trader's control. At certain position sizing levels, the likelihood of it occurring within a trader's lifetime can be extremely small - at such small levels, the chance of your edge deteriorating (or your system's ability to adaptively capture it) becomes a much more likely culprit for eventual failure than that unlucky sequence...
The bottom line is that we can never deal in certainty. Anything can always happen, and things can suddenly change in unforeseen ways. This is the case with most things in life that, unlike casinos, aren't confined to static probabilities. The casino could theoretically fail if that extremely low probability (in the casino's case) losing streak was to occur; as traders, we could fail either as a result of:
1) a functioning edge but detrimental losing streak
2) no edge/diminishing edge.
What matters is that you are aware of this, and know what you would do in any potential situation. You would know that when you reach a certain drawdown level you are outside of expectation and should either stop trading completely or cut risk significantly while you continue to at least paper trade the strategy to see if it does ultimately recover. If it does, then you can resume trading; if not, thnn at least you only lost x% of your account, and hopefully achieved significant net profit regardless. Use position sizing to trade a system that has drawdown expectations that are tolerable for you; then, even if you exceed them in that catastrophic event - be it an unlucky sequence or a failed/non-existent edge - you haven't lost something that you weren't prepared to lose.
Personally, I tend to be more conservative, and like to have the probability of even a 15% drawdown be very low, but this is obviously just my comfort zone. I find it fascinating how different traders approach this question. I remember a certain fairly prominent trader on this forum who allegedly ran up an account 1000% in a year, risking - if I remember correctly - 8% on each trade. He was so immodestly certain that, based on testing, his system would continue to work - even though during testing it had some incredible drawdowns. I didn't even doubt the quality of his testing, but his certitude was ridiculous, especially after the live year. At 8% risk, you don't need THAT many losing trades to destroy you. Of course, it all crashed and burned, and his future posts were somewhat more humble.
I think that is really what Tdion is getting at: that sense of certainty that many seem to have, and how it is completely unfounded. I get that and I agree. At the same time, the hysteria surrounding luck in trading is overdone. Know what to expect as an acceptable worst-case, the likelihood of it happening, and what to do if it does happen within your trading career.
Trading system design
Lucky...That would be far more exciting.
I rarely post on the FF, but I have seen a lot of these posts recently - questioning (or, in some cases, audaciously claiming) that it is impossible to trade successfully in the long term, or that any long-term prospect of success is weighted far more towards luck than a sound trading practice. Let me address this as thoroughly as possible, hopefully in a somewhat logical order.
The time-frames that are you trading on (1m, 5m, etc) will undoubtedly be exposed to a significant amount of noise - news releases or other liquidity spikes will be much more likely to stop you out if you hold tight-stopped, short-term positions. I am NOT saying that is it impossible to trade smaller time frames, but just for someone that is worried (and seemingly overwhelmed) by the numerous factors that effect the market, I think larger timeframes would be a better bet.
I will now run through the process that I personally use to construct trading systems. Yes, I only ever trade a system with a strong statistical basis, since trading anything other than that would be impossible for me to put any long-standing faith in, and subsequently impossible to mentally stick with in times of greater drawdown. Even an EA that I hadn't PERSONALLY tested and judged to be statistically significant in its expectation would be very difficult to stick with during losing streaks. But I digress...
The first step of the process is to identify variables that you believe create a slight statistical edge - where given 1000s of incidents of that variable occurring, you would expect the chance of "something" occurring slightly more 50/50 (the greater the ratio, the greater the edge of that particular variable). Once you have that variable, you look for other variables that can be used in conjunction to further increase your statistical outcome through filtering out some of the initial trades. Eventually, you have an entry condition that could be expressed as an if statement: if x=3 and y=5 and z=10 then you place a buy stop/sell stop at a certain predefined point (the numbers and variables used are completely arbitrary, so don't pm me asking how I defined z...). On that note, to truly create a system that you have any statistical confidence in, everything - every single possible action that you take entering, existing or modifying a position - has to be 100% defined.
So at this point, what do you have? You essentially only have an entry condition where you are confident that when x,y and z align in a certain way the outcome over many instances should be within some statistical expectation. Does this mean you have a winning system and can conquer the world? If only it were so easy...
At this point - which honestly is the point that many traders stop at, if they even define things so precisely at all - you simply know when to enter the market. That’s it. You have no concept of money management, stop placement (fixed pip or varying based on recent volatility), or exit conditions. How do you go about defining those? In much the same way as you defined the entry. By looking at 1000s of occurrences where your system produced an entry, and then meticulously testing variations of all of the above. Sounds pretty tedious right? Well, it is, but it is double for those with patience and reasonable logical faculties.
Let me give you an example. (Disclaimer: this is by no means an actual system - I am literally making this up right now with no basis in anything. I will sell it to you though…) Say you have defined your timeframe as the daily charts. The entry condition that you have defined is that when the RSI 96 is above 50 AND when you have an inside bar AND when the price breaks the inside bar by at least 15 pips (through the use of a buy). Your stop lose is based on some consistent measure of recent volatility (ATR, etc), and you are using fixed fractional position sizing for your MM. Your exit is defined as whenever the move reaches 1.5R in profit. You also mechanically cut loses depending on other x,y,z factors that you observe at the end of a given period (at the end of the day, in this case). All trading actions are taken at the end of the period, and only at the end of the period, to remain 100% statistically consistent.
So, now you have a system that is completely defined, but does it work? The only way to answer that (aside from live trading, of course), is to first backtest it over 1000s of occurrences. Another point is that in a statistically based system, you have to take EVERY SINGLE INCIDENCE of a trade that aligns with your variables, making it more difficult to do on lower time frames without an EA unless you want to watch the monitor at the end of every period like a crazy insomniac. Backtesting over a large sample size with 100% defined trading rules will allow you to see how your system would have performed over a certain time period.
To make it clear, when I say backtest, I don't mean what I think many in this forum do: looking at their chart over a couple of years (or months - or even weeks...) and gleefully counting in their head "winner, winner, winner, winner, loser, winner, winner, loser, winner", while half-focusing on the finishings on next year's 200 foot mega yacht. The testing should be nothing less than scientific. You are a market scientist, trying to create a market theory, so every stage of the process needs to be defined and testable. You will know that you are doing this right when you aren't thinking of all the money you are going to make but instead simply recording, in thorough detail, all of the data that you are going to need to properly formulate a compelling theory; as a side benefit, you will also limit testing bias, since you will no longer TRYING to prove anything, but simply testing to see if it could be a tenable theory.
Lets say you do this, and you find that your system over 5000 consecutive trades would have produced a win rate of 55% and a average win/average lose ratio, as a percentage of R, of 1.3/1. As a brief aside, for those that haven't done this before, constructing a system is always a balancing of two often-competing factors: win rate and ave win/ave lose ratio. Generally they are inversely correlated to a degree. A trend following system, where you typically have high R multiple winners will typically have a high ave win/ave lose ratio, but a lower win rate (often below 50%). A scalping system, on the other hand, where you are quicker to take profits, will typically have a higher win rate, but a lower ave win/ave lose ratio, since, well, you are quicker to take profits and therefore don't capitalize on those large R moves. It is the balance of these two factors that creates your expectancy - and, if you have developed a good edge, hopefully a positive one.
So are we done yet? Haha - not quite. Those two factors are only a small measure of a system's success. Ultimately you should focus on the biggest factor that will determine your system's biggest success: its annual return/worst annual drawdown. And the ratio itself is only part of the battle. Sure, you can have a 50/1 ratio, but if you have a max drawdown of 60% than the ratio is somewhat misleading, even with that 3000% return. You can of course decrease the drawdown by decreasing your position risk, but that will also exponentially decrease the ratio due to less compounding on the upside. Ultimately, you are looking for a decent ratio - but more importantly, a reasonable drawdown that is psychologically palatable for you, and which your system can reasonably recover from.
After that you have that, for an extra measure of confidence, you should perform a monte carlo test on your 1000s of results. You want to make sure that 1,000,000s of permutations of the results are consistent, and that the results that you obtained were not just the product of 'lucky' historical sequencing.
Finally, once you have all of that, then you are finally ready to...forward test. How glamorous, huh? So, you forward test the system over a couple of months, and if it clearly performs within statistical expectation, then, and only then, are you ready to go live.
Some other notes on system development:
1. Make sure that your sample size is suitably large. Constructing a system over 50-100 or so trades is complete foolishness, and 'curve-fitting', in the negative sense of the word (with the arduous strategy above being in the more positive sense). You are a scientist, and you need enough results to formulate a plausible market theory.
2. Make sure that EVERYTHING is measurable and defined. If not, then your system will have elements of inconsistency. Wishful thinking prays on these little pockets of testing-inconsistency, and can significantly distort your statistical expectation if you allow it to leak into a system that is crafted with anything less than 100% precision.
3. Make sure that your testing period includes diverse markets, and preferably functions over numerous market conditions and many years. Even better if it broadly functions across different currencies, but this is not essential. Essentially, you want to limit the myopic curve-fitting experience, where your system is highly calibrated to a rigid set of market parameters. If for instance, your system works great in 2008, make sure that is works well in 200x, since 2008 is not necessarily broadly representative.
4. Always remember that there will be testing inaccuracies. Be it that certain positions were different/entered/not entered based on spread changes, charting errors (hopefully not if you choose a good feed) and the tendency for human positive bias (mitigated by 100% rigid testing parameters). Generally, a shorter time-frame system will be affected more my the spread change issue than a longer-term one.
Whew! So there you have it: a system that you can put a fair degree of faith in moving forward. And that, ladies and gentlemen, is about all you can ever hope for in trading. Why? Well, to finally address the initial question in the thread, because you can never, ever, ever get away from the fact that the market is uncertain, and that at any moment in the future it can behave completely differently from any way that it has behaved before. So is that luck then? Only if you define luck as the market consistently behaving based on robust expectation. At that point it just becomes a question of semantics.
One thing that certainly isn't luck, though, are the long-term track records of the successful few; that type of legacy is the product of systematically superimposing robust constraints on the markets. But what about when the systems stop working - does that not then negate the proceeding accomplishments and make it all a lucky ride? Not in the slightest. For one, the more robust and broadly functioning the system, the less likelihood that it will stop working - which, of course, is a design feature that has nothing to do with luck.
Sure, Chris, but even THOSE can stop working too - isn't that luck? Well, yes, in that very rigid sense I suppose that you could define this inextricable luck component as the "duration of time that a particular robust system functions before it no longer functions". I will concede that limited point, but again, I more than accept that as inevitable uncertainty, that you will necessary have in any endeavor that you peruse. You could start an orange juice company that does great year after year for 20 years until the FDA comes out and says that orange juice knocks 10 years off the average life, and the market completely shrivels up. I never look at any system I develop as a sure thing, or something where I can simply press play, go into a 50-year coma, and wake up the richest man in the world. Again, this is where long-term success should not be confused with luck. There are always exogenous uncontrollables (black swans, as it were), but the part that isn't lucky is having a feedback mechanism to recognize when one has happened, and having a plan in place for when it does.
To bring it back to the example, say the system that you designed had a maximum drawdown, over a 15-year period, of 20%. With monte carlo analysis, over millions of permutations based on 1000s of initial observations, you conclude that you have a 95% confidence of never dropping below a 25% drawdown. Does this mean that it will never happen - is this the certainty that you were looking for? No way. It very well may happen; in fact, I would postulate that given enough time it will happen, since, after all, it is only a 95% confidence. Even a 100% confidence would still be based on only x thousands of occurrences, never escaping the uncertainty of what may come.
What you do know, however, is that if you drop below 25% drawdown then you are starting to venture outside of statistical expectation. So you make a fail safe. You write it on your wall and you stick to it no matter what. If the system ever breaches x% drawdown, then I will stop trading until I am again assured that it is operating within expectation, and that the drawdown was merely a standard deviation event; if, however, it doesn't resume its normal functioning - if it doesn't recover from the drawdown based on a reasonable logarithmic expectation - then it is time to go back to the drawing board, figure out what changed, modify your variables accordingly, and strive to develop a version of your system that incorporates all of your previous 1000s of occurrences AND the new ones that had previously thrown it off. Curve-fitting? Sure, but again over many, many occurrences so that it is broadly functioning. The more robust your model in the first place, the fewer changes that you will likely have to make, and it will be easier to integrate them without a complete overhaul.
Well, that’s about it from me for today. I hope this was helpful. I obviously know that it can appear overwhelming, but this is simply the reality that has allowed me to be consistently successful. Stop looking for certainty, stop worrying about luck and designing something that will prove to be infinitely viable. Become a market scientist, create a viable market theory, play it out until it stops working (hopefully, if it is exceedingly robust, you will be dead long before that happens), and then have a feedback mechanism ready so that you can roll with the punches, make your adjustments, and continue moving forward. And specifically for the initial poster, don’t worry so much about all the millions of factors that move the market. Stop trying to know and control everything - you can’t and you don’t need to.
Best,
Chris
The time-frames that are you trading on (1m, 5m, etc) will undoubtedly be exposed to a significant amount of noise - news releases or other liquidity spikes will be much more likely to stop you out if you hold tight-stopped, short-term positions. I am NOT saying that is it impossible to trade smaller time frames, but just for someone that is worried (and seemingly overwhelmed) by the numerous factors that effect the market, I think larger timeframes would be a better bet.
I will now run through the process that I personally use to construct trading systems. Yes, I only ever trade a system with a strong statistical basis, since trading anything other than that would be impossible for me to put any long-standing faith in, and subsequently impossible to mentally stick with in times of greater drawdown. Even an EA that I hadn't PERSONALLY tested and judged to be statistically significant in its expectation would be very difficult to stick with during losing streaks. But I digress...
The first step of the process is to identify variables that you believe create a slight statistical edge - where given 1000s of incidents of that variable occurring, you would expect the chance of "something" occurring slightly more 50/50 (the greater the ratio, the greater the edge of that particular variable). Once you have that variable, you look for other variables that can be used in conjunction to further increase your statistical outcome through filtering out some of the initial trades. Eventually, you have an entry condition that could be expressed as an if statement: if x=3 and y=5 and z=10 then you place a buy stop/sell stop at a certain predefined point (the numbers and variables used are completely arbitrary, so don't pm me asking how I defined z...). On that note, to truly create a system that you have any statistical confidence in, everything - every single possible action that you take entering, existing or modifying a position - has to be 100% defined.
So at this point, what do you have? You essentially only have an entry condition where you are confident that when x,y and z align in a certain way the outcome over many instances should be within some statistical expectation. Does this mean you have a winning system and can conquer the world? If only it were so easy...
At this point - which honestly is the point that many traders stop at, if they even define things so precisely at all - you simply know when to enter the market. That’s it. You have no concept of money management, stop placement (fixed pip or varying based on recent volatility), or exit conditions. How do you go about defining those? In much the same way as you defined the entry. By looking at 1000s of occurrences where your system produced an entry, and then meticulously testing variations of all of the above. Sounds pretty tedious right? Well, it is, but it is double for those with patience and reasonable logical faculties.
Let me give you an example. (Disclaimer: this is by no means an actual system - I am literally making this up right now with no basis in anything. I will sell it to you though…) Say you have defined your timeframe as the daily charts. The entry condition that you have defined is that when the RSI 96 is above 50 AND when you have an inside bar AND when the price breaks the inside bar by at least 15 pips (through the use of a buy). Your stop lose is based on some consistent measure of recent volatility (ATR, etc), and you are using fixed fractional position sizing for your MM. Your exit is defined as whenever the move reaches 1.5R in profit. You also mechanically cut loses depending on other x,y,z factors that you observe at the end of a given period (at the end of the day, in this case). All trading actions are taken at the end of the period, and only at the end of the period, to remain 100% statistically consistent.
So, now you have a system that is completely defined, but does it work? The only way to answer that (aside from live trading, of course), is to first backtest it over 1000s of occurrences. Another point is that in a statistically based system, you have to take EVERY SINGLE INCIDENCE of a trade that aligns with your variables, making it more difficult to do on lower time frames without an EA unless you want to watch the monitor at the end of every period like a crazy insomniac. Backtesting over a large sample size with 100% defined trading rules will allow you to see how your system would have performed over a certain time period.
To make it clear, when I say backtest, I don't mean what I think many in this forum do: looking at their chart over a couple of years (or months - or even weeks...) and gleefully counting in their head "winner, winner, winner, winner, loser, winner, winner, loser, winner", while half-focusing on the finishings on next year's 200 foot mega yacht. The testing should be nothing less than scientific. You are a market scientist, trying to create a market theory, so every stage of the process needs to be defined and testable. You will know that you are doing this right when you aren't thinking of all the money you are going to make but instead simply recording, in thorough detail, all of the data that you are going to need to properly formulate a compelling theory; as a side benefit, you will also limit testing bias, since you will no longer TRYING to prove anything, but simply testing to see if it could be a tenable theory.
Lets say you do this, and you find that your system over 5000 consecutive trades would have produced a win rate of 55% and a average win/average lose ratio, as a percentage of R, of 1.3/1. As a brief aside, for those that haven't done this before, constructing a system is always a balancing of two often-competing factors: win rate and ave win/ave lose ratio. Generally they are inversely correlated to a degree. A trend following system, where you typically have high R multiple winners will typically have a high ave win/ave lose ratio, but a lower win rate (often below 50%). A scalping system, on the other hand, where you are quicker to take profits, will typically have a higher win rate, but a lower ave win/ave lose ratio, since, well, you are quicker to take profits and therefore don't capitalize on those large R moves. It is the balance of these two factors that creates your expectancy - and, if you have developed a good edge, hopefully a positive one.
So are we done yet? Haha - not quite. Those two factors are only a small measure of a system's success. Ultimately you should focus on the biggest factor that will determine your system's biggest success: its annual return/worst annual drawdown. And the ratio itself is only part of the battle. Sure, you can have a 50/1 ratio, but if you have a max drawdown of 60% than the ratio is somewhat misleading, even with that 3000% return. You can of course decrease the drawdown by decreasing your position risk, but that will also exponentially decrease the ratio due to less compounding on the upside. Ultimately, you are looking for a decent ratio - but more importantly, a reasonable drawdown that is psychologically palatable for you, and which your system can reasonably recover from.
After that you have that, for an extra measure of confidence, you should perform a monte carlo test on your 1000s of results. You want to make sure that 1,000,000s of permutations of the results are consistent, and that the results that you obtained were not just the product of 'lucky' historical sequencing.
Finally, once you have all of that, then you are finally ready to...forward test. How glamorous, huh? So, you forward test the system over a couple of months, and if it clearly performs within statistical expectation, then, and only then, are you ready to go live.
Some other notes on system development:
1. Make sure that your sample size is suitably large. Constructing a system over 50-100 or so trades is complete foolishness, and 'curve-fitting', in the negative sense of the word (with the arduous strategy above being in the more positive sense). You are a scientist, and you need enough results to formulate a plausible market theory.
2. Make sure that EVERYTHING is measurable and defined. If not, then your system will have elements of inconsistency. Wishful thinking prays on these little pockets of testing-inconsistency, and can significantly distort your statistical expectation if you allow it to leak into a system that is crafted with anything less than 100% precision.
3. Make sure that your testing period includes diverse markets, and preferably functions over numerous market conditions and many years. Even better if it broadly functions across different currencies, but this is not essential. Essentially, you want to limit the myopic curve-fitting experience, where your system is highly calibrated to a rigid set of market parameters. If for instance, your system works great in 2008, make sure that is works well in 200x, since 2008 is not necessarily broadly representative.
4. Always remember that there will be testing inaccuracies. Be it that certain positions were different/entered/not entered based on spread changes, charting errors (hopefully not if you choose a good feed) and the tendency for human positive bias (mitigated by 100% rigid testing parameters). Generally, a shorter time-frame system will be affected more my the spread change issue than a longer-term one.
Whew! So there you have it: a system that you can put a fair degree of faith in moving forward. And that, ladies and gentlemen, is about all you can ever hope for in trading. Why? Well, to finally address the initial question in the thread, because you can never, ever, ever get away from the fact that the market is uncertain, and that at any moment in the future it can behave completely differently from any way that it has behaved before. So is that luck then? Only if you define luck as the market consistently behaving based on robust expectation. At that point it just becomes a question of semantics.
One thing that certainly isn't luck, though, are the long-term track records of the successful few; that type of legacy is the product of systematically superimposing robust constraints on the markets. But what about when the systems stop working - does that not then negate the proceeding accomplishments and make it all a lucky ride? Not in the slightest. For one, the more robust and broadly functioning the system, the less likelihood that it will stop working - which, of course, is a design feature that has nothing to do with luck.
Sure, Chris, but even THOSE can stop working too - isn't that luck? Well, yes, in that very rigid sense I suppose that you could define this inextricable luck component as the "duration of time that a particular robust system functions before it no longer functions". I will concede that limited point, but again, I more than accept that as inevitable uncertainty, that you will necessary have in any endeavor that you peruse. You could start an orange juice company that does great year after year for 20 years until the FDA comes out and says that orange juice knocks 10 years off the average life, and the market completely shrivels up. I never look at any system I develop as a sure thing, or something where I can simply press play, go into a 50-year coma, and wake up the richest man in the world. Again, this is where long-term success should not be confused with luck. There are always exogenous uncontrollables (black swans, as it were), but the part that isn't lucky is having a feedback mechanism to recognize when one has happened, and having a plan in place for when it does.
To bring it back to the example, say the system that you designed had a maximum drawdown, over a 15-year period, of 20%. With monte carlo analysis, over millions of permutations based on 1000s of initial observations, you conclude that you have a 95% confidence of never dropping below a 25% drawdown. Does this mean that it will never happen - is this the certainty that you were looking for? No way. It very well may happen; in fact, I would postulate that given enough time it will happen, since, after all, it is only a 95% confidence. Even a 100% confidence would still be based on only x thousands of occurrences, never escaping the uncertainty of what may come.
What you do know, however, is that if you drop below 25% drawdown then you are starting to venture outside of statistical expectation. So you make a fail safe. You write it on your wall and you stick to it no matter what. If the system ever breaches x% drawdown, then I will stop trading until I am again assured that it is operating within expectation, and that the drawdown was merely a standard deviation event; if, however, it doesn't resume its normal functioning - if it doesn't recover from the drawdown based on a reasonable logarithmic expectation - then it is time to go back to the drawing board, figure out what changed, modify your variables accordingly, and strive to develop a version of your system that incorporates all of your previous 1000s of occurrences AND the new ones that had previously thrown it off. Curve-fitting? Sure, but again over many, many occurrences so that it is broadly functioning. The more robust your model in the first place, the fewer changes that you will likely have to make, and it will be easier to integrate them without a complete overhaul.
Well, that’s about it from me for today. I hope this was helpful. I obviously know that it can appear overwhelming, but this is simply the reality that has allowed me to be consistently successful. Stop looking for certainty, stop worrying about luck and designing something that will prove to be infinitely viable. Become a market scientist, create a viable market theory, play it out until it stops working (hopefully, if it is exceedingly robust, you will be dead long before that happens), and then have a feedback mechanism ready so that you can roll with the punches, make your adjustments, and continue moving forward. And specifically for the initial poster, don’t worry so much about all the millions of factors that move the market. Stop trying to know and control everything - you can’t and you don’t need to.
Best,
Chris
http://www.forexfactory.com/showpost.php?p=2212020&postcount=12
You need a rules
No problem, Leon. Glad to know that I have helped at least give you some ideas.
As for your question, you are asking if you sat me down in front of some naked charts and said "trade away Chris" if I would be able to be consistently profitable. Haha - while I would love to think so it is highly doubtful. And not because I wouldn't have winning trades; I'm sure that I would have many, and probably even some decent streaks. However, I would likely fail in the longer-term for several reasons:
1. I would be lacking the precision that I find necessary in my trading to properly exploit an edge. Looking at a naked chart would force my process to become discretionary, which would distort the integrity of my exits and position risk adjustment, etc.
2. I would almost certainly lose faith in my 'strategy' when I went into drawdown, since I would have no statistical drawdown expectations to help ground my battered confidence.
3. I would undoubtedly get caught up in the emotion of trading again, which is never something that has made me successful. Overconfidence or fear would inevitably erode my capital.
I do want to make it clear, though, that my only input is price. I don't use volume or any sort of fundamental analysis. I don't want to give you the idea that my screen is cluttered with a million lines and indicators; at the same time, I follow carefully constructed rules that cover every potential occurrence. I never even contemplate whether or not to enter a position: it is a given based on my rules, as is every single action that I could possibly take with that position as a reaction to the market.
To put it simply, there is no thinking involved in any of my trading decisions; in fact, I wouldn't even really call them decisions, since they were decided along time ago. Now they are simply givens. All of the thinking (discretion) went into creating the strategy, following it is simply about discipline. Discipline only ever wavers during drawdowns, and even then it is kept in check by more rules. Rules, rules, rules - they are what keep me confident enough to follow a strategy consistently; sane enough to live everyday without a frenetic fixation on the market; and humble enough to know that the outcome of any single trade - or series of trades - is completely out of my control. After all, I'm just following orders. Just make sure that those orders are grounded on a tenable foundation - that you actually have a solid edge at the core of the entire process.
Good luck,
http://www.forexfactory.com/showpost.php?p=2385007&postcount=72
As for your question, you are asking if you sat me down in front of some naked charts and said "trade away Chris" if I would be able to be consistently profitable. Haha - while I would love to think so it is highly doubtful. And not because I wouldn't have winning trades; I'm sure that I would have many, and probably even some decent streaks. However, I would likely fail in the longer-term for several reasons:
1. I would be lacking the precision that I find necessary in my trading to properly exploit an edge. Looking at a naked chart would force my process to become discretionary, which would distort the integrity of my exits and position risk adjustment, etc.
2. I would almost certainly lose faith in my 'strategy' when I went into drawdown, since I would have no statistical drawdown expectations to help ground my battered confidence.
3. I would undoubtedly get caught up in the emotion of trading again, which is never something that has made me successful. Overconfidence or fear would inevitably erode my capital.
I do want to make it clear, though, that my only input is price. I don't use volume or any sort of fundamental analysis. I don't want to give you the idea that my screen is cluttered with a million lines and indicators; at the same time, I follow carefully constructed rules that cover every potential occurrence. I never even contemplate whether or not to enter a position: it is a given based on my rules, as is every single action that I could possibly take with that position as a reaction to the market.
To put it simply, there is no thinking involved in any of my trading decisions; in fact, I wouldn't even really call them decisions, since they were decided along time ago. Now they are simply givens. All of the thinking (discretion) went into creating the strategy, following it is simply about discipline. Discipline only ever wavers during drawdowns, and even then it is kept in check by more rules. Rules, rules, rules - they are what keep me confident enough to follow a strategy consistently; sane enough to live everyday without a frenetic fixation on the market; and humble enough to know that the outcome of any single trade - or series of trades - is completely out of my control. After all, I'm just following orders. Just make sure that those orders are grounded on a tenable foundation - that you actually have a solid edge at the core of the entire process.
Good luck,
http://www.forexfactory.com/showpost.php?p=2385007&postcount=72
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