Advice on trading systems

[Fisherfisher]

Hi
My I have been trading for about 2 years now while working full time, I've tried to learn as much as I can and have lost a fair bit of money in the process which I don't mind as it has helped me learn a lot. One of the things I have learned is to have a good system and stick to it. So the system is and going to try is a simple one which I hope to adapt. Basically on the ftse 100 on days charts I am going to follow the rsi, buy on 33 and sell on 66 with 100 point stop loss. I have back tested this which has made a profit of 3500 a year which I would be more than happy with. I'd appreciate any input. Thank you

 

[EnlightenedJoe]

Consider why anyone would give you 3500 a year. Is it because they are rich ? Is it because their head's gone a bit funny ? Is it because the money grew on trees, therefore anyone can just go pick some up ?

On the other hand, if that money belongs to someone, wouldn't they fight you for it ? Imagine you were taking 3500 off someone on the street, what will likely to happen ? Same will happen in the market.

 

[Fisherfisher]

Hi, I understand that, and I do think this system seems maybe too simple but if it worked when back testing does this not mean it could work live? I understand that you can't predict the future but if it would of worked in the past isn't there a good chance it would work again?
Thanks for your reply

 

[tomorton]

Interesting. In what ways do you need to adapt your system? i.e. before searching for the answers, do you have the questions?

Do you have any other filters for entries? What are your exit criteria per trade? Is it one trade at a time or does your plan support multiple trades?

 

[EnlightenedJoe]

Hi, I understand that, and I do think this system seems maybe too simple but if it worked when back testing does this not mean it could work live? I understand that you can't predict the future but if it would of worked in the past isn't there a good chance it would work again?
Thanks for your reply

Your assumption is that the past will predict the future. Let's run with that then. In the past 2 years since you have been trying, no one has given you 3500. Going with your model of prediction, that would suggest no one will give you 3500 in the future either.

As for it "working", it hasn't. It only works if you have taken money off someone. You haven't done that to date.

 

[jjames69]

you can try it, but rsi is lagging indicator, and simply follows price. i have experimented with simple systems like that, and haven't found them very profitable.

i think rsi is best used as an alert that a trend change is about to occur, and to be on the look out for a reversal or continuation pattern. another way i might use it is as a signal to take profits whenever rsi shows momentum is slowing.

i recommend to key off classic patterns, and use a breadth indicator for confirmation, ie the mcclellan oscillator. to get a good volume of trades swing trading you'll need to find patterns in the index's underlying components, as well as the index. if you want to just trade the index, you'll have to daytrade to get a good volume of trades.

 

[malaguti]

Hi
My I have been trading for about 2 years now while working full time, I've tried to learn as much as I can and have lost a fair bit of money in the process which I don't mind as it has helped me learn a lot. One of the things I have learned is to have a good system and stick to it. So the system is and going to try is a simple one which I hope to adapt. Basically on the ftse 100 on days charts I am going to follow the rsi, buy on 33 and sell on 66 with 100 point stop loss. I have back tested this which has made a profit of 3500 a year which I would be more than happy with. I'd appreciate any input. Thank you

i would consider having additional filters if i were you..just taking one recent example

 

[Fisherfisher]

Thank you for your reply, I would use a 100 point stop loss which should reduce the loss. Also I accept there will be losses but the winning trades seem to outweigh the loosing. Is there any filters you would suggest?

 

[Fisherfisher]

Interesting. In what ways do you need to adapt your system? i.e. before searching for the answers, do you have the questions?

Do you have any other filters for entries? What are your exit criteria per trade? Is it one trade at a time or does your plan support multiple trades?

Hi, my exit will be when is either hits 66 after buying or 33 after selling. I don't have any reason to adapt it at the moment but I understand the markets will always change.

 

[Fisherfisher]

Your assumption is that the past will predict the future. Let's run with that then. In the past 2 years since you have been trying, no one has given you 3500. Going with your model of prediction, that would suggest no one will give you 3500 in the future either.

As for it "working", it hasn't. It only works if you have taken money off someone. You haven't done that to date.

Hi, the last couple of years has been a lot of learning, I havent tried the system yet as I wanted some advice first.

 

[Fisherfisher]

you can try it, but rsi is lagging indicator, and simply follows price. i have experimented with simple systems like that, and haven't found them very profitable.

i think rsi is best used as an alert that a trend change is about to occur, and to be on the look out for a reversal or continuation pattern. another way i might use it is as a signal to take profits whenever rsi shows momentum is slowing.

i recommend to key off classic patterns, and use a breadth indicator for confirmation, ie the mcclellan oscillator. to get a good volume of trades swing trading you'll need to find patterns in the index's underlying components, as well as the index. if you want to just trade the index, you'll have to daytrade to get a good volume of trades.

Thank you for your advice, I will have a look at the other indicators you suggested. I have tried day trading but working full time means I can't keep an eye on the market as often as I should. With this system there are very few trades but I'm ok with that as long as it's in profit however much it is.

 

[EnlightenedJoe]

Hi, the last couple of years has been a lot of learning, I havent tried the system yet as I wanted some advice first.

Well, you haven't learnt the market is there to take your money even though it has. It's going to take more from you until you learn that. Changing from random betting to mechanical betting will produce exactly the same result. The reason is that whatever they have sold to you to speculate, they will have to buy it back cheaper. That's their business. Their simple formula is what caused your loss and what will cause your future losses. You have nothing that can defeat their formula but a hope that maybe this time it will be different. But there is no reason for them to be different. The more you pay them, the more reason they have to keep doing it.

 

[Fisherfisher]

Well, you haven't learnt the market is there to take your money even though it has. It's going to take more from you until you learn that. Changing from random betting to mechanical betting will produce exactly the same result. The reason is that whatever they have sold to you to speculate, they will have to buy it back cheaper. That's their business. Their simple formula is what caused your loss and what will cause your future losses. You have nothing that can defeat their formula but a hope that maybe this time it will be different. But there is no reason for them to be different. The more you pay them, the more reason they have to keep doing it.

So your saying you can't make a profit spread betting?

 

[jjames69]

Thank you for your advice, I will have a look at the other indicators you suggested. I have tried day trading but working full time means I can't keep an eye on the market as often as I should. With this system there are very few trades but I'm ok with that as long as it's in profit however much it is.

right daytrading requires concentration, so doing it while working is not an option.

you'll probably have to scan through the ftse 100, or the major indexes, to find profitable setups, using a daily or one hour bar chart.. you'd likely want to trade in the direction of overall market breadth too, since if the overall market turns it can pull everything with it. however, some traders do take a bottoms up approach. double bottoms and tops are most common and reliable. start there, and slowly expand your universe to include other patterns, ie cup and handles, triangles, head and shoulders, flags, etc. you can use pattern height, or a moving average, or a momentum indicator as a sell signal.

paper trade your system and see how it works.

 

[EnlightenedJoe]

So your saying you can't make a profit spread betting?

I am not saying that. But your own experience is saying that. Since everything you tried have failed to work, I guess you can no longer trust yourself to listen to yourself.

The common statistics/belief is that 90% of people in the retail market lose their shirts. If you are losing your shirt, you are merely joining the shirtless club. You are not doing worst than the rest.

All common money making (loosing?) strategies cannot defeat their buy-it-back-cheaper formula. So long as your method is likewise, no you can't make profit.

 

[Fisherfisher]

I am not saying that. But your own experience is saying that. Since everything you tried have failed to work, I guess you can no longer trust yourself to listen to yourself.

The common statistics/belief is that 90% of people in the retail market lose their shirts. If you are losing your shirt, you are merely joining the shirtless club. You are not doing worst than the rest.

All common money making (loosing?) strategies cannot defeat their buy-it-back-cheaper formula. So long as your method is likewise, no you can't make profit.

I haven't tried this strategy yet so haven't lost any money doing it, i just wanted some advice so i can leave the "90%". I am learning all the time to be a better trader and everyone has to start somewhere. what would you suggest is the best way to be in the 10%?

 

[Fisherfisher]

right daytrading requires concentration, so doing it while working is not an option.

you'll probably have to scan through the ftse 100, or the major indexes, to find profitable setups, using a daily or one hour bar chart.. you'd likely want to trade in the direction of overall market breadth too, since if the overall market turns it can pull everything with it. however, some traders do take a bottoms up approach. double bottoms and tops are most common and reliable. start there, and slowly expand your universe to include other patterns, ie cup and handles, triangles, head and shoulders, flags, etc. you can use pattern height, or a moving average, or a momentum indicator as a sell signal.

paper trade your system and see how it works.

I was going to use a daily chart to hopefully deal with the time I'm at work. maybe using rsi to confirm a trading pattern is the best approach. thank you for your advice

 

[EnlightenedJoe]

I haven't tried this strategy yet so haven't lost any money doing it, i just wanted some advice so i can leave the "90%". I am learning all the time to be a better trader and everyone has to start somewhere. what would you suggest is the best way to be in the 10%?

To leave the 90% you have to be special. Likewise, to be a math genius you have to be special. You can't be one just because you want to.

With the markets, it's essential to understand who has taken your money and why. Without this understanding, you have no way to stop them repeating the same.

 

[jjames69]

I was going to use a daily chart to hopefully deal with the time I'm at work. maybe using rsi to confirm a trading pattern is the best approach. thank you for your advice

my 2 cents

your better indicators for confirmation are probably breadth indicators, like the mcclellan ocsillator, and the Percent of Stocks Above 50 Day Moving Average. these are also leading indicators since they are based on market internals.

rsi, macd, sto's, etc, are basically momentum indicators and will ultimately follow price, since that is what the calculation is based on. when these make crossovers they alert you a change of character may be taking place, such as a reversal, continuation, or simply a loss of momentum. you have to determine what that change is utilizing TA, ie trend analysis, support, patterns, underlying breadth, etc, and trade accordingly. generally your trigger is a decisive support/resistance break.

cheers

 

[malaguti]

Thank you for your reply, I would use a 100 point stop loss which should reduce the loss. Also I accept there will be losses but the winning trades seem to outweigh the loosing. Is there any filters you would suggest?

so you did, I do apologise. you probably would have had 3 losses on the trot so a loss of 300 within that period which in itself isn't really that bad.
the only filter i can think that you would probably want is something to identfy the trend. you would i guess be looking at buying at 33 when the trend is up rather than at all times.
To be honest this should be quite easy to code and backtest. let me take a look and see how it may have performed historically and then see if a filter would improve the results if any