Are there only a few ways of becoming a successful Trader?

[BBB]

mechanical systems can and do make money - well, some of them. It's easier to understand and quick to implement.

A systematic or discretionary trader however will ALWAYS (if he's good) beat the best mechanical system hands down. The problem here though is that it takes a lot longer to learn to trade this way.

A simple reason is that no matter how complex a mechanical system, or how powerful the computer, itwill never be able to comprehend price action in the same way the brain can, in relation to other markets, or even its own market.

Twalker made a good point though. If you cut your losses (ie exit as soon as the position shows a loss), rather than waiting for the stop to be hit in the vain hope that the market will turn) your PnL will probably double. This is what they mean when they say cut your losses. They dont mean have a stop and wait for it to be hit, thinking you're risk adverse just because you had a stop.

This I TRULY BELIEVE is what stops most from winning. If there is any one piece of advise I would give anyone, that was it.

Good luck

 

[BBB]

...too bad most of you will never do this though, because your ego doesnt want to admit defeat.

Don't worry, just leaves more money for me!

 

[bracke]

Cannot a system be both systematic and mechaniacal?

If you are systematic you are looking to get all your ducks in a row before you make a trade

If you had the skill could you not devise a piece of software that would wait for the ducks to line up and then make the trade for you.

Regards

bracke

 

[kevin546]

BBB

An excellent post regarding stops. When I 1st began using them that is exactly what they became for me, my get out. The result was I had stopped large losses so thought this was the way forward but became complacent and did not make use of discretionary stops to add to my profit by calling a loss deal before the stop was reached. I think this issue only becomes apparent when you actually use a stop and then through record keeping and evaluation of your system identify areas that can be improved.

However I suspect there are many that do not need to consider this because they have attained that level of skill that they see it for what it is rather than simple old me that does need to approach my whole system from a mechaincal or systematic plan.

Brakke

I approach this problem by applying 2 different methods of entering a trade and of profit taking, which allows for a small amount of discretionary dealing and a lot of mechanical/systematic dealing in an attempt to get more from the market. Could that be an edge!

 

[chump]

"A simple reason is that no matter how complex a mechanical system, or how powerful the computer, itwill never be able to comprehend price action in the same way the brain "

depends on the brain ...lol..you can call me amoeba for short

Cheers

 

[grubs50]

And how does a mechanical system fare in terms of fundamental analysis? cos it is most likely gonna be based on TA, isn't it?

 

[kevin546]

I suppose a mechanical system would generally apply to TA. This brings us back to the old FA v TA question.

IMHO there is no RIGHT OR WRONG WAY TO TRADE. Whichever you use it all depends on YOU being able to APPLY IT.

Although I use charting as my method I would think you could apply FA in a mechanical way. For example what if your decision to buy was based on a company following specifics, such as profitability, good dividend, positive news or results, director buying, p/e ratios and lots more.

If there was a pattern to these features coming to the notice of the market then that could produce a trading plan to buy supporting such information and selling at a certain % point or when any of the news becomes outdated or bad news etc.

The point of being mechanical or systematic is that your trading follows a given path so it does not always have to be assigned to TA. IMHO.

 

[grubs50]

So we can safely conclude that it is wrong for anybody , no matter how experienced they r, to dismiss other ppl's methods and results cos they think that he/she has not adhered to certain principles of TA and money management...........all the responses (so far!) indicate that there is no perfect way of trading

 

[kevin546]

Grubs

You give the impression of being on a crusade!

There is a perfect way to trade and that is to trade the way that best suits the individual. After that if you cannot or are not prepared to go through the learning process then the next best step is to try a one-one tutor trying to learn another trading style where this system has proved successful by that individual. The downside to this approach maybe that while the system is tried and tested you may still not be able to follow it successfully.

As for other people's comments on bb's often perception of how something is said can be misconstrued. As for TA either you support it or you don't like many things take it or leave it. In the case of money management it is and can be the most fundamental aspect of making sure you stay in the game and avoid wipe-out. Many in the past have won a fortune over years of trading only to lose it all in quick succession during this bear market. You don't have to follow any rules because you can do what you want and may still make more money but by not following these aspects you run a much higher risk of failing. Certainly in the case of where someone has yet to prove to themselves that the system of trading whatever it is maybe successful then they SHOULD apply risk management otherwise they are likely to lose all of the money before they get the chance to learn and produce a style that works for them.

 

[grubs50]

Unfortunately i'm not on a crusade......i am just interested hearing various views about the subject.....i won't deny the fact that reading so many posts ripping into other ppl's profit claims and methods on the basis that they don't conform to certain TA and money management rules was the reason y i asked the question in d first place.

 

[CityTrader]

BBB, is spot on again, personally I will never let a winning position turn into a loss. Remember, nobody ever went broke, taking a profit.

 

[Grey1]

Trading is simple if you just know how ?

All you need is a positive expectancy system + money management /.. Without the former no amount of money management helps..

regards

 

[kevin546]

Grubs

The only thing I can add is that whatever way a person decides to make money from the market if it is tested thoroughly and produces the goods then it is right for that person.

Any comments made by other traders experienced or otherwise can be considered on the basis that they may offer something to improve on an existing strategy. Most you will see do not work for you and can be discarded immediately. However it can be beneficial to have an open mind because occasionally an item may jump out at you, and with further research may find its way into the strategy, improving it.

There comes a point when you reach a stage when to add anything further just makes the system more complicated. It is at that point you realise you have a complete system and regardless of what others might say is of no consequence because the system works.

Good luck

Kevin

 

[grubs50]

positive expectancy system = good entry?

 

[kevin546]

No it = a positive return of profit having been tested and proven results over a given time or large number of trades. Based on your risk against win and loss. With a good to high win/profit return.

 

[kevin546]

I should have added a good entry is nice but not essential in this regard. As I have said before it all depends on the system of trading you apply.

 

[ChartMan]

Spot on Kevin. There will always be some snippet from someone at sometime that you may find to be of benefit, even though 90% of what they usually say may fall into the trash can .....

 

[frugi]

Expectancy = average win * probability of win - average loss * probability of loss

Positive expectancy means the result is >1 i.e it is a winning system

e.g The system below has an expectancy of $5501 * 0.37 - $2272 * 0.63 = $604

If we have to risk $2272 (average loss) on every trade we can expect to make $604 from it, on average. In other words for every $1 risked the return should be $0.266.

Grey1 please feel free to correct me as I know you are the resident expert.

Consolidated Summary: All Trades for Frugi

Avg Profit/Trade $616.26 Avg Position Size $20,000.00
Avg % Gain/Trade 3.081% Avg % Gain/Bar $0.143%
Gross profit $232,580.03 Maximum Drawdown $7,300.00
Commissions $7,027.20 Average Drawdown $2,928.55
Net Profit $225,552.83 Ratio Avg Win/Avg Loss 2.42
Total # Of Trades 366 Percent Profitable 37%
Winning Trades 136 Losing Trades 230
Largest Winning Trade $18,380.80 Largest Losing Trade $7,669.20
Average Winning Trade $5,501.46 Average Losing Trade $2,272.37
Largest Winning Long $15,580.80 Largest Losing Long $7,669.20
Largest Winning Short $18,380.80 Largest Losing Short $7,269.20
Number Periods Long 4121 Percent Periods Long 47.03%
Number Periods Short 3744 Percent Periods Short 42.73%
Max Consec. Winners 5 Max Consec. Losers 10
Avg # Bars In Winners 38 Avg # Bars In Losers 11
********************************************************************************
Investor/RT Professional 7.0 Rev 3 Trading System Development, (c) 1996-2004 Linn Software, Inc. www.linnsoft.com

E-MINI S&P 500 INDEX - CME (60 Minutes) 02/12/1999 14:30 - 02/10/2004 15:34:28
Performance Summary: All ES`H Trades

 

[stevem12]

Frugi,

The profit is $0.266 per $1 risked

The return is $1.266 per $1 risked, otherwise it would be a losing system 😀

Steve

 

[Grey1]

Kevin..

Quote " I should have added a good entry is nice but not essential in this regard "

I think Entry is the most important part of trading .. It is the entry which determines the risk and not any other factor..

regards