Champion Trader

[BrianT]

Shinobi

Great idea - It would be a good to compare how we are doing using variations on the same strategy. At the minute I'm only using Vol. 1 of CT but I will consider buying the second book once I'm convinced of the methods. I am going to try out using more indicators particularly on stops. I feel that for entry the formula has just about proven itself but we all know it is easy to enter a trade, it's during and getting out which is more important to understand.

I will update you on how things go and would appreciate any input. I don't believe in not divulging useful info., anyway most other traders have their own tried and tested methods.

 

[orchard]

What a useful board. On my paper trading system I am using a standard 20 points stop on all trades except small value shares where I use the abort value. I feel that to get anything out of this I need basic criteria. I do not expect to find a definite result when I finally analyse the data, but I do expect to find pointers which, I hope, will give a small advantage. I have already noted some things, like reverse trends coming too late, and enormous variations in daily prices adversly affect the profitablilty of a trade.
Reading this board, I am happy to find I don't appear to have wasted my cash, I must admit that the book explains things about shares and indices which I have found useful and so basic that the 'experts' think we should have already known. Lets all keep sharing our experiences. Maybe we can beat the SB companies yet!!!!
Orchard.

 

[shinobi]

Orchard,

Just re-read one of your earlier posts about being at week six of your testing period. This is probably the worst six week period to choose to test any system - let alone a trend following system like the CT formula. See my comments about current whipsaws/choppyness!

You know the old adage about flipping a coin? If you flip it enough times you will probably come up with ten heads (or tails) in a row? Same with trading - ie. ten losses in a row! Doesn't mean your system is rubbish - just a law of average thing.

I would suggest you back test the formula against those periods were market trending strongly, and see what sort of results you get then. Lesson for me over recent weeks is to avoid trading when market going sideways. Look for breakout from current range and beprepared to jump on board again.

Two "ifs" - if there is a pre-Xmas rally and if the FTSE manages to crack 4200 there may be good opportunity for profit before Xmas. But, as always, trade what you see not what you think.

 

[orchard]

Thanks for the advice shenobi. Yes I do realise that the last few weeks have been 'choppy' (you are the master of understatement!). but I intend to do a minimum of 10 weeks. I am not looking for certainties (I have learnt the one certain thing about the market is its UNcertainty), but pointers. I know it's not always going to be right (another understatement!) but to try and gain the best advantage I can - I am also quite prepared for losses (in fact already had some of those!!!).
Still I do find it exciting - even the dull bits like printing charts and making notes and analysing results (actually I love it).
Without the advice on these boards it would be much harder.
Regards all.

 

[BrianT]

Orchard

I've backlisted as Shinobi advises and I can advocate the basic CT formula, but not entirely. You are right to add your own stop - it is the main flaw in the formula. I second the view on recent weeks - it is an awful time to try and prove or disprove a formula. Don't use take your results too seriously , it is just a case of bad timing. I would say the lesson to be learned from the last few weeks is that thre will not always be an abundance of trading opportunities - particularly if you are trading the indcies. look elswhere and explore the possibility of different instruments. By the same token don't give yourself to much to keep up with.

Looking forward to the rally!

Brian

 

[shinobi]

Using CT I've got a buy signal on Dax at 3386 (technically a day late on this). So lets see what happens!

edit - £1pp Dec Dax @ 3395, sl @ -200 (40 day sma).

edit - got out of this @ -30 when things looked like tanking badly.

 

[FloorTrader]

CT backtesting

The 'CT formula' (although it is simply a rehash of a very old strategy - see http://www.hardrightedge.com/wizard/tl2.htm for an example of the groundwaork it is based on, the so-called 'Holy Grail Indicator!!!!!) has been extensively backtested, on FTSE and SP500.

It works well in strongly trending markets, but will whipsaw you to death in a sideways chop.

The appeal of it is its simplicity - we would all like to think there is a easy way to make money on the markets (sorry, there isnt).

HOWEVER, if you must play with it, be aware of the following:-

(1) it works best in a strongly trending market (as does 'buying' or 'selling', two 'strategies' that are even simpler!!!)

(2) statistically you need to be out by day 3, and the difference in gains between day 2 and day 3 is (on average) too small to make the capital risk acceptable.

(3) the Stop strategy is diabolical, and means you generally have a NEGATIVE risk reward ratio (i.e. you risk an average of 300 points to make 100). A better place for the stop is just under the low of the signal bar. If it breaks this its probably going bad (or the high if the signal is a short).

(4) The strategy as it is written, if followed exactly will get you into real trouble, real quick in anything except a steep trend. You should instead look for a trend in place on each and every one of the 4 days of the signal. (ie DOWN-UP-UP-UP is no good).

(5) When you have 3 bars in place, and a possible signal the next day, watch it from the open on day 4. If it breaks above the high, launch the trade, as statistically the close will be higher still, and according to the book, you already have your signal. (and statistically, you might make 45% of the total average points up to todays high). (obviously for a short, reverse that).

Alternatively, you could learn to trade.
Hope this is of help,
FT

 

[Scientist]

CT and its followers...

Folks, Folks, Folks...
Well, for a start, Floor Trader really speaks my language, I agree in every point!
-Yes, I purchased the CT manual - plus the CTA - And, NO, they weren't necessarily such a waste of money, as in the author explains a lot of things about markets as well as crucial trading principles very well and hammers them into your brain - stop losses, discipline, making a plan and sticking to it, knowing what you're doing and PARTICULARLY to get rich sloooowly... Also it gets you that initial enthusiasm to start looking into trading...

Good for a total beginner, for its philosophies, but you wasted your money for the formula... Honestly... I've tried it... Even CTA on various indexes (S&P500, 100, FTSE100 etc) and blue chip stocks. Done it all in Excel with the accompanying CT software (the next thing they'll try to hock you!) - It's a mad formula to me, because the risk is too high. I mean, real actual trading is much more profitable and - believe it - much less risky! ...

It's far too risky to me - And I'm saying this as a seasoned trader... Trust me... Besides, it's hell boring...

Why don't you guys just join the fun of real trading?

I give you some tips how to do so - It's really not that hard if you study a bit - And it's much more fun than CT!!!
Get yourselves some good books:

-For starters, there's a much better and cheaper course that you can download as a pdf immediately": truetrend.com!

-Also, there are some MUST read books that you can't go past having read twice before you even start doing the things you're doing right now:
-"How I made $2,000,000 In The Stock Market" by Nicholas Darvas (amazon.com) -great book about the concept of stop-loss!
-"Market Wizards" and "New Market Wizards" by Jack Schwager
- A beginners guide to day trading online" by Toni Turner - good book... real page-turner! You'll see!

Anyway... Here we go! Please read my recent posts for more insights into this business!...

Yours Sincerely,
~The Scientist

 

[generalford]

Hi all,
I too am a CT & CTA reader and its good to hear about others out there that are using it, this being the first formula I've come across being a beginer and I have to say that I agree with Shinobi, Orchard & Brain. I have found the formula very intersting and informative although i have changed my stop loss to 25 pts.
I've only been trading for about 4 weeks and like you all said it seems I've started at the wrong time! Not many signals from the FTSE but the only one i have traded on I profited 90 pts.
Without the formula I would have been down a lot by now as the first day my account was opened I got all too excited and tried trading without the formaula trying to guess my way and lost a few £00's! I wont do that again.
Has anyone tried the software that they are selling?

generalford

 

[shinobi]

Scientist & Floor Trader,

Good input guys but I think we sort of recognise what you say already. Maybe the CT formula isn't the Holy Grail ('cause it doesn't exist) but it could represent a reasonably sound starting point for at least "learning to trade properly".

I suspect you are both experienced traders, probably with many years between you - we're not, so we have to start somewhere! If our comments are somewhat naive from your perpective then that's OK - but we have a journey to make to get to where you are now.

I for one will follow your suggested reading - links etc to see if they can help me on this steep learning curve. But I still think this little part of my journey is valid - even if its only a stepping stone to other strategies.

 

[BrianT]

Shinobi

Read your first edition message and can second that. If someone could give the definition of 'real trading' I would appreciate it.

We all start somwhere and I am grateful for any advice on literature or trading strategies but if you have a glance at other threads on this website there are many books recommended by a lot of members, each with their own favourite. How do you know you are investing your money in the correct book? You don't - it is a risk, just like trading.

 

[mmillar]

Just to chime in on CT.

To be fair the guy does say on his website that you should use 20 point stops. For people saying he uses huge stops you just haven't read it properly.

I think CT it is an EXCELLENT start for people. It's very simple to use and at £100 brilliant value. Just compare it to things like VSA or Advanced Get which (probably) do similar things but cost 000s.

For me it gave a great start on how to build a system. Start with the CT moving average and breakout system then modify/add indicators to strengthen it. Before long you have the perfect system!!! I use modified CT and CTA as part of a battery of 'systems' so that I get regular signals to trade against. Works for me.

 

[shinobi]

mmillar

My thoughts exactly! Would you be prepared to share some of the extra modifications you have made to the CT & CTA formulas in developing your own system?

Specifically, have you any any stategy for coping with the recent up/down market? How to you manage stop losses? How to you work your exits? What are the "other indicators" you use?

Would really value your contributions if you have time.

 

[mmillar]

I'm trying several variations - primarily because I trade the Dax and S&P rather than the FTSE. I'm experimenting with a variety of MA's, confirming with volume, using overbought/sold indicators. Afraid, I haven't perfected it. If I do I'll have one of my slave girls send you all an email from my island.

Of course, as others have said, a trend following system like CT doesn't work particularly well in this kind of market. You need other systems to provide signals - i'm using lots of failure signals at the moment which seems to be working a treat!

 

[mmillar]

Really people, if you are going to use a system you should at least read it properly. I believe the technical term is RTFM.

CT has stops on the FTSE of 20 points. Mr CT says stop yourself out after 20 points then get back in if the market goes back above/below your buy/sell signal. People running with 300 point stops must have lost their houses by now.

 

[shinobi]

MMillar - thanks for the info. Look forward to receiving info of your "secrets" from your desert island paradise!

Little confused about your comment re S/L though. One of the first things I did was to change from what I thought CT was saying to a S/L about 30 - 50 pts (depending on market). Just re-checked manual and page 105 definitely says use the A/L as your stop if things don't go well.

Where did you get info re using 20 pt stops and re-entering trade if it goes back in your favour - which would seem to be much more sensible. Sometimes RTFM isn't enough!

Ta

 

[mmillar]

On his website.

When you bought CT he sent you an ID and password to gain access to his website. I wont post it here for obvious reasons.

 

[shinobi]

Blimey! And I thought I'd read the website inside out too! You're right of course - might have been useful if he'd put that piece of info in the book too! Takes away one of the big criticisms of the CT formula about wild stop losses.

Keep posting.

Shinobi

P.S. How long have you been trading for?

 

[BrianT]

Where might I find my ID and password?

 

[BrianT]

Still trying out new variations on CT method. Just a thought - we have all commented on current chopyness and how the formula (or any formula) struggles at times like these . So looking at the the last couple of weeks and the trading range it seems to me that a mini CT strategy can be applied.

Assuming (and I know we shouldn't act on this alone ) that there is to be a Christmas rally then the 'high' points in recent days are testing the trend, it would follow that looking at the ftse we need to identify the next USL which could be any day. It may not make a huge profit but at least it would be consistent with the formula.

Also to you guys who have CTA - I have been backtesting again and can see good indicators using CT intra-day. I know CTA goes into this in more detail but what timespan and sma would you use for DT? Have also posted new thread to find a website which will calculate charts intra-day as market unfolds.

Will post next signal for your perusal soon.