edge init

[scose-no-doubt]

It is not arbitrary construction. It is a very specific 1 minute construction. The trend in other TF's is irrelevant when I trade 1m TF. Maybe you just don't understand the 1m TF as much as I do. In any case, the TF is irrelevant once a trade achieves lift off - when there is no possibility of losing.

Nobody is talking about trends in higher TFs. Are you saying is that 1min TF trends with no volatility or insufficient volatility to wipe you out of a trade?

 

[wallstreetwarrior87]

this is a completely ridiculous statement. sure you can trade profitably without charts but you can also trade profitably with them.

Of course you can, but you miss my (important) point; I said looking. I am trying offer an alternative. Maybe help point in the direction of how traders perceive a chart.

Yes you can trade with them, thats exactly what I do, as Im a retail trader. But it is very unlikely we will have the same outlook, or conclusion from the information we both have in front of us.

 

[wallstreetwarrior87]

So many people are of the opinion that there is only 1 way to do things and everyone else is wrong. Very close-minded.

Peter

From my POV, there are a hundred ways to skin a cat. But there are also many ways to hinder potential. This is what my post was supposed to imply (although it seems not to be the case).

Without institutional information, what do we really have to work with???

 

[the hare]

How can any of you be sure that your results are not a just a function of a set of random outcomes with your risk management being the only thing keeping the chart based strategy from ruin?

In my opinion, trying to determine that is precisely what trading is all about ! that's precisely what I spend each and every day trying to do !

However, most markets that I've analyzed exhibit either enough leptokurtosis to exploit in one form or another, or they mean revert reliably enough to earn a few bob

part of the game is learning how to capitalize on those random outcomes. I can probably add 25-30% to my bottom line annually by simply knowing what a trend looks like in the time-frames I trade.

 

[BeginnerJoe]

Nobody is talking about trends in higher TFs. Are you saying is that 1min TF trends with no volatility or insufficient volatility to wipe you out of a trade?

I think what you see as volatility is probably what I see as trend. As for trades being wiped out, what so terrible about that ? If a trade is wiped out then it is not a very good trade and effort should be put in to find a better trade. In fact if a trade gets wiped out and the original reason for entering the trade remains intact, the market is giving you a chance to get a better trade.

 

[wallstreetwarrior87]

Excellent question!

Your 1st 3 words are very important. You believe; this means that this is your foundation to how you view the market, ie how it works. I dont dispute your belief, however I view the market as a mass fight for liquidity, liquidity is limited so the strong survive and the weak retreat. This is how (in my view) all markets work. You have to figure out what percentage of your chosen instrument will account for hedging, arbing etc. Then you are left with directional based traders (retail traders; be they pro or amateur). If everyone sat down and thought things through they would not be concerned with what they can not know or control (hedging/arbing) and would instead focus on what they can have access to (directional speculators) in the form of a chart.

From this point on its upto the individual to work out what they want (small edge, or a big edge) and how they are going to get it. I am happy with mine as it is evolving all the time, and if your happy with yours, great.

But this was really supposed to be aimed at those who do not know their edge, or if indeed they even have one and why.

I would never disclose what I consider to be my true edge, as that is my edge, and the more people that knew it, would affect my results.

So in advance of the question; how do you know not many traders do the same thing as me? Simple, time and sales data tells me that there are very few traders trading at the same point I do, so this confirms that very few interpret the opportunities in the same way i do. If I then see T/S data showing me increased participation, say 10 points higher (for a target of 20 pts), I know my edge over my competitors is huge as I am in way before them, ie, im collecting double the points they are.

Loads of hints in this post, some may find value to the above, others may think its useless. It does not matter to me. Like I say there are many ways to do it, mine is just one.

 

[wallstreetwarrior87]

In my opinion, trying to determine that is precisely what trading is all about ! that's precisely what I spend each and every day trying to do !

:clap::clap::clap::clap::clap::clap::clap::clap::clap:

 

[ChocolateDigestive]

earlier on in the thread Trendie mentioned Linda Raschke and the 'holy grail' set up. Linda co-authored Street Smarts.

Street Smarts: High Probability Short Term Trading Strategies: Amazon.co.uk: Laurence A. Connors, Linda Bradford Raschke: Books

just for the purposes of stimulating discussion below is a screen shot of a 'holy grail' trade.

Now I am NOT saying this is an edge, I have absolutely no idea.

The set up is really simple any instrument, any timeframe, ADX(14) on the bottom, 20 ema on the chart.

When ADX moves clearly above 30 look for a pullback with entry bar intersecting with the 20 ema. The book mentions the immortal term 'pin bar'. Stop is below the entry bar, Target is at least the previous swing high/low.

Before the indicator and set up police get on to me, please understand I HAVE NO IDEA if this is an edge, I don't trade like this, actually I don't use indicators at all but as always I keep an open mind.

 

[BeginnerJoe]

Before the indicator and set up police get on to me, please understand I HAVE NO IDEA if this is an edge, I don't trade like this, actually I don't use indicators at all but as always I keep an open mind.

Nothing special about this. Even Baghddady would do this trade and I have a video to prove it.

 

[VielGeld]

^^ I read Street Smarts myself, and paid careful attention to her section in that Market Wizard book she appears in.

As far as I could tell, all her setups were unique to her, and only so detailed because there's no other way to display a pattern. I'm fairly certain that IRL she'd be all "well, it looks a bit like this, and if you see how it moves here and here, then it should tell you that this is high-prob". No silly "pin bars" in there.

In fact, she keeps repeating the importance of experience since experience is likely the most important determinant of success. Jack even asks at one point what would happen if others knew how she made her money. Her response was basically "I don't really care, because then other patterns would emerge, and I'd take advantage of those."

 

[wallstreetwarrior87]

earlier on in the thread Trendie mentioned Linda Raschke and the 'holy grail' set up. Linda co-authored Street Smarts.

Street Smarts: High Probability Short Term Trading Strategies: Amazon.co.uk: Laurence A. Connors, Linda Bradford Raschke: Books

just for the purposes of stimulating discussion below is a screen shot of a 'holy grail' trade.

Now I am NOT saying this is an edge, I have absolutely no idea.

The set up is really simple any instrument, any timeframe, ADX(14) on the bottom, 20 ema on the chart.

When ADX moves clearly above 30 look for a pullback with entry bar intersecting with the 20 ema. The book mentions the immortal term 'pin bar'. Stop is below the entry bar, Target is at least the previous swing high/low.

Before the indicator and set up police get on to me, please understand I HAVE NO IDEA if this is an edge, I don't trade like this, actually I don't use indicators at all but as always I keep an open mind.

Maybe the fact that she is now running chat rooms and seminars etc might indicate she has lost her edge?

Just me being cynical!

The set up works here, but not because of the reasons given from the indicators and M/A but because of another reason (need more than 1 chart for this).

The rules make it easy to understand, so no thought process needed, just take those set-ups and we will be rich Rodney!!! No hard work required, just scan away till our heart is content.

LBR is very kind, giving away her edges for a small fee.


People please: If you had a massive edge would you tell anyone what is was. There must be others who at least consider this?


Chocolate, I know you posted this as an example, the reply is not a go at you.

 

[counter_violent]

Lets examine this statement.

"So many people" means market participants who each have their own way of doing things.

So lets say we have 1000 traders who think they have an edge. Of those 1000 lets say that 95% of them who think they have an edge...do not have an edge, or at least an edge that is sufficiently rhobust to make them consistently profitable.


are of the opinion that there is only 1 way to do things and everyone else is wrong.

So that leaves 50 traders or 5% who are consistently profitable. Of these 50 traders using the 95% rule once again, only 2 or 3 will make it to the very top of the heap and they will take the lions share of the profits consistently from the markets. The remainder although consistently profitable will be ordered from 50 through to 4.

So I would argue that there are edges and edges and edges. Some obviously far superior than others. A hierarchy of edges. So unless a trader is continually developing his edge or edges then he is in fact going backwards as others catch up or develop better edges.

This is the difference between "edges" and "better edges"
A trader should always strive for "better" or "best edge" survival of the fittest !

 

[VielGeld]

[snip]

So I would argue that there are edges and edges and edges. Some obviously far superior than others. A hierarchy of edges. So unless a trader is continually developing his edge or edges then he is in fact going backwards as others catch up or develop better edges.

This is the difference between "edges" and "better edges"
A trader should always strive for "better" or "best edge" survival of the fittest !

And isn't this everything that competition implies? No wonder many can't stay in the game that long. They simply eventually tire out and lose their drive, win or lose.

------

Hmm... I just thought of something...

If there is a style I have found to be quite strong in one-on-one competitions it is: "Unpredictable and Aggressive (or proactive)".

Academics have also pushed the idea that prices are equivalent to a random walk. I'm starting to think that this is what markets would look like if they were dominated by strong players. If no one can read price... Then aren't traders on the other side reaping all the profits? Their edge lies in making their moves unreadable.

I think I may be "letting cats out of bags" here... The Hare will kill me.

 

[robster970]

This.....

However, most markets that I've analyzed exhibit either enough leptokurtosis to exploit in one form or another, or they mean revert reliably enough to earn a few bob

and this.

I dont dispute your belief, however I view the market as a mass fight for liquidity, liquidity is limited so the strong survive and the weak retreat.

Retail traders don't have liquidity issues.

 

[scose-no-doubt]

@wall street why do you think a market is a fight for liquidity? A lot of what you wrote baffled the life out of me but that more so than the rest. Can you expand on that?

@viel geld you're talking about "the other side of the trade" but the reality is that the party on the other side is almost certainly not punting directionally and could be trading for any number of reasons.

 

[VielGeld]

^ You mean people trade for reasons other than to make money?

 

[wallstreetwarrior87]

Retail traders don't have liquidity issues.

Ok, I know what you mean. So to put it a better way. 2 types of traders, Institutional and retail. Institution from the POV that they work for banks/organisations etc. Retail from the POV they are private (granted they may trade for a small group of investors) but they have no restrictions apart from their own rules.

So retail traders can be small or big (ie 500-1000 lot traders on ES)

These are the guys/gals fighting for the liquidity. These are the ones whom play games, manipulate, spoof, flip, sweep etc. Simply because they can.

These are the elite players, all private retail traders using multiple accounts /brokers etc to remain anonymous.

If you think about it; it has to be this way logically as the only restraint for these players is the liquidity. They are in the minority of course, but they posses a huge edge, and with the power of aggressive compounding they get to their limit very quickly.

Im talking in terms of the futures market here; as an estimate probably about 20 big players dominate the market. But they all know their place, as they do not want to step on each others toes.

For every Paul Rotter there will be another 5 that choose to remain totally anonymous, and who can blame them.

 

[wallstreetwarrior87]

@wall street why do you think a market is a fight for liquidity? A lot of what you wrote baffled the life out of me but that more so than the rest. Can you expand on that?

Hi Scose, the above answer to robster is also relevant to your question.

Thanks

 

[wallstreetwarrior87]

@viel geld you're talking about "the other side of the trade" but the reality is that the party on the other side is almost certainly not punting directionally and could be trading for any number of reasons.

Very interesting you think that the opposite party are not directional traders. They are probably just not trading in the same direction.

Again there is a simple way to prove or disprove this theory.

Its up to the individual to probe enough to figure that out, but it can be done.

 

[Jack o'Clubs]

Ok, I know what you mean. So to put it a better way. 2 types of traders, Institutional and retail. Institution from the POV that they work for banks/organisations etc. Retail from the POV they are private (granted they may trade for a small group of investors) but they have no restrictions apart from their own rules.

So retail traders can be small or big (ie 500-1000 lot traders on ES)

These are the guys/gals fighting for the liquidity. These are the ones whom play games, manipulate, spoof, flip, sweep etc. Simply because they can.

Interesting comments WSW, and I think there is definitely 'edge potential' in your view. My observation is that the institutional traders also play games, manipulate, spoof, flip and sweep, simply because they have to. Imagine I run a $1bn institutional equities fund. I want to initiate a 1pc portfolio position in a new stock. My trader has to build a $10m position from scratch inside a week without moving the price: he has to play some serious games to do that, and the best ones can do it without even leaving a ripple in the water. As a retail trader you have to be really good to be able spot what's going on yet alone exploit it which I guess comes back to why the success rate is so low / maintaining a sustainable edge is so rare.