Frustrated trader, need advice

[meanreversion]

what is the modus operandi for your trade?

Event A occurred at time B on more than 80% of the time, therefore the next time B comes around, it is 80% likely that A occurs again.

 

[DashRiprock]

Event A occurred at time B on more than 80% of the time, therefore the next time B comes around, it is 80% likely that A occurs again.

this is just like adams blog!

sorry this is not a good strategy. you cant drive a car from looking in the mirrors and hoping the roads will always be the same.

 

[meanreversion]

I've actually seen a presentation from a chap who trades this way. He data mines to find non-causal relationships, e.g. EUR/USD rallies first day of September 18 times out of the last 20 years.. then buys digitals the next time it comes round at (e.g.) 53%, believing that "true value" is 18/20 = 90%.

 

[DashRiprock]

sorry i dont want to knock the blog off line

I have NEVER been to a seminar or NEVEr paid someone for mentoring or courses or anything. there is too much BS out there i save my money for market data nd good software and best information i can afford

the thing about those types of strategy is that, imo, some of them are OK. specially when you look at things like inter commodity spreads like the agris, there is a famous website I will try and make a link when i think of it. or even small caps or january effect, it doesnt mean it wont work from now on but it has to be better than just being coincidence!

there is as well a good book on behavioural finance which has like 20 best papers with like closed end fund puzzle and things which is nice trading reading. link if i can remember

 

[DashRiprock]

found seasonal links from my bookmarks but i cant find behaviour book i might have to raid the ole filing cabinet for my references :/

http://www.mrci.com/web/index.php
http://www.spectrumcommodities.com/education/commodity/charts/index.html

(i dont pay for or profit fro these websites!)

 

[marketpupil]

I've actually seen a presentation from a chap who trades this way. He data mines to find non-causal relationships, e.g. EUR/USD rallies first day of September 18 times out of the last 20 years.. then buys digitals the next time it comes round at (e.g.) 53%, believing that "true value" is 18/20 = 90%.

What you have outlined in this post is a weak system, primarily because 18 occurrences over 20 years is simply not enough to indicate any type of natural bias.

I have traded this system for about 7 months now, with a success rate that lines up with the back tested results. In addition, this system back tests over the last 19 months and 10 years with nearly the same staggering results. Can you explain why this trade has been successful for the last 10 years?

I simply cannot chalk this up to coincidence. There is a clear causal relationship between the US session ending bullishly and the AU session opening bearishly. As I said before, time-based trading works. The key to any successful, back tested strategy is the amount of occurrences over time. Both the time and the amount of occurrences bear this out. Here are the numbers since 06/05/09:

Total Trades: 233
Winners: 171
Losers: 62
Winning % = 73.39%

Gross Profit: $23,290.00
Gross Loss: $14,356.00

Net Profit: $8,934.00
Avg Monthly P/L: $446.70

 

[marketpupil]

Just a quick update. The AU open trade was a success today. I entered the trade at 1.36023 and hit my target at 1.35923 at around 5:09 CST.

Profit = 10 pips ($100)
Length of trade = 3 bars

I'll keep updating this board as this trade progresses. Have a great day!

 

[DashRiprock]

What you have outlined in this post is a weak system, primarily because 18 occurrences over 20 years is simply not enough to indicate any type of natural bias.

I have traded this system for about 7 months now, with a success rate that lines up with the back tested results. In addition, this system back tests over the last 19 months and 10 years with nearly the same staggering results. Can you explain why this trade has been successful for the last 10 years?

I simply cannot chalk this up to coincidence. There is a clear causal relationship between the US session ending bullishly and the AU session opening bearishly. As I said before, time-based trading works. The key to any successful, back tested strategy is the amount of occurrences over time. Both the time and the amount of occurrences bear this out. Here are the numbers since 06/05/09:

Total Trades: 233
Winners: 171
Losers: 62
Winning % = 73.39%

Gross Profit: $23,290.00
Gross Loss: $14,356.00

Net Profit: $8,934.00
Avg Monthly P/L: $446.70

hi

sorry but I am disagreeing with you.

NOT about the US / AUD thing... for example it could be that the easiest way to trade a good US session in australia is to short aussiedollar because of narrowing ir differentials. nobody i dont think is saying that is COULDNT make sense, but you are getting to a plausible conclusion from a coincidental route.

you say you wont put it down to coindidence. Have yu tested for this?

I reckon that if you got 10 different daily prices spread from asset classes over 20 years you can find SOME patterns that are stastically above/below average. that some will be above and below is written in the rules!

sorry but your strategy is not robust, it is retrospective. not to mention that its very hard to trade.

 

[marketpupil]

hi

sorry but I am disagreeing with you.

NOT about the US / AUD thing... for example it could be that the easiest way to trade a good US session in australia is to short aussiedollar because of narrowing ir differentials. nobody i dont think is saying that is COULDNT make sense, but you are getting to a plausible conclusion from a coincidental route.

you say you wont put it down to coindidence. Have yu tested for this?

I reckon that if you got 10 different daily prices spread from asset classes over 20 years you can find SOME patterns that are stastically above/below average. that some will be above and below is written in the rules!

sorry but your strategy is not robust, it is retrospective. not to mention that its very hard to trade.

As I said, the disagreement is the basic argument against TA by fundamentalist. At the core of my analysis and trading, I have found that history does, in fact, repeat itself on a consistent basis.

All I can tell you is that I have several strategies similar to this one that have proven to be successful over time both in both back tested and trading scenarios.

This system is very consistent and very easy to trade. I have had no difficulty hand-trading this. If a trader does not have time to hand-trade this, they can simply commission someone to program an EA in MT4 or 5 to place the trade automatically.

There are natural biases in the market, and this happens to be one of them. I appreciate your response, but I must agree to disagree and let the profit speak for itself.

 

[liontrades]

Aspiring trader,

Having taught many trainee traders myself, I can tell you that one of the reasons you are failing is because you do not have your set rules draw out. Have all your rules drawn out and just stick to them. Obviously the hard part is drawing up a set of rules which are continually profitable. The only way to achieve this is to keep backtesting.

Regards

 

[meanreversion]

I have traded this system for about 7 months now, with a success rate that lines up with the back tested results. In addition, this system back tests over the last 19 months and 10 years with nearly the same staggering results. Can you explain why this trade has been successful for the last 10 years?

Firstly, you ask "can you explain why this trade has been successful for ten years".

You went looking for a pattern and found one, therefore this question is invalid.

Secondly, you claim to have been successfully trading it for seven months. If you think that is a significant length of time ... well keep on going. You are definitely "fooled by randomness" but I know I can't change your mind. Good luck.

 

[marketpupil]

Firstly, you ask "can you explain why this trade has been successful for ten years".

You went looking for a pattern and found one, therefore this question is invalid.

Secondly, you claim to have been successfully trading it for seven months. If you think that is a significant length of time ... well keep on going. You are definitely "fooled by randomness" but I know I can't change your mind. Good luck.

Once again, you say random and I say that few continuing scenarios with recurring themes in the market (and in life in general) are coincidental. We come from two different schools of thought, thus we agree to disagree. However, I wish you the best as you continue trading.

 

[marketpupil]

By the way folks, be sure to keep an eye out for the a possible EURUSD trading opportunity over the gap between today's end of session and Sunday's open. I will update the board later with which way I believe the gap is going to move. Happy trading!

 

[DashRiprock]

Once again, you say random and I say that few continuing scenarios with recurring themes in the market (and in life in general) are coincidental. We come from two different schools of thought, thus we agree to disagree. However, I wish you the best as you continue trading.

hi

can you explain what causes the patterns you trade to occur?

 

[meanreversion]

hi

can you explain what causes the patterns you trade to occur?

That doesn't matter. We know there is a pattern, ergo it will repeat. Seven months of profitable trading says so!

 

[marketpupil]

hi

can you explain what causes the patterns you trade to occur?

This particular trade is successful because of the correlation between a bullish US close and a bearish AU open. In addition, my belief in the strength of this trade is not based solely on 7 months worth success trading the system, it is based on 10 years worth of back tested results. If this system has worked for a 10 year, 19 month, and for the last 7 month period how can it be coincidence?

Consider probabilities in a coin toss and apply that logic here. There is no way that these movements are a coincidence, the occurrences are too high.

 

[DashRiprock]

This particular trade is successful because of the correlation between a bullish US close and a bearish AU open. In addition, my belief in the strength of this trade is not based solely on 7 months worth success trading the system, it is based on 10 years worth of back tested results. If this system has worked for a 10 year, 19 month, and for the last 7 month period how can it be coincidence?

Consider probabilities in a coin toss and apply that logic here. There is no way that these movements are a coincidence, the occurrences are too high.

hi

you are thinking back to front.

correlation isnt the same as causation. thats a circular reference - "its caused by the correlation which makes the correlation which is the causation etc....."

"If this system has worked for a 10 year, 19 month, and for the last 7 month period how can it be coincidence?"

well you should do a test like I said before with maybe 10 different tickers and 20 years of daily data. so you have 50400 data points for 100 series. You will find correlations above the average, but they dont mean anything.

answer this question - which came first, the idea for the pattern or finding the correlation?


(as well, why isnt 10 yrs and 19 months 11 years and 7 months?????)

 

[meanreversion]

This particular trade is successful because of the correlation between a bullish US close and a bearish AU open. In addition, my belief in the strength of this trade is not based solely on 7 months worth success trading the system, it is based on 10 years worth of back tested results. If this system has worked for a 10 year, 19 month, and for the last 7 month period how can it be coincidence?

Consider probabilities in a coin toss and apply that logic here. There is no way that these movements are a coincidence, the occurrences are too high.

Er, ok, let's consider coin tosses. Let's say there are 100,000 people tossing coins, and one of them throws 100 heads in a row. Your data mining approach would lead you to conclude that THIS person is far more likely to toss a head the next time than anyone else.

Look, there are an INFINITE number of patterns. If you look hard, you can probably find a stock which is perfectly correlated with the temperature in central London. But it doesn't mean ANYTHING, unless there is a reason behind it (maybe this company sells sun screen?).

Please just take a step back and think about what you're doing. Just because there is a pattern over ten, or twenty or even thirty years, doesn't mean it's going to repeat.

 

[fayalac]

Just skimmed over your post but how wide are your stops when trading the dailies and what markets do you trade?

I got anhialated trading the 4HR TF on EUR\USD because my stops were too tight. If you trade long TF's your stop must be protected by a decent support\resistance level or you'll get screwed. Also, ditch the notion that you need a certain RR ratio - 3:1 etc is ********.. If you have a 100 pip stop and market gives you 90 pips profit and you can see it turning then cut it quick... Don't wait for it to either stop you out or hit your 3:1 because the market couldn't give a **** about where your targets and stops are. It simply goes where it goes but gives plenty of clues on the way!

Thats how it should work. Good advice

 

[marketpupil]

Er, ok, let's consider coin tosses. Let's say there are 100,000 people tossing coins, and one of them throws 100 heads in a row. Your data mining approach would lead you to conclude that THIS person is far more likely to toss a head the next time than anyone else.

Look, there are an INFINITE number of patterns. If you look hard, you can probably find a stock which is perfectly correlated with the temperature in central London. But it doesn't mean ANYTHING, unless there is a reason behind it (maybe this company sells sun screen?).

Please just take a step back and think about what you're doing. Just because there is a pattern over ten, or twenty or even thirty years, doesn't mean it's going to repeat.

As I've said a near tiring number of times, this is the basic argument between fundamental thought and those who use TA: The basic belief in whether history will repeat itself or not. At the end of the day, you can attribute the reason for the success of this system to something that translates into fundamental thought if it eases your aversion to the risk of the trade.

Myself and thousands of others firmly believe that history in the market can and does repeat itself. Regardless of whether you use TA or Fundamentalism as the foundation for your trading, if you are successful I say continue doing what you are doing until it doesn't work any longer. As I mentioned before, nothing speaks louder than profit or lack thereof. In the end, the percentage of growth in your account is all that matters.

Good luck!