I don't know what I am doing

[trendie]

OR:
What I am doing is one-step removed from reality, and I am trading a restricted vision of reality.

Markets move.
They rise, fall or range.
They move, sometimes gently, sometimes sharply.

My indicators are an abstraction of, and a form of proxy for the underlying reality. They are not the reality.

It is dawning on me that my rules are arbitrary, and curve-fitted. However, the curve-fitting is relatively robust. So far.
Even the Turtle rules for 20 and 55 day breakouts must be a form of curve-fitting.
And, any mathematically derived formulae, must, of necessity, be a lucky happenstance.
For example, the ACD pivots. (Mark Fisher)

Even patterns are an attempt to contain reality into a structure we can recognise.

Its all money management, isn't it?

 

[HaloTrader]

Money management and risk:reward ratio.
Entries only help identify places MAYBE price will accelerate for you abit faster than normal.

Pivots for example - Random levels, why not.

 

[arabianights]

If markets genuinely trend, then with arbitary liquidity then yes, all you need is money management...

 

[Skill Leverage]

Money management and risk:reward ratio.
Entries only help identify places MAYBE price will accelerate for you abit faster than normal.

Pivots for example - Random levels, why not.

Is pivot theory a big part of your 100% system then

 

[RedGreenBen]

I get the point you are making and it is thought-provoking, but the only thought it has provoked so far for me is "what is the alternative?".

I'm not sure about the statement below though...?...

And, any mathematically derived formulae, must, of necessity, be a lucky happenstance.

 

[Skill Leverage]

re: the question at hand, I reckon you're not far off. A good 'system' as far as I'm concerned is more about your money management principles than much else; I'm not much of a believer in a rigid set of trading criteria, as I believe that as a local you can be easily exploited - as a basic example, anyone trying to straight out buy/sell support/resistance trendlines would have a very rough time of it in front of the ladder. For me (from my admittedly limited experience), it's the ability to consistently act in your best interests, being able to take your lumps and move on, and on occasion listening to your gut when it's telling you you're wrong, rather than waiting to be proved wrong.

However, there are a 1,000,001 different ways to skin a cat, and people like bnaimy seem to be very successful with a rigid trading plan. That said, I'd wager that out of the hundreds of people on T2W who have read and no doubt attempted to duplicate his system, very few (if any) will have had his results.

SL

 

[Skill Leverage]

I like to think of it in the way that chess players approach the game; if you can look past what the market is doing now, and look at what you feel that the players are looking to do two or three moves ahead, you can have a lot more confidence when you step up to buy when the whole world seems to be selling.

 

[trendie]

SL,

I relate to your point about taking signals. I have moved away from totally mechanical, and try to understand the context within which a signal is given. For example, after two consec losses, if it becomes apparent the market is in a range, I switch to breakout mode.

But, back to my post, I feel that I am responding to patterns that once gave a specific result, without necessarily understanding the true cause of the pattern; government action, cross-currency actions by companies, hedge-funds, etc.

Much as if I am sacrificing a virgin to the sun-god, in the hope I will achieve a bumper harvest, without realising perhaps I ought to use better fertiliser for my crops.

 

[Technically Fundamental]

SL,

I relate to your point about taking signals. I have moved away from totally mechanical, and try to understand the context within which a signal is given. For example, after two consec losses, if it becomes apparent the market is in a range, I switch to breakout mode.

But, back to my post, I feel that I am responding to patterns that once gave a specific result, without necessarily understanding the true cause of the pattern; government action, cross-currency actions by companies, hedge-funds, etc.

Much as if I am sacrificing a virgin to the sun-god, in the hope I will achieve a bumper harvest, without realising perhaps I ought to use better fertiliser for my crops.

I was looking at taking this approach but can you ever really know whats going to happen if you're not on the inside?

even if you do a masters in banking and finance who's to say that institutions do things by the textbook methods in practice?

plus you have to think about the head-cases pulling the trigger. look at Gammajammer lol.

 

[trendie]

I was looking at taking this approach but can you ever really know whats going to happen if you're not on the inside?

precisely!

 

[teojh]

no need to understand. that's why its called speculation man

 

[Technically Fundamental]

If a bank holds $ and wants £ I believe that they're dealing with so much money that there must be some sort of process by which they offload currencies to gain maximum benefit. I'd say its based on algorithms but I don't know. Maybe they just wing it and entrust the money to the skill of individual traders/groups of traders whose size is on balance with demonstrated performance, skill and experience or whatever other criteria they see fit. If overall profit for the year exceeds inflation+interest then job done.

Edit: Actually I remember Gammajammer telling me that there are teams of boffins who deal with that sort of stuff. probably works the same way for everything.

 

[robster970]

If (Win% x Average Win) - (Lose% x Average Lose) > 0 over a statistically significant sample then you'll be profitable.

All you're trying to do with your entry is find a higher probability entry for the above little formula being positive.

As mass human behaviour creates repeated patterns, these patterns can be exploited to make the formula work.

So money mgmt and exploitation of repeated patterns = profit, not just money mgmt alone imho.

Much as if I am sacrificing a virgin to the sun-god, in the hope I will achieve a bumper harvest, without realising perhaps I ought to use better fertiliser for my crops.

So is it just a case of looking for the lowest common denominator of predictible behaviour over a statistically significant sample or is it about chopping and changing to intellectually justify to yourself something that you fundamentally have little control over and can be more effectively executed in a mechanical way? Do you really believe that your discretionary methods make a significant difference over the long term?

 

[Skill Leverage]

I was looking at taking this approach but can you ever really know whats going to happen if you're not on the inside?

even if you do a masters in banking and finance who's to say that institutions do things by the textbook methods in practice?

plus you have to think about the head-cases pulling the trigger. look at Gammajammer lol.

I'm not really talking about institutions so much as the bigger locals and the general sentiment - you can see things in the price action that tell you so much more than the direction of a chart; for example, sometimes you will see a market selling off very grudgingly, lots of people getting into large long positions, and you get the feeling that when a certain level is reached it will take off in the other direction. Rather than just thinking 'this market is going down, I should sell', you can think 'the market is trending downwards - how aggressive is it, and at what point do I think people will start taking profits/rejecting the area?'

 

[TheBramble]

If (Win% x Average Win) - (Lose% x Average Lose) > 0 over a statistically significant sample then you'll be profitable.

Pw=1% Pl=99% Aw=1,000,000 Al=10,000. This has positive expectancy. How many would trade it profitably?

 

[searchlight]

OR:
What I am doing is one-step removed from reality, and I am trading a restricted vision of reality.

Markets move.
They rise, fall or range.
They move, sometimes gently, sometimes sharply.

My indicators are an abstraction of, and a form of proxy for the underlying reality. They are not the reality.

It is dawning on me that my rules are arbitrary, and curve-fitted. However, the curve-fitting is relatively robust. So far.
Even the Turtle rules for 20 and 55 day breakouts must be a form of curve-fitting.
And, any mathematically derived formulae, must, of necessity, be a lucky happenstance.
For example, the ACD pivots. (Mark Fisher)

Even patterns are an attempt to contain reality into a structure we can recognise.

Its all money management, isn't it?

I think all the ways you describe and countless others are; search to find patterns that consistent in their appearance and lend themselves to predictive analysis. So which method you use to find patterns in "reality" is not really important. It could be "real price" or abstraction of, and a form of proxy of it. As long as they are consistent and lend themselves to predictive analysis any pattern is good enough, even the ones that derived from your cat's behavior in certain market hours. In that sense nobody trades "price" . All they trading is pattern/s are made by price. If you take out the all the numbers from their charts they wouldn't even notice it. . So I think your description of patterns are half true and you left the most important part (lend themselves to predictive analysis) out. There must be thousand of patterns out there that dont lend themselves to predictive analysis. As the Arabian says if we are talking about consistently trending market; then you have a pattern that re occurring over and over again with predictability all you need money management. But.....

 

[TheBramble]

OR:
What I am doing is one-step removed from reality, and I am trading a restricted vision of reality.

Markets move.
They rise, fall or range.
They move, sometimes gently, sometimes sharply.

My indicators are an abstraction of, and a form of proxy for the underlying reality. They are not the reality.

It is dawning on me that my rules are arbitrary, and curve-fitted. However, the curve-fitting is relatively robust. So far.
Even the Turtle rules for 20 and 55 day breakouts must be a form of curve-fitting.
And, any mathematically derived formulae, must, of necessity, be a lucky happenstance.
For example, the ACD pivots. (Mark Fisher)

Even patterns are an attempt to contain reality into a structure we can recognise.

Its all money management, isn't it?

If new car sales are down today, what does that likely indicate about the price of a new car tomorrow?

Inds are a derivative of price and time (and possibly volume). There are valid representations of the data upon which they operate. It’s not a restricted view at all. That you choose to use them and what you choose to make of them is your thing, but they’re as real as you want them to be.

You can’t day after day ‘see’ price do something and then do something else, the same, more than 50% of the time (inds or no inds) and not make a pattern out of it. I think it’s this seeing what is, and what is more than 50% of the time the same ‘response/reaction’, which is where skills and experience diverge rapidly.

 

[robster970]

Pw=1% Pl=99% Aw=1,000,000 Al=10,000. This has positive expectancy. How many would trade it profitably?

Only those that felt the return was worth it. Function of equity available at the end of the day (max drawdowns, risk) and other non-mathematical/financial constraints they are under.

I wouldn't. Doesn't mean it's not possible though.

 

[trendie]

....

So is it just a case of looking for the lowest common denominator of predictible behaviour over a statistically significant sample or is it about chopping and changing to intellectually justify to yourself something that you fundamentally have little control over and can be more effectively executed in a mechanical way? Do you really believe that your discretionary methods make a significant difference over the long term?

I think you have hit the nail on the head.
When I used to work in IT, I had clear control over my actions, and the consequences of my actions. When I do anything else, there is a sense of control.

I understand trading is statistical, and I try to visualise trading as would a salesperson perhaps. I have to make many pitches before I get a sale. No guarantees.

But, on another level, I feel I have entered the world of quantum theory, where my worldview has become distinctly different. There are days when I get quite worried. Even after two years of doing this. Yet, I cant stop trading, and wouldn't really want to change!

Its the statistical nature of it that I sometimes feel its because I dont understand what I am doing.

Who was it who said that doing the same thing over and over again, expecting a different conclusion is a sign of madness?

 

[Skill Leverage]

Who was it who said that doing the same thing over and over again, expecting a different conclusion is a sign of madness?

The problem with that is that we're not in a lab, we're involved in markets with thousands of other people, all with different interpretations of the same data/charts/statistics. I'm not saying that patterns aren't useful, I just think it's better as an intraday trader to interpret what's going on in your own mind - instead of selling that potential head and shoulders at the correct technical level, wait to see how the level is approached, whether the TA guys are going to get squeezed out before the reversal, or whether it is shaping up to dump/blow through it.

These are my $0.02, and could well be bilge...