Successful trading system

[herr]

Hi ! I am new in trading. All speak about a profitable trading system. How do you know the probabilities in trading ? It is not like the casino. Here you don't know anything.

All speak about discipline. OK
What happens if you have 200 consecutives stop-loss ? Do I have to continue losing and losing ?

Sorry for my pessimism, but you read some people and all is very easy in theory. In practice....is different.

 

[HowardCohodas]

If it were that easy in practice, everyone would be rich doing it.

On the other hand, will and focus and discipline will help you succeed. So how do you get from where you are to where you want to be? Answer: Study - Practice - Evaluate - Repeat

 

[herr]

If it were that easy in practice, everyone would be rich doing it.

On the other hand, will and focus and discipline will help you succeed. So how do you get from where you are to where you want to be? Answer: Practice

Yes, will, focus and discipline. I heard that many times. Last month I traded with will, focus, discipline and I only broke even. I need to win, breaking even is feeding the broker. I think that is the "secret" the key to success in trading. Some indicator, some chart pattern, something like that. I am 100 % sure that is something like that.

 

[HowardCohodas]

Yes, will, focus and discipline. I heard that many times. Last month I traded with will, focus, discipline and I only broke even. I need to win, breaking even is feeding the broker. I think that is the "secret" the key to success in trading. Some indicator, some chart pattern, something like that. I am 100 % sure that is something like that.

OK, grasshopper, you are ready for more advanced lesson.

Actually, I believe there are two critical secrets for successful trading.

1. Find a strategy with positive expectation within your comfort zone for its dynamics
2. Money management

For me, money management was the easiest to master.

There are lots of strategies available with positive expectation. They have different dynamics which need to be matched with your personality, discipline, available time, speed of execution, draw downs, max number of consecutive losses, etc.

You are on a journey with many emotional ups and downs. Try to enjoy the ride. Your patience will be rewarded.

 

[herr]

OK, grasshopper, you are ready for more advanced lesson.

Actually, I believe there are two critical secrets for successful trading.

1. Find a strategy with positive expectation within your comfort zone for its dynamics
2. Money management

For me, money management was the easiest to master.

There are lots of strategies available with positive expectation. They have different dynamics which need to be matched with your personality, discipline, available time, speed of execution, draw downs, max number of consecutive losses, etc.

You are on a journey with many emotional ups and downs. Try to enjoy the ride. Your patience will be rewarded.

I can tell you my strategy. I have no problems in giving it:

Minute 16 (9.46 ET) I enter a trade. I always enter at the same time. It is my only trade of the day, I like to do ONE trade and I use the same stock everyday. The criteria to enter the trade is simple:

I look the MACD (60,30,9). If it is positive, I buy. If it is neagtive, I sell. Exit points are:
Stop loss: -0.45%
Target: +1.55%

It´s that. My results this month are negative:

1-Nov.. Stopped
2-Nov.. Stopped
3-Nov.. Stopped

Many stops in a row, can happen ? The point is psychology. You end the day thinking in that you are going to be stopped always.

 

[HowardCohodas]

I can tell you my strategy.

There are thousands of strategies with positive expectation (in a statistical sense). It's your responsibility to evaluate if your strategy is one of them. What have you done to qualify it?

 

[timsk]

Hi Herr,
Welcome to the site!
Click on the first 2 links in my signature and all your questions will be answered.
Tim.

 

[texpert]

I can tell you my strategy. I have no problems in giving it:

Minute 16 (9.46 ET) I enter a trade. I always enter at the same time. It is my only trade of the day, I like to do ONE trade and I use the same stock everyday. The criteria to enter the trade is simple:

I look the MACD (60,30,9). If it is positive, I buy. If it is neagtive, I sell. Exit points are:
Stop loss: -0.45%
Target: +1.55%

It´s that. My results this month are negative:

1-Nov.. Stopped
2-Nov.. Stopped
3-Nov.. Stopped

Many stops in a row, can happen ? The point is psychology. You end the day thinking in that you are going to be stopped always.

Where is the rolling on the floor laughing out loud emoticon when you need it?! You are correct, though! When a trader has taken a string of losses and the staked reality of his ill informed judgment stares at him, his/her psyche is conditioned to expect losses.

Advice: Go back to the first comment by HowardCohodas

"Answer: Study - Practice - Evaluate - Repeat"

You can't get a different result from a trading approach that has lost you money.

 

[rsidivergence]

There are lots of strategies available with positive expectation.

No, no, you have possibly no real trading experience. There aren't many positive expectation strategies available. Trading is zero or negative sum game with random walk inputs and random non-stationary outputs. It takes a lot of hard work for many years to find one of the few positive expectation strategies, if any exist, that are left by the supercomputer hunting of hedge funds and other quantitative advisors. It is beyond what you know and understand so it may be better to avoid this subject all together because you are giving the wrong advice to people.

 

[HowardCohodas]

No, no, you have possibly no real trading experience. There aren't many positive expectation strategies available. Trading is zero or negative sum game with random walk inputs and random non-stationary outputs. It takes a lot of hard work for many years to find one of the few positive expectation strategies, if any exist, that are left by the supercomputer hunting of hedge funds and other quantitative advisors. It is beyond what you know and understand so it may be better to avoid this subject all together because you are giving the wrong advice to people.

Well now, I hardly know where to begin in responding to your statement. As my friends in the military like to say, you have provided me with a "target rich environment."

No trading experience ...
Take just a little time and review some of my other posts on this forum. I don't want to waste everyone else's time repeating my story.

There aren't many positive expectations available ...
Have you done any research on this subject? I have for more than 40 years. Provide some credible sources to back your position.

Trading is a zero to negative sum game ...
That must be why so many without supercomputers are so successful.

I have more, but you get the idea.

It's not what we don't know that hurts. It's what we know that ain't so.

 

[Talbs!]

Im with Howard !

"Answer: Study - Practice - Evaluate - Repeat"

I think its about finding a system that works for you and sticking with it. It took me about 8 years to fine tune my system and now im happy with it. Stay in you comfort zone and try to trade the market not whats in your account, so many people will go all in and there stop will be calculated on how much they want to lose and not where the support resistance levels are, if you can only afford to lose £100 then do £2 a point instead of £5 ! I think once your comfortable with what your doing and stick to it all will be well !

 

[texpert]

Im with Howard !

"Answer: Study - Practice - Evaluate - Repeat"

I think its about finding a system that works for you and sticking with it. It took me about 8 years to fine tune my system and now im happy with it. Stay in you comfort zone and try to trade the market not whats in your account, so many people will go all in and there stop will be calculated on how much they want to lose and not where the support resistance levels are, if you can only afford to lose £100 then do £2 a point instead of £5 ! I think once your comfortable with what your doing and stick to it all will be well !

My trading approach took me 14years to fine tune despite impressive results. I knew something was missing. Until the rules are firmly established and you can identify a winning trade within seconds, success, if any at all, is rather based on luck!

 

[Ravi_Sankar]

Hi All,

I am new to this market, so I have lost $1000 in forex trading last week, without analyzing properly on that, therefore now i wanna details & study about successful trading system should teach me how to take profits on forex trading.

 

[Shakone]

No, no, you have possibly no real trading experience. There aren't many positive expectation strategies available. Trading is zero or negative sum game with random walk inputs and random non-stationary outputs. It takes a lot of hard work for many years to find one of the few positive expectation strategies, if any exist, that are left by the supercomputer hunting of hedge funds and other quantitative advisors. It is beyond what you know and understand so it may be better to avoid this subject all together because you are giving the wrong advice to people.

HowardCohodas' advice was spot on in my view.

How do you know there aren't many positive expectation strategies? Given that there are infinite possible strategies and infinite timeframes to use them on, can we really know how many? Even a supercomputer can't check infinitely many.

And is it really likely to be just a handful? If you can find one after a few years of work, in which you have probably only considered a small number of strategies (small compared to the infinite available), then that would suggest there are a great many.

 

[herr]

There are thousands of strategies with positive expectation (in a statistical sense). It's your responsibility to evaluate if your strategy is one of them. What have you done to qualify it?

I tested a stock for 60 days, and gave me positive results.
I did the same with another one, and also gave me positive results in 40 days.
I did it also with the one I am trading for 20 days and the results were positive.

How many days are "enough" to conclude that a strategy is "correct" ?

 

[Ravi_Sankar]

I tested a stock for 60 days, and gave me positive results.
I did the same with another one, and also gave me positive results in 40 days.
I did it also with the one I am trading for 20 days and the results were positive.

How many days are "enough" to conclude that a strategy is "correct" ?

But for me, i want to know how did you asses for 60 days to gain profits, subsequently to 40 days and to 20 days,

so tell me how many days required to test before playing in the forex market.? and how did you analyze the strategy, pl share me the secret. Since i have lost $1000 in a week, it really makes me worry.

 

[herr]

But for me, i want to know how did you asses for 60 days to gain profits, subsequently to 40 days and to 20 days,

so tell me how many days required to test before playing in the forex market.? and how did you analyze the strategy, pl share me the secret. Since i have lost $1000 in a week, it really makes me worry.

You must have a plan. For example....you will enter when RSI is 20 % and you will do a trade per day. You pick up a graph and see what happened after RSI touched 20 %. You make a simulation without trading. You set a stop loss and a target. For example....0.5% SL, and 1.5% Target.

Each day you see the price touches the SL, record that day in a spreadsheet. The same when it reaches the target. After many days, you will have the results.

In 60 days, if you have 40 stops and 20 targets, the strategy is useful.
40*0.5 = 20
20*1.5= 30

Note: if the price doesn`t touch nor the SL neither the target, you set a time to exit the trade. You also record the trade. For example, my time is 3.45 ET always.

You will arrive to the conclusion that the strategy gives positives returns. Then, you will trade using that strategy.

That is the way I do. But as always...how do you know that the strategy WILL CONTINUE WORKING ?? That is the magic question that nobody answers.

 

[HowardCohodas]

I tested a stock for 60 days, and gave me positive results.
I did the same with another one, and also gave me positive results in 40 days.
I did it also with the one I am trading for 20 days and the results were positive.

How many days are "enough" to conclude that a strategy is "correct" ?

I teach a four step qualification process before I put a strategy into production; Computer Simulation, Prototype, Pre-production, Production. I'm an engineer so fiddling with a system is in my DNA. However, whenever I tweak my strategy, I go back at least as far as prototyping. No tweaked strategy goes directly to production.

The details of my qualification program are:

1. Back testing, like any computer simulation of the real world (think engineering) has its limitations. Even with tick data, you can't assume the trades you want to make will be executed in a timely fashion or at the price you want.
   
2. Once your computer simulation shows promise, you should go to paper trading. Paper trading, like an engineering prototype, is good for working out the bugs of interfacing with the real world. Even paper trading has it's compromises. Although you will be filled at the price you request if the market trades at that level, no consideration is given to availability.
   
3. Your next step is to trade live (with money) but for small amounts. Consider this preproduction testing.
   
4. Now you are ready for full production. Live long and prosper.

For my current strategy I computer simulated (back tested) first two years of data and eventually five years when I decided to teach it. I prototype it (paper traded it) for five months. I was in pre-production (small money) for one month. I've been in full production (serious money) for three months in a separate auditable account. The auditable account was to establish credibility with my students.

What do you think adequate testing is, now?

 

[herr]

I teach a four step qualification process before I put a strategy into production; Computer Simulation, Prototype, Pre-production, Production. I'm an engineer so fiddling with a system is in my DNA. However, whenever I tweak my strategy, I go back at least as far as prototyping. No tweaked strategy goes directly to production.

The details of my qualification program are:

1. Back testing, like any computer simulation of the real world (think engineering) has its limitations. Even with tick data, you can't assume the trades you want to make will be executed in a timely fashion or at the price you want.
   
2. Once your computer simulation shows promise, you should go to paper trading. Paper trading, like an engineering prototype, is good for working out the bugs of interfacing with the real world. Even paper trading has it's compromises. Although you will be filled at the price you request if the market trades at that level, no consideration is given to availability.
   
3. Your next step is to trade live (with money) but for small amounts. Consider this preproduction testing.
   
4. Now you are ready for full production. Live long and prosper.

For my current strategy I computer simulated (back tested) first two years of data and eventually five years when I decided to teach it. I prototype it (paper traded it) for five months. I was in pre-production (small money) for one month. I've been in full production (serious money) for three months in a separate auditable account. The auditable account was to establish credibility with my students.

What do you think adequate testing is, now?

Ok, but I cannot wait seven years. It is a lot !
Something shorter ?

I think a year is adequate for a single stock. Out of 250 days, if you are right in 100 and wrong in 150, you will have, according to my strategy:

100*1.5= +150
150*0.5= -75

It is a 75 % return. Think about a binomial distribution. 250 samples I think is enough.

 

[Hotch]

There are thousands of strategies with positive edge yes, but there are an infinite number with a negative edge.