Wow! Nice to see you write this point. Took me more than three years and a few blowups to realize it -- so, as you can see I am definitely a dull-wit! What I did was to take a PA context and filtered out all the "unreliable" signals - a long and laborious manual process. The resulting set is what I consider the 'valid' set of signal(s) for a PA context. This is still a work in process. Although my way of looking at PA context is different from the way you look at it, the general idea of statistically analyzing signals within a PA context should translate. Hope this helps. All the best, Moniod.
Options.... 1. Be willing to take loads of feeler trades, take 2pt, lose 2pts hope they balance each other out then hold the ones that move well, issue with this got to quick to take the 2 or SL will be hit, then you will end up killing all early. 2. Work out which trades are likely to go 10pts, then try to only take them, which requires looking at the bigger picture. I was trying to do no.2 for a while, but moving back to no.1 recently and making $$$$'s again, i like the idea of no.2 but its tricky. M1 is just more information, when you get over seeing every bar as a signal, more information is always better Imho.
Yea. I still haven't seen it all. But I had this thought yesterday--or day before--why am I making this so damn hard? The Mental Analysis I've been working on has opened my mind to more possibilities. We shall see where it leads. Inside the mind of the market. That'll be intense! Thanks --JS
Nice to meet you Moniod. Thanks for your comments. I wonder how many people were waiting to see when I'd realize you can't trade every damn signal. Woops. Your suggestions are actually what I'm going to begin working on. I'm also aware of the long/laborious process it will require. I might not be "trading" for a while, but I will surely work "on" my trading. It does help. Thanks. -JS
I think they can both exist in harmony. A time and a place for each approach. Quick scalps, longer swings. Obviously, each approach needs it's own set of strict rules/guidelines and statistically proven edge.
Hello Jsmacksen: Has been a few days; so, thought to check in to see how the "work" is coming along. Keep us posted. Regards, Monoid.
Hey Mo, Good of you to check in. Thanks. Been working hard, and I'll finally be back tomorrow and Friday. I plan to hopefully stay back for a while to do forward tests on SIM. The works been hard but good. Waiting for the good context looks like it's going to take discipline and patience. --JS
JS: Good to hear back from you. Thought to share some experience that I feel might be of help to you as you go about filtering and understanding your signals. In some ways, what I am going to say could be considered ‘next steps’. However, before I go about sharing my experience, it might be helpful for you to understand my belief about the market so that you can better understand my direction/thoughts and make adjustments to anything you might find interesting to fit your belief on markets. I view markets as a pattern generating, self-organizing complex system as opposed to a random system. Why is this distinction important to me? Because, if a system is random, one concedes that the best a market participant can do is have access to partial information. This means that there is no use digging for more information from the market, and every single signal has a 50% probability of working (i.e. we don’t know if a given trade will work or not), although in the long run the winning percentage can be positively skewed. This is the view @Redneck adheres too (@Redneck, please correct me if I am wrong). Technically, the above statement about "positive skew" in a Random system is incorrect, but I am going to brush it aside and say that the random system I am talking about is partially random (the more important point being randomness implies partial information and not complete information availability). In believing that the markets are pattern generating, self-organizing complex systems, I am of the view that it is possible for a market participant to extract complete information from the market. However, we cannot predict when that information will be available. In other words, I believe that information drives trades. Look at it this way, if we are looking at a support level, one way of looking at this would be, the support could hold or will not hold, and stop there. This is consistent with the Random System view of markets. On the other hand, if one frames the issue like this: there is something that market participants are seeing that will either (a) make them commit their hard earned dollars to take the trade; or, (b) not make them make such commitment. That something is *information*. If the market participants make the commitment, the the support level will hold; if they don’t, the support level will not hold. This thinking is consistent with a complex system view. As you can see, the difference is subtle but very important for it provides one with direction for research: (a) concentrate on discovering signals and contexts, in one; and, (b) concentrate on discovering signals, contexts, and information in the other. Now, on to what I wanted to share with you: When I first started out filtering signals, I started with the assumption that markets are Random Systems. I did not change my belief about the market, but started out with the assumption of randomness for the simple reason that it is the easiest way to filter our signals in a context. However, to me this was just the first step. After I had the set of signals for a context, I then removed the randomness assumption and started looking for information within the context which, when properly extracted, should help me align with the majority of market participants. This to me was a critical piece — reading price action at it its best. As I currently stand, in few of my contexts, I can tell, with a high degree of accuracy, as information arrives, what type of result is to be expected of the signal — these have now become my high probability signals (bread and butter trades). One thing you will notice, should you decide to following this path, is that once you get to this stage in your analysis and place trades, you will become part of the large volume that usually accompanies the move in your expected direction. Yes, you will become part of what some traders call “large” traders. For the sake of clarity, I want to emphasis that I don’t look at volume to place trades, but I become part of the volume that others might look at to place trades. Another thing you will notice is that, once the information is make available, it does not change — I can only postulate why this might be so. May be, because so many traders are committed to their position based on the information that was make available, that it becomes a self fulfilling prophecy. But then, that is how a self-organizing complex system is supposed to work in the the first place! This line of thought could be expanded to analysis of risk and price discovery, but such discussion is not appropriate for this present post. I am still working on deciphering information in other contexts. However this is not at all easy. I found that in order to do all this, one has to work with raw data. Any type of summarization of data (be it time-bar, volume bar, tick bar, range bar, PnF, etc) abstracts away valuable information. In Statistics, we summarize data so that we don’t have to deal with a lot of information. However, in trading, we want all the information as possible to make the best possible decision. Summarization becomes a death knell in trading. As you can see all this takes a lot of work and effort. I find it interesting when people say trading is easy or simple — it has never been to me. Trading takes a lot of ongoing pre-market analysis to properly understand context, a lot of focus to properly extract information from the market to trade the signals in one's context, and on top of it all, the need to constantly deal with one's urge to make love to that beautiful lady who goes by the name emotion. None of this easy or simple, but does become a routine. All the best. Regards, Monoid. PS: The information I am talking about here should be confused with the information (or its efficiency) as discussed in EMH.
Greetings Mo; I hope you don’t mind that I’ve also adopted Redneck’s moniker for you, but I too like the ring of it. You have provided a very interesting thesis on your beliefs, and on your subsequent technical actions in the market based on those beliefs. The power of our beliefs and the actions they engender are truly a remarkable phenomenon. And it’s also a true testament to the “cause” and “effect” relationship between our market thoughts, and our subsequent market actions. I must say, it’s quite refreshing how you clearly express your thoughts, ideas, and intentions on paper, as in the example below: “However, before I go about sharing my experience, it might be helpful for you to understand my belief about the market so that you can better understand my direction/thoughts and make adjustments to anything you might find interesting to fit your belief on markets.” In the above, you wisely couched your commentary to inform the reader of your findings, yet still remain mentally open to learn something new,....nicely done. In any case, “mano y mano”, “my hand to yours”, and also in the same spirit of learning something new, I would like to present my views on your subject matter, which you will find are very much diametrically opposed to yours. But, this is part of the fun and the learning, and the essential reasons why we are all here on ET…..smile. I have come to understand that the market is a place where there are traders who may have any numbers of beliefs about how the market works or doesn’t work. And as such; “it is done unto you as you believe”. So the concept at hand is not so much whether or not your belief or theory is factual, as it is in answering the essential question of; how well is that belief serving you? Some beliefs and theories you have stated below are: “I view markets as a pattern generating, self-organizing complex system as opposed to a random system.” “In believing that the markets are pattern generating, self-organizing complex systems, I am of the view that it is possible for a market participant to extract complete information from the market.” As a result of holding these particular beliefs, you will no doubt be guided by them to look for patterns in the market. And of course, there is nothing wrong with this TA step alone. That is in point of fact a viable function of TA, to find replicable patterns in the market. But you may not be aware that therein lays some serious and insidious problems of “intention” and of “expectation”, as I will attempt to explain. Since patterns imply consistency, (i.e. First “A”, then “B”, then “C”) as such they can unwittingly and quite unconsciously seduce you into believing that you already “know” what will happen next, as in the case of (“C” must come after “B”). And as a result, you will already “know” what to be expecting by the time “B” arrives. This sets up a not too obvious dilemma. The problem is; it is a direct conflict of beliefs to think and believe you “know” what will happen next, and at the same time think and believe that “anything can happen”, and that “every moment is unique”. Both these conflicting beliefs cannot exist at the same time in your mental environment and one will dominate. The consequences of harboring such direct mental conflicts and in-congruencies are obviously less than desirable to our state of mind while trading. And worst, will likely result in a seemingly endless cycle of emotional pain and frustration. This no doubt will stem from our mental discomfort with the unmet expectations from our patterns. Further, this initial inappropriate belief can foster and engender others,…such as: “In other words, I believe that information drives trades. Look at it this way, if we are looking at a support level, one way of looking at this would be, the support could hold or will not hold, and stop there.” “However, in trading, we want all the information as possible to make the best possible decision. Summarization becomes a death knell in trading”. In my opinion, these beliefs above are potentially dangerous ways of looking at the market, and all engendered by an initial constellation of inoperative beliefs. These beliefs have you falsely assuming that in a single trade, your pattern, your PA, and your TA, has a direct bearing and correlation on the outcome of a particular single trade pattern. And it does not. The result of any given single trade is random. Any expectation you place on the direct correlation of your TA (pattern) to what is going to happen in this particular trade under study, is a completely inoperative belief and expectation. And your belief will unwittingly cause you to attempt to use your TA in ways in which it was not designed, and could not possibly accomplish the results you were seeking. All this action results in more TA, better TA, more Studies, better Studies, in an endless cycle of emotional pain and frustration. And again, this initial constellation of inappropriate beliefs can foster and engender other actions,…such as: “As you can see all this takes a lot of work and effort. I find it interesting when people say trading is easy or simple — it has never been to me. Trading takes a lot of ongoing pre-market analysis to properly understand context, a lot of focus to properly extract information from the market to trade the signals in one's context, and on top of it all, the need to constantly deal with one's urge to make love to that beautiful lady who goes by the name emotion. None of this easy or simple, but does become a routine.” As long as you harbor and continually energize this inoperative and inappropriate constellation of beliefs about the true nature of the markets, you will continue to “struggle and fight” with the market. But more importantly, you will be unwittingly fighting against yourself and the negative consequences of your own strongly held inoperative beliefs. When you begin to understand the true nature of the game you are playing, and then understand the necessary rules to succeed in that kind of game, the struggle will cease. Your task is not to continue to struggle with the “effect” on the outside, while harboring and energizing “cause” on the inside. Your task is to work to create the kind of “Traders Mindset” and the appropriate constellation of beliefs, that doesn’t contain any faulty market beliefs, unrealistic expectations, and most of all FEAR. If you think you “know” about a certain outcome from your pattern: Then you cannot also simultaneously expect that virtually anything can happen. The moment you let your mind hold onto the notion that you know, you stop taking all of the unknown variables into consideration. Your mind won't let you have it both ways. If you believe you “know” something from your pattern: Then the moment is no longer unique. If the moment isn't unique, then everything is known or knowable; that is, there's nothing not to know. However, what is worst is that the moment you stop factoring in what you don't or can't know about the situation instead of being available to receive what the market is offering, you make yourself susceptible to all of the typical trading errors, and open the door to your painful emotions and fears. Just my opinion. Let me know what you think,….PM’s responses are ok too. KDASFTG. Big thanks to Douglas
I think this is a good topic that isn't talked much about for some reason. Here is a rough example that I use in my trading. I'll just refer to certain triggers / signals I look for as A,B,C, etc. 1. Monitor until certain context A appears. 2. For the window that the context is present, I will watch for B. 3. After B, I will take the trade if C occurs. 4. If D occurs before E, I will wash the trade, likely somewhere in the ballpark of -8 / +16 ticks. And so on and so forth... I am not advocating making things over-complicated, but I think trading along these lines is much more optimized than taking a bet on a single signal with a fixed stop and hoping for the best. If you continue to monitor to see if the dominoes keep falling in the right direction or if the basis for your trade changes, you can let your golden trades run and drop the sub-par ones for pretty much break-even. You're always in control. A lot more comforting than trying to grind out a fixed r/r with positive expectancy over a long enough time-frame imo. I'm not saying the latter isn't a valid way to trade, but it's not the only way to trade.