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Lornz
Registered: Jan 2008
Posts: 918 |
04-23-12 03:34 PM
Two similar threads on the same day?
I've been doing this for years. The advantage of discretionary trading is most prominent, at least in my case, in trading the larger swings.
I also use a statistical method for intraday and swing trading. Different approaches for different problems...
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Martinghoul
Registered: Jan 2009
Posts: 5641 |
04-23-12 03:39 PM
There's a case to be made for being very selective, but there's also a case to be made for being less selective, if you have capacity. Sometimes it's optimal to accept a lower Sharpe to generate a better gross return.
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Swan Noir
Registered: Jun 2009
Posts: 1704 |
04-23-12 04:41 PM
I never understood the expression "crazy like a fox before". This story is right on point and bolsters the OP's contention. I trade only futures and don't hold overnight so obviously I take many more trades yet in my time frame I need to worry less (probably not at all) about missing good trades and focus on only the best.
Being extremely selective and the striking instantly when it is all right is surely the way to low risk high profit trading. While actually doing it is hard it is the correct goal. I will raise my hand when I get there!!
Quote from oldtime:
there's a very good nature documentary about the foxes of Tibet. Contrary to what many hippies think about Tibetens, they live on almost a 100% carnivorous diet. The main thing being rabbit. Over the centuries they have devised many ways to hunt rabbit, including kites and trained birds.
The one thing that messes them up is the fox. So both the humans and the fox track a rabbit and try to figure out the best way to kill it so they can eat.
They have these pictures of a fox with his ribs showing through because it has been so long since he has killed and eaten a rabbit. But as much as he likes to eat, he likes staying alive even more.
So this fox will watch the hunting ground, but if there is even one thing that doesn't look right to him he will back off and let the humans kill the rabbit.
I guess he figures "I can go longer without eating than they can."
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Swan Noir
Registered: Jun 2009
Posts: 1704 |
04-23-12 04:56 PM
I think the poker analogy is not correct. In poker because you must ante up there is a cash cost to sitting tight in addition to the opportunity cost. More and more I think of trading as comparable to a NL game which in liquid markets your bets are always faded with no cash cost for sitting.
If you could find such a poker game you would surely raise your opening hand standards sky high. Why not? The fade is there. Part of the reason it pays to "shop" for weak tables in a poker room is so you can get faded more often on your aggresive bets. That is what weak players do -- they call big bets with draw hands and mediocre made hands.
My guess is that there is a very high correlation between selectivity and low risk/highly profitable trading and if we could look at the statement of every successful trader that correlation would be shockingly high ... maybe even unimaginably high.
Quote from Daal:
The argument against ultra-selectivity would be a statistical one. If a trader can find 3-5 excellent trades a year its likely he could find several multiples of that in good trades a year
A trader would have to have a very good reason to pass up smaller edges, maybe a time constraint of some kind. Otherwise this would be like playing poker but refusing to steal the blinds with good but not great hands when you know its profitable
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Martinghoul
Registered: Jan 2009
Posts: 5641 |
04-23-12 05:08 PM
Quote from Swan Noir:
Being extremely selective and the striking instantly when it is all right is surely the way to low risk high profit trading. While actually doing it is hard it is the correct goal. I will raise my hand when I get there!!
Not necessarily... It depends on a variety of factors. A simplest counterexample is a mkt-maker, who can't be selective, 'cause selectivity isn't in the job description. And yet, mkt-making and liquidity provision is one of the most lucrative activities out there.
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Swan Noir
Registered: Jun 2009
Posts: 1704 |
04-23-12 06:39 PM
Clearly Martin, market making can be extremely lucrative but it is not trading in the context of this conversation and is not trading in the context of 99% of the conversations here on ET.
I have no quibble with your contention that some of the most lucrative activities revolve around being willing to post and be hit but again, in this thread, the conversation is not conducive to that type of technical argument.
Quote from Martinghoul:
Not necessarily... It depends on a variety of factors. A simplest counterexample is a mkt-maker, who can't be selective, 'cause selectivity isn't in the job description. And yet, mkt-making and liquidity provision is one of the most lucrative activities out there.
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