One of the best indicators I've seen is the Yahoo stock boards.. they are the true indicator of the "dumb money" group. For example, the MXO (Maxtor) group just has strong buy after strong buy recommendations by everyone .. yet a blind man can see a downside breakdown on volume and now it is retracing weakly to the break point -- before presumably, heading back down hard. Any mentioning of "sell" on that board will lead to personal attacks on your mother. This is an indicator of "weak longs" and a double confirmation with the dumb money. Works for me.
And have you tried all combinations of discretionary trading to warrant your "overgeneralization" in the first quote?
If the end trader has the possibility of taking different actions under the same dynamics without any basis for deviation, those practices fall under discretionary trading. And since trades can be taken without basis, these actions are undefined. We cannot test undefined rules. Discretionary traders go by hunches, or feelings, and these properties cannot be quantified by any statistical testing. If these feelings can quantified, then by definition they are rules, and you begin to fall under the label of system trader, instead of discretionary.
"Risk management helped to turn everything around. " Aint that the triple truth....since I sat down and figured out my avg winner/avg loser ratio and cut my losses to half my avg winner its like I found some long lost trading secret...Damn I am thick headed..
I disagree. I'm a discretionary trader in the Eminis and all my trade setups have specific rule-based criterias. No feelings...no hunches...no opinions. No sujectvitiy about the rule-based criterias. Here's where the subjectivity (discretionary aspect) comes into play... For example...lets say I get a trade signal 2mins prior to the release of a key economic report or a few minutes before an interest rate announcement... I most likely will ignore the trade. Simply...I won't take the trade eventhough its a trade signal. Here's another example...lets say I get a high probability trade signal that I usually go normal to heavy on the contracts... however...the current market internals starts acting weird because President Bush is live on TV and being covered by all the major financial networks... I may take the trade...but light on the contracts to manage my risk or no trade at all. To me...that's discretionary trading and one of the reasons why backtesting or looking for statistical meaning via computer methods... just doesn't work because of the subjectivity involved in whether or not to take a trade. The more I think about this...in some ways you may be right if you were talking about another type of trader... one that trades WITHOUT a trading plan (entry signal, exit signal, stop/loss placement, profit-targets, ect)... nor a trading methodology (the business aspect of trading...overhead costs management...size management...risk management and so on). P.S. Maybe the trading plan and trading methodology described above is interchangable. NihabaAshi
NihabaAshi I agree with you 100%! There are no absolutes. A discretionary trader can have rules but have the experience to know when to improvise. One of a trader's greatest assets is to remain flexible and open-minded.
This thread how somehow evolved from someone asking a simple question about indicators to a debate over systematic vs. discretionary trading. For the record, I'll add my two cents worth. I've been involved in trading for 15 years and I believe the are some market relationships and observations which will never be able to be programmed into a system. In some respects, you could draw an analogy to many aspects of life. There have been debates on whether our nuclear warheads should be run totally by computer. Thank God that hasn't happend yet. I for one will always value the human element, even with its inhereny weaknesses.
Yes my trading improved when I begin to understand probabilities of the strategy along with better risk management (I do this via position size management). Yet...although indicators are lagging...they are very useful to me. My trading would suffer greatly without indicators or suffer greatly without good risk management. Simply...they co-exist well together and I do not see one without the other. So many different trade methodologies that make money or lose money...the issue isn't if indicators work or not... in my opinion...the issue is if you know how to successfully use technical indicators. Here's the facts...technical indicators work for some traders and doesn't work for some traders. Further, it doesn't matter if your a price action only trader or an indicator only trader or a little of both... your profits should improve with an improved or better understanding of the probabilities of a strategy along with good risk management. Note: I use strategies with technical indicators and strategies without indicators. I don't see one having an advantage over the other...other than less computer CPU usage NihabaAshi