Strongly disagree. Most methods fail all the time, because they are geared towards only a certain type of market. Trend-following methods fail bigtime when the market turns choppy. RTM methods fail bigtime when the market turns trendy. To say it's all the trader's fault is very short-sighted, unless you expect the trader to *know* when the market is trendy or choppy independent of the technical indicators that are almost never any help in that regard. Traders fail largely because their tools are flawed, not because they can't follow basic instructions. Most people can.
That is an interesting thought... Part of successful trading is to know in wich market you are and knowing wich method will work. It is pretty standard knowledge about the market that is easy to understand. Up/down/sideways and high/medium/low volatility. Breakout strategies that are discussed above work great in up and low to medium volatility markets but will indeed fail in sideway high volatility market. Common sense, standard knowledge available to the public... About your remark that most people can follow basic instructions. I find it in my experiences not true... Most people can not follow basic instructions. They first 'filter' the instructions with their own experiences and then apply what they think is the instruction. Besides trading, I have also some other business where I work with other people. My findings are that a simple instruction with one aspect of something they must do, will be followed trough, but as soon I give an order that is more complex, like build a stand, invite people and use exactly this words if you talk to them, that they alter the instructions to their believe and experiences. And trading is even more complex in my eyes...
I know I'm going to rub your hair in the wrong way with this comment but backtesting is way overrated to find a tradingsystem that work... I can make every system work in backtesting, with only adapting the variables when to get out... But it is a handy tool to know what kind of system would work in what kind of market condition... I do agree that not every author I have mentioned has a system; Especially Van Tharp (who I personally know) is a big advocate of finding your own system that fit's your personality. But the guy who he is working with the last decade knows almost everything about tradingsystems, Ken Long, is one of the top notch traders I know. Intraday, Swing and longterm, his trading is very good. And he uses what Van talks about in his trading. As do I.
My pedigree from research related to things like IQ and Income, that could predict what income you'd earn when you were 40 based on your ASVAB iq percentile, showed that intelligence was the greatest predictor of income with a 37% R^2. I guess my analysis of that is why I'm always leaning towards quantitative trading methods, than seat of the pants guessing. I don't consider strategies that work in real time optimized on past data as any reason to discount backtesting. Backtesting is a way to find a solution to a formula. Assuming your strategy is not literally measuring if it's May 5th, 2010, do not buy, then whatever the model says it did around that time is probably close to what it would have done actually. Even if the trades went off at different prices, it still would have had relatively similar positions on. In the case of IQ and Income, your intelligence modelled against the log of your income at age 40 is just the same as the models output at the time you had optimized it. Everything works is naive, because what doesn't work is thinking that not having to optimize simply because you fail to see the scientific basis behind backtesting is significantly more effective than trading on discretion. I prefer artificial intelligence to a trader's guesstimate any day of the week, and know that those discretionary traders cannot possibly trade as well as my robots do.
I hear you. I know from your responses to this site you are very heavily based to scientific research and wants to see 'hard' facts about some ideas before it is valid in your mind. And that is good. Your aproach is one way and a good way. But there is a whole other world out there, that exist with people, traders, that do very well without the knowledge you talk about. Many, many great traders never ever backtested their ideas, because they knew what they knew about the markets. My 'trouble' with backtesting is not how you do it. My 'trouble' with backtesting is, that it is way to easy to be fooled as a new guy in the believe that you have a good system, if you do not know what you need to know about trading and the market you are going to trade. But also this piece of information is known to the public and easy researchable... Let's agree to disagree on this matter Oh, one more thing: i'm very very naive. That is one of the reasons I can get information from someone else and take it in good faith without any resistance and applied it to my benefit. I believe (almost) everything untill proofed other wise
I agree. Any strategy you came up with when you were flat and of sound mind and body may not make you money, but it will at least get you back close to even. The problem arises when it starts off in the drawdown (even though you predicted the drawdown would inevitabley occur) and you give up on the system and start on something new, but now at a reduced account size. They all work, minus the spread and commissions. No way to overcome spread and commissions without accepting unknown risk which no system can compensate for. In otherwords, you need to guess, and you need to guess right. The system is just a foundation to work off of. Hopefully it has a strong money management component and a reasonable stop loss protection plan.
yeah, that's a good one. If you enter ES long and it moves 2 points against you should close it out at a loss, thus honoring the "cut your losses short" adage. And then you should immediately reenter long at a better price, thus honoring the "buy when there is blood in the streets" adage If it moves in your favor, you should never take a profit unless they don't ring a bell, thus honoring the "They never ring a bell at the top" adage.
danielc1. You have a lot to learn. Suppose you do. Blah blah blah Suppose you don't. Blah blah blah Read Time magazine's 100. Narrow your focus to a comment quoted by the economics and financial editor. He quotes this guy who said something he discovered (and he is wrong, too). Here are two people that the public might even put some credence into. Let me help you past the sophistry of Time magazine and those who receive compliments on their supposed to be true truisms. There is no risk in trading on any fractal once you have purposely built your mind to totally parallel the operations of the markets. (You build a fully differentiated mind) Look into your mind to see some systems where you have successfully done that in the past and in your youth where you could still learn. Now assess other posters in the field of trading by measuring whether they have gone through building their minds fully for trading or whether they are FOS. Regarding Time magazine and it editor and the person who got recognition, they all are FOS. Lets pretend. See below. When you use your fully differentiated mind for trading, you notice there is no noise, no anomalies and that every observable fractal for trading is fully interlocking and a perfectly rigid unfailing system. That is to say, you went through your very familiar process of learning on the topic of markets and your mind is fully differentiated and precisely parallels the system of the market. Make a list of topics that you have learned completely. Next to it make columns for who taught you and the method they got you to use to become fully differentiated. For example, right now you have a mistaken notion that Blowinski is scientific. You do not understand, so far, about science. Look and see that science or a science topic is not on your list, nor were you taught or trained. Have you learned about mathematics or maybe algebra for base 10. Each base has a separate algebra is what you were told when you took simple math courses. One type of math is dictated by the markets. If you are reading comments from a person, for the person to be correct, he has to be using that kind of math. Read about backtesting from posts of those who do and do not backtest. (I cannot, simply because of the math that market's dictate, this math is always certain and probability cannot be part of this brand of math). Someone in this thread spoke of one's mental orientation. They didn't highlight one aspect that, roughly speaking, is deadly and terminal. The mind does not erase very well. What is the mind's substitute for being unable to erase its memory. Make a new column on your list and list how you learned to correct mental mistakes you made while learning a topic that you were able to learn in the past. Notice that all the topics were long ago and nowadays you are not adding topics anymore. In trading, I have found three methods are required. Three are needed because of market size. Market size limits your personal application of capital. Each method stems from but one core. The core and each methods are published here as one pagers. This means there are four one-page sets of rules for trading by being in the market all the time (RTH's); on the correct side of the market all the time, and taking the full offer of the market in profit segments all the time (carving turns with partial fills). It takes about 40 to 60 days to become fully differentiated mentally. If you have a unsettled heritage or have been casual about knowledge and skills acquisition, it may take you longer to read and knowledgeably use the four pages. The 10,000 hours thing is longer than it takes you whole body to replace all of its cells. Why consider spending 2,500 hours a page. The more FOS you are, the more toiling (think of how toilet paper gets its name) you will have to do. Stop right now accepting unfounded input. The PVT page for short term position trading stocks was determined to have a Sharpe ratio of 60 by Worden Bros using their universe (the NAZ 100) for a year's trading. Blowinski debates the findings of Worden Bros drag nd drop Blox which converted the one pager to logic and applied it to the NAZ 100. Is Worden FOS or is Blowinski? When Worden Bros did their thing at the TradersExpo in thier exihibition booth, they did not believe they did it correctly the first time. (they promptly erased it....) I chuckled. Look,,,, Think..... You do drag and drop and you run it for a year on 100 stocks. You get a number never seen in Worden Bros ever before. Why would you erase it? Wouldn't you save it to a secure file and keep it safe and available for later analysis? My best post of all time was promptly deleted by ET management. Topically, it presented by mathematical name, the four cornerstones of creating in financial markets. But I used the word "fuck" (I am told) 26 times. Anyway Worden did their drag and drop over and got the same Sharpe of 60 plus. And then they didn't delete it. BUT they didn't sell it either. It is here free as one pager. danielc1, sorry, I have to be the bearer of such sad tidings for you.