There are multiple ways of developing and / or improving a trading system. You can do it top-down: start with an idea, then test and refine it. You can do it bottom-up: start with bits and pieces, then fit them together. In my opinion the first approach is far superior, but let's be frank: not everybody is capable of having good ideas. It's the difference between smart working and hard working. It's the difference between trailblazers and masses. Testing entries with fixed holding period or random exits, and testing exits with random entries are one hard working approach that may lead to a minuscule edge, if any at all. Why? Because the market doesn't behave that way. Because backtesting on any amount of past data tells you little about what's next. In a good trading system entries and exits work synergistically. Together they yield great results, while separately tested they may fare poorly or even fail miserably. On a side note: not everybody is capable of doing proper backtesting, and probably most are not even aware of it Money management, meaning position sizing, as well as using hard stop losses will not make by themselves a great trading system, but will improve your results, will protect your capital, and will give you consistency. Bottom line: you need a great idea. If you're not creative enough to generate it yourself, look for one! You may not even be smart enough to recognize a good idea. Then, if you really want to trade, resign yourself to a bitter life of work hard for minimal profits. But anyway use money management and hard stops!
I agree that's not enough information, but just looking at this picture I think a short entry has better odds. Why? - a lower high - 2 shooting stars with the same high - second shooting star has a dark (red) body and a lower low - last bar broke down though the trendline - price is bellow whatever moving average - last 4 green bars and thier slope look like a regular counter-trend wave. Maybe whoever posted this snippet would show us the whole picture.
I believe there is some disconnect in yours and others here thinking process with respect to entries. Allow me to explain. (I apologize in advance If I am sounding like a "know it all" because I don't know shit, I just want to further my own understanding of why others do the things they do in the markets, I find this information to be the most valuable with respect to identifying good trades.) The disconnect IMO is the difference between entry (no matter long or short) and expected outcome. Good entries are not ones that produce consistent winning trades (yeah, I know this sounds silly, but bear with me), but rather ones that offer the least amount of risk. I dont care If I lose 3 points ten times in a row because I know that I'll make 30 points the next time. (I believe my win ratio is about 40% at the moment) Case in point, the chart scenario doesn't have a good exit point for being wrong on the short trade... Where is the exit point? I don't see one, this market scenario lends itself to elasticity, not direction (again, if it was a heavy directional day, my opinion would change about this). There is no value to this trade on the short side, you might take down a point or two but is this really the situation you want to put your capital at risk into? My point is, random entries or not, It doesn't really matter, it where you manage your stops and how you identify and respond to *unlikely* scenarios. Your comments only established conditions for your bias, they did not establish conditions for the trade. Very important disconnect here.
both of u previous posters just mad a case for the validity of a random entry based on that chart, even tho it looks [at least to me] like a clear short. prolly u cud take the opposite direction if u get stopped instead than flippin' the coin again and maybe then with a half random entry system [+strict money management rules] u likely to get positive overall results.
Okay, so there are 3 people looking to short this and I'm the guy going long. Those are great odds, I would take that long position every time given those odds. Where would you put your stop?
stop just above previous green bar would do just fine to me...still, i'd like to know what mkt this is and if bearbelly can reveal to us the rest of the chart...your odds for a long are just atrocious by the way, hee hee, look at that double freakin' top, bar closin' below trendline, etc etc... edit; u also forgot that u are not pickin' against two mediocre traders; cnms is apparently a profitable one and sure i am 1, if not the best trader here . not sure bearbelly tho, but given he sides with us he must be good as well, innit
Yeah. Maybe your right, I see a upside down head'n'shoulders as well... could be the days reversal point. Also, my holding time would probably an hour or two. I don't take down little pts here and there, I prefer large R/R trades. My guess is this an index future, possibly the ER2... Show us the f--king result already..
You're correct that you shouldn't take a trade before knowing where's your stop and what's your profit target. And there's not enough information for me to decide on those. But Bearbelly's question was:
If you backtested a system which only triggered a signal after a 500 point move in the ES in one day what information would it tell you to expect next with regard to one day 500 point moves in the ES ? BTW what backtesting platform did you use to arrive at your conclusions ?
Yeah, I have no answer to that question. I don't know what will happen. I like the idea that it appears like an obvious short to you guys. It all depends on the product I guess...