Bill, I have no problem changing a system over time; in fact, I would almost expect that I would have to as markets change over the years. However all that would get taken care of after hours and concrete rules (whether existing or modified) would be in place when the market opens so that there is no discretion. 1. That makes sense... but if it's trading down and you don't trade, how will it ever trade back up again? Or would you just paper trade until you're back to being consistent again (meaning either the market has gone back to the way that it works with your system, or your system has been tweaked to work in the new market conditions)? 2. I also like this idea. 3. Yup. Yeah, chop sucks. Too bad there's not a way to know ahead of time how choppy the market is going to be on a given day, and just take those days off To be profitable wouldn't you need to adjust the parameters (in this case, bar size) before the trading day? Although I see how what you're saying could work like this: your system stops being as profitable as it was before... so you modify the bar size a little bit until you're getting better results, and then you keep it that way until you need to modify it again, etc. I'm struggling with that rule, too. I know that obviously some times are better/worse than others, but with the exception of my rule of not entering any new trades during the last 30 min of normal hours, I haven't seen any times when the majority of my trades are profitable or unprofitable, and for that reason I took every trade from 8:30am CST until 2:30pm CST. Of course, with some of the small tick charts that were being posted, trading all day would result in 100s of round trips. I don't like doing any more trades than I have to. The way I was doing it before (500 volume charts on the YM) resulted in between 15-30 round trips a day. Honestly I'd like to develop a system that is much less than that. Maybe 1 or 2 round trips a day with much bigger profit targets. That'd be awesome But I'm still working on that. You're right, I don't know much about those. Any advice? You're talking about things like dynamic congestion areas and NOT pre-calculated pivot points and stuff, right? Yeah, I would like to learn more about those. Thanks for the reply.
That would actually be really useful for me. I'll have to see if I can come up with something like that for SierraChart. I've been experimenting with the Adaptive Moving Average (AMA) for similar purposes because during congestion it becomes flat. It's not perfect but it's definitely interesting. It may be useful in knowing when to sit out when there's no trend where a regular MA would be chopping and whipsawing all over. On your trade the 240WMA chart, are you just entering with bracket orders and a profit target of 5 pips? What's your stop loss? 5 pips as well for stop?
That's an alternative but then what's being guaged isn't by definition an equity curve. Drawdowns are expected losses compared to expected returns. It's a ratio of a fully tested system. The appeal of mechanical systems lay in trading highly leveraged accounts. When more losses appear than expected, trades are still executed, only you're risking less of your buying power and equity. If you're trading for an example a system that delivers 4:1 wins over losses, you can trade a 20 contract account as an 80 contract account. If suddenly the expected return drops by 50% you would scale back trading maybe 10 contracts until you can replicate original system parameters. By going sim in drawdowns you can't rightfully say you've all required data sets in forward testing the rate at which drawdowns rise over expected returns.
In a previous post, I already mentioned Lance Beggs essay (I think the title is something like Top Down Trading) and website. He trades between support and resistance using candlestick formations (no indicators). There is a lot of useful free trading info on his site. Toni Hansen wrote several articles about S/R trading. She includes Fibonacci and whole number S/R which I don't use. She also uses some indicators. Linda Bradford Raschke has written articles about price action and Support/Resistance (I think she calls it Tape Reading which is a misnomer, it should be called Chart Reading). She uses indicators in her trading. Judy MacKeigan (a.k.a. Buffy) wrote an article on price action that discusses trend analysis and S/R that has useful info. She uses indicators in her trading. Bill
IMHO, this is a BIG MISTAKE! People say "markets change". That's an ILLUSION! What really changes? There are buyers and sellers in all markets. The price goes up and down in all markets. The only thing that changes is PRICE and VOLUME. That's what makes it a market. It's really the RATE OF CHANGE that you see over the time frame you are viewing that matters. When THAT changes, you say the market has changed. From page 1, post #3: To me, this is key. Every trading day is the same to me. So long as the price is going up and down, I can make money. People ask me about the market. I always tell the market is the same going up and down all day long. I DON'T CARE ABOUT THE MARKET! I am focused on what I am trading. If the market is going up but what I am trading is going down, I better be short, selling or flat, right? If the market is going down but what I am trading is going up, I better be long, buying or flat, right? Is there a reason that jjrvat's PBP should change if the "market changes"? I don't think so. The market will still move in waves. Some waves will be higher/lower than others. Price will either be above or below the WMA(240). ETC... jjrvat, if you are reading, please comment. Thank you.
TRO... I think what ironfist meant was that his system might have to change over time as conditions change.... perhaps his word "markets" is what you responded to. a couple of examples of conditions changing... but there are many more... 1. change from fraction pricing to penny pricing 2. change from nyse market makers to hybrid of pit/electronic each of these examples changed existing trading systems in effect prior to the change. Cheers Toucan
To me, this is key. Every trading day is the same to me. So long as the price is going up and down, I can make money. People ask me about the market. I always tell the market is the same going up and down all day long. I DON'T CARE ABOUT THE MARKET! I am focused on what I am trading. If the market is going up but what I am trading is going down, I better be short, selling or flat, right? If the market is going down but what I am trading is going up, I better be long, buying or flat, right? Is there a reason that jjrvat's PBP should change if the "market changes"? I don't think so. The market will still move in waves. Some waves will be higher/lower than others. Price will either be above or below the WMA(240). ETC... +1
Nah. Say you're using a system that uses x constant volume bars. In a couple years, say the total daily volume on the instrument you trade doubles. Maybe not to compensate you have to use 2x constant volume bars to get the same signals you were getting before. I don't disagree with any of that, but PRICE, VOLUME and RATE OF CHANGE changing could all possibly require system modification. Cheers.