Do you have any piece of advice for a novice trader? Anything that could be helpful?

Discussion in 'Options' started by newbie003, Oct 27, 2019.

  1. padutrader

    padutrader

    you did not ask me.
    but all are winners so you are better than 95% or maybe 99% .

    so my advice choose any one and go live.
     
    #51     Oct 28, 2019
    SimpleMeLike likes this.
  2. raVar

    raVar

    A couple of observations, from my experience in Quant work.

    First, remember ... I run Non-Correlated Strategies, to help me control my risk ( https://www.elitetrader.com/et/thre...ading-journal-that-shows-profit.337303/page-2 ). So honestly? I'm what a colleague calls "Strategy Agnostic". In other words, I don't really think any positive expectancy strategy is better than any other strategy. It's more of a matter of what the strategies actually are and how they work together.

    In other words, I have a strategy that annualizes 7.0%, but it's Sharpe Ratio is 1.1 and it's Sortino Ratio is 2.54. It's maximum drawdown is less than 1x it's annualized rate. Rock solid. But it doesn't annualize a lot. So is that a 'bad' a strategy? How would we define that? "Well, I want to make a lot of money!". Ok. Fair enough. But on the way to that goal? People find that drawdown (when a strategy pulls back for a short time) messes with their head and their discipline, and psychology. So if they want a low drawdown process / strategy? Then this might serve.

    But then again, I can take that strategy (which is very simple to run), and then mix it with a strategy that Annualizes 24%, but with deeper 12% dradowns.

    Then, when I run both of them together? The sum total, is that it's annualizes more like 13%, with very, very low drawdowns. The second strategy pulls the first strategy UP in and by mixing them, the first strategy minimizes the drawdowns from the second strategy.

    That's just an illustration though. The point? Is that strategy is important to me, only insofar as how I can use it in conjunction with other strategies, and the results of the combination of those strategies.

    So I don't really believe in a 'strategy being better' than any other strategy.

    There's a second point ...

    And that's what we refer to as "event count".

    Making sure that the strategies? Have a proper amount of history behind them, for the time-frame they are trading.

    For example ... that first strategy I mentioned? It's balanced every month, and I have history on it, as to how it performed, back to 1998. That's 252 occurrences, over 21 years. That gives me a lot of confidence.

    I have another strategy, that operates 4 or 5 times inside a month. I have over 594 different occurances, to let me know what it does, over 11 years.

    So my point? Is to be very critical of any data, that doesn't go back at least 11 years, with plenty of occurances, to give you some sort of idea how it performs in different types of markets.

    Third?

    I'd be very careful of anyone who says: "Always go with a high accuracy system" with no thoughts of the above context.

    I'm not the only Quant out there, God knows. There's a million of us, and I'm nothing special. Clifford Assness of AQR Capital also speaks publicly, and you'll find that he has similar thoughts to myself.
     
    #52     Oct 29, 2019
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  3. themickey

    themickey

    I enjoy the way you describe processes, always interested hearing a pro describe methods.
    However I kinda disagree with one thing, and that's history / backtesting.
    Every event is different and unique.
    Example, I buy at times IPO stocks which have just bolted out of the stalls, no history.
    Also I buy stocks at bottoms, falling knives, their history for the most part is doom & gloom.
    I pay little attention to what has been, I trade in the moment as it were, what is happening now, couldn't care less about a week ago.
    Or put it this way, history is history, it often has no reflection on the future - for trading.
     
    #53     Oct 29, 2019
  4. tiddlywinks

    tiddlywinks


    I agree with you for the most part, regarding trading in the moment. But there is a rabbit hole that needs to be addressed.... Uniqueness bias.

    Once you strip away the components/characteristics like fundamentals, market environment, traders mindset, and more, leaving you with only price and volume, you find that the current scenario HAS happened before in history: the current occurrence is NOT unique.

    How far down that rabbit hole you go can have dramatic effect on instrument/vehicle selection and trading profits/losses... The current situation/occurrence is NOT unique.

    Trade On!
     
    #54     Oct 29, 2019
    raVar likes this.
  5. %%
    That, tomorton Trender;
    + while a fortune has been made in option oil drilling buys/sells + REALTY options.Options are good in the sense of an automatic stop loss, but compare it to cash markets[SPY + QQQ+ REALTY..........} or derivatives that pay a small diVidend. Even if one was sure FED cuts again, which may or not be true, as my banker dad used to say- the roller coaster on FED WED can be a killer even if you were mostly right..................................................................................................[EDit note with no expiry time==,====== I kept some option books/charts ; BIG TRENDS, as Mr Price Headly named them LOL]
     
    #55     Oct 29, 2019
  6. raVar

    raVar

    It sounds like you are describing discretion?

    Oh, discretion definitely can be an edge. Without question mate.

    And make no mistake ... I have zero idea which of my trades will be a winner or a loser. I don't know, and know one knows, really.

    The really Quant development is done? Is to build confidence in the process being traded, and you learn what to expect out of any given market. And it let's me know if something is going wrong with the strategy, when I run it into the future.

    For example, take that first process I mentioned. Annualizes 6.2% right? It's maximum drawdown is -5.1%. In 2001, it did 1.2%, and in 2008, it did -2.1% for the year.

    So all of a sudden, if we hit a market like 2008, and the thing has drawdown of -10%, and it finishes the year at -12%? It may have "beat" the S&P 500 Index ... but I know something is wrong with the strategy. Or I better have an answer as to why such a large outlier would have happened with it.

    Quant work just helps you build confidence, and let's you know the bounds you'll be working with; as well as to let you know that your thesis is sound and can work in almost any type of market we've seen in the past.

    But the next trade? Complexity mechanics taught me there is no way to predict with certainty.
     
    #56     Oct 29, 2019
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  7. themickey

    themickey

    I'm having difficulty understanding, can you express this in practical terms, thx.
     
    #57     Oct 29, 2019
  8. newbie003

    newbie003

    I also came across this 'trading software' the other day. Wonder if anyone uses it or its just the ones that only want to turn their $100 to $1,000,000 ASAP. wouldn't every trader become a millionaire if the software worked? I don't think the software is legit, what do you think? Have you ever tried any 'trading softwares'?

    Thanks in advance for your reply!
     
    #58     Oct 29, 2019
  9. Thank you raVar,

    I am a manual day trader, so I take 1-3 trades per day. I forward test daily.

    I am not able to backtest to 11 years ago. I guess I can, but that will take forever.

    Within one year, I can record about 200-500 trades.

    Is 200-500 trades enough to test/prove a strategy is profitable within my drawdown tolerance?
     
    Last edited: Oct 29, 2019
    #59     Oct 29, 2019
    raVar likes this.
  10. Hello Mr. padutrader,

    Thank you for the advice. I always appreciate you.
     
    #60     Oct 29, 2019