I think that you're parsing the concept a bit but I won't argue the point. Of course you need the underlyings to move so I suppose that's directional. But you'd be surprised at how much a pair can sometimes percolate intraday as the spread b/t the two underlyings narrows and widens, enabling bias shifts and repeated substitution of players.
I've gotta say, this concisely sums up my experience in finding an edge... and it took me nearly 5 years to find it.
edges are mostly random. pure price action is the key robert hoffman teches pure price action and makes thousands guy from electroniclocal makes also thousands from order flow there is a new guy promoting spread correlation trading spreadprofessor.com. it is highly questionable. correlation does not imply causation. if he was that good why are his charts unreadable? we are on the verge of a 30 year ice age, yet people tell us the earth is warming. don't be naïve
The common that edges are random, does this mean your stance is that any patterns that tend to recur likely will come and go and aren't as likely to be useful as price action? Just trying to clarify. Silly question, but as much as I think I may know what it means, I want to be sure: What exactly does the term price action imply? Can you give me some examples of what it is or isn't? I do understand that it isn't watching indicators, but I'm not clear as to whether it precludes the use of charts. Is it more related to order flow? Is it intuitive/subjective or is it pattern-based at all? Thanks.
Not a bad idea. I'm not a Zen guy, but perhaps you will find these words by Ch'ing-Yuan to be thought-provoking: "Before I had studied Zen for thirty years, I saw mountains as mountains, and waters as waters. When I arrived at a more intimate knowledge, I came to the point where I saw that mountains are not mountains, and waters are not waters. But now that I have got its very substance I am at rest. For it's just that I see mountains once again as mountains, and waters once again as waters."
It's interesting that you bring that up because I've heard traders discuss something similar before. However, the reference was to a teapot instead of mountains. Same gist though... A little mystical for my taste, but interesting nonetheless. I guess the message is you start simple, get lost somewhere along the way, but then end simple again. I can definitely see this in trading. You start off just gazing at charts seeing fortunes, you get into indicators, all the bells and whistles, making it more complicated than it needs to be, ultimately settling for something much less than that.
I both agree and disagree on this point. I agree in that after I finally became profitable (in hindsight), my methodology is pretty darned simple (from a 50,000 foot level). But, the devil is in the details. Optimization of my strategy was extremely difficult. Understanding exactly how to place my stops. Understanding how to enter into and exit out of positions and how to properly size positions (based on estimated slippage, etc...). Execution of my strategy (to ensure maximum profit) is EXTREMELY difficult to do with perfection day-in/day-out. I'm automated---so this greatly simplifies things for me. But, even in writing my automated trading system, the complexities involved in getting it as perfect as can be were mind-boggling. All the way from outages, partial fills, broker problems, data provider problems, co-location facility problems and the list goes on and on and on....... Simple strategy---Yes. But INSANELY difficult to execute with perfection!!!!!
I have a similar approach using futures so i understand where you are coming from-the market must pay you and it becomes money/position mangement. I also ,like you,bias towards the trend or unwind if i see weakness/strength coming in. I also have similar problems if i am biased the wrong way at a given time but there are ways to deal with this. This type of approach could be divulged to others with no risk of destroying your perceived edge.And of course no 2 traders would trade the same way. I admire traders who take a view one way and back it for large swings but i admit i wouldn't be able to sleep at night. You gravitate to what you feel comfortable with-in trading and life in general. Good thread going here.Maybe ET is better this year,seems to be far less trolls and spammers in general.. thanks to OP for somehow getting a thread going on a subject that's been done many times in the past but somehow seems fresh....