As you ease into being able to see the markets, you will notice that there are many levels of market cycling. I use the term cycling to describe the sequences of trends and reversals in your terminology. You may think of this cycling as a triangular or sine waveform. It turns out there is no choice on the table for traders when it comes to trend or reversal. At all times the market is doing one or the other on each of the fractals upon which a trader may choose to trade. I monitor three fractals and I prefer to always be in the market and hold throughout each trend and I do reversals (a trading tool that combines and exit AND entry at a given price). The name I have given to the monitoring task for this is called MODE. According to the P, V relationship (Granville, Dodd, 1934), the market is Continuing or Changing. Continuing is trending and Changing is reversing. The thread you have started is the key to trading as an alternative to the CW (Conventional Wisdom). By running an ATS that gives you the MODE on multiple fractals, it is possible to extract all that the market offers. If you do not have an ATS, this can be done manually (mechanically) by monitoring, analysis, decision making and taking action (MADA) as a fequently done routine. I personaly hope you continue to think critically about what you are doing and how you are developing the beliefs you will need to be successful. You need to have a trading plan and a business plan.
Wow thanks for the advice. I didn't know that was touching on a key issue, just a question i had while watching the charts for my first time last night. Just of out curiosity what IS the CW? I didnt know I was going against it
There are a lot of CW type traders in ET. As I observe, they generally look for opportunities to make money. These opportunities are determined to be acceptable based on back testing (without curve fitting). The potential for sucess is determined by using odds (probability). From here on out the CW dictates how capital is preserved by management and risk control. There are industrywide standards for these measures. As you read in this CW sequence you can see that the process is inductive and not based on what is called science which hypothesizes based upon the null hypothesis. The natural consequence is what is read in the literature under the two faces (sides of the coin): the market wizards and those who fell regarding Balck Swans. There are about 80 successful common edges used in CW trading. Success is defined by aggregate data across the capital sizing spectrum. To see the picture more closely with respect to trading sucess, you have to back out fees, commissions and deal type activity which coincides with the portions of capital that are actually "traded". You also have to back out "investments" of these "trading" organizations. Buffett, for eample does not trade at all. I hope you will see posted here other views on what CW trading is. There is a great contrast between the MODE based approach I described and CW trading. When you trade using MODE, effectively, you are frontrunning the CW traders. Since they are sidelined significant amounts of time, their performance is a subset of the whole of MODE based trading. Therefore, when performance is compared as a ratio, it is apparent why the ratio is as it is. If two ratios are used (one for time and one for performance) it is seen that the ratios are not comparable and it is possible to conclude that there is no benefit from not being in the market and , especially, no benefit from leaving a trend early. The issue of the difference of trading perfomance boils down to only thing: timing. In MODE based trading an exit is coincident with the next entry; in CW trading an entry has no connection to the subsequent exit AND the next entry has no connection to the prior exit. This disconnect in continuity of trading in the CW trading is the primal cause of its shift in preformance compared the the MODE based style of trading. NB: There was an era of trading that subtended the CW. From the 1980's until about JUN 06, quants came into being and completed their run. This is largely an exploitation strategy where advantage is gained by exploiting market inefficiencies: doing more with less is an apt description. The math of choice uses large and fast computers (See nuclear reseach computing requirements (very tall stacks of PC equivalents)). There will always be pockets of this exploitive approach that in some cases includes securitization (designing and building securities that at the end of their useful lives become illiquid). For the MODE based trading, the limiting mechanical manual case is a multiple of the ATR. when used at a MADA rotine cycle pace that is in the ATS realm the multiple is more than doubled AND this is largely a factor of effectiveness and efficiency. thee is no Black Swan aspect since the ATS logic is derived from the scientific application of the null hypothesis (It is important that the programming administration has affected this discipline, by the way). My views are based on pragmatic experience being reduced to practice as modern technological supports were invented and came into financial industry usage over a very long period of time. the financial industry is nortoriously poorly equipped in handling AND processing data. The delivery of data, so far, is in its infancy.
I think I understand what you;re saying. a lot of it goes over my head though. I appreciate your advice.