"the holy grail is this: great traders are great not because of some computer program they use but because they have the ability to control their reality. the computer provides the information; it does not supply the thinking. the holy grail is nothing other than the self-examined life according to 21 irrefutable truths."------john hayden
I think your presumptions are based off of analysis of historical indicator data, please correct me if I am wrong. Here's an interesting question. I'm not an investor but why not use this example for simplicity. Assume you want a 40$ stock. Your criteria for selection is based on this one variable, 40$ share price. Let's say you have two choices, XYZ which is a dividend paying stock, been around forever, not a real mover but not dead either. Then there is ABC, a fly-by-night tech company with no earnings, no cash flow, riding on pure momentum. I think your selection method would be to flip a coin and pick one of them, and just manage the risk through position size and stops. My method would be to delve deeper. ABC may very well be a better opportunity, XYZ could blow up. Nothing is certain. I will look at all factors available, and make an informed decision. I think if I maintain discipline, the coin-flipper will get a mean return in comparison. There is a reason that shorting even the most pathetic stock may be a bad idea in a very bullish broad market, and vice versa. If you accept the existence of trend, then you have just refuted your original theory. Goodluck,
Agree 100%... That is why technicals work, they are self perpetuating - if everyone (or at least a lot of people) in the market thing a move will happen, it will happen...
IMHO every trading system will break down eventually. The secret is trade management of the exit once you are in, not entries. Say I have one entry that goes wrong, do I get out immediately, or wait for the natural wave to make it less of a loss or break even and possibly lose a little more. When I have a good entry, do I cut it off too early or do I let them run for the right amount of time. Do I get out before it fails or as it is failing? Am I too afraid of being wrong, so my losses get away from me? Or afraid of losing money and getting chicken feed. Reading the pace and depths of the moves IMHO is the most important factor in trading. You can be right on the entry 50% of the time, but the exits are so bad you lose money.
Sounds like your post has less to do with entries and more to do with managing hope and fear, which applies to both entries and exits, if you have no strategy.
This is a more advanced topic, but my method is to go with a stop at a point that is .5/.75 of the initial gain I am looking for. If I see the position go against me right out of the gate, and it doesn't hit that stop on the first swing down, I will get out on the next swing up even at a loss unless there is a strong move back in my favor (which happens rarely when things start to go south). So basically that means I rarely take the full stop loss on a position, and thus my results tend to better than if I were to back test with a mechanical approach. That's just the method that works for me, others may find their system requires more or less risk, and more urgency in exiting when things go south. Goodluck,
Yes, quite true. If you can trust your strategy. I have been going back to the drawing board a lot lately. I am finding my discretionary trades are working better than my strategy trades. I have stripped my charts down to basics. Movetrend, Bollingers, EMAs, candle patterns. Just the facts, no oscillators.
======================== If it only ''works'' 94.777% of time still good gap rule; F & GM dealers gap up thier prices on new models about every September. Several reasons it still works over time; however 95% sucess work can still fail 7 times in a row or more. ============================================== One of several logical reasons it works so well; biggest players and most players watch prices closely and dont want to buy up gap up most of the time.