I just don't understand

Discussion in 'Trading' started by shark, Apr 5, 2010.

  1. shark


    I read a thread where a guy posted a system. It traded based on the fact that the market tends to establish a daily high or low before like 11:00 AM. Historical data also backed this up.

    Isn't this a little bit too simple to possibly work? I just can't imagine systems like this to even exist. I'm sure someone out there is trading an uber-simple system like "the market always reverses direction at 10:43" and making consistent profit off it. And I'm sure that I can find any number of other systems that are 80% accurate every day.

    I'm a skeptic, and it seems impossible for these systems to be profitable. If they were, wouldn't they be abused to extinction by literally everyone? What is the logical basis for such simple systems to actually be profitable?
  2. You are confusing simple vs. easy ... There are many good simple systems out there, but that does not mean they are easy and can be used by anyone.
  3. shark


    The way i see it, finding an exploitable edge is 95% of the work. The rest of it is easy enough.
  4. The entry is among the least important parts of a trading system. Bet size and risk management are much more important. Just knowing when to enter a trade is hardly a system.
  5. u21c3f6


    Actually, no. The trick is to know how to apply the information. Interestingly enough, one strategy that I use is to look for an entry after 10 AM. While I am not looking for the top or bottom, I am looking for a short ride somewhat based on what you wrote above.

    The bottom line of this whole thing (just like gambling, yes I said gambling) is for your set-ups to collect more in total on your winners than you lose in total on your losers. In my 10 AM strategy I run about 60% winners at 1:1 risk. There is not an entry every day. Simple but very effective.

    One other note. Many times people will write that you can't do this or you must do this etc. There is no one way to do almost anything and that is certainly true of trading. I have found many times that doing the opposite of what is considered the "correct" thing to do is actually where the profit is (and that includes gambling)!

  6. shark


    I see, so what I'm understanding is that these statistical advantages exist and are obvious, but they require skill to profit from. aaaaand the reason why everyone isn't using them is because they don't manage their risk-reward properly?
  7. I have noticed that the market tends to top out or bottom out mid-day, not necessarily specific times.
  8. F112358


    I have noticed that the market sells off from the high of the day and rallies from the low of the day, and that the open is often enough very close to one of those extremes. If the exit is exactly on the close, to make matters simpler, one can make millions with this information as it is.

    I'm sure you'll find a way to fuck it up in the middle. Thousands have lost millions doing it.
  9. cokezero


    The simple answer is the bulk of the move happens before 11:00am.

    The same argument holds true for saying ALL daily high/low happens before 15:00pm. The only problem is we have zero move left to profit from.