Zboy is right react not predict. When you predict you form an opinion which can be deadly. I'll point out a few different thing also. In past markets I would see a a huge news story of a company heavily beating earnings. I'd jump on board and could easily grab 3 or 4 points if it wasn't gapped too heavily. Now this market gives me .10 sometimes. There is a big difference. I don't see as much momentum in the market. That was usually caused by the elephants. ie mutual funds and insurnace companies. When they have to buy 800,000 shares they move stocks. Lately they aren't moving as much. I used to run volume scans and whatever was up heavily for the day I'd buy or sell depending on the market for 3 , 4 or even 15 points when it got parabolic. This type of momentum isn't around. I like to think of myself as a little feeder fish off of a huge shark. Don't ever get in front of one as he will eat you, but I'll take all of his scraps everyday. Since he is sleeping it pays to sometimes be sleeping when he does. Right now a lot of trading going on is a feeder fish trying to eat other feeder fish. They bite back so be careful. It maybe easy to say but it can be hard to do. It is all about your exits, and how many shares. rtharp
I think there is a fine line between anticipation and prediction, just like there is a fine line between seduction and rape. Its an art form. Jeffrey
I am a programmer and I maintain a several gig database containing every tick of CME and other futures in the last 3 years. I backtested a lot, but most results confirm what hsanson says. RSI based systems seem to be completely useless (50:50 chance), but if you found something sucessful, please tell, I will backtest it and you will get my results. Until now, I found one somehow promising thing: the divergence of the price from an exponential MA + the trade volume. The big problem in intraday is the huge amount of noise. A good noise filter could be a solution. Are there any math students of know something about it ? Please tell your ideas, I will try to backtest them. You can reach me also via sascha@daytrader.com
I thought of one thing that I forgot to mention before. I find that almost ever indicator works best the futures, not stocks. I don't even have any indicators on my stock charts these days. Here's a pic of my indicator setup on a 10 min COMPX chart for those interested. It may help newbies get an idea of how to set things up. I base 80% of my trades from this chart. http://www.iwinfree.com/notes.htm (I'm referring to the top chart)
I think Swing trading is better for me after reading this thread. Is it my wrong thinking that given any group of people in any profession, there will always be a scale of smart to not so smart in that group. I think I would rather follow 10 or 12 stocks everyday and develope a feel for their cycles and how the public relates to them under different circumstances. I would think doing this would give you the edge in that group of people that is just the general investment public. To me there is no difference between a professional stock analist, and a non professional. It boils down to opinion based on precieved facts. Chase a dog and it will turn and bite you. Watch what the dog does everyday, and you'll have a better idea of when to approach or stay away.
I did some programming with emini NQ, and during the bear market we had in the last quarter of 2000 and first quarter of 2001, a simple trend following system based on MACD filtered with longer term MA works wonders. Of course, when volatility levels off, it doesn't work well anymore. I am wondering if there are indeed traders out there doing strictly system trading (absolutely no human intervention) and are profitable. I came across some people who develop trading systems and try to trade other people's money for 15% fee... the big question is, why don't they trade their own account if they have 100% confidence that the system will work. I guess the Holy Grail is inside the trader him/herself... it's all about reward/risk ratio, position sizing and money management. My own experience in intraday trading is that break-outs from tight range works the best because you can define very small risk... if you have a stock that moves 5 pts a day and you see a 5-min candle with 1/4 point range, you buy the break out from that candle, with a target of 2-3 points, that gives you an R multiple of 10+... do it numerous times during the day and it's tough NOT to make money.
Of course you can make money with system trading. There are many ways to make money. The reason it is interesting to trade other people's money for a fee is leverage. At least for me. I have several systems, but trade only one with my own money. The other systems are traded for other people with their money and I get my fee. You just can't trade them all. Also, each system has its own risk/reward profile, holding period, general method of working etc.. Each trader and investor has preferences. You also described [or mentioned] a system above. You think it made money, why would you think others can't make money with systematic strategies. The tricky part with system trading is to know when a system is no longer working. It should be part of any system trading to monitor itself. When the system is no longer within its predefined parameters of win ratio, risk/reward, consecutive loosers etc.. it may be deactivated, and go back to simulation mode for a while to see if the problem is serious or not. It is just like other types of trading. When you hit a bad loosing streak, you should reduce size and even consider off time to regroup and see what it is wrong. System trading is the same, it is not Holy Grail. So you can succeed with it or other ways. Something to know : in actual implementation of system trading, the usual source of failure is the human trader [that is when the system can't send orders to the broker itself]. With system trading it is crucial to execute all the trades, the exact way the system expects it. Doing otherwise causes results to be statistically different than the back test and eventually a good system becomes a big looser when not implemented properly. I noticed how often it is difficult for people to do 100% of what the computer tells them. Usually the computer is right and they are wrong. But it is tough to admit. vpiNeo
Yes, the Holy Grail is inside the trader themselves. The big boys, the likes of Goldman Sacks, hire traders who are put on probation. If the do not make a minimum of 200% per year their first year are let go. Many make more like, 400%.(Re: Published Trader interviews) Why don't they just quit, and trade for themselves? A trader can be successful with a system, and changing the trading environment does not fit that traders personality, and/or training. Example: The amount of money traded, and the source of money traded. Conclusion: Most traders who can, and do trade Millions of dollars of other peoples money, can't trade for themselves. They find that there are some emotions that have interfered with decision making. I know of someone who came off the floor thinking he could do it. It took him two years before being able to trade for himself, and he still went back to working for others. Now he does both. Jeffrey
Yes, Jeffrey is right, it is easier to trade when it is not your money on the line. If you always only traded for others I can imagine you have a very hard time on your own. Psychology is also critical in system trading, just like in other types of trading. It is not true that because it is a system you can trade like a robot [you should, but you don't]. Holy Grail is always in yourself, is yourself [Van Tharp]. That's why there are so many ways of trading with success, and so few actually succeeding. vpiNeo
Truth within truth Keep to the basics and succeed, Buy low, sell high. systems to me are like baked potatoes, start with a rotten potatoe, put on sour cream, bacon, chives, cheese.....guess what, you still have a rotten potatoe. use a bad system, put on level 2 quotes, quick trading access, lots of capital, guess what you still have a bad system. Don't get lost in all the "systems", use common sense. Don't catch a falling knife, and don't try to jump on a moving train.