"Really ? commen sense is not so common in trading" Well, look at the market. It's not hard to see that prices move in waves. Momentum is greatest in the middle and least in the beginning or end. So common sense would be to start looking for a reversal wave when momentum starts to fade.
This extracted from Berstein's famous book "The improbable origin of Modern Wall Street" http://perso.wanadoo.fr/harrytrader/random_walk1.gif do you see wave ? Well you see wave in what is pure Random Walk that is to say NOISE !
"due to less bad results, i am not ditching the strategy on second notice" English first language yours not is, young Jedi? MurrayMath is not you being try next wonder I?
As for myself I know that this market is not pure random walk because I created a model, but I don't talk about me, I talk in general of any trader who doesn't use my model (not yet ) or any other predictive model, they abord the market as noise so what you called wave or trend is not wave or trend in statistical sense of term since there is no wave or trend in a noise. I even saw once in an analyst book a justification of trend in random walk with arc sinus law : this is a great laugh for a statistician, arc sinus law (or in fact Levy's law who made the discovery around 1959) has nothing to do with trend but with persistency of chance or bad luck. That said, it is true that one can abord the market with randomness in mind (see my answer below to an other post on aother forum) but please don't talk about wave or trend since statiscally it is not that. Silver >...Was it Van Tharp who conducted an experiment >whereby trade signals were generated by the flip of a coin. The >system made money, as I recall. Me - Of course the system made money because of trading rules who permits you to enter or leave the market when you want AND because there is persistent trend ! >What does this suggest? Well a couple of things: trade signals >are not the determinant of success; Me - It doesn't mean that if you have good trade signals you won't have a much greater chance of success. Silver >some argue that a system can be wrong 70% of the time and >still make money. Me - Yeah it is not a discovery : Since Pascal at least a few centuries ag, one know that gain has two components: probabibilty and average gain. Your average success is probabibilty * average gain: you either privilege one or the other or both ! Now for people who doesn't want or who can't predict market, they will privilege the average gain that is to say have a win/loss ratio of at least 3. They will have to cut losses rapidly since they enter the market at random and that market only trends 20% of the time that's why they are wrong so often but still win globally. But of course if you can predict the market you can lower the risk, and optimize the avagerage gain, and that means much smaller drawdown and much less capital requirement especially on futures market. If you use random entry on the market, and you are not enough capitalised for this market you will be washed out. So chose your market consequently and do not go to trading futures on daily scale with just 2000 $ !
Harry, So you agree that there is there is trending behaviour in markets, ie a hurst component >1 (i am not sure about this but you know what i mean) Conclusively, you can make money by just good money management (if it's good enough to pay for slippage and commissions) What's your take on predicting: high win/loss ratio? is this possible too? merely trending behaviour doesn't give you any signals..