I think you will find it much easier to make money as a screen trader once you know what you are doing, I am going to start a journal tonight on this very subject. The thing is that the big money is obviously made through automation, but the big money made through automation is made by traders who have a higher level of capitalization. I will explain my woes going both ways in my journal but basically everything i had going into last year went to shit in terms of automated systems, and it ends up being in many cases much more work to keep an automated system going then a discretionary one.
Losing trades doesn't come into play for me as my system doesn't lose the trade. However it is very very selective ... so I miss many moves that I could have gotten. Cherry picking is safe but sometimes boring.
Hi Martin, I've read a few papers from the esteemed academic community relating to this particular hypothesis and without fail they have been flawed (using statistically insignificant datasets etc). I would be interested in any worthwhile research you have come across relating to this issue. The research I have undertaken using both historical data and MC analysis has led to my rejection of the nonrelational hypothesis.
Neither - you can't these things bother you after a while, they will degrade performance and the satisfaction of a positive day.
A puzzle is presented by the market. Only if you know or want to know what the puzzle is, will you be able to solve it. Here is the puzzle: a market offers a maximum number of points per session, open to close. That maximum is defined by the gyrations. A gyration is a swing up followed by a swing down (or vice versa). The sum of all the swings is the maximum points the market offers from the open to the close each day. Arbitrarily (but also judged as an optimum minimum) I set the minimum swing at 35 points. Taking NG (NYMEX Natural Gas) on Friday (Jan 29, 2010) the market offered 500 points in 7 swings at a mean average of 71 points per swing. The task is this: you need to take as much as you can from the daily maximum. Daytrading is assumed for this task. To execute this task you need to buy the upswings and and sell the downswings, sequentially, as they follow each other. Two basic requirements have to be satisfied to execute the task: chart configuration and methodology. I don't believe I've noted anyone on ET mentioning the correct sorts of chart configuration you need. The methodology you want, must set up a reliable system with signals to buy each upswing and sell each downswing.
Neither. Up 20% in a day? Down 20% in a day? Same shit. I'm a numb zombie. I guess the feeling will come back when I'm wiped out or ultra rich.
With respect to your very pertinent comments, there are many methods presented on ET. Search the word "cycles", for example. The zig zag indicator comes very close to following your description of the "configuration and methodology" requirement. As in NG, all tradables have a daily value of zigs and zags that are extractable. Sometimes it is normalized by comparing it to a multiple of the ATR, so named because of your thesis. The core is reading P,V in its relationship. The interesting thing is the zig zag relationship of P to V. Who would have thought that three P zigs happen in the same period as four P zigs. This solution to the puzzle is anything but obvious as you state. I also like the efficiency and effectiveness of the ergonomic puzzle solvers. The era when inventing and using indicators also had great yields for technical traders. Sentiment indicators match the zig zag software most closely. Finally, there are so many levels of trading cycles to consider. You notice the beginner level on NG, for example. I guess scalping continually could be another rather high frequency zig zag approach if all zigs and zags were scalped. I particularly liked trader666's vantage point where he doesn't see much market movement as he trades(?) stocks at some level of gyration. He did 1000 stocks for three (3) years (240 days) and only had 24,000 trades (1 long trade (holding for 5 days) of a stock in each 30 day period on average). the math: (1,000X3X240)/24,000 = 30 days per gyration (this was a net loss per trade of 20 bucks). Another of his examples made 200 dollars a gyration and he found a trade once every 700 day period, approximately. He held five days of each gyration and must have waited the other days just trading long, he said. Considering different fractals, a person gets a different number of trades per day. For me, I do a routine (methodology) observable (configured) on about four fractals using two charts (5 min and 2 min). The slowest is 4 to 7 trades (zig/zags) a day, the next is about 15; the next is 15 to 30 and the last is 20 to 40. I see just one pattern of three price moves and four volume moves in a half gyration (long or short). Your puzzle is correct. You are precisely correct about the happenings within a gyration. The market is so very orderly in terms of the puzzle solution. It is nice that there is one answer and so many approaches for monitoring and analyzing it. Anyone can take a chart and scribe the zigs and zags on any fractal they choose. They can also "see" that all fractals are nested in a fixed gyration ratio of three to one. Your conclusion to buy the upswings and sell the downswings is very precise. That is what I do on the fractal that gyrates 20 to 40 swings a day each day (it is a hold of 20 to 10 minutes for each profit segment, as shown on prints of consecutive reversals I have posted in the past few months). From most to least precise, I feel the signals you mention are as follows: 1. 2 pairs on OTR, 2. DOM Walls (Level II) 3. Premium sentiment (2) 4. Two line indicator triad cases (6) 5. Adjacent bars cases (9) 6. Volume moves (4) 7. Price moves (3) 8. Ergonomic sentiment 8. Sub building block patterns 9. Building block patterns 10. Tape patterns 11. Traverse patterns 12. Channel patterns 13. Econometric patterns 14. Economic bull and bear patterns. Edges and and patterns like Lo, et al, rsearched are non starters for timing markets. (See traderzones confirmations of this). So is the probabilisitic and "frequentisits" orientation. Buffett's "durable value" considerations are "bridgers" of 12, 13, 14 they are so slow. I didn't include candlestocks either since they rank with the Lo, et al pattern research. PA is edge trading and is more a set up than a gyration measuring mechanism. As you see there is a surprise. There ar no signals (which you addressed and suggested in a manner, so to speak). You mention signals and you mention how it really works as well. Any signal is deceptive since it may work or not work. There is lots and lots of written text on money management, risk analysis and measures of performance (See more traderzones on this side issue of trading). All these things explain why signal based trading is only marginal compared to the zig zag of the market's offer. Your replacement for signals is very appropriate. I am glad you put it on the table. I really feel this is THE way that all the analogies to trading came into beiing: swimming, skiing, sports, sailing, gliding and riding a bike or driving a car. The gyrations are fractal and they have parts. The parts relate specifically and precisely as you say. So the market has a parts list and the parts appear on the market blueprint that shows them being put together. Architects, engineers and interior designers read blueprints. Sailors and flyers read maps and the clouds. Skiers read trail signs and the slopes they ski. Cyclists and drivers read maps or "know that they know" when they go for a ride locally. All do a routine that makes it work for them. In trading, most people make up a substitute for what they need. The substitute is signals and traderzone's lists of non performance. A Sharpe ratio of 60 is what you get from a zig zag chart.....LOL... Sharpe isn't sharp after all. I use B2B 2R 2B and R2R 2B 2R mostly on four levels for volume leading price. WTF???? lol..... Each follows the other. P, T, P are the volume moves for B2B and R2R. The middle price move is P to T for volume. The third price move is T to P for volume. There are no signals, however. I do keep the DOM walls right to the right of my forming price bars (the Pepe script) and I do keep a "shadow" of the end of bar final volume behind to forming volume bar PRV script). These are "tools" of convenience. Since fractals are nested, it takes three moves on a faster fractal to complete one move on the slower fractal. I log the progress of each of the observable fractals. I know that I know at all times. As you point out the swings follow one another. The swings have inner parts that do the same. There has never been a swing that did not begin, then end. It is the strangest thing to see on ET that people do not know much at all about gyrations. I find that almost 100% of traders do not know when a gyration is beginning or ending. They do not know much at all about the progress of gyrations between their beginnings and endings. A while back I had to post, a day ahead of time, the next 17 to 20 trades and post the timing of the end of a channel within 5 to 7 minutes in response to a crock (pottery) that traderzones posted to depict me in his opinion. All those trades happened as I stated and the channel ended when I suggested it would. For me, it is like filling in a log a day ahead of time. Well why not? You stated how it works (except for the signal part, signals aren't needed). Trader666 got off a real good one a few years back. He said that for a gyration there are more upswing signals than downswing signals as gyrations go along. So he made a timeout signal to replace the missing downswing signals and he got a statistically insignificant result testing a bad universe of stocks. That is how it goes with signals. What if he replaced the thing he did with a trading method for doing gyrations in the way you suggest: look at the parts of the gyration as they happen and use a leading indicator of price? In his thousands of tests he hasn't done that as yet. There is a reason. He doesn't see what you suggest is the answer to the puzzle. Maybe he hasn't seen the puzzle. It IS the puzzle to solve. Solving it is done as you say. Since you haven't seen anything on ET rsembling the solution to the puzzle, I put up about 15 that I have seen on ET. There are a good 30 others that are noteworthy; none have anything to do with induction.
Thanks to everyone who responded. Although I appreciate everyone's input, I don't think that a number of you quite got what I was looking for and curious about. And although I tried to clarify in the first few posts what I was trying to home in on, perhaps I did not adequately convey what I had in mind. Even so, thanks for participating. As for the near even poll results, I've had other polls where there was an almost 50/50 split between the two options provided. So I'm inclined to think that maybe a few people and their army of aliases are obscuring the landscape for entertainment purposes. Therefore, I'm inclined to attach even less weight to the numeric poll results than I normally would for an ET poll. But we've had such fun, eh?
@Gabfly, if I understand you correctly (and I'm not sure I do), the reason you did not get responses to hone in on what you were looking for is that your clarification contradicts an inherent implication in your original question. If you meant to ask the question within the realm of one's trading system then the question is perhaps answerable. One should trouble themselves with whichever of the two has the most room for improvement. For successful systems this is usually catching missed moves. However, if you meant to ask the question with respect to any move that is NOT within the realm of one's system (as I understand your intent to be), then your question is nonsensical, as any move that occurs outside the realm of one's system is neither a loss nor a proffit, but neutral by definition.