Principle based day trading strategies

"Never lose your money" is a principle/attitude.

http://www.investopedia.com/financial-edge/0210/rules-that-warren-buffett-lives-by.aspx

We have to minimize loss in every single trade so that the long term is healthy. That is what this strategy is trying to do by studying the behavior of micro trend within a time frame.

This strategy allows us a safer take off (entry) and avoid crash landings (sudden reversal) there by reducing the losses in every single trade.

 

This strategy can also be used as a launch pad (entry rule) for an existing strategy.

 

It is a good principle to trade, more better then to trade without any principle at all.

 

Loss aversion trading is a psychological handicap of the human brain .Most traders cut profits , in fear of loss , but succesful traders run their profits under the most uncomfortable present situations.

http://www.businessinsider.com/colin-camerer-wins-genius-grant-2013-9?IR=T

 

Creating a strategy is one kind of Art.

Trading by using a strategy is another kind of Art.

Its like a few people make swords with their own expertise. And other people use the swords with their own expertise.

Sword makers must have thorough knowledge about the purpose of the sword.

Sword fighters must know how to use the sword in the war.

Sword fighters need not know or analyze much on how the sword is made.

They only need to focus on how to use the sword effectively. Then only they can evaluate the strength and weakness of the sword.

Makes sense, right ?

 

rajesheck,

Your stop loss for every single trade will avoid a sudden reversal opposite of your entry. The loss per trade should be already calculated before placing the trade.

Unless, i am confused, I don't believe there is away to "reduce the losses in every single trade" a loss is a loss. What matter is how much you lose and how frequently you lose.

Just because you reduce the loss on every trade, doesn't mean your overall loss will go down.

Let me know if I am confused about your strategy.

 

How will you backtest your strategy? Or will you forward test in sim?

 

In conventional strategies we have a rules based signal and we exit if price hits the pre-defined stop loss. Here minimizing the loss mainly depends on stop loss.

So the price to enter trade is different from price to exit. There is a gap between these two prices. This gap is basically due to the swings that happen in day trading.

Contrarily, this unconventional strategy studies the swing behavior and the entry rule is set in such a way that the price moves upwards a little most of the times. Thus your entry price becomes virtually your stop loss.

In other words the concept of minimizing the loss is built-in inside the signal itself. On the other hand conventional strategies depend purely on stop loss.

For obvious reason this strategy can also be used just as a launch pad (entry rules) for any existing strategies.

 

"Don't lose money."

Doesn't everybody operate with this principle?

Seems redundant. A truism.

 

Thanks for your thoughtful question.

The question is about the priorities.

Whether the first priority is to make money or to minimize the loss. We can have only one thing on top of our priorities list.

Priorities makes the whole difference in every department of our personal and professional life.

Lack of priorities or lack of clarity in priorities will have its own effect.

Principle/attitude = Priority

In conventional strategies "don't lose money" is just one of the ingredients. There will be no principle or character in them.

Whereas in this unconventional strategy, "Never lose your money" is the priority, key, seed, principle, character and attitude.