Principles of Market Timing

Discussion in 'Trading' started by riskfreetrading, Feb 20, 2009.

  1. Let me add some principles in a block in a series in case I never revist this thread again:

    Principle 6:

    All technical indicators are equivalent.
     
    #21     Feb 20, 2009
  2. Principle 7:

    Give me one moving average, and I will derive from it all moving averages from it.
     
    #22     Feb 20, 2009
  3. Principle 8:

    What you see depends on where you sit.

    So to see the whole object you need to sit everywhere.
     
    #23     Feb 20, 2009
  4. Principle 9:

    How do you sit everywhere? You need to make sure that you can move from place to place, and that you have had all angles to look at what you want to look at.

    Technical indicators, averages, etc, offers help in this area, but not enough on their own.

    You need other tools, and most importantly other knowledge and measures.
     
    #24     Feb 20, 2009
  5. Principle 10:

    If you have said to your self that this guy just told me that all technical indicatos, and a principle or two later is telling they can help, how is that possible?

    The value of them is the convenience they offer to look at the object in question.

    The knowledge derived from them is not in them but in your understanding of indicators of why they are equivalent.

    Once your know why they are equivalent, you will know what they can answer, what they cannot, and more important you will understand what they offer you as a set of tools put together.

    It is part of seeing from direction seats, and/or the sum of the parts is greater than the whole!
     
    #25     Feb 20, 2009
  6. Principle 11:


    Trading without stops is a zero sum game.

    Trading with stops is worse. It is a negative sum game.
     
    #26     Feb 20, 2009
  7. lundy

    lundy

    please expand/explain. thx.
     
    #27     Feb 21, 2009
  8. Principle 12:


    Principle 11 assumed no edge in timing. You have to understand the difference between time and timing. Do not confuse these two.


    If you are not good at timing, you can also use time.

    Here is a trading system for you to think about:

    1. Open a position. If there is a loss after X bars, close it.

    2. If it is profitable hold it another Y bars. If Y is 3X, your profit should be double your loss.

    3. Do not use a stop, unless losses in step 1 are abnormal (Use your knowledge about noses to decide on normal vs. abnormal).

    This system's aim is meant for you to differentiate between timing in trading and time trading.

    Timing is much harder than time trading.
     
    #28     Feb 21, 2009
  9. Principle 13:

    Your need to understand the concept of variance reduction, techniques used, requirements for it to work.

    Central to variance reduction techniques is the central limit theorem. Two practical things to remember:

    1. You always need a sample of at least two dozens items.

    2. Variance reduced as you raise the size (inversely proportional to SQRT of size).

    Application of this to trading is next.
     
    #29     Feb 21, 2009
  10. Impossible.
     
    #30     Feb 21, 2009