Real or fake?

I don’t care about anything except about the ticks that are coming in. Because all I do is based on the ticks. So no news, no PPI, no CPI, no program trading, no Greenspan, nothing at all, just ticks.
So I don’t know what the influence would be.
But these program trading systems are mechanical and much slower than what I do, so I suppose that when they go long I will be already long and if they go short I will probably already be short. I have been able to follow very closely the funds managed by John Henry, so I knew when he bought and when he sold. His action was always in the way of my trend, so he gave an extra boost to the market in favor of my position.
There is not a single fund that is managed so intensively as I trade, because for them this is impossible to do. So I always have the advantage of a very short reaction time.

Just a small reaction on the comment from Avid_Consumer about arrogant self-defence. I’m not arrogant, if you trade a system you have to have a huge self-confidence and trust in your system, otherwise you are lost. I lost lots of money because other people influenced me, now I’m strong enough to go short and stay short, if my system says so, even if everybody on ET would yell I had to go long. But to some people it sounds like being arrogant. I call it: being consequent with your system, and that’s vital to survive.
There are not many things I’m good in, but I was lucky that I ‘m good in trading.

In the mean time we made last week higher highs and higher lows, and this week we do it again. That’s what I posted in ADVANCE, so no hindsight. But I don’t amuse myself anymore with posting predictions or realtime trades, except sometimes in reaction on a posting (like I did two weeks ago).

 

Spike, can you give the idea about trend strength measure , how you do this ?

Thanks.

 

No, i cannot answer that question, because it is the heart of the system. But every traders should know that finding "the trend" is the most difficult and most valuable thing in trading. Once "the trend" has been found the basis of the system has been build.

I include a decisiontabel to show the logic i use. For each situation i know exactly what to do and why. So i always know what i will do in reaction to the market. Too many people think about what the markets will do, but that's just the opposite of what you should do.

I compare trading to the Formula 1.
Each race has different setups to optimize the result:
different tires
different setup for downpressure on the car
diffent ratio in the gearbox
.....

On top of that there are the weather conditions.
So each formula 1 team will have dozens of different setups. They go through a decisiontable to get to the best setup for that specific race. That's what i do also. And in Formula 1 a small difference in setup can have huge results in racing; in trading it goes the same way.


I like Formula 1; and i like trading.

 

/big grin.....so true. thank you for this thread it helped me develope a system that SIGNIFICANTLLY outperformed what i was using previous. and my opinion by the way...definatelly real signals.

 

Hi Spike,

I just read (and found out) about your posts last night... (I went back to those few who gave me good advice in the past.)
I have a question... price is price and momentum is momentum (derived from price)?? Wouldn't the system get into trouble when the price and momentum diverge? I mean using the hourly bars, they can go separate way for long enough to take out points. No? Thanks.

Regards,
William

 

All depends on how you measure the strength (or the momentum). Your conclusion is correct if you measure the strength by using MA’s or MACD, but as I don’t use them I don’t have that problem often, and there is always a stop in case….

I divide trend in different strengths, and for each strength I have different entry and exits. As my strength is measured rather fast I stay most of the time in line with the prices. The fact that I only enter a trade at the optimal point of my system, gives me some space to see what will happen. That gives me the advantage that I can get out fast and most of the times before losing a lot of money.

The basic of a good trend following system is a system that defines the trend fast and accurately. This causes normally a problem, because fast means that it can reverse fast, it can whipsaw, reverse too soon, and signals can become unreliable. That’s why the system evaluates the strength and shifts to another scenario when the strength changes according to my decision table.

If you compare measuring the strength by a MACD with my method, I will probably get several warnings of a changing trend even before you see it in the MACD. But once the strength is developing I shift to another scenario and automatically the system is adapting it’s exit accordingly to the strength of the trend. I think it is impossible to have 1 system that trades well in all different kind of markets. That’s why I have build so many different scenarios.

Maybe a bad example, but better a bad one than none at all is the following:
You are driving in the mountains. To travel fast and comfortable you will have to adapt your speed in function of the inclination of the road. If the road is flat you can go in fifth gear, if the road goes up at 25% you will be forced down to the second gear. My system studies the road and says which gear is optimal for fast and comfortable travelling. But as the road changes constantly my system checks constantly to see if the actual gear is optimal or not.

 

Thanks Spike. This is some sophisticated stuff. Just by looking at the hourly C,H,L, (so few dimensions) even with the help of 15 min, it seems almost hopeless to get to your point but then why is the combination so elusive? Thank you for your explanation and generosity. I am gonna try hard thinking about this.

Just a side question, how come your system doesn't consider Volume into the equation? Is it because it doesn't help in your opinion or you just don't want to overcomplicate things (obviously you have accomplished without it). Thanks again.

Regards,
William

 

It looks more complex than it is. This is a result of more than 15 years of researching, testing and re-evaluating. I work by elimination; first try to find the trend, 8 possibilities to choose between. After that, just take the corresponding long and short systems and apply them. That’s all. If things are not clear, just wait till they become clear; not trading is part of the trading.

Why not use volume?
If I don’t need it why should I use it? The main purpose of a system is to take only the information that is necessary to get a successful system. If you haven’t enough information you should add some, if you have too much information eliminate what is not really necessary. You cannot trade on 1 or 2 indicators, but if you use 25 indicators you will never get any signals because there will always be 1 that is not in line with the rest. Search for the optimal ratio between amount of information and return; the brain is limited when it comes to analysing information.

I trade the ES only in RTH, so when Chicago is open. There is always plenty of volume to trade, so volume is no issue for me.

 

This is an interesting thread. Good luck to you Spike.

Just wanted to ask on this point. Could other traders give their opinions on which markets could sustain large size positions being flipped through as a day-trader. (large means 200kUS$-2mill US$)

[My system gives 5-10 signals a day, but the market I trade can only realistically let anyone trade 50-100k US$ per position before the slippage gets noticeable.]

I'm guessing Nikkei (how much can it take?), FTSE, DOW, but what about commodities, currencies? Gold? Oil? Bovespa?-great movement... Korea?

I may start a thread on this, but hope someone can give me some views.

Thanks in advance.

Simex

 

Hi Spike,

I gave up systems some time ago because my beginner mistake with curve fitting. I start trading countertrend because I thought trend trading is about taking a lot of "take the pain" and try to catch a big fish. I thought I am not capable being a trend trader. Your system shows me trend trading can be very different from what I read and what I tested. Obviously I haven't thought beyond the conventional ideas. I believe you when you said it took you 15 years. I might not even get there in 15 but I am gonna try. Anyone not seeing your thread would have given up in 2 weeks of testing because they would conclude the same thing as all the books they read.

To me, information overload = stress so I appreciate what you said about too much information. I am thinking along the line that the problem with momentum divergence is I am not really comparing apple with apple and orange with orange while I am trying to define trend. Yesterday, I also try to cheat by playing with volume to define trend and it turns out some interesting pattern not so much for defining trend but good for entry so I am gonna test it and save it for later use. Without knowing the trend, it would be like hopping on a bus not asking the driver where it is going.

Thank you for your replies. I am gonna trade very little until I reach some conclusions.

Regards,
William