Joe and Bob are both probably on the right path, and doing the right thing. A purely discretionary system works just find. Many traders are proof of that. If you think in terms of what is important and build your philosophy around solid and long term proven idea's you will be able to trade in changing markets without jumping from one hot setup to the next. Generally this would be based upon some form of pattern recognition, which is by its definition discetionary. A purely mechanical sytem also works just fine. I have a friend who runs an arbs system in equities, 100% mechanical and 0% discretion. The system returns over 500% a year with pretty small risk (its maximum capital is also very small, small enough that it would keep it from being of interest to most of the big houses that do this kind of trading, but large enough to be just great for my friend). A lot of the money being run in the futures market is also 100% rules based with no discretion applied. I suspect that this kind of trading appeals very much to engineers and other mathematical types, as they are who I most commonly see using them successfully. Brandon
oh, ok, then i misunderstood you indeed. i would like to make your statement above more precise, and say that in real life setups with (historical) edge you never know the probability of the outcome, because the historical edge may not survive the market changes. the lady's system with random long/short entry obviously is an artificial construct that lacks any edge. - jaan
yes, very good point. it is also our experience that once you try to design a system that could handle really big money (FX, futures, even the most liquid stocks), you'll be competing with boys that have much bigger R&D budgets than you. hence, the more liquid an instrument, the more random is its price movement. precisely. in our case, large portion of our motivation in building an automated system has been that the project is really cool as a science-project. - jaan
don, can you honestly say that no type of trading system can work? for example, take someone like tony oz. i would say his trading style is much different than your oo style. would you say tony's method can't work? not tryin to pick a fight with you, just wondering how you'd answer this because i've seen many posts by you saying that this type of trading doesn't work. thanks
This is complete rubbish, apart from the fact it is possible to have a ridiculously high percentage of winners, that you would not believe. 61% is not hard. This can be done in different ways, too. I FIRMLY don't believe new traders should have a low percentage of winners because they won't be able to handle the drawdowns (in their heads). I'd be aiming for 75 percent, and encouraging scratch trades. If it takes lowering targets and increasing stops, I'd do this too. r/r is absolute propaganda.