"One thing you could try to keep you in the game (but that has no real edge) is just take long trades. This will work as long as the market keeps going up. " This suggestion is only effective on a basket of investments held over the long term. Your probability of failure on a day trade in an individual stock with this approach is as great as any other day trade. Therefore, why limit your options to going long? You could just as easily go short. Correctly using the MACD and supply/demand idea at least slightly increases your probability of selecting the direction of the stock. I need a better strategy. So, I am listening, analysing, reading, and doing my own research. Eventually, I will find what works for me. Another strategy that is being used in our office is taking advantage of the market opening. There is often a large spread between the closing price and the opening bid. I've watched a few people in our office successfully take advantage of this over the last few days. No, I am not working for Title.
I'll add also that developing highly internalizing state tends to eventually produce delusion which has many negative associations. However, this is the fastest way to greatness. Your current methods do not make sense. For example, you say "I held onto a losing trade by being stubborn but I got lucky." What this means is that: A. You broke your rules. If you believed your rules had absolute profitability then you would never have did this. You had some suspicion that your rules were inadequate. B. You profited from breaking your rules confirming that your rules were inadequate. Your problem is not one of discipline but of total and absolute ignorance. It is important to have a clarity of mind on these issues because if not then the next time this comes up you will be inhibited because 50% of your brain will be saying one thing and 50% the other. You will see a profit and lose it because you will hesitate. Do you have a "discipline" problem with walking out in front of a moving car? Do you have a "discipline" problem with touching a hot stove?
Thanks for your comments Lucias. Sorry, my last reply sounded rather abrupt. You added more to your post after I had finished writing. Sadly, I can't modify it because I am a new user, and my post isn't even showing up yet. I hope my new status changes soon. This is frustrating! Understand, please, that right now I am simply trying to get comfortable. I know that I have a lot of reading and thinking to do. This will come in time. Finally, I can edit and posts are appearing immediately. Yes, absolute ignorance. Without a doubt. We all have start somewhere.
Are you sure about that? Did you test it? I did and found that trading with a long term trend on a shorter time basis gives one about a .11 edge on the profit factor and 1.45% to .2% edge on the win ratio. Going against the trend cost one about an equal amount. I don't trade with the trend and one needs to determine if one even has a trend to know if this applies. What does it mean to use the MACD correctly? How do you know the correct way to use it? It is good to know you know these things. I'm curious as to how you learned them. Bhardy, no offense taken. I don't have all the answers either, not even close. Hopefully some others here will provide some more information for you. Good luck! Please keep us updated on your progress.
"' Instead of focusing on trading , focus on what the market is doing '' i would take that advice." "Going against the trend cost one about an equal amount. " You're both saying something similar. Now, isn't that the point of the MACD - establishing the trend? Actually, this was just thrown at me on Friday. An upward cross is a buying opportunity; a downward cross is a selling indicator. I have been trying to find my old stats book dealing with the exponential moving average so that I can understand better what this MACD indicator is all about. Oh, by the way, the supply/demand approach works with almost perfect consistency. If total (reasonable) bids exceed offers, market price ticks up. If total (reasonable) offers exceed bids, market price ticks down. Watching this and following MACD, seems to produce fairly reliable results. Total 32 trades for the day. 8 initial expensive losses ( before I understood the bid/offer relationship; 23 consecutive wins. One loss at the end; went short on Dell just before closing.
Bhardy, you need to make a distinction between descriptive vs predictive statistics. A moving average (if shifted) represents a perfect description of the past price action. Wouldn't it be nice to know the real average in the future? Unfortunately these methods are not predictive. There have been some studies that show averages are predictive but they tend to be on very long time frames. Most indicators are price based, the information can be seen in the price data directly or after performing manipulations. Some of these can be profitable but it is unlikely you found a profitable method, -- building profitable trading systems requires extensive study, testing, etc. Very simple methods like you are describing are either A. don't work or B. may work but require extensive work to discover. Most technical indicators and methods you read about in books are going to be break even at best. You need to believe in something though. Believe in yourself and observation. Believe in your absolute success. Right now you need to ask yourself, can I be the best in the world? You either feel it or you don't. That is what you need to ask yourself. Off to do school work.
Oh, I never believed for a second that the MACD would accurately predict an outcome, but it has been shown to provide an edge when used correctly. Thanks for your help. Good luck with your school work. What are you taking? BTW: "What basis do you have to believe you were "stupidly stubborn"? Your behavior produced a win. Where did this knowledge you posses about cutting losing trades come from? Why do you believe you were lucky?" For the same reason that jumping off the edge of a cliff and landing on thick layer of feathers is luck. I set a loss limit for myself and ignored it. I was lucky that the loss turned positive. I could have just as easily landed on a bed of nails.
"Are you sure about that? Did you test it? I did and found that trading with a long term trend on a shorter time basis gives one about a .11 edge on the profit factor and 1.45% to .2% edge on the win ratio. Going against the trend cost one about an equal amount. I don't trade with the trend and one needs to determine if one even has a trend to know if this applies." I am guessing you did this test on past data. Therefore, by your own arguments, we must conclude that this is no more predictive than the MACD. From what I can see, every working strategy only works for a while, and then it fails. The movement of a stock is nothing more than then an aggregated representation of 30 % personal opinion and speculation, and 70% the result of some sophisticated quant analysis given by the 70% of trades that are now completed through algorithmic trading. My point quite simply is, can we ever come up with an approach that is consistent? Clearly, your study shows that on that particular group of data, if you had got into the market at that time, you would have produced positive results, but will you in the future.
I'm not 100% sure if this is contrast to what you're saying or not...but in any given trade I believe there's a certain amount of luck involved...but over a long period of success I would say that luck isn't an element of the equation. However, I do think I would've been lucky to trade during the golden age of trading. I'd love for those markets to return...probably will have to wait at least another 40 years for real irrational exuberance. Hopefully I'm wrong.