Technical Analysis, from a Quant's Perspective

Discussion in 'Technical Analysis' started by fatrat, Nov 27, 2006.

  1. See attached.
     
    #41     Nov 29, 2006
  2. Nope. Wouldn't overcome transaction costs.

     
    #42     Nov 29, 2006

  3. the other way doesn't overcome costs either. critical point that these gurus never mention. good observation.

    surf:D
     
    #43     Nov 29, 2006
  4. Does your doctor know you're posting to ET again?

     
    #44     Nov 29, 2006
  5. me1969

    me1969


    Couldn`t imagine that this thread becomes so much fun.
    Thanx, Jack, you are one of kind....

    :D
     
    #45     Nov 29, 2006
  6. Grant

    Grant

    Fatrat,

    I think the point re hiring maths Ph.D's is they have demonstrated the capacity for original thought and research.

    If they're hired, there is a belief they can produce unique approaches, be innovative, and solve problems, eg identify potential arbitrage.

    At worst, they can design new products to sell to clients.

    Grant.
     
    #46     Nov 29, 2006
  7. whister

    Below is a quote from a post I made on October 13
    in the thread at
    http://www.elitetrader.com/vb/showthread.php?s=&postid=1230440#post1230440

    "Many people will tell you you can not make money with a reward to risk ratio of less than 3 to 1 and definitely not less than 1 to 1.
    When trading for larger moves, I tend to agree. But when scalping the ES I definitely disagree.

    The only way I have been able to make it work is just the opposite, with a reward to risk ratio of 1 to 4.

    That is with a 1/4 profit target with a 1 point stop.

    I can nearly hear the laughter now, but I can tell you that is the only way I have been able to personally make it work.

    With the 1/4 target and 1/4 to 1/2 stop the win rate is too close to 50/50 (just because of the normal shoving back and forth) and with the slippage and commissions I can't make it work. With the 1 point stop and very very selective entries I have been able to hit a win rate of over 85% for a 1/4 target. One really important thing is to use a trading platform that automatically enters you stop order when you enter your original order. Also I use a stop market order NOT a stop limit order. Yes this usually means a fill 1 1/4 below entry. But with this type of trading if it gets that close to your zone you had better be out and ask questions latter."


     
    #47     Nov 29, 2006
  8. nice post, nutseal

    my stops (and targets ) are dependant on the setup

    and since i generally scale out (for most setups), it's hard to talk about the so called R/R ratio cause there is a fixed INITIAL stop, but more than one target

    one of my most frequent YM setups is a

    10 pt stop 6 pt first target 8 pt second target, 3 target runner (trail the stop)

    it's not REALLY a 5/3 risk/reward because there are incremental targets as you can see

    but that one is a successful trade 80% of the time.

    also,. the stop is moved to entry +1 upon the 6pt target being hit

    imo (and ime) for scalping, entries are CRITICAL.

    i almost always try to buy the bid/sell the ask.

    this is also true with the nikkei, considering the 5 point spread :)
     
    #48     Nov 29, 2006
  9. Given the discussion of stops and targets, I think it would be wise to distinguish the use of TA for futures versus equities. The two inherently behave differently. Derivatives being elastic and subject to not only different TA principles but also different profit/loss targets.

    EDIT: I'm not sure I can accept a stock trading strategy that allows for fractionally skewed (in favor of risk) risk to reward trades... whereas with derivatives, the instrument itself being the defining factor, I could definetly see a risk skewed R/R strategy working.
     
    #49     Nov 29, 2006
  10. mokwit

    mokwit

    "transmute the hypothecation of binary transubtantiation"

    ? :(
     
    #50     Nov 29, 2006