I am going to sound like a dickhead, but I know not of any other way to address your questions. (A) What is your definition of system? Is this system of yours the same as the one I talked about? I get an impression that they are not the same. Don't forget about the all important context. (B) When bottom line performance cannot be measured in a reliable way, how can one use it as a measure of performance? (C) For a context-aware signal that has a high probability of success (win-rate), the expectancy will be positive. That is all that can be said -- positive. Not how big that number is. So, why bother with expectancy? (D) Conceiving scenarios of high win-rates that results in negative expectancy is an exercise in intellectual masturbation. It doesn't happen. I am only talking about context-aware signals. (A) Do open-ended systems like MA crossing have contexts? If so, what I talked about is also valid for them. (B) If these systems are based on signals without contexts, expectancy is the only way to measure the feasibility of these systems. But, this measure is flawed and cannot be trusted. It is just a mirage that provides hope. I used to run (still do for a fund) systems like these. The only way to trade these systems are in a basket of instruments because they provide the required "risk diversification". In other words, since the measure of expectancy is flawed, and there is not other way to measure the performance of these systems, lets spread the risk. After years of doing this, I am convinced this is not the way to trade. I am yet to find a way to trade these systems as-is profitably on single instruments. Trading signals that are context-aware is the way to go. VPhantom, in order to understand what Redneck, Handle123, or any of the other successful traders here is talking about, you need to understand context. Without that understanding, you will, more likely than not, misinterpret their posts. So what is this context I keep harping about? Let us say you identified a break out signal. Let us be specific: a break-out to the upside signal. We humans are good at pattern recognition. So, this one is easy to recognize. Now, you also see that sometimes this signal works by "taking off", some times it fails, and other times it pulls-back and then moves up. There are two ways to approach this signal: (a) convincing oneself that one is playing a game of probability, and the described action is what one would expect in this game. To develop trading plan around this signal, one would measure historical up-move "points", pullback "points", and based on the distributions come up with what one considers a good profit target, and stop-loss levels. This is playing a signal without context. (b) You dig-in to understand the Price Action around all the instances you find when the breakout "took-off". You then compare it with the scenarios where the pullback occurred prior to the move up. In this comparison of Price Action you find differences between the two -- and you form 2 contexts. Now, you look at more instances of break-outs that took-off to make sure you have a stronger grip of its context (lets call this Context-A). Then, you design a trading plan to trade the "take-off" breakouts in Context-A. Similarly you design a trading plan to trade "pullback" breakouts in Context-B. You don't trade "take-off" breakouts in Context-B, or "pullback" breakouts in Context-A. Here, you have made signals context aware. You don't rely on historical pullback distribution to set a stop-level or historical "move-up" distribution to set profit targets; the signal in its context will provide stop-level, and a context change will provide you a profit target -- no need for any distribution. Also, since "take-off" breakouts have a high win-rate in Context-A, you will have a positive expectancy, but will not know the size of it; or, no use measuring the size of it for every new instance of change from Context-A will produce a different sized profit. The same is true for "pullback" breakout in Context-B. You can measure expectancy, but what do you use it for? In trading a signal without context you use it (implicitly) to set you stop-loss and profit targets; here, they are of no use. Some food for thought: In the trading world, it is commonly said: (1) every losing trade is an opportunity to learn. What does one learn when one trades signals without context? One cannot say they learn about the signal's real expectancy 'cos no one can predict future size of profits or pullbacks (which is used in determining stop-loss). When I trade context-aware signals, I learn more about my context. No more invalid assumptions. Just pure Price Action. (2) make a trading plan your own. How does one make a signal without context their own? Every one sees it. In trading a context-aware signal, I bring my understanding of context, based on Price Action, to the trading plan. That is how I make the trading plan my own; not the signal itself, but signal-context combination. Will stop here. All the best. Regards, Monoid.
That's basically how I learn, and I implicitly thought that all traders went through the same effort to build and refine their trading plans. Anyway, as a downside of learning autonomously I suppose, I guess I don't use the proper vocabulary to describe my activities. The confusion thus came from two things: My personal definition of "pattern" seems to represent the combination of a single instance each of what you call "signal" + "context". A pair of these, to me, forms a distinct "pattern" to recognize and act upon. This yields as many distinctions, just structured and labeled differently. From the start of this arc, my intention has been to try to understand @marketsurfer 's assertion that traders enter positions randomly, with pattern recognition and technical analysis thus being nothing more than a convoluted and expensive form of superstition, making entries no less random, and also that high win rates are meaningless in disproving that. I am not contending that myself, but he's been around longer than I so respectfully I'm not dismissing his opinion without thorough consideration. I have yet to understand how he can be so categorical about it, but he seems to ignore requests for clarification so I'm getting close to giving up and dismissing him as just another failed trader who cannot reconcile that others may be successful. Thank you for your thoughtful contributions.
OMG…some of you really get into it DEEP ..and that’s great if it works for ya! For me…I have found... after all these years... whether you use “signals”-patterns-price action-flip coins-or just “jump in cause u like it”…it all comes down to THIS : “Throw that LOSER away as SOON as POSSIBLE” Never Bet too Big…so you can leave room for mistakes…and have chips to continue playing and If you feel Mentally bad…don’t trade
Hey Scott! Your Coffee story reminds me of something funny that happened to me: My 2nd job in the business was in 1982 …I was working as an assistant in the Commodity Department at the Century City office of Bear Stearns. Besides updating charts by hand & learning how to call in orders…I had a small office to make some trades & learn something more ( hopefully). I made a coffee trade long & got out with some small profit ($500). About 3 weeks later, my boss asked me “What do you want to do with that Coffee trade?”…I said “what coffee trade?”. He said “you don’t know…your up $4500 on that short” It turns out I forgot to cancel my sell stop and was filled and it went much lower. Moral of the Story: “once every 10 years... a trading error goes your way!!!!!!!!!!”
What an important question you ask LL This question..., and the answer - is what a trader (meaning one whose transitioned from the journey of becoming a trader - to trading centric ) should (must) be continuously focused on..., understanding..., managing..., owning - imo ============= Curious if you appreciate the importance..., ramifications - of your question..., and the answer If it merely to determine if I a piker - then specifically answering your question is of no concern to me Your question..., and the specific answer - are the very core of my trading (and not just the performance aspect) If however.., it to delve into my crore - then I want to first determine if you fully appreciate what it is you're asking - and if you willing to divulge similar In this particular case..., merely asking for my % ROCU - to gauge my trading ability..., to determine if I a piker..., trader... bullshitter - is not adequate Please detail out the specific significance's - of what you ask..., and the answer I will then reciprocate ============= In the meantime suffice to say each PnL represents; a %..., > 1%...., < 10%..., and no where near 3X the daily range - per day - of my net trading capital (net meaning less the 4X buying power available to day trade stocks) ============= Absolutely great question Sir - the specific answer of which - deserves a commensurate understanding of - that being asked..., and the answer RN
I ask the % return because...just giving a dollar amount return is kind of meaningless. Initially saying you made $7,500 day-trading sounds awesome...but if your account is for example 300K...then that becomes nothing to gawk about...that's a normal/small deviation. I'm just interested in seeing the overall/complete big picture of things. in the interest of full disclosure.