The other thing you have to ask yourself is: "are you being too hard on yourself?" I think most new traders probably are. Everyone wants to attack trading as though they have to have a significant edge, like 70...80...90 percent. You have to realize that thats a HUGE edge, that most "odds-based" businesses don't ever achieve on a consistent basis. Look at a casino....their edge on a lot of games, that they make a lot of money on, are just slightly better than 50%... and some of their best games only have a few bets that give them as high as a 17% edge. And yet a lot of new traders seem to feel that if they aren't able to pump out 8 winners every 10 trades....then they're doing something wrong. I know quite a few, very professional traders who probably having winning percentages as low as 20%....What! How can that be? That means that out every 10 trades they're booking a loser, on average, 8 times. Essentially, we would have to say, that they have no edge....and yet they've been able to make a living at it for decades because they know how to kick the crap out of the few winning trades they do happen to get into. And to a certain extent, they think slightly different than a lot of traders might on a board like this. If they get into a winning trade, they're not looking to exit and book a small winner. They're looking for a decent pull-back so that they can add on to their trade. If a trade moves against them, no big deal, they just book a small loser on 1 unit. But if they get any kind of a decent move, they're finally getting stopped out of their trades for 15 to 100 units. Essentially risk-free most of the way because they were able to essentially "re-invest" their profits along the way and move up their stop....or I guess a craps player would say that they just "pressed it up." Think about it this way. We know for a fact that there are professional craps players out there in the world. We also know for a fact, that no matter what they do, they will always have to overcome being on the bad side of every coin flip. No matter what bets they make, they will not only never have and edge...but the edge will always be against them. And yet I could personally introduce you to guys who have been able to make a living at it for more than 15 years. Made a living at overcoming a negative expectation game. So its important to understand that even if you don't have an edge, that doesn't mean that you can't make money. Now, if you feel comfortable that your trading approach does in fact give you an edge, then thats great...you actually should be a mechanical trader and very rarely will it make sense to be a discretionary trader. BUT....if you don't feel as though your trading model actually gives you a quantifiable edge, then you should be a discretionary trader, because making money might be dependent on having to overcome a negative expectation game. Now even though the math is against them, the professional craps player does have two distinct adavantages over the casino: (1) they can choose when and how to put their money at risk, and (2) they can choose how much money they want to be at risk at any given time. This means that they can bet small when things are not going their way, and can bet bigger when the "law of averages" is taking a "random walk" and they're essentially "getting lucky." Well, I'm sure you won't be surprised to find out that the discretionary trader also has some of these very same advantages, however, unlike the craps player, there will be certain "bets" we make where we actually do have the edge. And, if we take enough of them I assure you that we will lose plenty of them, just like we will win on some of the bets we made that we did NOT have an edge in. So the point I'm trying to make is that whether you have an edge or not is not the most important thing, because we know that there are ways to compensate for playing a negative expecatation game. What IS the most important thing, is understanding what type of trader you are, and what type of numbers your trading approach produces, and making sure that you have a money management approach that is appropriate for the type of trading you do. You know, there are some traders out there whose money management strategy is significantly more complicated then their actual trading rules. That says something. Now, if you don't know what your numbers are off the top of your head, then that probably means that you're not keeping a trade journal, which could also could be one of the reasons you're struggling. If you don't keep a trade journal, then its hard to figure out what your numbers are, which means that you're not going to be implementing an ideal money management strategy, and in some cases, might have actually implemented the worse possible money management strategy.
Terry, The indicators are password protected. Without looking at the code it could be a major disaster for traders.
the same indicators for both entries and exits with an additional set of indicators - essentially a discretionary influence - on exits.
"Stratasearch can build and evaluate over 1.5 million trading strategies in a single day" After reading this and looking at the site, the only thing I could think of is, if hundreds of monkeys type at hundreds of typewriters for millions of years, eventually they could reproduce the works of Shakespeare... Among other problems, generating 1.5 million strategies guarantee that 15,000 will be in the top 1% and will look good. Of course, that is no guarantee that any of them have value. Backtesting, etc...
Firstly, my suggestion is stay out of the markets and away from sims and backtesting until you come to see indicators for what they are. Many comments made concerning indicators leave the reader with the impression that they are an alternative to price. Now this is dead wrong. Your inputs into trading are: ...... ..price ..volume ..time ..limit stops the way in which you care to manipulate these four inputs is entirely over to you and you can call the outputs indicators ... who cares, it is your money so call them what you like. The highly liquid markets are never the same and yet they are. So you need to read the whole sentence in the chart and not just the right hand edge. One day your stoch will be working well and the next day it will not... this is a typical statement from an indicator watcher. A chart watcher will tell you that yesterday the market was trapped inside limit stops so fading was the way to go. Today the market has absorbed all the fade inventory to the long side without any significant fade on the DOM and therefore has broken out to the highs. The trading industry is ring fenced with product peddlers. Now ask yourself "would I prefer to trade or sell indicators" If you would prefer to trade then ask yourself " why do these other folk prefer to sell indicators" Are you different from all the rest or is there something about yourself that you do not fully understand. Incidentally, I am not a card player and never will be because it does not interest me..... each to their own. However it seems to me that cards are made up of 4 suites*13 cards plus a set of rules and rankings and whenever you bet, you are filled. I imagine that if you are filled with the winning hand in poker then your body language needs to perform in a less certain manner otherwise the other hands will fold, and so there is the body language variable which cannot be coded, but the rest of the inputs can. But can someone here please explain to me the parallel between cards and trading I mean a real life parallel not a theorectical one.
No offense,but you are missing the point,and you should read the thread starters initial post. Secondly,your first thought actually validates the process.. I agree with you regarding your last statement and thought the very same thing as you did.But you are making the assumption that you are testing the rules over one period,and not with a testing period and out of sample period.You would be very suprised how few of the top 1% actually work in a Walk Foward analysis,or pass the Monte Carlo return analysis,and that alone is invaluable.Of course nothing is guaranteed,but do you want to take the other side of a trade that had a 70% chance of success?? I had the very same questions as Iron Fist,and have come to learn that I am better off letting a computer sift thru combinations and permutations to answer the "indicator" performance question.I will only tell you after running thru hundreds of thousands/millions of indicator combinations and permutations,I have discovered things I would never have on my own..Why?? Because we have a belief system,and it is very hard to escape from it... BTW,I am a discretionary trader
I rarely post anymore, but this is relevant. I use one indicator. Avg True Range. Markets move a certain rate. Traders lose because they cannot pinpoint the speed of a market. People short into a raging bull market, because they "think" that it is overbought. There is no such thing as overbought, or oversold. Study your market in terms of the amount of TIME it take for price to move a certain DISTANCE. You will then be on your way. Best Regards Oddi