Traders Goals

Discussion in 'Trading' started by Spectre2007, Feb 10, 2007.

  1. Line 0 - minimum wage /credit card debt population

    Line 1 - lower middle class

    Line 2 - upper middle class

    Line 3 - wealthy

    Line 4 - traders with risk management


    The goal is to increase the slope of your equity. Equity equals income - expenses. Most get a biweekly paycheck. Based on your paycheck, you would be at different slopes.

    How you invest your savings plays a large role, on how our equity curves factor over time. Some people just rely on compounding which is powerful in itself. And some resort to investing/trading.

    Without risk management you can easily fall into line 0 or 1. The greater the slope the greater the risk being taken. Some would argue you can only afford to lose a months paycheck for the year. That would set you back 1/12. Some dont have the income to take the risk, and just live breaking even.

    I think on average the upper middle class plays around with 10,000 loss limits. So if they lose 10,000 on trading over the year, most of the time it wouldnt bother them.

    Some would argue find the price/time curve in different markets that has the slope increasing at the fastest rate over time. Then switch in and out into different curves to obtain line 4 results or better.
     
  2. equity curves
     
  3. so basically your looking for these curves. Different derivative bubbles. The bubbles can be in any timeframe but the longer the timeframe, less entry and exit fees involved.

    some confuse buy n hold with this long term time frame, buy n hold exposes you to the same derivative downward cycle in the time period your trading.

    Now what exactly are we looking for?
     
  4. this, the slope increasing at a faster rate over time.
     
  5. how exactly do we figure when to exit, you can study different speculative bubbles and calculate what the greatest increase in slope over time was before price became unstable to the downside.

    you wont be able to pick the exact top, but risk parameters and volatility can be used to determine exits. What characteristics do all speculative bubbles share before they collapse?
     
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  6. most people have trouble identifing the trend let alone a bubble at its inception.

    the reason is people get caught up in their timeframe versus the longer term timeframe. And the gross trend is not obvious. Its fractal pattern, they see a downward spike and presume the trend has reversed.
     
  7. trend is basically the slope of the linear regression in the timeframe your trading.

    calculate the slope of the LR over time, and you will notice bubbles at their inception. As the LRslopes themselves trend over time.
     
  8. most of this you can eyeball, but if your scanning a stock database, you need to code specialized software to do it.
     
  9. schematic 4 represents a combined LR slope plus high degree of volatility representing a possible risk a top is approaching.
     
  10. Here is a chart that covers trading and potental profits. The red line is the potential for any particular frequency of doing trades.

    The time scale is an exponential scale along the horizontal axis.

    The vertical scale is there to show the yield the market offers on the red line.

    The other lines show where traders can operate using SCT and it does apply to all trading.

    The black general line for general SCT does not apply to other trading in general.

    Any person can fill in their operating effectiveness and efficiency by drawing another line.


    What the graph is designed to show is the contrast between people trading with their efficiencies and how the market is capable of delivering profits for a given periodicity of market moves.

    Most people cannot take money out of the market in very short time intervals as fast as the market offers it in very short time intervals.

    The compromise is to trade a little more slowly and get what is offered as a beginner and then as skill improves to move to the intermediate curve and do more trades to get more from the market.

    finally a person takes the most he can in trading by honing his skills to take every offering at the frequency is is offered but only up to the limit of the frequency at which he is effective and efficient.

    This operating point for position vector trading comes uot to be 2 1/2 percent a day compoundeing daily through the year.

    For commodities trading it is a multiple of the daily range that is about 3 where 20 to 40 actions are taken (average of about 100% of daily margin). Beginner trades about 4 to 6 trades a day and is at 25% of margin and intermediate is 10 to 20 trades a day and is at about 50% of margin.

    Most traders do not compare themselves with what is available from the markets. that is not going to change because most trading is done on an entry/exit basis and most traders are on the sidelines most of the time just watching. What trades they do are short in duration and they only take a portion of what is offered at that time beause of severe timing constraints relative to entry and exit, particularly drwdown stops out inherent in entry/exit styles of trading.

    PVT trading involves rotating capital from long half cycles of very high quality stocks. when the money velocity of a hold is fading, it is replaced by an hot list stock that is beginning its half cycle at an accelerating money velocity rate.
    SCT trading in volves being in the market always and being always on the right side of the market. reversal trading is used and on various levels of skill more trades are down with greater sensitivity of the moves inside of moves, ultimately on three levels. Extraction is limited by the pace of the market which determines the number of cars that can be handled at the various paces of the market.
     
    #10     Feb 10, 2007