Trading WITH versus WITHOUT a system

Discussion in 'Strategy Development' started by Georgii, Apr 12, 2009.

  1. I use a Ouija board.

    obviously, if the original poster had a system he would know if he was on the right side of the trade or not.

    knowing what will happen next really helps, come up with a system where what happens next is not a surprise.

    trend lines, volume, and chart patterns are useful for this.
    #21     Apr 13, 2009
  2. Op,you have just been handed one of the very few diamonds in the dust here. Just add money management,patience and discipline-try to lose as less money as possible while you learn those 3 things.And finally,make sure your strategy can be summarised in 2 or 3 sentences.At this moment in time you are on target to waste the next 2 or 3 years proving that 99% of the stuff out there is 100% useless.
    #22     Apr 13, 2009
  3. Handle123


    This is exactly one of the reasons why so many spend huge amounts of time learning about trading.

    Let's say you have a few brains and say you won't start trading till you have a well tested method of at least 3000 sample size and then forward test it for min of six weeks, providing of course in your backtest of min of 3000 sample size it agrees with your personality. Not the best method is the best for you. You might find that drawdowns are too huge for your account size, maybe your risk is too huge. There are a number of reasons of why a profitable method may not agree with WHO you are as a person.

    I have tried all the indicators, some better than others. To me one indicator is enough and to watch it and learn all you can about what that indicator does in regards to price. It is just easy for me to see it and know what that market is doing as I day trade several futures during the day. But I use it WITH Price Action.

    When I build a new system, it is easier to program using 1-2 indicators, the difference between me and a new trader is I use that indicator differently that it was intended. I don't just entry on the cross of anything. But I can use it as confirming of price action trend. It is said to have higher highs/higher lows for trend up, an indicator may show that it's trend may still have it in a down trend, so this might be a possible trade to not take. But that is only found through extensive backtesting.

    I only have a couple patterns for entry, but I have 37 money management rules. It is the getting out that shows the profits, the breakeven trades and the losses.

    I set up like a diary for each trade, on winning trades I want to know how far price went against (this will help me figure out protective stops). How many bars or time did the trade just sit there (time stop rules might be used). How far did price go after target was made (figure out targets this way).

    I learn very little from losing trades, I learn much from winning trades.

    #23     Apr 13, 2009
  4. If you want to see the entire evolution of a beginner turned professional, I suggest reading nexial_1002002's comments by searching the forums at

    I strongly suggest Fidelity as your broker of choice. WL is the single greatest backtesting platform known to man. TS is only useful for intraday trading, and has no portfolio level backtesting.

    That said, couple that with courses on finance and economics, and I think you'll be all set. It's not that simply backtesting gives you a strategy, more than it is about that it teaches you how to manage money from a mechanical perspective. The truth is, every professional when he allocates a client is required to have a reasonable and adequate basis. An analysis, if you will, is a pre-condition for taking investment action. The path to learn "how to analyze" is the secret of backtesting, and is essentially required study if you plan to make it as a trader.

    I have no interest in recommending Fidelity, other than that they have been a consistent, objective broker during the seven years I have used them, for both WL and fundamental research and data. I strongly recommend them. If anything, for the first three months to be "testing" strategies like MACD crossover with StochD>80 type bullshit. What you'll find is that while they might be profitable, they aren't necessarily something you could stomach actually trading.

    It's all about risk and reward, and it is only through backtesting that you'll understand risk and reward in terms of how you rate as a trader. Giving yourself the benefit of hindsight is one of the easiest things to do, but only if you understand its limitations.

    This bullshit about "be on the right side of the trade" is what they call the holy grail. However, you'll find that even the holiest of holy grails loses from time to time.

    I hope this helps you see the gargantuan task in front of you. Here's a tip: lie about how often you trade for the first three months at fidelity. This should get you enough time to experiment to the point that you have something you "might" be willing to risk hard earned money at, but, obviously, this requires at least $25k. And this is a very decent amount to begin trading with. Enough to make it worth your time while you learn, and, the real bread and butter amount that gets you passed the day traders rule on the NYSE and NASDAQ.

    The benefit I want you to get from reading my early comments is to understand that knowing that you don't know will take you to the next level. It may not be profitable yet, but it will help you understand what you don't know. Then, when you learn what you do know, you can have confidence enough to bet your future and your family's future on your day to day trades. This is a stage that only a handful of traders get to, and, really, there's very few on here that have. A lot of them can say they have, but not many have verifiable proof.

    I'm pretty sure you've caught that I'm someone that knows what he's talking about without being questioned about my background or credentials. At this point, only the most uninformed or simply arrogant traders would question my comments on this subject. You'll find that the single greatest breakthrough in modern finance and in my own personal trading endeavors was learning about how to exploit volatility. Adding standard deviations to indicators and formulating a theory on how to use them was one of the keys to my success. CAPM, APT, these are all variations on volatility and how to use them. Just look at how SuperBands with Linear Regression Analysis turned out more than 3 years after releasing it at \. I did a whole lecture to the Kentucky Math Association on this strategy, and while it wasn't anyones bag but my own, it was instrumental I think in taking me forward in my development.

    At more advanced levels you'll begin to notice mean reversion is the only absolute in modern finance and any price chart. This may be beyond your understanding of trading now, but once you "get it", coming up with profitable strategies will be your true passion. It has become mine after years of development, some heartache, and extra money for the future.
    #24     Apr 13, 2009
  5. Was this the system you used to generate those -30% returns last year or this the new and improved version??
    #26     Apr 13, 2009
  6. lindq


    #27     Apr 14, 2009
  7. lindq


    You need to understand a couple things, because you are way off base on your assumptions.

    First, discretionary trading is something that you may elect to do ONLY after years in the saddle. You can't beat the market unless you know it better than your competition. Five years from now you can - possibly - think about trading with some personal discretion. Even then I would advise against it unless you are very, very good.

    Second, successful system trading is about statistical probabilities. It has nothing to do with a single trade, or a single day. It has everything to do with many trades, over many days, weeks and months. That's the value of backtesting. You need to put the statistical odds in your favor in order to beat the house. Otherwise you simply won't do it over time.

    Third, you are making a very typical newbie mistake of focusing on technical indicators. There are NO secrets there. An indicator is nothing more than a measure of past price and/or volume. You first need to spend many, many hours sitting in front of realtime or playback charts, trying to understand what's happening and why. Then you can engage in trying to backtest your observations. After quite a few years at this, my very best systems use no technical indicators at all. They only measure price in relation to past price. That's it. Nothing more.

    Finally, your 'creativity' will come in systems development, not in trading. Creativity during the trading day will be your ruin, because it will engage your emotions, which you need to keep under wraps. If you feel like you need a creative outlet, then pick another profession or take up a hobby.

    Good luck.
    #28     Apr 14, 2009
  8. Get a job at a successful trading firm.

    1. Everything you think and people tell you are pretty much BS until you see it happening or confirmed via money.

    2. General idea of trading within a retail environment is only the tip of the iceberg, compared to how the institutions make money. There's a lot more happening behind what Bloomberg reports and what you read in books.

    3. Keep yourself up-to-date. Market Wizard, Van Tharp's book, etc. etc. are all out-dated. I wouldn't bother reading things that's been written 5 years and older. It's only interesting to read for nostalgic purposes, and the industry is different from what's been written. Industry and environment changes as much as the market does.

    There is no such thing as being timeless. Being in time is more important. Sorta' like trading a losing model that's tested profitably with 30 year data and trading a winning model that's been tested with 5 days of data.

    4. Get connected. Meet people rather than reading about things.
    #29     Apr 14, 2009
  9. It is fascinating how much of your opinion is ill-informed and based on untested assumptions. :D LOL
    #30     Apr 14, 2009