If my criteria for entering a trade have been satisfied, I question nothing, I do nothing more except enter the trade with the parameters I have designed. I accept with serenity that I do not trade with a 100% win rate. I know that pursuing a 100% win rate is a foolish endeavour. I have full confidence in my statistical analysis of thousands of trades. I do not worry about the butterfly effect of a small factor that I have not noticed. I understand the overwhelming force of the alignment of my other factors. “Where one is weak many are strong.” - Bobby Axelrod I know, without doubt, that no matter the outcome of any single trade, the average of the next thousand will be profoundly profitable. “I’ve still got the greatest enthusiasm and confidence in the mission.” - HAL9000 I do not search for the nit, on the nut, of a gnat.
Historical data mining, statistics and walk forward analysis. Otherwise it’s always a shot in the dark.
You'll NEVER know. for sure. in the heat of the trade battle moment. You have to take that virtual leap of faith...with each Trade, Everything is only crystal clear, and obvious, and rational, and logical...in Hindsight -- when it's all said and done, already. That's why trading is so difficult, and many many people fail; it's part art...part science...every Day, You can sound smart, and read a 100 books on trading...But that can all be relatively meaningless in the real world of trading if you were asked to apply it...and make all that magic happen...and make money rain down on you from the sky, Good trading, and May the Farce be with you...ET extraterrestrials, Mobile, Alabama Leprechaun ...2006 news story...this town reminds me of the vast majority of traders,
As you may begin to suspect, answers fall "in the between". In your typical org, it's between each responsible areas. It's exactly what you dont pay people for, since they are rewarded with unemployment if solving them. Beware though of confusing correllation with causation. Where's the evidence?
I’m very conscious about what I do to eliminate false positives, but it is also rather specific to my personal approach to trading, which essentially comes down to entering intra-day positions in the Forex market. I find currency pairs to be rather predictable and relatively obedient to the dictates of a 24-hour market cycle, so for me it all starts by establishing the levels beyond which price almost never distances itself from each day’s open. When I see a reversal taking place at these levels, I know that the statistical probability of the new direction taken by the intra-day trend being a deceptive little move designed to lure me into a trap is greatly reduced. After asking myself if the apparent start of a new intra-day trend is occurring at one of these key levels, my next question is, “Am I entering a trade in the direction of the overall day-to-day trend?” Of course, the answer has to be “yes,” or I elect not to take action. To establish the direction of the general trend, I do not look for higher highs and higher lows or vice versa, but rely on very specific simple moving averages that I have come to regard as valid and reliable for this purpose (but not your standard 10-, 20-, 50-, 100- or 200-period SMAs). I have also established the extremes beyond which price is not typically willing to distance itself from these key moving averages, so my third question is, “Does price appear to be reversing to join the overall trend at one of these key deviation levels beyond which it is typically unwilling to separate itself any farther from the underlying moving average? My fourth and final question is whether price is located near horizontal support/resistance where it was turned away once, or even several times, in the past. These four questions are serving me very well when it comes to currency pairs, but I find this is less so with stocks, which only trade 6.5 hours a day. I can spot the perfect setup, have the closing bell sound before it fully develops, and then see everything completely thrown out of wack by where the stock opens the next day. This problem can sort of be eliminated by trading index futures rather than equities, but my impression is that stocks are your game, so I only share this information for what it’s worth, or if it’s worth nothing, I share it because I have a lot of free time on my hands since putting the finishing touches on my trading system, and have nothing else I wish to work on at this particular moment.
Why are you trying to eliminate false positives? Managing your trades is more important then trying to get a 100% win rate.
I saw a guy pass on a gold trade signal very recently because of what currencies and treasuries were doing.
Good on you. NO ONE should EVER think that they're 100% right -- not and expect to keep their account. As a tick scalper, I was at home -- "Please God, just let me and 'the indicators' be right for the next 5-7 minutes." And that mostly worked. Doing credit spreads, I *know* I'm going to be wrong -- the question is only by "How much?" OUCH! It still gets dicey. So whatta ya do? You second guess. Re-guess. And plan your escapes early and often.
This actually one of the best questions I have read on the forum lately and yet many answer it is cute funny ways. Most young traders do an extra 1.50 to 2.00 losing trades a day based on chatting with many through the years, so would your bottom line be very much positive if you were able to reduce two losing trades per day? This has nothing to do with attaining 100% profitable trading which I doubt can be done at all, all my time regarding trading is used in risk management ideas and not attaining 100% winners. So how does one ignore taking a good signal is the question. My favorite instrument is ES as I have trade it the longest, for me for 90 minutes, I can expect 3 swings, I keep averages of each swing, so if there is a swing of price going say 8 points in one direction and get another trend signal, and ave swing is 7-10 points, I can either ignore it, can shorten risk to so many ticks, can shorten amount of time to get to breakeven plus one tick. Other factors can come into play such as speed of recent price action, if speed and amount of points is twice that of price action before it and current price is in the 7-10 point zone-markets that shoot up fast tend to come down fast-so this signal be ignored if I got a buy signal to soon after fast run up. Megaphone patterns can develop, so any breakout trades are ignored and only buy low/sell high are traded. This is just few examples of reasons of not taking otherwise good signals for me.