What's your Trading System??

Thats like KFC or KO giving out their secret recipe. Why would anyone give out a system?

Anytime you hear someone selling you a system, run away.

 

it's patchwork. I learned it all from ET too... someday I'll make a fortune. The only problem is I already spent it....

 

a 200 ma ? 6% more than the stock market? acording from my testing I did the past 100 years for a study with my university and it wasn't that much.

While buy and hold retrieved around 9.6 % with 18% standard deviation and a maximum drawdown of 80% (great depression), the real benefit that the 200 ma gave was a drastic reduction on drawdown and volatility.

The return also increased a bit which in such a long time frame makes a huge diference. 200 ma gave a 11.3% return with 11% standard deviation and max drawdown of 40'ish percent. But that was a long only portfolio, by switching to the risk free rate whenever price was below the 200 MA, so I can't assess what are the numbers for shorts.

Also, I then constructed a poprtfolio of 5 uncorrelated assets, such as commodities index, stock market index, world stock market index, etc.

The result was a 50% decrease in volatility to 6%, a maximum drawdown of 9.7% and a 12'ish % return. The period considered was from 1975 to 2008

Worst year was 2008 with a -2% performance

 

Several traders here have provided full details of how they trade: Anekdoten (http://www.elitetrader.com/vb/showthread.php?s=&threadid=99283), Saliva (http://www.elitetrader.com/vb/showthread.php?s=&threadid=144884), SusanaDT (http://www.elitetrader.com/vb/showthread.php?s=&threadid=132170&perpage=40&pagenumber=1). They've taken time to provide in great detail what they do.

Geez (http://www.elitetrader.com/vb/showthread.php?s=&threadid=148752) provided a journal of live calls last year demonstrating how a 1:2 risk:reward ratio using a relative strength/weakness with-trend strategy makes it possible for a 50% annual return in day trading quite likely when you follow this simplest of strategies with strong risk management. (I believe he ended the year with much greater than 50% return, but sadly his journal was spammed and he stopped posting.)

If you can read, put in some chart study and live screen time to memorize what price action patterns indicate most of the time, set rules for yourself and stick to them, you can get everything you need to be a profitable trader right here on ET for free.

 

You put a gem in your post that many traders have missed. I have used the same meta-system approach as yours in designing automated systems for the last 12 years trading stocks.

Average traders today are consumed with finding entry and exit signals that work in discretionary setups. Once these discretionary set ups work a few times they are then built into automated systems. But these converted discretionary automated systems fail to work. The reason they fail to work is these traders have ignored the metadata (that is the conditions that surround the entry and exit signals for price, volume and volatility) that made the discretionary setups work. Without a solid metadata base in an automated system IMO it’s a coin toss as to whether that system will work going forward for any length of time.

 

Nod thank you so much for sharing these threads with us. By the way I love your ...second mouse gets the cheese.... so I added to my collection on the wall which is:

Early bird gets the worm, but the second mouse gets the cheese.
If everything in trading seems to be going well, you have obviously overlooked something.
When everything is coming your way with a trade, you're in the wrong trade.
Trading eagles may soar, but weasels don't get sucked into jet engines.
If at first you don't succeed in trading, destroy all evidence that you tried.
A conclusion about these markets is the place where you got tired of thinking.
Trading experience is something you don't get until just after you need it.
For every new trading action, there is an equal and opposite traders criticism in the log.

 

If it works, it's worth something and is unlikely to be shared. Philanthropic gifts generally involve cash that achieve deductions not cash generators.

Analogous to the brokerage argument is a system where supply is limited. A coupla f(r)iends or ET-er's could reduce available size limit gains.

 

Too funny Others directed me to these threads, but what ET needs is a section for Hall of Fame threads that the mods can only add to. It would be a nice resource all in one place.

Someone else here once posted second mouse gets the cheese and I think it was around one of those days I had where I kept trading something too soon before there was actual confirmation of a reversal and I was stopped out again and again and when I finally threw my hands up in frustration and walked away, I came back to find a beautiful reversal AFTER the confirmed reversal signal was put in. That saying couldn't have been more timely for me.

OK I have one that's been on the door of my office for a long time and this week I started chanting it out loud to charge myself up for trading oil futures in the live account:

"The future is that time when you'll wish you had done what you aren't doing now."

It's starting to work. I managed to put on a very uncomfortable (for me) trade yesterday by saying that out loud, best trade of the day.

 

Nod many on ET don’t understand that these funny little sayings you and I use play a crucial role in using our trading methods as part of ‘What’s my Trading System?”. These techniques are cross training our brains to use our trading systems effectively. You are using some excellent techniques to train yourself. Hearing your own voice say something is an excellent leaning tool.

I learned how to cross train my brain in the early 1990s. I was working for a steel mill owned by the Japanese. We all were required to learn KAIZEN as our quality control method. I was chosen to be a team leader for quality control for IT databases and security and sent through two weeks of training with instructors from Japan.

One Japanese KAIZEN instructor in particular challenged our western way of thinking in those classes. With statements like “…Why do always take “Yes” for an answer when it is not true….”, “…Will you be true to yourself when you are the source of the problem…”, “…Why do fixate on innovation while allowing standard processes to steadily deteriorate and decay…” and “…the truth about learning lessons is they are never learned; they must be relearned every day…”

What KAIZEN taught me is I not only have to stick to my trading plan but
- I have to reinforce every day what I must do right.
- Teach my trading brain each day not to make the mistakes of the past.
- Continuously provide myself feedback whether my plan and advice (reinforcement) is working.
- Keep change and improvement to small steps so not to disrupt trading.
- Maintain and relearn what works with my trading
- Pay attention to details about each trade as to how it happened, why it happened and did it go according to plan.
- And to expect and measure gradual improvement over the long term.

For example this means I must stop my primitive brains urges each day from destroying my trading. The list is actually much longer than I have shown you.

Here is an example of what I’m talking about. In the past I discovered that after one or two good profitable swing trades I would be full of myself and deviate from the plan with “new untested trading actions.” These have in the past destroyed my trading. If I find myself doing this today I penalize myself with long log entries for doing something that stupid – which I hate writing. This threat is a major one for me. It almost happened to me again a few days ago. I had just closed out my profitable Apple long the other day. A low and behold I found myself thinking about shorting Apple where there was no short set up. But I caught it and started my cross brain training with “For every new trading action….”

So Nod keep on chanting out loud and cross training yourself. But I would take on innovation slow and easy while maintaining what works.

 

Great post. When you have designed the wheel, this is how to keep the rubber on the road, and that is where the real war is fought.