10K in the hole

[pinkman]

Quote from newwurldmn:

you know if you have an edge. It will be obvious - like access to inside information.

Exactly! And that's kind of my issue with the term 'edge'

I believe that pretty much nobody here on ET has what I would call 'an edge'.

That term gets thrown around all the time nowadays. I think of it as a clear 'advantage' over others. Most of us are all looking at the same information/charts. There's no edge there.

People who work for big banks etc can access information that us retail crowd aren't privy too. Any 'edges' are reserved for them.

 

[slumdog]

I would agree.

There are two type of probabilistic edges, one that is a 'sure thing' kind of edge, of making money over the long run. Think edges the banks have or the casino has.

Then there is the 'maybe' type of edge, that the rest of us have to rely on.
These types of edges will only hold up if market conditions are good to us.
Your back test results will only match the future if the market doesn't change too much. Still there is the potential to develop something that has a high chance of holding up well if you have the skill and experience, and im not saying i have. You have to be continually researching for these types of edges.

I recall Ed Thorps interview in Hedge Fund wizards, he had good stat arb strategy that printed money for a long time but then degraded and he stopped doing stat arb.

 

[dev]

Quote from pinkman:

Exactly! And that's kind of my issue with the term 'edge'

I believe that pretty much nobody here on ET has what I would call 'an edge'.

That term gets thrown around all the time nowadays. I think of it as a clear 'advantage' over others. Most of us are all looking at the same information/charts. There's no edge there.

People who work for big banks etc can access information that us retail crowd aren't privy too. Any 'edges' are reserved for them.

The trouble with opinion, its often mis-stated as fact.

Yes, I'm being sarcastic.

 

[Mo06]

Just looking at Dax volatility over the last few years.... could be that traders relying on high volatility have suffered recently.

 

[slumdog]

Quote from Mo06:

Just looking at Dax volatility over the last few years.... could be that traders relying on high volatility have suffered recently.

Volatility has not been that bad over the last couple of years.
But recently with indexes sitting near the top of their ranges, there isn't much fear or greed in the market.
That is when other market players make irrational decisions and it becomes easier for traders to make money.

 

[glassinc]

The majority of us would be in agreement that there is no single Holy Grail system for all market conditions.

One can create or adapt ones beliefs and behavior to have a system or systems for a part of the several different market types. Having a means of identifying which market type you are in, and trade the system for it, that fits both you and it.

Edges come in many areas. For those that believe you don't have an edge unless you're a bank or broker, or another institution, based upon inside info, or research, etc. Why then even risk capital trading?

You have an edge by being smaller, easier to get in and out of positions, no boards, committees, or clients to answer to. You can have an edge having a written plan, trading it with high efficiency. You have an edge by being patient and taking only the trades which have a higher probability. High efficiency would be mistake free or nearly mistake free, by following your plan and the rule set for the particular system. This doesn't mean you won't have losses, as we know they are part of being in the business of trading.

Losses taken following rule based automated or discretionary trading are more positive, than winners breaking them in the long term. The former reinforces good behavior, while the latter reinforces poor. While getting away with poor behavior is possible for a time, eventually we get caught and punished. Continued consistent positive behavior is rewarded with profitable results.

There is no harm in halting trading to reevaluate. One can drastically reduce capital in one of two ways, one to a few large losses the fast way, or multiple small ones the slow way.

This is but a small amount of info. I wish you well on your path back to profitable trading.

 

[Swan Noir]

The reason generals disengage from the battle is that they know that their only chance to win the war is to have an army in the field with the equipment to fight another day. Good generals can lose a few battles yet still win the war over time.

If I have two losing trades in a day I stop trading for $$$ and either leave the screen or, more likely, observe the balance of the session. In the early days of learning to trade I had some stops and starts and being willing to stop -- to retreat -- made learning less stressful and cut the tuition cost in half. Losing streaks can develop a life of their own. I learned years ago when I was putting in 40 to 50 hours a week playing poker in Atlantic City and covering hotel and other living expenses before I saw a dime that walking away from the table when your stuck is a move that pros employ to manage their energy and emotions. They never want to be even on the verge of "tilt" so they regroup before letting the emotions rule.

Quote from slumdog:

I will continue to trade small as an alternative to stoping trading.

I have done work that will prevent me having big losing days in the future. Have developed an auto liquidator for my IB account which will close all open positions at my daily loss limit, I'm setting my daily loss limit at -2.5R. As 1R is 0.6% at the moment i will lose at most 1.5% on a bad day (+costs).

 

[failed_trad3r]

Quote from slumdog:

For something systematic to work every year it has to generate lots of trades. A low trade system will just have too much variance in returns.

Something that generates lots of trades will also generate lots of transaction costs. A retail trader doesn't exactly have the lowest transaction costs. These transactions costs will take the system negative in a bad year.

Anyone can design a system that seems to work very well on past data. Has 100% profitable years. But going forward it is much harder to maintain as market conditions change.

I am always afraid my system stops working. I have a system with 100% profitable years but only 15 trades a year (swing)
This was in 2011 i discovered it and backtested on all SPY data since 1993.
Then i got scared in 2012 to trade it.
Guess what, 2012 and 2013 (so far) both were profitable.
the jokes on me for not trusting the system.
system only has <300 total trades.

 

[failed_trad3r]

Quote from tortoise:

I was $215k in the hole until I finally learned how to do it.

Made up all my losses. and it's been blue sky since.

If I can do it, anybody can. I was the most incompetent trader on earth for a very long time.

I lost €50k same story before I finally realized the power of consistent backtesting.
Aka spend 1-2 hours at least a day just thinking about new ways to backtest, exercise the idea muscle. Read ET or investments books for ideas. etc etc.
Ive probably tried over 200 different ideas and only 5 are viable.

 

[failed_trad3r]

Quote from Mo06:

Just looking at Dax volatility over the last few years.... could be that traders relying on high volatility have suffered recently.

Lots of people who were banking coin in 2008 were banking coin because of high volatlity using sub-par methods. I was one of them. We called ourselves trend traders. Then when volatility disappeared I realized we werent trend traders at all. Trend was up yet I was losing money. I was trading volatility. They soon disappeared from the chatroom (blown up?) and i graduated to greener pastures (LUCK) before I was gonna end in the inevitable blowup

Know what you are trading, it is vital.