The point of my earlier post is that Bollinger Bands are not a legitimate frame of reference insofar as standard deviations are concerned. This point is quite apart from whether or not it "works," either as a stand alone method or merely as a component of an overall trading strategy. Its theoretical premise is flawed in its application. Therefore, if its frame of reference helps the trader, then it does so for some other reason. Regardless, a trader would be well advised not to take too much comfort in the "science" of Bollinger Bands.
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A Truth on Trading.**Everyone, please Read**
- Thread starter Bullz n Bearz
- Start date
again, yes
markets are NOT normally distributed. any gaussian assumptions will leave you cold
i agree. that's my point.
*if* markets had normal price distribution, then BB's would be MUCH more useful than they are.
you are correct, if you think of them in terms of SD envelopes (and thus with a predictive value as to normal distribution) forget it.
if you realize that they (like average true range) is a tool to show you volatility in relation to current, price - they are useful.
markets are NOT normally distributed. any gaussian assumptions will leave you cold
i agree. that's my point.
*if* markets had normal price distribution, then BB's would be MUCH more useful than they are.
you are correct, if you think of them in terms of SD envelopes (and thus with a predictive value as to normal distribution) forget it.
if you realize that they (like average true range) is a tool to show you volatility in relation to current, price - they are useful.
imo, before you use any setup you should have at least n=50 to give you an idea of validity.
the chance of a random setup giving positive expectancy (for example 60%) with 50 trials is pretty frigging small.
personally, i like extra confidence, so most of my setups were trialed over 100 times.
i wonder what %age of traders truly test their setups before using them...
or how many even have precisely defined setups!
the chance of a random setup giving positive expectancy (for example 60%) with 50 trials is pretty frigging small.
personally, i like extra confidence, so most of my setups were trialed over 100 times.
i wonder what %age of traders truly test their setups before using them...
or how many even have precisely defined setups!
Quote from whitster:
imo, before you use any setup you should have at least n=50 to give you an idea of validity.
the chance of a random setup giving positive expectancy (for example 60%) with 50 trials is pretty frigging small.
personally, i like extra confidence, so most of my setups were trialed over 100 times.
i wonder what %age of traders truly test their setups before using them...
or how many even have precisely defined setups!
Hmmm, what about the those traders that have transcended setups all together? I've seen traders that have become so tuned to the markets and information that they are acting on pure defined and developed instinct.
Granted many of these people started with defined "systems" or setups (God I hate that term), but now have grown in their trading and have all but forgotten them.
Simple price action for many is all that is needed. I call them TRUE MARKET DEMONS! They exist and it's almost scary to watch them in action.....
Trading is such a personalized pursuit that what works for some will look like such B.S. to others, but in the end it's probably more about control and discipline than anything else. Very similar to martial arts in many ways.
Good Luck!
whats imo..
"Hmmm, what about the those traders that have transcended setups all together? I've seen traders that have become so tuned to the markets and information that they are acting on pure defined and developed instinct."
absolutely they exist. but a very rare breed. i know one guy who can trade futures with just tape (former floor trader) and pit noise. just for the record, I am referrring to daytrading of futures. i think it is MUCH easier to trade stocks (and certainly to invest) and over longer time frame without specifically defined setups.
in my experience (as a trainer) , i have found that most people will lose in futures trading without having defined setups.
some can transcend defined setups and trade purely discretionary, but it's rare (and for most traders - incredibly difficult).
again, i am talking about daytrading futures. not stocks.
i breakdown traders into 3 main categories...
systems trader - automatic and nondiscretionary
discretionary - can still have SOME subjective elements but setups are mostly defined ESPECIALLY as to risk/reward.
"feel" trader - doesn't use setups. just looks at market and makes his trades.
note that the third type of trader can be (and most are) essentially a "random" trader. destined to lose. the very skilled feel trader is not, though.
absolutely they exist. but a very rare breed. i know one guy who can trade futures with just tape (former floor trader) and pit noise. just for the record, I am referrring to daytrading of futures. i think it is MUCH easier to trade stocks (and certainly to invest) and over longer time frame without specifically defined setups.
in my experience (as a trainer) , i have found that most people will lose in futures trading without having defined setups.
some can transcend defined setups and trade purely discretionary, but it's rare (and for most traders - incredibly difficult).
again, i am talking about daytrading futures. not stocks.
i breakdown traders into 3 main categories...
systems trader - automatic and nondiscretionary
discretionary - can still have SOME subjective elements but setups are mostly defined ESPECIALLY as to risk/reward.
"feel" trader - doesn't use setups. just looks at market and makes his trades.
note that the third type of trader can be (and most are) essentially a "random" trader. destined to lose. the very skilled feel trader is not, though.