"Always be fading"?

I

IronFist

Attachment on post 3

I found this posted on another site and thought I'd post it here. It's probably a repost but whatever.

edit - it says it's too long to post so I've attached it.


This guy says "always be fading." I think I might try that. Almost every time a popular indicator gives a buy signal, there's always a little drop that may or may not continue. And vice versa for sell signals.

wtf

If most people follow these and diligently buy when their system tells them to, and then exit when their system tells them to, and they lose money, maybe they should be doing the opposite. That's what "fading" means, isn't it?

I spend hours each day studying systems, coming up with new ideas, coding and testing them, and I really haven't found anything with an edge over time.

Maybe I'll start doing the opposite of all this stuff.

Except it seems like fading would require scalping, and I hate scalping. I always get shitty fills, even when I use bracket orders off the DOM (unless I use limits to enter, but I don't see how you could use limit orders to enter on a scalp). Seriously like I enter on a bracket order with exits +/- 4 ticks in either direction, and somehow I always get filled 1 tick away from my exit in the wrong way. So one tick against me stops me out... wtf is that? And it also means I'm entered with 3 ticks already against me. Do not want! This doesn't happen if I use market orders, but like I said, I never know where the price is gonna be when I'm gonna want to enter so market orders are pretty hard to use.

Discuss.
 
maybe I misunderstand, but i would never work on a system, just so I can trade opposite to what it is telling me to do. If it doesn't work, I would do away with it and start over.

market's are always changing. when one system works, people catch on and it stops working. my experience is that, when things aren't working, stop and paper trade until they do.

doing the opposite of what a system tells you to is a case of trying to outsmart yourself, imo.

good luck.
 
Taking the opposite side of a system "just because someone else is buying it" is a very poor trading strategy. They key to trading is finding a edge that "suits you." Find out who you are as a person, develop the system around that, refine it until you find an edge, and repeat it over and over and over and over and....
 
Quote from ProfitTakgFool:

Taking the opposite side of a system "just because someone else is buying it" is a very poor trading strategy. They key to trading is finding a edge that "suits you." Find out who you are as a person, develop the system around that, refine it until you find an edge, and repeat it over and over and over and over and....
More...

On the other hand:

Never, ever, follow conventional wisdom in the market. You have to learn to go counter to the markets. You have to learn how to think for yourself; to be able to see that the emperor has no clothes. Most people can’t do it. Most people want to follow a trend. “The trend is your friend.” Maybe that is valid for a few minutes in Chicago, but for the most part, following what everyone else is doing is rarely a way to get rich. You may make money that way for a while, but keeping it is very hard.
James Rogers, MW, p.314
 
Nice article, it fits pretty much my experience using the usual retail traders toolbox.

I don't think the point of the article was to encourage you to do the opposite of what your signals are telling you.

I took on the following points:

1. Scale in to positions
2. Trade as if the market is ranging as it seems to be 80% of the time according to the article.
3. Use wide stops but only take a small amount of risk on each trade.

Most trading methods rely on identifying the trend whereas this guy says the market hardly ever trends. I like that...

Cheers
 
I only know of 2 systems that have historically proven to work , although there are probably others. The 1st is fading the gap. There have been a number of papers published showing that if a stock gaps a certain percent at the open and you go against the gap, the percentage is high that within 3 weeks your position will be making money. A classic example was Freddie Mac the other day. Big gap down at the open and up 50% within the same day. Osip and Apple are other companies I've faded the gap on for big gains.
 
I just couldn't agree more.

Quote from Bingoking:

On the other hand:

Never, ever, follow conventional wisdom in the market. You have to learn to go counter to the markets. You have to learn how to think for yourself; to be able to see that the emperor has no clothes. Most people can’t do it. Most people want to follow a trend. “The trend is your friend.” Maybe that is valid for a few minutes in Chicago, but for the most part, following what everyone else is doing is rarely a way to get rich. You may make money that way for a while, but keeping it is very hard.
James Rogers, MW, p.314
More...
 
1. Scale in to positions----->>> I've probably said this 100 times on this site but it's so important I think it's worth repeating. Traders have a natural tendency to think you have to time the market to make money and the only form of risk management is using stops. That couldn't be farther from the truth. You should give yourself a comfortable margin of error on your trades and initiate a trade with a small amount of capital. Scale into it if the market offers you noise but the logic for putting on the trade in the first place is still intact. The best in the business put a low priority on timing. I know a guy who operates a hedge fund a NEVER uses a stop. He uses Delta Neutral as a form of managing risk and keeping profits. Stops only make money for the broker.

2. Trade as if the market is ranging as it seems to be 80% of the time according to the article.---->>> I would agree for the most part with this but I would also add....the market doesn't go up forever, or down forever, even if it's trending. There is typically an ebb and flow to the market. How the market closed today is the exception and not the rule. You don't see all out buying with no corrections very often and when you do it typically happens in the last hour of the day. The morning can still be volatile and ripe for fading and scaling and rapid profit taking.

3. Use wide stops but only take a small amount of risk on each trade.------>>> Spot on. My largest position today was 2% of my account total and I made 1.0047%. It was one of those days where everything I touched worked. Tomorrow that may not be the case but I'll have 98% in reserve to fight that battle if that's how things turn out.

If you can do 20% per year, consistently, using money management, wide stops, and put a low priority on timing they will run a parade for you right down Wall Street and when you go through a 20% drawdown your name will show up on ET with the word idiot after it. :confused:

Good thread here!!
Quote from womblevader:

Nice article, it fits pretty much my experience using the usual retail traders toolbox.

I don't think the point of the article was to encourage you to do the opposite of what your signals are telling you.

I took on the following points:

1. Scale in to positions
2. Trade as if the market is ranging as it seems to be 80% of the time according to the article.
3. Use wide stops but only take a small amount of risk on each trade.

Most trading methods rely on identifying the trend whereas this guy says the market hardly ever trends. I like that...

Cheers
More...
 
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