Edge types, efficiency, etc

In response to your "relax and just trade" question, it took me about 2 years (after being profitable) to actually relax and just trade. I day trade equities via a custom built ATS and I've had periods that have sometimes lasted for a solid month where I don't make a dime. These times have been the absolute worst times for me, because it's very difficult to turn my ATS on every morning when I've had 20 days of crappy trading and my account is down 4% or 5%. But, it's also been during these times that I've been able to work through issues in my software and further optimize my methodology.

The real "piece of mind" for me came last year when I finally finished my backtesting software. This enabled me to further optimize my methodology and also allowed me to compare my realtime trading with my backtest results (nightly).

I have so much more that I could say, but I don't want to ramble on.....
 
Quote from New2thegame:

Great, I'm glad my thoughts resonate with some of you. I will read your thread in a little bit. I have been demo trading and I mentioned earlier that I do find some pretty promising tendencies but I see enough variation that it forces me to assume that it's no better than the null hypothesis. That is, even though it still may be quite valid (or not)... I know theoretically assuming a 1:1 R/R that one could make quite a living from a 5% edge net of costs but in reality when trying to convince yourself in trading with real money, or even demo money for that matter that 55% is good enough, it's hard. It's hard because I know this "edge" could be explained by standard deviation. It really ruins baseball for me too ;) Most teams' winning records could be attributable mostly to chance, how disappointing. How did you reconcile yourself and learn to relax and just trade?
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My thread may be a bit dissapointing so dont get your hopes up. It was more to do with whether you can ever be sure that you 'have something'...an 'edge' if you will. If the market is always changing, like i here so much, then what use is a backtest?

Them sort of questions.

I managed to 'relax and just trade' because i realised i was never gonna get the answer i was looking for. Nobody really knows the answer to Most of my questions.

i trade intraday and gained confidence when i tested my theories over lots of different instruments, over lots of different timeframes, over lots of different periods in time. It was all done by hand as i cant program. Brutally slow. I picked random instruments from a random year and went through the chart with my 'method'. my results were wroth persuing and i began trading it with small size.

I also gained confidence because i met a real life trader (not just a name on a forum), whose method wasn't a million miles from mine (price action trading), who has been doing it a lot longer than me. Markets do 'change' but that doesn't mean that it should effect your method if you are trading price. Support and resistance wont suddenly 'stop working'.

I decided it was Best to just get on with it and develop one's inner self in peace and quiet!!
 
Quote from New2thegame:
I believe I already know a lot, and am currently in the process of weeding out the uselessness. I suppose it's the small nagging prospect in my head that wonders if it's nearly all useless.
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1) You have to be optimistic about your prospects. Otherwise, you'll never take the first step.
2) Keep in mind that you'll continue to learn, especially after you begin trading. You won't "know it all" at the outset.
3) You may be exhibiting perfectionism and pessimism. If you think the effort is useless, maybe you should stop all together or get to a point where you feel confident about being consistent. :cool:
 
I'm all for optimism so long as it's warranted. I'm trying to get there, any tips on how to be sure your edge is in fact what you believe it may be? I agree about the perfectionism as a problem part. In the scientist/skeptic in me. I'm trying leverage that without letting it ruin what might otherwise be.

Quote from nazzdack:

1) You have to be optimistic about your prospects. Otherwise, you'll never take the first step.
2) Keep in mind that you'll continue to learn, especially after you begin trading. You won't "know it all" at the outset.
3) You may be exhibiting perfectionism and pessimism. If you think the effort is useless, maybe you should stop all together or get to a point where you feel confident about being consistent. :cool:
More...
 
No worries, brother. Speak on. I'm personally interested in anything you have to say. Don't worry about hijacking the thread. Anything honest and intended to be helpful is welcome in my book (thread). Do you trade automated-only? Do you live from trading or does the ATS allow you to keep a day job (as if that were a desirable thing).

Quote from sappjason:

In response to your "relax and just trade" question, it took me about 2 years (after being profitable) to actually relax and just trade. I day trade equities via a custom built ATS and I've had periods that have sometimes lasted for a solid month where I don't make a dime. These times have been the absolute worst times for me, because it's very difficult to turn my ATS on every morning when I've had 20 days of crappy trading and my account is down 4% or 5%. But, it's also been during these times that I've been able to work through issues in my software and further optimize my methodology.

The real "piece of mind" for me came last year when I finally finished my backtesting software. This enabled me to further optimize my methodology and also allowed me to compare my realtime trading with my backtest results (nightly).

I have so much more that I could say, but I don't want to ramble on.....
More...
 
I do not live from trading only. I'm still a full-time software engineer. Trading on a $220K portfolio and made $75K last year on about 3400 trades (63% return approx last year). Made 52% in 2008. My goal is to go either part-time or quit my day job (all-together), once I'm able to bring in approximately $250K to $300K per year in trading profits.

I should be close to that goal within the next 2 years, but only time will tell.....

I don't think I've developed the best system on the planet, but +50% per year, sure as hell beats any other type of standard investment. I also love the fact that I'm doing it myself and I'm cash at the end of every night (which I also like quite a bit).....

Oh yeah. I forgot. I trade 100% automated. Didn't at the beginning, but I do now.
 
Great, so you trade based on what you see in terms of support and resistance then? That certainly isn't easily quantifiable from a testing standpoint, but that isn't to say it can't work perfectly well. I have a propensity for keeping things as objective as possible, but fully realize just because something is untestable, doesn't preclude it from being useful. After all, if you ask someone how they can recognize someone's face in microseconds with minimal effort they will have trouble answering you to say the least. That said, it certainly doesn't make it easier on me. I have spent a fair amount of time convincing myself any idea must be fully falsifiable when I know that that is limiting my potential at least somewhat. If I could learn to trade on intuition alone that would definitely save me some money in historical data and testing software :) Considering there are mechanical traders and tape readers, it would be very interesting to hear a debate between the two camps. Unless of course they agree eachother's methods are both valid. That would be even better.

Quote from flatron:

My thread may be a bit dissapointing so dont get your hopes up. It was more to do with whether you can ever be sure that you 'have something'...an 'edge' if you will. If the market is always changing, like i here so much, then what use is a backtest?

Them sort of questions.

I managed to 'relax and just trade' because i realised i was never gonna get the answer i was looking for. Nobody really knows the answer to Most of my questions.

i trade intraday and gained confidence when i tested my theories over lots of different instruments, over lots of different timeframes, over lots of different periods in time. It was all done by hand as i cant program. Brutally slow. I picked random instruments from a random year and went through the chart with my 'method'. my results were wroth persuing and i began trading it with small size.

I also gained confidence because i met a real life trader (not just a name on a forum), whose method wasn't a million miles from mine (price action trading), who has been doing it a lot longer than me. Markets do 'change' but that doesn't mean that it should effect your method if you are trading price. Support and resistance wont suddenly 'stop working'.

I decided it was Best to just get on with it and develop one's inner self in peace and quiet!!
More...
 
Quote from New2thegame:

I'm all for optimism so long as it's warranted. I'm trying to get there, any tips on how to be sure your edge is in fact what you believe it may be? I agree about the perfectionism as a problem part. In the scientist/skeptic in me. I'm trying leverage that without letting it ruin what might otherwise be.
More...
For me it was testing my ideas on historical data. Then it was dipping my toe in with several 400-600 share positions. As profits accrued, I increased the size slowly. When some things didn't work, I tried to figure out why... or at least what could I have done to manage the risk better. I learned to shift the bias intraday and be relatively flat overnigh (hedged).

Learn from each experience. Modify. Success leads to confidence. Eventually I took on some 15-20 thousand share positions, something I never dreamed that I would ever do. But I NEVER bit off more than I could chew or allowed risk to control the show. In a sense, it almost becomes like playing an arcade game, trying to run up the score. You're alert due to the adrenaline flow but somewhere you hold onto the sanity that fears Game Over :)

If I find something that's working, I tend to trade it hard, fully knowing that eventually it's going to bite me. Incremental size enables you to build a cushion. The last trade hurts but when it's down the road and say it takes 5% of your gains, you chalk it up to "It's part of the overhead" and move on.
 
That is excellent. Congratulations. Sounds like you're living the dream, or you're almost there anyway. Great job... May I ask what type of inefficiency your system seeks to exploit? Let me clarify: I don't expect you to say how it does it, but is it some kind of intraday mean reversion, breakout, gap reversal/continuation, fundamental? It must be 100% mechanical since it's automated, but is it fully based on the chart? Any particular reason you don't trade futures? Is it because they're more difficult to extract excess returns or they just aren't your thing?

Quote from sappjason:

I do not live from trading only. I'm still a full-time software engineer. Trading on a $220K portfolio and made $75K last year on about 3400 trades (63% return approx last year). Made 52% in 2008. My goal is to go either part-time or quit my day job (all-together), once I'm able to bring in approximately $250K to $300K per year in trading profits.

I should be close to that goal within the next 2 years, but only time will tell.....

I don't think I've developed the best system on the planet, but +50% per year, sure as hell beats any other type of standard investment. I also love the fact that I'm doing it myself and I'm cash at the end of every night (which I also like quite a bit).....

Oh yeah. I forgot. I trade 100% automated. Didn't at the beginning, but I do now.
More...
 
I trade trends on an intradday basis, based on support/resistance and volume abnormalities. I know that's a mouthful and also doesn't give you a hell-uv-a-lot to go on, but hey, took me many years, so I'm not going to go into a lot of detail on an open forum.....

As far as futures, the volume abnormalities that I'm seeking happen too infrequently in futures and as such, I just wouldn't get nearly the number of trades that I get trading equities.
 
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