ES Journal Archive (2011)
- Thread starter Buy1Sell2
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vol,
sometimes it can be simple =)
But never easy.
The post was directed at vol because we both got a similar read on ES that it should pullback or having a late day sell off.
But, he chose to fade the top and taking the heat - I admire the courage.
I chose to wait for the weaknesses to show up first.
That's all.
Direct correlation between simplicity and profitability
<b>One month down - results unsatisfying ...</b>
<p>but not unexpected. Transitioning from a trading 'hobbyist' to a 'serious' trader makes you see the natural pitfalls inherent in making trading a hobby. I think it starts with the process. As a hobbyist, I was more focused on system development and trading environment. I probably did a pretty good job of that, but that does not necessarily translate into results. And it is the results that the 'serious' trader needs to focus on.</p>
<p>Looking at the primary systems themselves, they went from two strong months to a mediocre month. In and of itself that is nothing to be concerned about, but you always worry about over optimization. I try to base the systems on just a few factors, but than have many ways to describe those factors, e.g. how do you describe sufficient value? One symptom of possible over optimization is the systems generated 50% more trades this month than average. This is partially due to not picking up the trading trends as well as I would like. A good value in a down trend is likely a terrible value in an up trend. Here is an example that shows what I am looking at for the primary trend. </a></p>
<p><img src="http://cashcarewins.com/blog/wp-content/uploads/20110401_15min.png" alt="March 15 Min Trend" /></p>
<p>You can see that little mini sell off on March 28 led to a sell signal on the 29th. That is all the pink on the indicators at the bottom of the chart. This is the weakest of trend indicators because there is no confirmation after the initial sell off. Most of the indicators turn blue pretty quickly on the 30th. Unfortunately, those are the 'confirming' indicators. The primary trend indicator does not turn up until April 1. That leads to a sequence of chasing shorts on the way up and missing the nice retracement trades on the 31st and 1st. (FWIW, the actual trend changes are channel breakouts with confirming volume using various channel lengths and volume measures. This months trading trends went long -27; short +9; long +14; short -22; long 0) With such poor trend tracking it's not a surprise to have mediocre results - basically flat on -26 trend points. In a way, that shows how strong the system entries themselves are to keep me out of worst trouble in such a poor trading environment. Even at that, a couple of tick changes at the end of bars could have changed some no trades into decent winners.</p>
<p>This goes to the root of what I started to say ... hobbyists can be too enamored with their systems. As a trader I could see the low risk buying opportunity on the 29th, but I was unwilling to go outside the system box. When I finally went outside the system on the obvious trading double bottom on the 31st, I had some success. The thing to like about systems is they help take the emotion out of trading. But I don't think they can react as fast as a good trader, and most importantly, they don't provide a good risk analysis of trades that are outside of the system box. All I need to do is look back to my first go at trading and see that my success came from evaluating risk and hitting those high risk/reward points hard as much as picking the right direction.</p>
<p>Developing systems for me is about taking the emotional roller coaster out of trading. For optimal results, I may need to find a balance that puts a little of that back in.</p>
<p>but not unexpected. Transitioning from a trading 'hobbyist' to a 'serious' trader makes you see the natural pitfalls inherent in making trading a hobby. I think it starts with the process. As a hobbyist, I was more focused on system development and trading environment. I probably did a pretty good job of that, but that does not necessarily translate into results. And it is the results that the 'serious' trader needs to focus on.</p>
<p>Looking at the primary systems themselves, they went from two strong months to a mediocre month. In and of itself that is nothing to be concerned about, but you always worry about over optimization. I try to base the systems on just a few factors, but than have many ways to describe those factors, e.g. how do you describe sufficient value? One symptom of possible over optimization is the systems generated 50% more trades this month than average. This is partially due to not picking up the trading trends as well as I would like. A good value in a down trend is likely a terrible value in an up trend. Here is an example that shows what I am looking at for the primary trend. </a></p>
<p><img src="http://cashcarewins.com/blog/wp-content/uploads/20110401_15min.png" alt="March 15 Min Trend" /></p>
<p>You can see that little mini sell off on March 28 led to a sell signal on the 29th. That is all the pink on the indicators at the bottom of the chart. This is the weakest of trend indicators because there is no confirmation after the initial sell off. Most of the indicators turn blue pretty quickly on the 30th. Unfortunately, those are the 'confirming' indicators. The primary trend indicator does not turn up until April 1. That leads to a sequence of chasing shorts on the way up and missing the nice retracement trades on the 31st and 1st. (FWIW, the actual trend changes are channel breakouts with confirming volume using various channel lengths and volume measures. This months trading trends went long -27; short +9; long +14; short -22; long 0) With such poor trend tracking it's not a surprise to have mediocre results - basically flat on -26 trend points. In a way, that shows how strong the system entries themselves are to keep me out of worst trouble in such a poor trading environment. Even at that, a couple of tick changes at the end of bars could have changed some no trades into decent winners.</p>
<p>This goes to the root of what I started to say ... hobbyists can be too enamored with their systems. As a trader I could see the low risk buying opportunity on the 29th, but I was unwilling to go outside the system box. When I finally went outside the system on the obvious trading double bottom on the 31st, I had some success. The thing to like about systems is they help take the emotion out of trading. But I don't think they can react as fast as a good trader, and most importantly, they don't provide a good risk analysis of trades that are outside of the system box. All I need to do is look back to my first go at trading and see that my success came from evaluating risk and hitting those high risk/reward points hard as much as picking the right direction.</p>
<p>Developing systems for me is about taking the emotional roller coaster out of trading. For optimal results, I may need to find a balance that puts a little of that back in.</p>
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