Fading a Guru
- Thread starter gotta_trade
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Can you explain it now?
I have plenty of Larry Williams books and video training courses. I even attended one of his seminars about 10 years ago. I probably spent more money on him than any other guru.
So, I'm gonna dig up my old notes and pick one of his trading strategies that appeal to me at that time. I'll also watch one or two of his seminars over the weekend.
I'll post my trading plan as it develops. Then I'll trade it.
This may or may not work?? But I'm sure I'll learn something from it.
So, I'm gonna dig up my old notes and pick one of his trading strategies that appeal to me at that time. I'll also watch one or two of his seminars over the weekend.
I'll post my trading plan as it develops. Then I'll trade it.
This may or may not work?? But I'm sure I'll learn something from it.
Excellent premise. The execution, however, is much more difficult than you think, as you will find out as you try it out. The classic theory and reality problem 
I know this from personal experience, because I incorporate much of this philosophy into my own personal tading strategy. It took me several years to refine it into something profitable.
I know this from personal experience, because I incorporate much of this philosophy into my own personal tading strategy. It took me several years to refine it into something profitable.
Thing is, there can always be an "explanation" that you did not follow the rules correctly, or you misinterpreted some "nuance" or whatever.
If you faded a public call like Cramer's, you could vid record the call, then splice in your fade (and post it on YouTube). Then you can show if the Guru or Anti-Guru did better.
If you faded a public call like Cramer's, you could vid record the call, then splice in your fade (and post it on YouTube). Then you can show if the Guru or Anti-Guru did better.
Because everyone else is being coy about it, I will tell you why it won't work. 
I know because I've test thousands of strategy variations, automatically, using custom software. I also tested their inverse in each case.
The first reason is that the strategy simply may not have any predictive power at all, positive or negative, so given slippage, commissions and imperfect trading technique, it will work equally badly in both directions.
The second reason is that the profitability of a strategy is strongly influenced by the parameters of trade management (stops, etc.), and you need to adjust those independently.
You might very well find something that seems to work -- but odds are that the drawdowns are unacceptably high, or it happens to be a good curve fit for your limited dataset.
OK, I don't think I explained that very well, but now that I've spilled the beans maybe somebody else can elaborate.
You're not the first person to think of fading a losing strategy. But go ahead and give it a shot (on paper, please) and you will be slightly closer to trading enlightenment.
I know because I've test thousands of strategy variations, automatically, using custom software. I also tested their inverse in each case.
The first reason is that the strategy simply may not have any predictive power at all, positive or negative, so given slippage, commissions and imperfect trading technique, it will work equally badly in both directions.
The second reason is that the profitability of a strategy is strongly influenced by the parameters of trade management (stops, etc.), and you need to adjust those independently.
You might very well find something that seems to work -- but odds are that the drawdowns are unacceptably high, or it happens to be a good curve fit for your limited dataset.
OK, I don't think I explained that very well, but now that I've spilled the beans maybe somebody else can elaborate.
You're not the first person to think of fading a losing strategy. But go ahead and give it a shot (on paper, please) and you will be slightly closer to trading enlightenment.
This is not accurate. Your only real world tests are probably systems that are slight losers or breakeven over time, excluding commissions. Real losing traders and gurus often are not like this.
If any of your systems were consistently and dramatically losing money in a predictable way (like some real traders), then taking the inverse of them would have almost certainly been profitable, if the trades are held over a reasonable timeframe (ie. not scalping for 10 ticks).
As I said there are many unforseen real world implications to nakedly applying this kind of strategy that make it much more difficult to use than first meets the eye. I apply this strategy in combination with a solid technical system and it works great.
In any case your argument is incorrect if you are disputing the concept as a profitable idea. My results speak for themselves and a large component of my success is due to fading other losing traders.
If any of your systems were consistently and dramatically losing money in a predictable way (like some real traders), then taking the inverse of them would have almost certainly been profitable, if the trades are held over a reasonable timeframe (ie. not scalping for 10 ticks).
As I said there are many unforseen real world implications to nakedly applying this kind of strategy that make it much more difficult to use than first meets the eye. I apply this strategy in combination with a solid technical system and it works great.
In any case your argument is incorrect if you are disputing the concept as a profitable idea. My results speak for themselves and a large component of my success is due to fading other losing traders.
Quote from lynx:
Because everyone else is being coy about it, I will tell you why it won't work.
I know because I've test thousands of strategy variations, automatically, using custom software. I also tested their inverse in each case.
The first reason is that the strategy simply may not have any predictive power at all, positive or negative, so given slippage, commissions and imperfect trading technique, it will work equally badly in both directions.
The second reason is that the profitability of a strategy is strongly influenced by the parameters of trade management (stops, etc.), and you need to adjust those independently.
You might very well find something that seems to work -- but odds are that the drawdowns are unacceptably high, or it happens to be a good curve fit for your limited dataset.
OK, I don't think I explained that very well, but now that I've spilled the beans maybe somebody else can elaborate.
You're not the first person to think of fading a losing strategy. But go ahead and give it a shot (on paper, please) and you will be slightly closer to trading enlightenment.
My comments refer more to fading losing systems rather than losing traders.
Traders lose big because of psychological reasons. If you could actually access a losing trader's bad decisions in real time, then you would really have something. But that's never going to happen unless you are their broker. So he's going to be fading the trader's stated system, not the traders actual mistakes.
If you did happen have a system that was a consistently large loser, then of course you just have to invert it. But like I said, most easily codable and testable systems tend to lack significant predictive power one way or another.
When you say you are profitable "fading losing traders", I assume that you are talking about trading specific, commonly known setups in an uncommon way. You are probably not just blindly inverting. The difference being that you have actually come up with a novel twist. Just my assumption, of course.
That would be awesome...you could have a split screen with Cramer flinging spittle and making cow noises while screaming "I love Qualcomm here at 800" and "Bear Stearns is a BUY!!!!" while showing a chart with large red candles on the other half...Quote from MarketMasher:
Thing is, there can always be an "explanation" that you did not follow the rules correctly, or you misinterpreted some "nuance" or whatever.
If you faded a public call like Cramer's, you could vid record the call, then splice in your fade (and post it on YouTube). Then you can show if the Guru or Anti-Guru did better.
I dug up all of my Larry Williams videos, books, and notes. He certainly has a lot to offer. I'll spend the next week or so studying his stuff, I'll pick one or two strategies, develop a trading plan, and then I'll take some trades. I'm hoping to be ready within the next week or so.
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