finding an edge...simple?

F

FRuiTY PeBBLe

So...we've all seen the posts stating to keep things simple. Yet, if edges were simple, wouldn't everyone trade one? Take this post, for example:

Quote from axeman:

After you have spent 15 hours a day for a full year or two,
come back and tell us your really out of ideas.

If your already out of ideas this quick, your toast.

You have to realize, your competing against entire
TEAMS of programmers hired by wall street looking
for a mechanical edge. For every 15 hours you put in
each day they are putting in thousands of man hours.
Not to mention all the independent traders out there
doing the same thing with far more experience than you.

Anything which can be figured out in 10 days, 15 hours
a day has already been done and has been optimized
right out of the market. The market is already efficient
in that manner. Unless you just get lucky and stumble
across something no one has ever thought of.

Think hard about this. Your expectations are way
out of whack. Mechanical systems are TOUGH, and take
much more work and research to achieve than you
have put in so far. The road ahead of you is far longer
than you will ever imagine.

Good luck. Tenacity is key.


peace

axeman
More...
What's the deal with finding an edge/keeping it simple?!

FRuiTY P.

p.s. If edges are so hard to find, why can ANYONE lose money EASY?! I don't know many people that blew out their accounts trading something that took a team of Wall St. programmers to come up with. (Aside from commissions and spreads, the opposite of their trades could have been taken to make money.)
 
<Smile>
You have some more digging to do.
First, try to define what trading is. When you've figured out that it's not only based on your entry rules, you will have found out a lot.
Take a SMA 9 / 12 on the ES intraday and tell me how it fairs.
Some days it will hurt, some days it will work but if it's a positive expectancy system, you will end up making money if you can sustain the down times.

NOTE and DISCLAIMER: the 9/12 actually works pretty well but I don't use it because i can't take big drawdowns. (so I settle for less upside)
 
I agree with Swoop.

If you want a system which puts in a good trade 80% of the time, you need to find a pretty good edge.

But there are also some pretty profitable systems with almost no edge and bigger drawdowns. They are profitable mainly because they let profits run and have a positive expectancy.
 
Example of simple system
http://www.nqoos.com/GB007_30-34.htm

So simple but profitable even if only one out of three trades is positive.

TradeStation Strategy Performance Report - _30/34 @ESH3-30 min. (11/11/1997-2/7/2003)
5pt stop 30pt profit

Performance Summary: All Trades

Total Net Profit $97.431,50 Open position P/L $925,00
Gross Profit $286.734,00
Gross Loss ($189.302,50)

Total # of trades 980
Percent profitable 31,94%
Number winning trades 313
Number losing trades 667

Largest winning trade $2.425,00
Largest losing trade ($1.662,50)
Average winning trade $916,08
Average losing trade ($283,81)
Ratio avg win/avg loss 3,23
Avg trade (win & loss) $99,42

Max consec. Winners 5
Max consec. losers 14
Avg # bars in winners 24
Avg # bars in losers 6

Max intraday drawdown ($7.725,00)
Profit Factor 1,51
Max # contracts held 1
Account size required $7.725,0
Return on account 1261,25%
 
If the link is not working...

The 30/34 System is a swing-type system for trading the S&P E-minis. Signals are taken from a 30 minute chart of the ES with a 34 EMA.


The 30/34 System rules are as follows:

1. Enter in the direction of the closing price whenever a closing bar CLOSES above/below the EMA by at least 1 full point (.99 doesn't count). The bar must be CLOSED. Penetrations that do not close 1+ point above/below the EMA DO NOT COUNT.

2. Crash stop is 5 points above/below the EMA and always take profits at the profit objective.

3. The profit objective will change depending on market volatility as measured by the last 3 months maximized theoretical profit. It is currently at +38. Note: in the time I have been monitoring this system on Woodie's, the profit objective has varied from 30-40 points.


4. The system is always in the market (including overnite) except when you have just taken profits and are waiting for the next entry.


5. New traders should wait for a theoretical drawdown of 35-40 points before starting to use the 30/34 since it has had a drawdown of -90 points and several in the - 60 point range in the past 6 years.

6. The 30/34 is a SAR (stop and reverse) system. Always take the SAR. The only other variables are closing out at the profit objective or getting stopped out at 5 points from the EMA. The SAR always rules though.

7. Only RTH (real-time hours) data is used.
 
Quote from MarathonTrading:


5. New traders should wait for a theoretical drawdown of 35-40 points before starting to use the 30/34 since it has had a drawdown of -90 points and several in the - 60 point range in the past 6 years.
More...

...Problem is, MANY systems that were great in the last 6 years have recently been hit hard and blown out due to lack of follow-through.
 
Quote from IndexTrader:



...Problem is, MANY systems that were great in the last 6 years have recently been hit hard and blown out due to lack of follow-through.
More...

Which is the problem with backtested systems that haven't been forward-tested.

--Db
 
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