Are you taking your trades based on charts only or do you take fundamentals into account?
Finding an Edge
- Thread starter Alfing
- Start date
Are you taking your trades based on charts only or do you take fundamentals into account?
Mostly the tape, but I do tell myself a fundamentals story (which could always be wrong). So you could say I’m colored by the fundamentals. I do know what most people get wrong (e.g. rising rates bad for the market- not so, yield curve shenanigans, effects of a rising/falling dollar, etc). If the charts don’t match my fundamentals, I suspect I’m misunderstanding something. Most times you can’t know what it is until after it’s done.
One area I totally ignore fundamentals is oil. There is no fucking way you could know all you need to know there. All that drawdown/build talk.. please. No way you could be on top of that. I’ve also noticed it doesn’t matter as the price moved days before the numbers have been released anyhow. Gold is another. Good luck on those “fundamentals”
Price leads. I also dont get how someone could be a fundamentals only person. Even if you were right all the time (who is?) your entries and exits would be for shit. It would be too much to overcome. I’m convinced druck, soros, gundlach, etc, either stare at charts themselves, or have chartists they trust with their lives (druck claims to not understand them, but has referenced someone who works for him being the best in the biz). Just listen to what they say and then look at a chart. It’s certainly heavily weighted in their perspective.
It actually reminds me of an economist who disected keynes fx trading (he traded!). Apparently his trading records were kept. The result was that he did pretty badly. The report concluded that he got the overall calls generally correct, but his timing killed him.
I like John Hill's material. He defines trend to be a "thrust" in one direct. So like if you have some moving average and entire bar is beyond it does show strong movement. So long as you know definition for trend, this reduces not being lost, at least for trend.
Many will say "Buy and Hold" is horrible way to trade, it is actually one of the top ten in my book. People always downplay methods cause "they" were never able to successfully profit. You study long enough about Buy and Hold and you able to cut down on fees, when you start seeing possible topping, buy many Put options to hedge, when you think the retracement is over, reverse options play/buy calls and score twice if price comes back to original prices. Bet Buffett does this and selling much options to boot.
And when you have questions and can't find answer in books, most likely you have found something good.
i never reverse when i close a trade for profit.....but if the market has been whipsawing in a wide range then i do it
you need to know where the market is going up or down; once the trend is up, it may correct but it will not reverse without some distribution taking place.
this distributing takes time because the smart money has to distribute to weak hands,of which there are not many,and also it has to to be distributed at a good rate,so the trend will be weakened by smart money but not destroyed:the weak hands must be convinced that the trend will continue.
so the reversal will be pattern based and any pattern may be recognised.
for swing you need to recognise this cycle;if you scalp then you need an edge
this distributing takes time because the smart money has to distribute to weak hands,of which there are not many,and also it has to to be distributed at a good rate,so the trend will be weakened by smart money but not destroyed:the weak hands must be convinced that the trend will continue.
so the reversal will be pattern based and any pattern may be recognised.
for swing you need to recognise this cycle;if you scalp then you need an edge
Someone on ET mentioned something the other day which made sense.
They mentioned about boring trading.
I've heard this mentioned numerous times over many years but this time it resonated with me in a different way.
Most retail traders I assume (including me) are constantly on the hunt for the next trading opportunity.
In a way we strain at the bit hoping something will provide an opportunity so we can place a trade then make a profit.
The truth of the matter I believe is that opportunities are few and far between, ie, there are more failing opportunities staring us in the face than winning opportunities.
We live in hope, live in a realm of optimism, live with cognitive biases which make us believe we can hit the jackpot against odds.
Boring...???
If we temper our enthusiasm, slow down, be more patient, trade less, don't get excited so much, trade more boringly, we may raise our hit rate and decrease the losses.
They mentioned about boring trading.
I've heard this mentioned numerous times over many years but this time it resonated with me in a different way.
Most retail traders I assume (including me) are constantly on the hunt for the next trading opportunity.
In a way we strain at the bit hoping something will provide an opportunity so we can place a trade then make a profit.
The truth of the matter I believe is that opportunities are few and far between, ie, there are more failing opportunities staring us in the face than winning opportunities.
We live in hope, live in a realm of optimism, live with cognitive biases which make us believe we can hit the jackpot against odds.
Boring...???
If we temper our enthusiasm, slow down, be more patient, trade less, don't get excited so much, trade more boringly, we may raise our hit rate and decrease the losses.
You can design algorithms to find persisting edges that last for months. I posted one on strategy development.
Some edges are based off of repeating price patterns. Those edges come and go based on macro market structure. If you have 5 edges that all come to bear at a given point in time. Probability is in your favor.
http://jspauld.com/post/35126549635/how-i-made-500k-with-machine-learning-and-hft
Key part of the above is optimization of inputs for multiple indicators that define micro/macro price structure.
Optimization is pretty resource intensive. Just looking at one years of tick data with 5 different inputs stepped by 1 from 1-99 is time consuming.
Some edges are based off of repeating price patterns. Those edges come and go based on macro market structure. If you have 5 edges that all come to bear at a given point in time. Probability is in your favor.
http://jspauld.com/post/35126549635/how-i-made-500k-with-machine-learning-and-hft
Key part of the above is optimization of inputs for multiple indicators that define micro/macro price structure.
Optimization is pretty resource intensive. Just looking at one years of tick data with 5 different inputs stepped by 1 from 1-99 is time consuming.
Last edited:
Certainly, there are many traders who fail (maybe *most* traders who fail??) at doing the proper analysis, but it's extremely *easy* to do a workable walk-forward analysis of a rules-based trading regime. (And perhaps that's where I lost the context here?)
There should be nothing on your market chart that is not subject to constant scrutiny, as to whether to enter or exit a trade. Whether tick-scalping or long-term investment, whether trading the asset or its options or asset spreads. If you are not *always* finding usable insight from walk-forward analysis, then you've got visual noise, which we just do NOT need.
How much time does it take? 30 seconds. ("Yep! Matches up! Trading will be easy, today.")
Or maybe 2-3 hours, while I mark off a year's worth of entry/exit signals by hand, and then track them to their next-day candles, and start counting points of the strawman regime's trades. (And give me a little while, and I'll have this all in a spreadsheet, where it'll be a 30-second scrape-of-data, and "Poof!" results.)
You make a lot of insightful posts, dn -- I'm betting I missed something here -- so Sorry! in advance.....
Last edited:
this is fact:with increased level playing field among all traders as far as access to markets and market information is concerned, this is bound to happen
So, if the whipsawing market is rising against your short, non-profitable position, then you reverse???
Oy.