Quote from jonbig04:
Wow thanks for the advice. I didn't know that was touching on a key issue, just a question i had while watching the charts for my first time last night. Just of out curiosity what IS the CW? I didnt know I was going against it
There are a lot of CW type traders in ET.
As I observe, they generally look for opportunities to make money. These opportunities are determined to be acceptable based on back testing (without curve fitting). The potential for sucess is determined by using odds (probability).
From here on out the CW dictates how capital is preserved by management and risk control. There are industrywide standards for these measures.
As you read in this CW sequence you can see that the process is inductive and not based on what is called science which hypothesizes based upon the null hypothesis. The natural consequence is what is read in the literature under the two faces (sides of the coin): the market wizards and those who fell regarding Balck Swans.
There are about 80 successful common edges used in CW trading. Success is defined by aggregate data across the capital sizing spectrum. To see the picture more closely with respect to trading sucess, you have to back out fees, commissions and deal type activity which coincides with the portions of capital that are actually "traded". You also have to back out "investments" of these "trading" organizations. Buffett, for eample does not trade at all.
I hope you will see posted here other views on what CW trading is. There is a great contrast between the MODE based approach I described and CW trading. When you trade using MODE, effectively, you are frontrunning the CW traders. Since they are sidelined significant amounts of time, their performance is a subset of the whole of MODE based trading. Therefore, when performance is compared as a ratio, it is apparent why the ratio is as it is. If two ratios are used (one for time and one for performance) it is seen that the ratios are not comparable and it is possible to conclude that there is no benefit from not being in the market and , especially, no benefit from leaving a trend early.
The issue of the difference of trading perfomance boils down to only thing: timing.
In MODE based trading an exit is coincident with the next entry; in CW trading an entry has no connection to the subsequent exit AND the next entry has no connection to the prior exit. This disconnect in continuity of trading in the CW trading is the primal cause of its shift in preformance compared the the MODE based style of trading.
NB: There was an era of trading that subtended the CW. From the 1980's until about JUN 06, quants came into being and completed their run. This is largely an exploitation strategy where advantage is gained by exploiting market inefficiencies: doing more with less is an apt description. The math of choice uses large and fast computers (See nuclear reseach computing requirements (very tall stacks of PC equivalents)). There will always be pockets of this exploitive approach that in some cases includes securitization (designing and building securities that at the end of their useful lives become illiquid).
For the MODE based trading, the limiting mechanical manual case is a multiple of the ATR. when used at a MADA rotine cycle pace that is in the ATS realm the multiple is more than doubled AND this is largely a factor of effectiveness and efficiency. thee is no Black Swan aspect since the ATS logic is derived from the scientific application of the null hypothesis (It is important that the programming administration has affected this discipline, by the way).
My views are based on pragmatic experience being reduced to practice as modern technological supports were invented and came into financial industry usage over a very long period of time. the financial industry is nortoriously poorly equipped in handling AND processing data. The delivery of data, so far, is in its infancy.
