Global Macro Trading Journal

[darkhorse]

Quote from Ghost of Cutten:

A bad stop is where you exit just because the price has moved against you. A good stop is where your exit because the trade expectation has moved against you.

So many nuances...

For example, trading methodology X might actually perform better with a higher rate of premature stopouts than a lower rate, if the tighter stop range causing the stopouts simultaneously allows for larger position size on the outlier winners.

Of course, that can be taken to an unworkable extreme too (trying to risk 10 cents to make $10 per share on 10,000 shares etc)... lots of variables and testable assumptions here.

In some ways a trading methodology is like a business model or an ecosystem survival strategy. One can talk of best practices and success metrics, but it is hard to speak of a business model or survival strategy in one-size-fits-all terms.

 

[ammo]

i like to take a total of your acct or your per annum profits,divide by 12,and make that your monthly stop loss, , it keeps your losses small compared to your net profit or acct,and wipes out any decision on whether its mental,edge related ,or market change(vol,int rate,war,recession,depression for example)protects your acct as a business rather than a reflection of your intellect or prowess as a trader, your stop ultimately it is about your acct but since rarely reached keeps you trading the market not your acct,and keeps you in the game, maybe that's too simple

 

[Debaser82]

http://globaleconomicanalysis.blogs...lysis+(Mish's+Global+Economic+Trend+Analysis)

Mish is doing a lottery in support of his wifes disease.

I am sponsoring a raffle for the benefit of ALS research. 50% of the proceeds of the raffle will go to the Les Turner Foundation, with the money specifically earmarked for ALS research.

The other 50% will go to raffle winners.

My goal is to sell 30,000 tickets at $200 each. If we can sell that number of tickets, $3 million will go to ALS research and $3 million to raffle winners in the following breakdown (assuming all the tickets are sold, otherwise on a similar percentage basis).

1st Prize $1 Million
2nd Prize $600,000
3rd Prize $300,000
4th Prize $300,000
5th Prize $300,000
6th Prize $100,000
7th Prize $100,000
8th Prize $100,000
9th Prize $100,000
10th Prize $100,000

If all tickets are sold, 1 in 3,000 will win a minimum of $100,000, and the lottery winner will receive $1.0 million.

You cannot beat these odds in any lottery anywhere.




I agree, i am buying a ticket.

 

[Daal]

Quote from Debaser82:

http://globaleconomicanalysis.blogs...lysis+(Mish's+Global+Economic+Trend+Analysis)

Mish is doing a lottery in support of his wifes disease.

I am sponsoring a raffle for the benefit of ALS research. 50% of the proceeds of the raffle will go to the Les Turner Foundation, with the money specifically earmarked for ALS research.

The other 50% will go to raffle winners.

My goal is to sell 30,000 tickets at $200 each. If we can sell that number of tickets, $3 million will go to ALS research and $3 million to raffle winners in the following breakdown (assuming all the tickets are sold, otherwise on a similar percentage basis).

1st Prize $1 Million
2nd Prize $600,000
3rd Prize $300,000
4th Prize $300,000
5th Prize $300,000
6th Prize $100,000
7th Prize $100,000
8th Prize $100,000
9th Prize $100,000
10th Prize $100,000

If all tickets are sold, 1 in 3,000 will win a minimum of $100,000, and the lottery winner will receive $1.0 million.

You cannot beat these odds in any lottery anywhere.




I agree, i am buying a ticket.

I believe you can find better odds elsewhere. The Mega Millions ticket was worth about 69 cents on the dollar after-tax, a loss of 31%. This one seems to be a loss of 50% PRE-tax, after tax should be more

I'm not sure its a good idea to sell lottery tickets for $200, the whole idea of lotteries is to appeal to the human bias of wanting to strike big by paying very little, $200 is not chump change for a lot of americans

That said I hope his wife recovers

 

[Debaser82]

Quote from Daal:

I believe you can find better odds elsewhere. The Mega Millions ticket was worth about 69 cents on the dollar after-tax, a loss of 31%. This one seems to be a loss of 50% PRE-tax, after tax should be more

I'm not sure its a good idea to sell lottery tickets for $200, the whole idea of lotteries is to appeal to the human bias of wanting to strike big by paying very little, $200 is not chump change for a lot of americans

That said I hope his wife recovers

1 in 3000 to win 100K isnt a good odd? I am not familiar with these kind of odds really...

 

[Daal]

Quote from darkhorse:


Right -- saying "the stop itself is an edge" is another way of saying "the stop is an intrinsic part of a profitable methodology."

Re, Thai baht to corn etc., the easiest way to normalize risk points is as a function of price action and volatility, i.e. chart levels and average trading range.

But how do you know its superior to use say 2.7 times the daily volatility as opposed to 3.1 times?Or to use a widespread technical level that everyone knows about based on TA?

Backtesting 'evidence' could be simply a case of being fooled by randomness, I rather look at the CONCEPT of the technical stop and see if it makes sense in terms of making money in public liquid markets

Most of these technical stops are well know by everybody so I don't believe they provide an edge. Its like going into basketball sports betting and trying to take advantage of the home advantage bias, its already in the price, not likely to make you any money since bookmakers already take that into account. Markets change and the backtesting might lead you to think its all ok

With a news stop(or fundamental stop), I will be getting out or in based on the news flow which is consistent with my initial thesis since the reason I'm trading that stock/bond/future is because I believe I'm interpreting the fundamental data better than the market

 

[Daal]

Quote from Debaser82:

1 in 3000 to win 100K isnt a good odd? I am not familiar with these kind of odds really...

You pay $200 for that shot, that is the difference, plus there are the chance of a split, taxes, etc
Try to think in terms of where the cash is going, since 50% is taken right away this is like playing roulette without zeros with a 50% fee by the casino

 

[darkhorse]

Quote from Daal:

But how do you know its superior to use say 2.7 times the daily volatility as opposed to 3.1 times?Or to use a widespread technical level that everyone knows about based on TA?

Backtesting 'evidence' could be simply a case of being fooled by randomness, I rather look at the CONCEPT of the technical stop and see if it makes sense in terms of making money in public liquid markets

Most of these technical stops are well know by everybody so I don't believe they provide an edge. Its like going into basketball sports betting and trying to take advantage of the home advantage bias, its already in the price, not likely to make you any money since bookmakers already take that into account. Markets change and the backtesting might lead you to think its all ok

With a news stop(or fundamental stop), I will be getting out or in based on the news flow which is consistent with my initial thesis since the reason I'm trading that stock/bond/future is because I believe I'm interpreting the fundamental data better than the market

One could make the same arguments for exits based on news flow:

How do you know which data point or headline is precisely the one to invalidate your thesis... news stories and data points are known by everyone ("already in the price")... there is always someone with better information or faster on the trigger with information... the gray area of of where to place the risk point is replaced by the gray area of how much are you really risking without a defined exit... a good streak could be lucky and summarily upended, and so on.

In short, in markets you need a competitive edge to be successful. And any competitive edge, no matter what it is, can be held under a microscope and the question asked, "But what if it's not really competitive."

I would argue the stop itself is not the edge, but regardless the deeper point applies. The nice thing about markets is that, at the end of the day, outside justification of one's competitive edge is not required. It either makes money or it doesn't.

 

[Daal]

Quote from darkhorse:

One could make the same arguments for exits based on news flow:

How do you know which data point or headline is precisely the one to invalidate your thesis... news stories and data points are known by everyone ("already in the price")... there is always someone with better information or faster on the trigger with information... the gray area of of where to place the risk point is replaced by the gray area of how much are you really risking without a defined exit... a good streak could be lucky and summarily upended, and so on.

No, because as I said the whole reason for me to be trading that instrument is because I believe I have a take on it that is better than the market. If the trader is consistently wrong on that he is going to go broke no matter if he uses technical stops or not

 

[darkhorse]

Quote from Daal:

No, because as I said the whole reason for me to be trading that instrument is because I believe I have a take on it that is better than the market. If the trader is consistently wrong on that he is going to go broke no matter if he uses technical stops or not

What you are saying can be generalized as "I have a competitive edge and the proof is that I make money / have not gone broke."

A trader who uses stops as part of a historically profitable methodology can say the exact same thing.

The same type of questions -- what if the historical results are illusory, what if the edge disappears etc -- can be directed at anyone. They do not help to prove or disprove whether stops are useful in a specific methodological context.