Yes to all you said. As to "unique", in my early days I thought that I needed to be clever and different so I experimented with different oscillator filters, odd fib based tick charts, multiple moving averages etc. etc. As none of my creations worked worth a shit, I sat back and just watched price develop and realized that trying to outsmart the market was futile and dumb. The "trick" is to understand what the market (institutions which move markets) want to do and follow along. And there is no need to over complicate the matter of doing so.
How can you tell when the trend is over?
- Thread starter mute9003
- Start date
I have no opinion as to virtusa but you have to keep in mind that margin capital on futures is a lot more liberal than that on stocks. Using 20-1 leverage which is really not that high to a skilled, experienced futures day trader,
brokers offer a lot more than that (absurd but it is what it is) equates to 50% cash on cash return.
The only voice of reason here! That quote you dug up is excellent. The fact that he has such a unique way to trade makes the need for metrics that much more important.
@virtusa , call out some specific trades that I can actually take to make money and I will be the first to give you praise. You are beating this horse to death about your BTC prediction to @Baron so clearly you have a need for recognition. As a vocal critic here, my praise should be valuable and I am very willing to give it. Please hook me up with some trades and let's make this happen. Would 10 trades be statistically significant enough? Can we get this done in a week or two?
Don't poke virtusa too much, or he will put you on /ignore/block, because he cannot stand criticism or debate. Just go along with everything he says.
When your trades in the direction of the trend begin to fail, then you are close.
Or it means that you suck at picking entries
It has been said that more money has been lost or left on the table by traders trying to pick a top or bottom than most other trading mistakes.
Since following great advice is not my forte...
Let's try a little thought experiment. But first we probably need some foundational information and to be clear-headed on definitions on what is a trend and even what qualifies as a indication of a potential top. Some relevant questions should then be explored leading to a rough outline of a plan of action to investigate further or the creation of some elements in a trading plan.
1. What time frame are we focusing on and why? The long term average return on broad indexes is roughly 9% per year, or about .75% per month. This has been enough of a return to allow some prudent investors to retire comfortably. Intraday trading attracts the most competative minds in the world in search of potentially greater returns, however over 90% of retail traders lose with intraday trading. Why is that? Whenever there is a competition between individuals, game theory should come to mind.
2. Game Theory, Optimized(GTO) strategies seek to engage competition in such a way that is unexpoitable by that competition. This is based on the idea the market is reasonably efficient and thus the players are reasonably, but not perfectly competent, allowing inefficiencies of the competition to accrue to the benefit of the GTO strategy. Another strategy is called exploitive. This strategy can be profitably employed when specific, significant inefficiencies of a class of market participants or structural inefficiencies are identified.
3. Market participants include market makers, hedge funds, retirement funds, and individuals who engage in a variety of strategies and time frames. There are patterns that can indicate which side of the market a particular participant is on. Having a sense of who is doing what can improve one's situational awareness to even providing information that an exploitive opportunity may exist.
4. Tops, which can only ultimately be seen in retrospect, come in several varieties and can leave early indications that a trend change may be imminent. I personally don't start thinking about tops unless price is at least a minimum numbers of ATRs from mean for a given time frame. One this threshold is reached, I look for a potential correction or reversal indication such as range expansion, possibly indicating capitulation of a market participant, or evidence of distribution. Distribution can look like consolidation, with the difference distribution often looks like a roof involving a significant number of bars, whereas consoldation preceding another run up often looks like a flag involving relatively fewer bars. Again, these indicators are in context of current price in relationship to its mean. Distribution often involves a large market participant either unloading inventory or an institution reallocating their portfolio, etc. There are relative volume and tick action considerations as well between the various indications of a top or possible imminent correction.
5. Regardless of the reasons for putting on a trade, we must remember there is event risk and the possibility a market participant is attempting to set up an exploitive situation. In other words, buying opportunities may still exist while searching for a top or correction. If statistics indicate that once a certain threshold is reached, there is a 70% chance the price will reverse to at least the mean using a specific RR, it also indicates that 30% of the time "The top" has not been found. There is a problem with the this line of thinking, though. A reasonable definition of a top seems to include the idea of price reversal. This in turn suggests prices need to trade below the mean, probably beneath the last support as perhaps defined by the mean well. Therefore, again, tops can only be determined in hindsight. Still, there does seem to be a narrow window where exiting a long, at least in part, in an area that often sees the start of corrections may be beneficial.
6. Ultimately, most of what profitable active traders do is related to identifying trade ideas that have been validated statistically which in turn demands back testing. The trick is to properly identify and define each relevant parameter for hopefully solid back testing statistics.
Since following great advice is not my forte...
Let's try a little thought experiment. But first we probably need some foundational information and to be clear-headed on definitions on what is a trend and even what qualifies as a indication of a potential top. Some relevant questions should then be explored leading to a rough outline of a plan of action to investigate further or the creation of some elements in a trading plan.
1. What time frame are we focusing on and why? The long term average return on broad indexes is roughly 9% per year, or about .75% per month. This has been enough of a return to allow some prudent investors to retire comfortably. Intraday trading attracts the most competative minds in the world in search of potentially greater returns, however over 90% of retail traders lose with intraday trading. Why is that? Whenever there is a competition between individuals, game theory should come to mind.
2. Game Theory, Optimized(GTO) strategies seek to engage competition in such a way that is unexpoitable by that competition. This is based on the idea the market is reasonably efficient and thus the players are reasonably, but not perfectly competent, allowing inefficiencies of the competition to accrue to the benefit of the GTO strategy. Another strategy is called exploitive. This strategy can be profitably employed when specific, significant inefficiencies of a class of market participants or structural inefficiencies are identified.
3. Market participants include market makers, hedge funds, retirement funds, and individuals who engage in a variety of strategies and time frames. There are patterns that can indicate which side of the market a particular participant is on. Having a sense of who is doing what can improve one's situational awareness to even providing information that an exploitive opportunity may exist.
4. Tops, which can only ultimately be seen in retrospect, come in several varieties and can leave early indications that a trend change may be imminent. I personally don't start thinking about tops unless price is at least a minimum numbers of ATRs from mean for a given time frame. One this threshold is reached, I look for a potential correction or reversal indication such as range expansion, possibly indicating capitulation of a market participant, or evidence of distribution. Distribution can look like consolidation, with the difference distribution often looks like a roof involving a significant number of bars, whereas consoldation preceding another run up often looks like a flag involving relatively fewer bars. Again, these indicators are in context of current price in relationship to its mean. Distribution often involves a large market participant either unloading inventory or an institution reallocating their portfolio, etc. There are relative volume and tick action considerations as well between the various indications of a top or possible imminent correction.
5. Regardless of the reasons for putting on a trade, we must remember there is event risk and the possibility a market participant is attempting to set up an exploitive situation. In other words, buying opportunities may still exist while searching for a top or correction. If statistics indicate that once a certain threshold is reached, there is a 70% chance the price will reverse to at least the mean using a specific RR, it also indicates that 30% of the time "The top" has not been found. There is a problem with the this line of thinking, though. A reasonable definition of a top seems to include the idea of price reversal. This in turn suggests prices need to trade below the mean, probably beneath the last support as perhaps defined by the mean well. Therefore, again, tops can only be determined in hindsight. Still, there does seem to be a narrow window where exiting a long, at least in part, in an area that often sees the start of corrections may be beneficial.
6. Ultimately, most of what profitable active traders do is related to identifying trade ideas that have been validated statistically which in turn demands back testing. The trick is to properly identify and define each relevant parameter for hopefully solid back testing statistics.
That was the logic that I used too. I mentioned many times on ET that the classical things available for free on internet don't work. I never studied any of these things as it is a waste of time and energy. For a real breakthru you need to start from zero and think out of the box.
Best way to have optimal results was not to read anything about the classical way people trade as that would infect the way you think in a negative way. Your subconscious would still use that knowlegde from classical theories and sabotage your attempts to research something completelly different.
I don't agree with your last sentence. I could not find an uncomplicated way. But maybe I am too stupid to find that.
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