how would you start now?

Sometimes MACD works, sometimes MAs, sometimes price patterns... Nothing is 100%
But I guarantee, that lacking the criteria or willpower to admit to yourself that you are wrong, that you will go down hard. That does two things for you. It keeps the losers reasonably small. And it grows your confidence.
If you are a discretionary trader, confidence is your bread and butter. If you lose confidence by allowing yourself to get scared from large losers or a large series of losers, then the game is more than half over.
Start small, gain confidence and the account will grow accordingly.
Albert
 
Quote from Albert:

[But I guarantee, that lacking the criteria or willpower to admit to yourself that you are wrong, that you will go down hard.




I am never wrong. I just tell my self that sometimes I am not right. :D

Just kidding. Actually I set a stop or dollar amount on all my trades. If it hits, I get out and figure that just gets me one loss closer to my next winner. Many times I will hold a trade for a while, so the stop is really only important to me at first. Once I am getting into the money I let the stop trail further back. I only move it close if it gets choppy or if something feels different.

I learned a while back that you cannot get mad at the market. Its just a waste of time. If it goes against you, oh well.
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Quote from jaronimo:

Quote from AAAintheBeltway:

If you are making money consistently trading futures, why try stocks?

That said, if you are interested in systems building and testing, there is a wealth of info available now. I think one of the most valuable uses of these backtesting platforms is to demonstrate to you that most of the indicator based approaches you read about in various books are worthless. Backtesting is also very helpful in teaching one about the effect of stops and their placement.

In many ways I think it is easier to design a system for futures because there are only a few markets versus thousands of stocks. Stock systems basically have to become scanning systems to select stocks on the move. See the various Jack Hershey threads, particularly the one by spydertrader for examples. With a commodity, you can focus on one tradeable and come up with entry and exit criteria.





At the moment I am not interseted in trading stocks. But in the future that may change. My concern was to figure out how to go about designing a system to trade futures/commodities.

I would like to figure out how to have the system pick out the trades for me. I am sure that will take a lot of trial and error, but thats fine. I also like your comments about backtesting being helpful in figuring out stops. I will probably spend quite a bit of time doing that.

Right now I keep it pretty simple. The majority of my trades would probably be considered trendfollowing. Hey, if it works, and its simple, why try to complicate it?

For instance I was short OJ for about 6 months. Pretty boring, but it kept making money. Then it started feeling weird so I got out. Then I felt it was going to turn around, but since I had no verification I just bought a bunch of calls, just in case I was wrong. That was about 3 weeks before the first hurricane hit. The options are working out fine.

When I first got into OJ I could look at the chart from across the room and see that it was obviously in a downtrend. When I got out it just felt weird. I have no idea how I could translate that into a programming code. I think the big downtrend I could program (maybe) and then issue buys or sells based on that, but I have not spent any time trying to figure out the "feeling".

I have gotten a lot of good feedback so far. I think my next step is to sign on with Tradestation or some other platform, and start playing with it.

I have been kicking around a few trading ideas and until I came across backtesting I really could not try them out without putting money on the line or spending tons of time papertrading. (I am a huge believer in papertrading). One of the ideas is so simple, I can't see how it cannot work. I only say that because many people discard anything simple as ineffective, so theres a good chance nobody is using it.
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I guess I misunderstood what you were asking. Personally, when I first started trading I used TradeStation and spent a lot of time backtesting. I found it highly valuable. You should defitiely look into Wealthlab as well. I have never used that s/w but I think it has some great features. One is the MAE chart, which gives you an idea of how far trades that ultimately will be winners are likely to go against you.

My own experience was that I could never really come up with a decent system using indicators. I think price levels and patterns are the way to go. You start with an observation or concept that has some rational relationship to the market and test it.
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Since I misunderstood you:

I prefer walk-forward testing; no better way to find out if something will work NOW. Not to mention that back testing is far from perfect, albeit still helpful. Develop systems based on your thought processes and test them in the present, then my previous post comes to life: Think big, start small. Small meaningless positions slowly evolving along with your method to larger; eventually meaningful size. Ultimately the strategy must be something you believe in/feel comfortable with. I will not likely ever be a scalper for instance, as I cannot for the life of me calm my nerves enough to do it. I trade options almost exclusively (good feelings), therefore I believe I have the best chance for long-term success. Puffy was wrong, it's not all about the Benjamins, it's all about the psychology....

1) Walk forward testing is easier, less time consuming (I believe more relevant)

2) Quite possibly as a result, more accurate in today's ever changing landscape

3) Might be considered more exciting

4) Doesn't require expensive back testing software

Just some food for thought

D
 
Quote from saturnine:

Since I misunderstood you:

I prefer walk-forward testing; no better way to find out if something will work NOW.




"Walk-forward testing" ??? Have not heard that term. Is that the same as papertrading? If it is, I have a habit of doing that.

I used to get these chart books every now and then. Sometimes I would go through them page by page and attach sticky-notes to them with comments like, going up, down, etc. Many times I would write down price targets that I thought it would hit. Then I would stick it in the drawer and pull it out a year or so later. Then I would kick myself because many of the trades went the way I wrote on the notes.
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Essentially yes, paper trading current market conditions. This type of analysis can occur in real time with software recording results, or cheaper yet, with a trader who is very honest his (herself).

Believe me when I say, I love all the toys and gadgets, and perhaps many live and die by them. However, I am convinced that a majority just tend to attempt to make things far too complicated than they need be. It's more fun to think about and try to develop the holy grail than it is to actually trade and lose money. So many get lost in the haze of indicators and toys; include me in that.

Pay for them (expensive services/indicators) to make your life easier, not to be the answer, > 51% will end up disappointed. This game is as much about saving money as it is about making it. Hate me for saying this: Each significant additional cost is like adding another zero to the Roulette wheel of trading.

Now, if these tools are available to you for free, knock yourself out :)
 
Quote from saturnine:


Believe me when I say, I love all the toys and gadgets, and perhaps many live and die by them. However, I am convinced that a majority just tend to attempt to make things far too complicated than they need be.



That is true. It seems that every popular indicator will make you money if you use it correctly. I also think many try to complicate things by combining indicators thinking they are more likely to get closer to a guarantee. I think it just keeps them from pulling the trigger in a timely fashion.

I think what many people forget, or don't know, is that you only need the slightest edge to get into a market. Then if it goes your way great, if not bail out quick. Keep the loses small and let the winners go.

I know a guy that spends so much time looking for confirmation that he misses many decent moves. He will get way too stressed out if the market turns even slightly against him, or if he waited too long and missed the move that he was correct about. Although he is almost even more stressed out if the market moves for him and he starts making money. Then its always "what if it turns", "when do I get out", etc... Pretty funny.

Even funnier is once about a year ago he told me "he was born to trade". I laughed so hard milk came out of my nose. And I haven't drank milk in years.
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if i were starting out new and had the benefit of fred bloggs advise, i'd forget trying to be a hero and trading high volatility index or currency futures or stocks for all that 'easy money' u c on a chart.

instead, id listen to good ol fred and look at the fixed income futures (bonds, eurodollar, notes etc)

this is because value on fi - or the perception of value is fixed and almost certain (in any given day) creating more equilibrium than 'hero' futures where no one can really tell you what true value is, when, where or how. in other words there is persistency and more confidence in a fi move.

once youve learned to trade in 'slow motion' on the fi futures, you can then speed things up on the index futures, then after youve learnt that, you can drop a gear, put your foot down, and trade fx futures.

BUT if youre making sure money on fi - why would you want to go to the index? just increase your size on fi and have more control of your risk.


as for platform - it just dont matter. if you cant trade, you cant trade and no platform will save you - not even if it has backtesting, bells, whistles etc.
ok - flame me me i dont care
 
Good thread. I got caught up in this one so I had to post.

I'm newer then new to trading but have similar questions and ideas as jaronimo.

Here's my thoughts to building a system that I've taken from books, posts on this forum and job experience.

Set Goals - Develop Plan - Implement Plan - Analyze - "tweak" plan" - Repeat

Set Goals
How much do you want to start with? Do you want to take money from the market daily? Weekly? Monthly? How much money is enough (the answer to this one is "there is never enough" but if you don't set your win/loss limits you're surely dead)

Develop Plan
Trade stocks? If so, what price levels? (this maybe a formula of how much you have divided by how much you want to make given a time frame) What indicators or facts about a stock lead you to buy or sell it? (I think this is the most controversial and important question - for which I'm looking for the answer also)

Implement
Put some money in an account and trade. STICK TO PREVIOUSLY MENTIONED PLAN. DO NOT WAVER. If you do, record it so you can analyze later (or kick yourself)

Analyze
What worked? What didn't? Where/when were you profitable? Did you waver? Were you comfortable during the process of trading? Any heart attacks? Could you sleep? Do you still have a home and enjoy trading?

"Tweak"
Make changes based on research into similar issues found by others. Make changes that allow you to sleep and enjoy trading.

Repeat


This maybe absolutely off base and naive. I selfishly posted this on your thread so I could put my own ideas on "paper". This is my own process and by sharing I finally wrote it down. Now I can spend the next year filling in the details, testing and reading before I begin to trade for a living.

kcmike
 
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