There are a few concepts in trading that I dislike. One is trend trading because I mostly can't stand trend supporters. Yes, I actually mean the people who talk about trend trading. They are either completely clueless, or literal geniuses that cannot explain what they do to anyone in a way that makes sense. Occam's razor.
Another one is adding to winners. Hey guys, let's give ourselves a less favorable entry price.
The last one is trailing stops. I feel like this never works out although I have no quantifiable data to back this up.
My purpose for mentioning these is because I actually think trailing stops might be required which means I'm considering that I was wrong about something.
To start, you need some way of periodically predicting tops and bottoms. Ignore trend following. This may involve order flow, it may involve the DOM, it may involve something like Urma Blume's (RIP) trade intensity, it may involve volume, it may involve price action. I shall tell you what it doesn't involve, actually. Every indicator (besides volume) that any charting programs have. Once you are able to kind of identify tops and bottoms you start averaging in. It doesn't matter if many of your trades are small, you want to make money, not make maximum money. A trade on 10 shares is fine as long as it's profitable. Since you cannot predict the exact bottom, you build positions as it goes against you (to a point), and then when it starts going in your favor you get a profit. Since you can locate bottoms you are right most of the time and you don't care if you're wrong sometimes.
Then, you let it go for a bit, figure out how often it goes how many points that requires statistics, and then you close out all but a small bit of your position which you keep on with a trailing stop for those times when you picked the low of the day, or lowest of the day remaining.
Negatives:
- you will get flack from ET because you aren't trend following.
- it requires kind of a big account
- won't work in Forex because Forex is a bullshit market anyway
Another one is adding to winners. Hey guys, let's give ourselves a less favorable entry price.
The last one is trailing stops. I feel like this never works out although I have no quantifiable data to back this up.
My purpose for mentioning these is because I actually think trailing stops might be required which means I'm considering that I was wrong about something.
To start, you need some way of periodically predicting tops and bottoms. Ignore trend following. This may involve order flow, it may involve the DOM, it may involve something like Urma Blume's (RIP) trade intensity, it may involve volume, it may involve price action. I shall tell you what it doesn't involve, actually. Every indicator (besides volume) that any charting programs have. Once you are able to kind of identify tops and bottoms you start averaging in. It doesn't matter if many of your trades are small, you want to make money, not make maximum money. A trade on 10 shares is fine as long as it's profitable. Since you cannot predict the exact bottom, you build positions as it goes against you (to a point), and then when it starts going in your favor you get a profit. Since you can locate bottoms you are right most of the time and you don't care if you're wrong sometimes.
Then, you let it go for a bit, figure out how often it goes how many points that requires statistics, and then you close out all but a small bit of your position which you keep on with a trailing stop for those times when you picked the low of the day, or lowest of the day remaining.
Negatives:
- you will get flack from ET because you aren't trend following.
- it requires kind of a big account
- won't work in Forex because Forex is a bullshit market anyway
