Just some food for thought for anyone jumping from system to system.

[Concinnity]

Maybe this is obvious to most people, but if not thought I would just make a post as it may help some new traders or even some traders still struggling to at least stop trading or back off until they can figure out the next step.

Most systems or things people teach you are simply what could be described as an "entry model". So essentially just a signal to get long or short with (hopefully) a risk perimeter attached to it. There is not generally speaking any inherent edge with this.

For example if market is extremely bearish, than it is almost is irrelevant what type of entry model you're using, if you're going long. So you could try every entry model or signal in the world, but if market environment isn't conducive to that direction it's going to mostly produce sub par if not disastrous results.

I do not fully use "ICT" because prefer what I do over it generally speaking, but I do use some concepts related to it. So just for a conceptual example: ICT one of the entry models would be what's called "Fair Value Gap", but to further add to that and let you know when to actually use that entry model, you would look for a "Market Structure Shift" along with also potentially using Daily bias. Point is at least ICT is letting you know when your entry model actually has a better chance to work out, providing an additional filter.

If anyone found this too basic or too obvious I apologize. Just thought it may help someone who is in the process of jumping from system to system.

Thanks

 

[earth_imperator]

Makes sense, man.
My basics:
If you want to go LongStock (or ShortPut), then enter only on bad days
If you want to go ShortStock (or LongCall), then enter only on good days

 

[earth_imperator]

Makes sense, man.
My basics:
If you want to go LongStock (or ShortPut), then enter only on bad days
If you want to go ShortStock (or LongCall), then enter only on good days

Correction:
If you want to go LongStock (or LongCall or ShortPut), then enter only on bad days
If you want to go ShortStock (or ShortCall or LongPut), then enter only on good days

 

[smallfil]

I am going to disagree and say that any trader who wants to be successful in the stockmarket has to backtest whatever trading system he or she is using. No stock goes up like a rocket every single day. Those stocks that go parabolic in a few days, see huge drops right after. Even strongly trending stocks which is up say 7-10 straight days, will consolidate and go sideways in a trading range. Does it invalidate your trading edge? No, it does not. Why should it? Ever hear of drawdowns? You will have your fair share because stocks will have pullbacks. Does that invalidate your edge? Nope. Nothing could be further from the truth. It seems you do not understand market structure and how stocks actually, move. It is not rocket science. You can go over 1,000 stockcharts if you wish, the same chart patterns happen, over and over again. It does not affect one's trading edge in the stockmarket and it is foolish to discard a working trading system with an edge just because the stock goes sideways in a trading range or pullback. Just my 2 cents. Do not take my word for it. I urge all serious traders to look at numerous stockcharts and verify themselves which is fact and which is fiction.

 

[Bad_Badness]

Good post.

IMHO there sems to be a theme among those who are searching for systems, of not yet fully adopting - understanding it is not like single trades. So the criteria for "good-bad" are FUNDEMENTALLY different.

Hence, for example, "profit" need to be considered with drawdown. BECAUSE, in a system it will happen, possibly repeatedly, unlike with a single trade, it might or might not. Likewise, time in trade is important. Single trades can waste time and create unnecessary exposure trying to dig out of a loss or drawdown. In a single trade you are done. In a system, time in market and opportunity costs, matter a lot. So a system that gets unintentionally "stuck" in a trade, is not a good one, for example.

Without going on ad nauseum, suffice it to say, one needs to interpret back tests, in context of a system not single trade criterium. That is why graphs, or trends in the backtest are so important. They show where the system is going, how it faulters and how it recovers over many trades and markets. After you have this data, then the work begins, not ends.

 

[Equities Lab]

Do backtests here refer to simulated trades on one stock, or simulated trades for a whole basket of trades? And what are popular backtest tools?

 

[smallfil]

Do backtests here refer to simulated trades on one stock, or simulated trades for a whole basket of trades? And what are popular backtest tools?

You backtest actual trades to account for real market conditions and slippage. Simulations of stock trading do not really give you an accurate picture because you always get good fills with no slippage. I do not know about any backtest tools. Backtest my trading system manually which is tedious but, I do not have any knowledge of coding or any reliable backtesting tools out there. One other way is to place actual trades of your trading system, risking only small amounts each time. After a while, you should enough data to figure out if you have positive expectation (edge) or negative expectation (no edge). It is better to have atleast 500 stock trades to test your trading system.

 

[Equities Lab]

If you used reasonable allowance for slippage (say 0.1% for large caps, or 0.5% for small caps), would that be enough to help the tool model usefully? If not, what else should I look out for?

 

[Concinnity]

I am going to disagree and say that any trader who wants to be successful in the stockmarket has to backtest whatever trading system he or she is using. No stock goes up like a rocket every single day. Those stocks that go parabolic in a few days, see huge drops right after. Even strongly trending stocks which is up say 7-10 straight days, will consolidate and go sideways in a trading range. Does it invalidate your trading edge? No, it does not. Why should it? Ever hear of drawdowns? You will have your fair share because stocks will have pullbacks. Does that invalidate your edge? Nope. Nothing could be further from the truth. It seems you do not understand market structure and how stocks actually, move. It is not rocket science. You can go over 1,000 stockcharts if you wish, the same chart patterns happen, over and over again. It does not affect one's trading edge in the stockmarket and it is foolish to discard a working trading system with an edge just because the stock goes sideways in a trading range or pullback. Just my 2 cents. Do not take my word for it. I urge all serious traders to look at numerous stockcharts and verify themselves which is fact and which is fiction.

- Never said don't back test, can't tell if you're alluding to that I said that or not?

- Markets are fractal so yes same patterns play out on every chart from smallest to largest


I'll just say any serious trader who is looking to make day trading their primary income and is only going to use a strategy that you describe, without adding any additional filter is going to make a hard task even harder. Particularly if we're speaking of actively intra-day trading.

I agree it is not rocket science. Sure you can have a simple strategy that works and if that's all you have and you know it works over time great. Still if you can add a filter in you can reduce draw down periods, which can be an absolutely killer particularly if you don't have large amount of capital. It makes the entry-level to trading a lot more difficult to produce the necessary income to be full time trading (if that's your goal, not saying anyone has to do that).

 

[alistera]

Maybe this is obvious to most people, but if not thought I would just make a post as it may help some new traders or even some traders still struggling to at least stop trading or back off until they can figure out the next step.

Most systems or things people teach you are simply what could be described as an "entry model". So essentially just a signal to get long or short with (hopefully) a risk perimeter attached to it. There is not generally speaking any inherent edge with this.

For example if market is extremely bearish, than it is almost is irrelevant what type of entry model you're using, if you're going long. So you could try every entry model or signal in the world, but if market environment isn't conducive to that direction it's going to mostly produce sub par if not disastrous results.

I do not fully use "ICT" because prefer what I do over it generally speaking, but I do use some concepts related to it. So just for a conceptual example: ICT one of the entry models would be what's called "Fair Value Gap", but to further add to that and let you know when to actually use that entry model, you would look for a "Market Structure Shift" along with also potentially using Daily bias. Point is at least ICT is letting you know when your entry model actually has a better chance to work out, providing an additional filter.

If anyone found this too basic or too obvious I apologize. Just thought it may help someone who is in the process of jumping from system to system.

Thanks

You've all had it, well mostly, what happened this past week is that in everyone's desperate attempts to 'power play' they have now cut off all things that "worked", leaving only what doesn't work for everyone to fight over.

That everything is based on a logarithmic curve, over the course of the coming months anything using a logarithmic curve will be taken to the cleaners, and so you are left with that little thought as the year progresses