Looking for "edge" ideas...

[k p]

Quote from dbphoenix:

1. Yes, it can be as simple as reacting to an opening gap, assuming you're talking about stocks (there are no gaps in futures, except from Friday afternoon to Sunday evening). And, yes, manually testing this would be exhaustive. And after futzing with it for hours and days and weeks, you might decide that you want something that shows up nearly every day, not just once in a while. Be wary, however, of being in a hurry. If you hurry, whatever you're doing will take two to three times longer at minimum.

2. I've been criticized for referring people to my threads, but repeating this stuff can get to be a drag. However, there are only three strategies -- reversals, breakouts, and retracements -- and what you choose will depend on a number of factors including how often they come up, how easy they are for you to define, what your risk tolerance is, how well you understand the auction market, how well you are able to detect changes in the balance between demand and supply, how easily you become disoriented with regard to up and down, whether you trade intraday or interday, etc. Yes, you can focus on double bottoms, which are a form of reversal. But if you trade only those which are most likely to generate a profit that will make the waiting worthwhile, then the waits will likely be lengthy. You won't make money trading crap, but neither will you make money if you don't trade at all.

As for being right 50% of the time, I suggest you go for much more than that. If half your trades are losers, you will not likely last very long. And if you set "targets", you will in effect be cutting your profits short, and doing so with such a tepid win rate will be wearing before long.

If you're a beginner, you're in a good position as you have so little to unlearn. Just make sure to determine for yourself what is or is not true among all that you read and that you are told, remembering that you have no way of knowing whether or not whoever is offering the advice is successful or not. And why would you want to take advice from some mystery trader without verifying for yourself that it is true?

1. Excellent that it can be that simple, but as you say, maybe that is the problem with this, it doesn't occur frequently enough to make it worthwhile.

The 50% win rate was proven incredibly successful by geez. I read his entire journal. He started with a 70k account and put on a bet that he could grow it by 50% in one year I believe. He used a max loss of $200 a day, 1:2 risk reward ratio so his wins were around $400, but with commission and slippage, it ended up being about 1:1.8. He would put on about 20 trades a week. Some days he was down 4 out of 4 trades, but on the days when he got only 2 out of 4 right, he was well ahead because of his risk management. Overall, I think his win rate was around 49%. He more than won the bet in much less time. He cut his wins as you say, but he knew his system worked and relied on setting strickt profit and loss targets. So in essence, once the trade was on, it would either hit his target or his stop and then it was off to the next one.

I am absolutely weary of who to take advise from but having lurked for so long, I see certain names popping up over and over again that I am learning to trust.

 

[k p]

Quote from wiesman02:

Yes, you are correct. You're being too literal though. I'm saying that without understanding why the pattern works, you can not cherry pick them accordingly. For example, double bottoms have no positive expectancy alone. There are other factors that make some work and some not. You need to be able to understand why some fail and some don't.

For example, lets talk about bull flags. We all know bull flags can be a great pullback opportunity in an uptrend. But do you know WHY the bull flag works. Do you know why the W pattern works ? Or the head and shoulders ?

I just brought this issue up with NoDoji about cherry picking. I would certainly love to be able to cherry pick my trades so that they work out more often than not, but doesn't this defeat the purpose of statistics and backtesting? When you introduce too many factors then it will be impossible to match them all up when you are looking for the same setups, and if you can't match them up, then what good is your backtesting?

I guess what I'm saying is do I need to know why a bull flag works or head and shoulders? If I see it forming and I know that more than 50% of the time the price drops after the right shoulder, then why not just put my trade on, with a stop above the head and my profit target at 2 times?

 

[dbphoenix]

Quote from k p:

1. Excellent that it can be that simple, but as you say, maybe that is the problem with this, it doesn't occur frequently enough to make it worthwhile.

The 50% win rate was proven incredibly successful by geez. I read his entire journal. He started with a 70k account and put on a bet that he could grow it by 50% in one year I believe. He used a max loss of $200 a day, 1:2 risk reward ratio so his wins were around $400, but with commission and slippage, it ended up being about 1:1.8. He would put on about 20 trades a week. Some days he was down 4 out of 4 trades, but on the days when he got only 2 out of 4 right, he was well ahead because of his risk management. Overall, I think his win rate was around 49%. He more than won the bet in much less time. He cut his wins as you say, but he knew his system worked and relied on setting strickt profit and loss targets. So in essence, once the trade was on, it would either hit his target or his stop and then it was off to the next one.

I am absolutely weary of who to take advise from but having lurked for so long, I see certain names popping up over and over again that I am learning to trust.

What somebody else does or does not do is entirely irrelevant to your success or failure. Reading books and journals and blogs and so forth may be inspirational and you may even get some ideas for research and testing. But somebody else's results have nothing to do with you. Don't study other traders. Study the market.

 

[k p]

Quote from stock777:

the last true edge was seen sometime in 2003 before the bots and Jack Hershey students grabbed them all.

Artistic License

That thing with the teeth, that's the market. The thing IN the teeth, guess who.

LOL... it better not be me! I can't quite figure out this Jack Heshey fellow. I see his posts everywhere, and he write quite a bit, but for the life of me, I can't really understand his posts. I think that what I've read about him is that he is an amazing trader who makes lots of money, so is this the same person who posts on here? I wish I knew what he was saying half the time...

 

[wiesman02]

Quote from k p:

I just brought this issue up with NoDoji about cherry picking. I would certainly love to be able to cherry pick my trades so that they work out more often than not, but doesn't this defeat the purpose of statistics and backtesting? When you introduce too many factors then it will be impossible to match them all up when you are looking for the same setups, and if you can't match them up, then what good is your backtesting?

I guess what I'm saying is do I need to know why a bull flag works or head and shoulders? If I see it forming and I know that more than 50% of the time the price drops after the right shoulder, then why not just put my trade on, with a stop above the head and my profit target at 2 times?

okay. So say you dont want to know the reason why the bull flag works. But if you cant understand why it works, how do you expect to read price correctly enough to exit at the right time ? They both go hand in hand.

 

[stock777]

Quote from k p:

LOL... it better not be me! I can't quite figure out this Jack Heshey fellow. I see his posts everywhere, and he write quite a bit, but for the life of me, I can't really understand his posts. I think that what I've read about him is that he is an amazing trader who makes lots of money, so is this the same person who posts on here? I wish I knew what he was saying half the time...

The day you understand anything JH says, is the day they come to take you away. We've lost quite a few here that way over the years.

As long as his posts bewilder you, you're ok.

 

[k p]

Quote from wiesman02:

okay. So say you dont want to know the reason why the bull flag works. But if you cant understand why it works, how do you expect to read price correctly enough to exit at the right time ? They both go hand in hand.

Oh certainly... and I should clarify that its not that I don't want to know, it would be good to know, but I feel as if my knowing wont change the outcome. If I know that a bull flag usually leads to a certain movement in price, I just put my trade based on how statistics tells me it will move.

As for the stops, when I follow the system of geez, the profit target would come from something that is attainable based on resistance levels and taking into account the daily range of the stock, and the stop would just be half of this move to get the 1:2 risk/reward ratio.

I do absolutely want to learn, but the system I believe has to be one where when you are in a trade you don't think about it too much because all your work was done before the trade and hence why you put it on in the first place.

 

[stock777]

http://www.theregister.co.uk/2013/10/31/dark_matter_still_missing_after_100day_experiment/

Now you see, this is the kind of racket you should be seeking. There's a REAL edge. You claim to have discovered some secret of the Universe , and if they'll fund you millions you'll find the proof.

And if you don't they say, what a shame and you still get paid.

 

[k p]

Quote from dbphoenix:

What somebody else does or does not do is entirely irrelevant to your success or failure. Reading books and journals and blogs and so forth may be inspirational and you may even get some ideas for research and testing. But somebody else's results have nothing to do with you. Don't study other traders. Study the market.

I fully agree! I am simply looking at how a wheel is shaped so I don't have to reinvent it when I go to build my own car. I think round shapes work better than square ones! LOL.... So when I see geez making great money with a disciplined system, I think a great start would be to emulate it based on my own edges that I learn from watching the markets.

 

[k p]

Quote from stock777:

http://www.theregister.co.uk/2013/10/31/dark_matter_still_missing_after_100day_experiment/

Now you see, this is the kind of racket you should be seeking. There's a REAL edge. You claim to have discovered some secret of the Universe , and if they'll fund you millions you'll find the proof.

And if you don't they say, what a shame and you still get paid.

Funny you should post that, I read the exact same thing here:

http://www.gizmag.com/null-large-underground-xenon-dark-matter-results/29572/

I think politicians have it even better if you ask me... but lets not get started about that!