Mechanical Trading ... Does it work?

Alain, for the second question.
there are all kind of market conditions. It's easy to show that.
take your system and pick randomly stocks, futures and bonds. (several of each, and different not correlated ones!).
If you have a system working with ALL with the same performance (relatively to the market's volatility of course), then you have the holy grail.
chances are it does not work.
if not, these represents the 'different market conditions'.
difference in volatility, acceleration, noise to move ratio, trending or not trending, small or big day range etc...
there are all kind of market conditions.
also, a trend following system can fail because the timeframe you trade suddenly is not trending, but there is ALWAYS a trend at any given time (otherwise the chart would be a flat line).

and yes, you can build a meta system capable of switching itself in different modes. however my experience is that separating the systems is better strategy. it allows better analysis. even a meta system won't work all the time because there are so many markets behaviours while a meta system is more difficult to maintain and debug.

tntneo
 
TNTneo

thank you.. your information is very helpful to me.

Now I have put together a little concept for how I could teach trading to my friend.
Let me know what you think.

- First teach the basics... executions, charts, indicators, volume, anatomy of the markets, what are trends, what are patterns, what is systemtrading, exchanges, what is a future etc...

- Second teach my trading system.. show him on what to look at what could go wrong, etc.

- Third teach the management of trading in combination with the psychological factors like discipline etc. and how to achieve for example the discipline. All this combined with a worked out personalized trading plan.

- Fourth he should trade the system for 12 months on just one future market. So he can concentrate on just one market.. not get confused with unnecessary things. In this time he should only trade the system nothing else. He should learn the discipline and get a feel of the market.

- Fifth during this time I sit together with him every three months or so to revise all the basics.. the trading system and analyze the trading performance. analyze where his weak points are and help him to improve those points.

- Sixth: After a year when he has a feeling for the market and understands the system and understands the market activity... it's has become a part of his thinking, I will start to teach him how to integrate News, special patterns, special market conditions, seasonal factors etc.. in his trading. So he can then adopt this factors to the system and improve the probability of the winning trades.

What do you think of this short concept... Maybe you could give me some input in what I then could integrate in the last element. What else could be thought after someone knows the basic of the markets? Is there something I'm totally missing?


Thank you,
Alain
(Switzerland)
 
alain, don't make an expert or guru of me. I am not. I just can trade and make money. many (in numbers, not percentage!) can do the same including yourself obviously.

that said, I think your map should work.
maybe it is a bit rigid in the time frame since each person is different. it takes more or less time to get it. 6 months, I bet, is a very minimum. but 2 years would not be that a surprise (and some will never get it!).

it's only by trading you learn trading. what I submit to everyone is that learning by following strict rules is a shortcut to success.
traders who do not will spend more time learning and may never succeed. Mostly because they usually trade a wrong perception of the market without knowing it.
systemtrading is about trading a perception of the market which is clearly put on paper (or computer). if it is wrong you can go back to it and try to know why.. or just scrap it ! :)

tntneo
 
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