This is too simplistic of a method to result in consistent profits. A more advanced approach is testing the conditions to find out whether they are causal. The step after that is testing inferred causal relations for significance. The step after that is testing the significance of the significance based on random signals. There are more steps after that. Why do you think proprietary trading firms and funds employ mathematics and physicists? But you have to start some place and you did and after you realize that this is not enough you will move on or quit.
Mechanical versus discretionary swing trading
- Thread starter Jim_Nasium
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This is too simplistic of a method to result in consistent profits. A more advanced approach is testing the conditions to find out whether they are causal. The step after that is testing inferred causal relations for significance. The step after that is testing the significance of the significance based on random signals. There are more steps after that. Why do you think proprietary trading firms and funds employ mathematics and physicists? But you have to start some place and you did and after you realize that this is not enough you will move on or quit.
You are right, if it's going to come down to an arms race between myself and prop firms I might as well quit
Oops, no chart
Thanks. Your previous post has given me a feeling that this is largely futile for somebody with my limited resources (time being of the most limited), so maybe I am kidding myself. Sure it's interesting but maybe I could do something interesting with my time which doesn't lose money = )
Or if it's money I am interested in perhaps I should empty my trading account and put it all in bit coins = )
Unfortunately, there are no prices, so this doesn't tell me anything.
Be that as it may, you asked about my reservations, so . . .
1. The use of MAs. If you use MAs, you will by definition be late, and the later you are in a trend, the more likely you will be stopped out.
2. Your criteria for the relationship between price and the MAs tilts the odds against you that traders will be seeking equilibrium, and while the bulk of trades take place during this activity, those trades aren't amenable to tight stops.
3. The inclusion of "targets". Targets have primarily to do with wish fulfillment. The market couldn't care less what your targets are. It's going to do what it's going to do and it's up to you to tag along for as long as it's doing it. Setting any sort of target creates an unreasonable expectation.
4. The "R:R" ratio. Just as the market couldn't care less what your target is, it couldn't care less about how much you're willing to risk. And since you have no way of knowing what reward to expect, much less what it's going to be, the r:r ratio is again primarily a fantasy. The market will give you what you want as long as you don't have too stringent a list of requirements, not unlike borrowing money from a relative under the condition that the relative is willing to meet certain criteria.
There is no inherent conflict between mechanical and discretionary, unless one defines "discretionary" as some sort of soft, fuzzy, feelings thing that entails trading intuitively with little or no regard for what's happening "out there". A discretionary approach can be very nearly as rigid as one which is based on indicators. The difference lies primarily in the bases for developing the strategies. And the requirement that one not be afraid of price.
Incidentally, if you don't know what Auction Market Theory or mean reversion are, find out.
If you're going to be swayed by the opinions of anonymous strangers rather than by your own research and testing, then, yes, you really ought to quit now and save yourself the time and money.
This isn't difficult, but you may have to unlearn quite a bit in order to make it work for you.
I'm going to need some time to ponder this.
OK, thanks