My edge isn't what I thought it was

traider said:
How do you know you are not overfitting your strategies
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I don’t know. But I spend a lot of time trying to find reasons for my strategies not to perform. The nice thing about automation is that I have plenty of time to worry about improving the strategy development process as opposed to worrying about specific trades.

There are a few ways I go about it none of them bullet proof:
1. The strategy has to work on baskets on random stocks, various stock universes
2. I try to minimize the number of variables and backtest on walk-forward out of sample rolling windows where I try not to pick any parameters
3. If I do optimization i look for consistent intervals and try not to pick the peaks so to speak.
4. I look for consistent results over various trading regimes.

If you have any other suggestions I’d be glad to hear them.
 
Naturex said:
I used to think my edge was my ability to do TA, and read charts.
But the level of TA I'm doing, most people can do by watching a couple youtube videos. So how am I then profitable? It's the mental aspect. And I believe this to be true for all profitable traders.

Why? My biggest obstacle in trading, (And still working with it). Is setting up an order with confidence, then wait for my order to get filled. And then again wait for it to hit my stop loss or target order (Over a span of days, weeks, months) Without changing anything. This sounds easy right? But for me it was/is the hardest aspect of trading. The waiting. The reason why waiting is so hard, is because in trading there is no guarantee. And waiting for something that isn't a certain, can be very stressfull. Esp. If you're not well funded, have little experience, your money management isn't good and/or you have stresses in life outside trading.

I remember reading somewhere that 90% of people would rather choose 100% chance of getting 100,000. Then a 90% chance of getting 200,000.
We are wired to pick certainty. Anything else is stressfull. Sitting in a position over several weeks, risking a couple hundred or thousand $, not knowing if it will lose or win money is indeed stressfull (esp. if you need those money). If you can overcome this, I believe you already have an edge over 80% of retail traders.

(This is why most beginners choose low time frames, less stressfull and more exciting. And the brokers love it).[
aggreeing with you. I heard this sentence, 'it's not how much money you make it's how much you succeed to keep'
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Orbiter said:
Not a solution for everyone but here is the way I went about it in my 20 years of investing:
1. For the first 5 years I mostly invested small amounts, long term, using asset allocation, dividend paying stocks, mutual funds, keeping the stress in check
2. Then I started using index options without (much) leverage hoping to lower my risk and get better results. I looked into technical analysis, voodoo Elliott waves, etc
3. As I became more confident I upped the risk and I realized that the following factors increased the stress:
a. Watching closely all positions and having to manage each one of them
b. The size of the positions and the large PNL fluctuations
c. Trading on short timeframes
d. Not having clear entry and exit rules
e. Missing trades due to life commitments and missing on life due to trading
e. Everything else not mentioned above /s
4. About 10 years ago I started to become really systematic by setting clear rules, backtesting them and trying to strictly follow them.
5. Being systematic helped but the real breakthrough came about 6 years ago when I started to automate my strategies and was able that way to diversify a lot more by not only owning a large number of positions in my portfolio buy also by having the ability to use multiple strategies at the same time. Now I spend my time in strategy development. Most of the stress factors mentioned above are almost gone. ( The ones not mentioned above are still there /s)
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What is the profit factor of your strategy?
 
What I find particularly helpful that helped me on my trading journey is to watch pro traders and do the same trades they're doing. Example here http://bit.ly/2oUJ5F4 You know what they say, who you hang around with is who you become. Or monkey see monkey do. That gave me an edge
 
imjohn said:
I despise waiting. Waiting for a trade to complete right now, and waiting for conditions to improve. I've read that "Patience" is active waiting.

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Perhaps you should be a day trader, or trade the hour or the minutes if waiting bothers you
 
traider said:
What is the profit factor for trend strategies vs mean reversion ones?
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The 1.5 mentioned in my previous post was mostly for mean reversion. For trending strategies I can get closer to 2.0. So maybe that bumps up the average a bit.

I am sure strategies in other time frames have different profit factors. Anyone can share some numbers for intraday trades ?

Again that’s all EOD stuff, taking in consideration survivorship bias and index constituents.
 
Orbiter said:
Not a solution for everyone but here is the way I went about it in my 20 years of investing:
1. For the first 5 years I mostly invested small amounts, long term, using asset allocation, dividend paying stocks, mutual funds, keeping the stress in check
2. Then I started using index options without (much) leverage hoping to lower my risk and get better results. I looked into technical analysis, voodoo Elliott waves, etc
3. As I became more confident I upped the risk and I realized that the following factors increased the stress:
a. Watching closely all positions and having to manage each one of them
b. The size of the positions and the large PNL fluctuations
c. Trading on short timeframes
d. Not having clear entry and exit rules
e. Missing trades due to life commitments and missing on life due to trading
e. Everything else not mentioned above /s
4. About 10 years ago I started to become really systematic by setting clear rules, backtesting them and trying to strictly follow them.
5. Being systematic helped but the real breakthrough came about 6 years ago when I started to automate my strategies and was able that way to diversify a lot more by not only owning a large number of positions in my portfolio buy also by having the ability to use multiple strategies at the same time. Now I spend my time in strategy development. Most of the stress factors mentioned above are almost gone. ( The ones not mentioned above are still there /s)
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Cannot understand why peoplebother with forex and stocks-for excitement go buy a motorbike, for trading, use index options. Why put yourself in the bearpit when you can trade on the level playing field?
 
Windlesham1 said:
Cannot understand why peoplebother with forex and stocks-for excitement go buy a motorbike, for trading, use index options. Why put yourself in the bearpit when you can trade on the level playing field?
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Promise not to seek excitement in stocks. They say motorbikes are more fun are way safer than stocks anyways.

Seriously now. How do trading index options solve the anxiety problem ?
 
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