Principle based day trading strategies

[rajesheck]

Principle based intraday strategy

When successful investors make principles based investment why not a day trader?

In fact the success rate in day trading will be higher than in investment because there is virtually zero external influence beyond the open price within day trading when compared to investment or even positional trading.

I created a day trading strategy based on a single principle : Never lose your money.

The reason to choose this principle is that the probability to lose money in trading is very high than to gain.

"Never lose your money" is not a technique but a trader's attitude. Which means the primary focus is on minimizing, or if possible avoiding, losses in every single trade. Profit making will be the secondary focus which aligns with the primary focus of protecting the money.

For that the entry and exit rules must be the same. The same reason (rule) which a trader enter the trade is to be used to exit if the reason (rule) does not exist.

The entry rule has to be configured in such a way that the possible loss will be minimal.

Entry Rules

1# A RALLY of X% or more within 20 minutes.

For example if the script is trading at price P then a rally of X% means rally from P to P + P * X/100 or more



2# WAIT for 2 minutes if the rally is gradual. If the rally is a bit faster then wait for 10 minutes.



3# ENTER when there is a crossover of the rally before 60 minutes.

For example if the rally touches price P by 10:10 am and crossover the same before 11:10 am.



Note : The rally need not be a breakout of the day's high/low breakout. The rally can be either with the trend or against the trend.


Target : Open target. Let the day decide it.

Stop loss : Exit immediately when the crossover of rally is reversed.

X values across segments:
1. Index Futures : 0.18%
2. Equities : 1%
3. Forex : 0.12%
4. Commodities : 0.5%

 

[wintergasp]

Principle based intraday strategy

When successful investors make principles based investment why not a day trader?

In fact the success rate in day trading will be higher than in investment because there is virtually zero external influence beyond the open price within day trading when compared to investment or even positional trading.

I created a day trading strategy based on a single principle : Never lose your money.

The reason to choose this principle is that the probability to lose money in trading is very high than to gain.

"Never lose your money" is not a technique but a trader's attitude. Which means the primary focus is on minimizing, or if possible avoiding, losses in every single trade. Profit making will be the secondary focus which aligns with the primary focus of protecting the money.

For that the entry and exit rules must be the same. The same reason (rule) which a trader enter the trade is to be used to exit if the reason (rule) does not exist.

The entry rule has to be configured in such a way that the possible loss will be minimal.

Entry Rules

1# A RALLY of X% or more within 20 minutes.

For example if the script is trading at price P then a rally of X% means rally from P to P + P * X/100 or more



2# WAIT for 2 minutes if the rally is gradual. If the rally is a bit faster then wait for 10 minutes.



3# ENTER when there is a crossover of the rally before 60 minutes.

For example if the rally touches price P by 10:10 am and crossover the same before 11:10 am.



Note : The rally need not be a breakout of the day's high/low breakout. The rally can be either with the trend or against the trend.


Target : Open target. Let the day decide it.

Stop loss : Exit immediately when the crossover of rally is reversed.

X values across segments:
1. Index Futures : 0.18%
2. Equities : 1%
3. Forex : 0.12%
4. Commodities : 0.5%

You're completely wrong.

Losing money is part of the game and this is the wrong attitude, you will still lose money but not make enough money because you get out too early.

Also, the notion of time in the market doesn't really exist.

Percentages also don't make sense in trading. Crude Oil has always traded in a range of 2$ per day, whether it was trading at 100$ or at 25$. In the former case that represents 2% in the latter 5%.

Don't listen to me, instead do a simulation on your strategy and see for yourself.

 

[Xela]

In fact the success rate in day trading will be higher than in investment because there is virtually zero external influence beyond the open price within day trading when compared to investment or even positional trading.

As ever, your logic lets you down.

It's true that external influences are far fewer when daytrading than when investing, but that doesn't mean that success-rates are higher. And in fact they're typically not.

There's a large number of other factors involved, too, all of which you've conveniently ignored.

The entry rule has to be configured in such a way that the possible loss will be minimal.

You got that one right.

It emerges from all your posts here that you're clearly quite an intelligent guy, but just with very out-of-focus thinking, somehow, about trading in general.

In this instance, your premise is a valid and wise one, but some of your conclusions drawn from it, and the general direction it's led you in, are as misguided as they come. Basically, you're "just wrong".

You seem to understand that trading is all about risk-management rather than about profit maximisation, and you're right about that. It's where that understanding apparently takes you that's the problem.

Maybe you just lack experience, in which case possibly I'm being unkind. I can't help thinking, though, that your "forum time", here, would be much better spent as a "learning-related" activity rather than as an attempted "teaching-related" one ...

 

[bone]

Speaking for myself and my clients, we take losses all the time. Sound position management is the closest thing to a universal "holy grail" in terms of reality and the independent speculator.

If you are the type of personality that requires certainty, I cannot think of a worst endeavor than trading to undertake. Just my 2 cents, YMMV.

 

[bone]

Principle based intraday strategy

When successful investors make principles based investment why not a day trader?

The "successful" investors that we typically know of are largely made known to us through intentional publicity - that is, they are trading OPM. A proper Offering Prospectus always includes the fund manager's investment "principles". It's for client consumption. Furthermore, the "guiding principle(s)" will seek to differentiate that fund manager from other fund managers, and will also strive to reassure the client and instill confidence. Again, it's a pitch.

Independent speculation does not require such superfluous distraction. Let me explain my reasoning. The way in which you incorporated the term "principle" into day trading axioms in your OP worried me a bit. You intentionally eschew "technique" in favor of an "attitude" divorced from the reality of taking a loss. To me, these semantics are important because it tells me that you favor a global axiom in lieu of grounded, market realities.

Let me politely offer an alternative mindset formed since the early '90's, forged through working with 150 clients, and which I thinks best sums up the proper mental framework for independent speculation. Throughout the history of life on earth as we know it, the most successful and longest lasting animals are typically ambush predators. They conserve energy (capital), watch and study the environment around them motionless for hours and days, and take instant advantage of opportunities as they present themselves. And when those opportunities turn into danger, they break off and flee immediately. Just my own 2 cents, YMMV.

 

[rajesheck]

Principle based intraday strategy


"Never lose your money" is not a technique but a trader's attitude. Which means the primary focus is on minimizing, or if possible avoiding, losses in every single trade. Profit making will be the secondary focus which aligns with the primary focus of protecting the money.

Thanks for all your valuable feedback.

http://www.investopedia.com/financial-edge/0210/rules-that-warren-buffett-lives-by.aspx

Basically this strategy is based on principle/attitude. This is an entirely different approach. The secret of successful traders lies in their principle/attitude, though they may not say it loud because either they don't know how to express or they are not aware of the connection between their attitude and their success.

Attitude is everything in trading.

This strategy can be...
1. Used as it is or
2. Used after making some tweaks or
3. Used as a tool or a case study on how to develop the attitude and later create a new strategy of personal choice.

 

[bone]

Never in my career have I seen a successful day or short term trader espouse an "attitude" or a viewpoint even remotely close to "never lose your money". Trading, by definition and indeed in practice, is calculated risk. With all due respect, you simply cannot day trade markets with an attitude or a principle based on an absolute - which is exactly what "never lose your money" is.

While I can appreciate your suggestion for a correct attitude - pushing an absolute like not losing money as a mantra for day trading is simply incorrect and it cannot be done. Warren Buffett does NOT day trade. He's a long term value investor. Big difference, and for you to extend his rule to an individual speculator day trading doesn't hold water.

 

[rajesheck]

Never in my career have I seen a successful day or short term trader espouse an "attitude" or a viewpoint even remotely close to "never lose your money". Trading, by definition and indeed in practice, is calculated risk. With all due respect, you simply cannot day trade markets with an attitude or a principle based on an absolute - which is exactly what "never lose your money" is.

While I can appreciate your suggestion for a correct attitude - pushing an absolute like not losing money as a mantra for day trading is simply incorrect and it cannot be done. Warren Buffett does NOT day trade. He's a long term value investor. Big difference, and for you to extend his rule to an individual speculator day trading doesn't hold water.

Thanks for making your valuable point.

My point is that all the ideas, approaches, techniques and strategies has to come from one single principle/attitude. Then only we can evaluate it more precisely.

The principle/attitude is like a seed from which ideas sprout, techniques roots in, understanding stems up, knowledge branches out and results blossom.

What i have observed and still trying to understand so far is that "never lose your money" is the seed principle/attitude from which the entire tree of wisdom is coming.

I created this experimental strategy based on this principle/attitude and experiencing success far better than before and still more and more enthusiastic to continue experiments.

This is not my idea, but my intuition. Ideas come and go. Intuitions are discovered within. Thanks to Warren Buffet's quotes and articles based on his approach. I could see his principle and also the connection between his principle and his ideas.

 

[SimpleMeLike]

Principle based intraday strategy

When successful investors make principles based investment why not a day trader?

In fact the success rate in day trading will be higher than in investment because there is virtually zero external influence beyond the open price within day trading when compared to investment or even positional trading.

I created a day trading strategy based on a single principle : Never lose your money.

The reason to choose this principle is that the probability to lose money in trading is very high than to gain.

"Never lose your money" is not a technique but a trader's attitude. Which means the primary focus is on minimizing, or if possible avoiding, losses in every single trade. Profit making will be the secondary focus which aligns with the primary focus of protecting the money.

For that the entry and exit rules must be the same. The same reason (rule) which a trader enter the trade is to be used to exit if the reason (rule) does not exist.

The entry rule has to be configured in such a way that the possible loss will be minimal.

Entry Rules

1# A RALLY of X% or more within 20 minutes.

For example if the script is trading at price P then a rally of X% means rally from P to P + P * X/100 or more



2# WAIT for 2 minutes if the rally is gradual. If the rally is a bit faster then wait for 10 minutes.



3# ENTER when there is a crossover of the rally before 60 minutes.

For example if the rally touches price P by 10:10 am and crossover the same before 11:10 am.



Note : The rally need not be a breakout of the day's high/low breakout. The rally can be either with the trend or against the trend.


Target : Open target. Let the day decide it.

Stop loss : Exit immediately when the crossover of rally is reversed.

X values across segments:
1. Index Futures : 0.18%
2. Equities : 1%
3. Forex : 0.12%
4. Commodities : 0.5%

Hello,

You have a nice system here and I can appreciate the effort.

 

[SimpleMeLike]

Thanks for making your valuable point.

My point is that all the ideas, approaches, techniques and strategies has to come from one single principle/attitude. Then only we can evaluate it more precisely.

The principle/attitude is like a seed from which ideas sprout, techniques roots in, understanding stems up, knowledge branches out and results blossom.

What i have observed and still trying to understand so far is that "never lose your money" is the seed principle/attitude from which the entire tree of wisdom is coming.

I created this experimental strategy based on this principle/attitude and experiencing success far better than before and still more and more enthusiastic to continue experiments.

This is not my idea, but my intuition. Ideas come and go. Intuitions are discovered within. Thanks to Warren Buffet's quotes and articles based on his approach. I could see his principle and also the connection between his principle and his ideas.

Hello,

Are you referring to never lose money over the long term of your trading career or never lose money per trade? Honestly, I do not like the phrase "never lose money" because every trader loses money on a trade.

You should test your strategy in sim mode for a month and review the results. That's the best way to see if something will work.