Thank you again @schizo.
Prudent Risk Management + No Edge = Positive Expectancy??
- Thread starter ironchef
- Start date
Great post. I have to digest your comments carefully. I do not know how to use indicators to trade (didn't work for me somehow). Purely general pattern and gut feel.
Now that you mentioned it, maybe subconsciously I followed momentum?
When I backtested, I only did over 3 years, but good mix of volatility, up and down markets. There are some people who swear by 10 year backtest or longer.
I think as long as you cover different market conditions, you should just go run with it.
What is risk management but a prediction of the future? If you can’t predict the future with any statistical significance you can’t do “prudent risk management”
Today’s example below. I entered long at $236 around 2:40pm. Price immediately went up. I moved stop to $236.25 and set profit exit at $237.75 and walked away. About 20 mins later I came back and the price was hovering around $236.7. When it dropped to $236.56 I couldn’t take it anymore and exited with a small profit, but ended the day in red. If I had waited until my original target gets hit, I’d have been a few hundred $ positive today.
Please post results of a minimum of 1000 trades over a minimum time span of 5y. This is really like discussing why your throw of the dice showed number 2
As for exiting, i think its best to start with a clear definition of your goal. Eg for me it is just captering that occasional large swing. In essence, this is what most retail traders want to do, breakout, OR, momentum etc it's basically all the same.
I also think this discussion on having an edge or not is nice but can put people off thinking they need to compete with the big funds perse, which is offcourse futile. I think its better - for retail- to focussing on to position yourself for if history repeats itself, again. (Let's call this a "prediction"). Then your study goes to how to do this properly, and you can sweat and search for that.
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I pretty much agree with everything in this post.Please post results of a minimum of 1000 trades over a minimum time span of 5y. This is really like discussing why your throw of the dice showed number 2
As for exiting, i think its best to start with a clear definition of your goal. Eg for me it is just captering that occasional large swing. In essence, this is what most retail traders want to do, breakout, OR, momentum etc it's basically all the same.
I also think this discussion on having an edge or not is nice but can put people off thinking they need to compete with the big funds perse, which is offcourse futile. I think its better - for retail- to focussing on to position yourself for if history repeats itself, again. (Let's call this a "prediction"). Then your study goes to how to do this properly, and you can sweat and search for that.
For me, once I identified and studied the target I wished to capture (1-3 trending moves per day in CL) everything changed. Still a work in progress but having that clearly defined goal, then developing a strategy around achieving said goal was a big leap for me. It's still not easy though...even with a solid plan the human element will fck you and requires its own level of refinement.
My point is a few times a day I can see the market clearly. But my psychology and execution often get in the way. Also, I think edge is not absolute, meaning sometimes you have a clear edge and sometimes you don’t. That’s why you need good execution and risk management all the time.
In addition, too often I mistake randomness as edge and over trade. Being able to tell real edge from randomness is by itself a true edge. I think it requires more experience and time in the market and a cultivation of good market intuition.
In addition, too often I mistake randomness as edge and over trade. Being able to tell real edge from randomness is by itself a true edge. I think it requires more experience and time in the market and a cultivation of good market intuition.
I agree if you are trading options, derivatives, etc. as what I have been doing since 2013.
In day trading, my approach is 180, I use trend following, simply follow the leader. According to your thesis, risk management is pointless if I don't know the future?