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Risk management and odds
- Thread starter NKNY
- Start date
Trader88,
What you are saying has been my entire point in this discussion, this is as good as it gets and it works.
I have had a good satisfactory experience with this method, for one its simple and doesnt become burdensome with TA or over analysis. I dont know how one could program this into a software package. But I trade manually, the old fashioned way, yes, i stare at screens all day.
What you are saying has been my entire point in this discussion, this is as good as it gets and it works.
I have had a good satisfactory experience with this method, for one its simple and doesnt become burdensome with TA or over analysis. I dont know how one could program this into a software package. But I trade manually, the old fashioned way, yes, i stare at screens all day.
if you look at a chart with stochastics, you can see how many times it gives false signal. you will need a lot of 'experience' and subjective judgement calls to make the 80% success rate. In that sense, what do you even need the indicator for? anyone what has been trading a few months can look at a chart without any indicators and tell if a thing is overbot or oversold.
I have been doing intraday trading for a little over a year and would like to share some experience here. For conventional TA to work well, you will need a lot of 'conventional' participants in the market. Back in the internet craze days and the year-end bear market days, there are tons of dumb money in the market, and therefore playing breakouts/breakdowns worked really well. In the recent months however, after much of the excess is cleared out of the market, these breakout/breakdown patterns don't work well anymore. To do good, you will have to identify the major participants in the market and identify their behavior.
There is no single TA tool that will win all the time, especially those 'canned' indicators you read from a book. The trend-following ones will lose a lot of money in range markets, the range indicators will lose a lot of money during trending markets.
Trying to identify what type of market we are in, this is where experience and subjectivity come in. And if you are not in tip-top shape mentally and physically, you will be wrong and lose a lot of money.
Therefore, having your own '100% mechanical' system is neccessary for some people (me included), without those canned indicators.
It will be helpful to do lots of back testing and check if your system is sound, in terms of performance and maximum drawdown.. and that has been where I put most of my spare time lately. And yes, There are some systems can be developed with reasonable drawdown so that you can still stick to it during tough times. At least for myself, this will be the type of trading I will be willing to do in the long run, in an enjoyable and stress-free fashion.
I have been doing intraday trading for a little over a year and would like to share some experience here. For conventional TA to work well, you will need a lot of 'conventional' participants in the market. Back in the internet craze days and the year-end bear market days, there are tons of dumb money in the market, and therefore playing breakouts/breakdowns worked really well. In the recent months however, after much of the excess is cleared out of the market, these breakout/breakdown patterns don't work well anymore. To do good, you will have to identify the major participants in the market and identify their behavior.
There is no single TA tool that will win all the time, especially those 'canned' indicators you read from a book. The trend-following ones will lose a lot of money in range markets, the range indicators will lose a lot of money during trending markets.
Trying to identify what type of market we are in, this is where experience and subjectivity come in. And if you are not in tip-top shape mentally and physically, you will be wrong and lose a lot of money.
Therefore, having your own '100% mechanical' system is neccessary for some people (me included), without those canned indicators.
It will be helpful to do lots of back testing and check if your system is sound, in terms of performance and maximum drawdown.. and that has been where I put most of my spare time lately. And yes, There are some systems can be developed with reasonable drawdown so that you can still stick to it during tough times. At least for myself, this will be the type of trading I will be willing to do in the long run, in an enjoyable and stress-free fashion.
While I respectfully accept that some traders are capable of an extended run with a 75% - 80% winning percentage, I think that this type of expectation for many beginners is discouraging and dangerous.
In most cases I believe it is better for newer traders to accept the idea that they will be right as often as they are wrong and to learn how to maximize their gains and minimize their losses. Until they are capable of defining a perceived edge, be it experienced judgment or a fantastic set of indicators, this approach to the market is more likely to keep them in the game.
I personally use some measure of subjective evaluation in my trading although I have found that the more the rules I define are inflexible the more I am able to avoid the dangers of emotionally biased trading.
I am not just talking about the ability to cut your losses. I am also referring to the propensity for a trader to focus on those aspects of the market that support his trade and avoid contrary indications. This is especially true under pressure. I realize this doesnât apply to technically and emotionally âgiftedâ traders but most new traders donât start out âgiftedâ and, even if they do, working a rigid system allows them a great base to expand from and develop their own style, be it subjective or not.
In most cases I believe it is better for newer traders to accept the idea that they will be right as often as they are wrong and to learn how to maximize their gains and minimize their losses. Until they are capable of defining a perceived edge, be it experienced judgment or a fantastic set of indicators, this approach to the market is more likely to keep them in the game.
I agree with dozu and I would like to add that a âmechanicalâ system is probably going to be more effective for the majority of traders than a method that allows for many different interpretations. I say this simply because, as many on this forum may agree, the greatest hurdle to overcome for the old and new is one's own emotions and lack of discipline.Originally posted by dozu888
Trying to identify what type of market we are in, this is where experience and subjectivity come in. And if you are not in tip-top shape mentally and physically, you will be wrong and lose a lot of money.
Therefore, having your own '100% mechanical' system is neccessary for some people (me included), without those canned indicators.
I personally use some measure of subjective evaluation in my trading although I have found that the more the rules I define are inflexible the more I am able to avoid the dangers of emotionally biased trading.
I am not just talking about the ability to cut your losses. I am also referring to the propensity for a trader to focus on those aspects of the market that support his trade and avoid contrary indications. This is especially true under pressure. I realize this doesnât apply to technically and emotionally âgiftedâ traders but most new traders donât start out âgiftedâ and, even if they do, working a rigid system allows them a great base to expand from and develop their own style, be it subjective or not.
Originally posted by tymjr
While I respectfully accept that some traders are capable of an extended run with a 75% - 80% winning percentage, I think that this type of expectation for many beginners is discouraging and dangerous.
In most cases I believe it is better for newer traders to accept the idea that they will be right as often as they are wrong and to learn how to maximize their gains and minimize their losses.
I agree and disagree with that statement. I'd take it a step further and say right only 30-40% of the time starting out.
I know some top hedge fund managers who do the exact same but still do quite well due to winners being huge.
rtharp
Gentleman and ladies-- I respect all but this thread has been painful to read and some of it such a bore. Who can deny we are in a corrupt business therefore TA although helpful must be questioned. As Farrell states in his book a stock will trend higher or lower depending upon whether the specialist is "net long" or "net short--on an intra-day basis. Hitman's story of the exceptional trader-see "trading edge at a proprietary firm"-rings true. Reading the specialist is paramount--a simple chart plus futures may be all we need. As for the naz-well- the naz is criminal. Furhtermore- Andrasm is a great source of info for this site. I respect his experience and point of view.