Simple trading strategies - impossible?

M

mag

In a competitive game like the stock market is it really possible to have a simple trading strategy that's profitable?

If it's simple, someone else is sure to have thought of it before and if it's profitable, they're going to already be using it thereby removing the edge.

What do you think?
 
Quote from mag:

In a competitive game like the stock market is it really possible to have a simple trading strategy that's profitable?

If it's simple, someone else is sure to have thought of it before and if it's profitable, they're going to already be using it thereby removing the edge.

What do you think?
More...


How do you define strategy because to some a strategy is part of a trading plan ???

Are you talking about a computer code because if you are not talking about a computer codes...

Others using the strategy regardless if it's simple of complex will NOT remove the edge.

There's just too many variables involved from one trader to the next trader for an edge to be lost.

Go try it (debates not needed)...take any method regardless if it's profitable or not and share it randomly with 100 traders that trade with real money in the same trading instrument.

I guarantee the real money results for each trader will be different...

Some traders will be profitable, breakeven while others lost money.

Simply, the real edge of a strategy or trading plan is the trader.

Mark
 
It all depends what you're trading, your timeframe, risk tolerance, profit points, and personality dictates.

For me it's a very simple setup with a clean chart and "lots of white space" that makes it simple for me to know when I should (or more importantly should not) be in a position. Others may like multiple charts and indicators and conditions. I don't slam anyone's setup or style ... if it works for them, fine - what do I care what/how they trade or what indicators they use, or what their entry/exit triggers or daily goals are?

You trade whatever works for you.

FWIW saying I favor the simple over the complex...less moving parts and less noise to distract me when trading. That's just who I am and how I operate. You may be 100% different, and that's as it should be. :)

ETA: My biggest 'edge' seems to be knowing when to stay out of a trade even if it's tempting to enter one. Keeps me from making bad decisions and losing money....so I guess as a retail trader that's one of my 'edges' so to speak.
 
Quote from mag:


If it's simple, someone else is sure to have thought of it before and if it's profitable, they're going to already be using it thereby removing the edge.
More...

With many thousands of instruments that can be traded, on many markets, and all in constant flux, there are millions (billions?) of ways to make money from price movement. Or, lack thereof.

I wouldn't worry about somebody stealing your edge.
 
Quote from mag:

In a competitive game like the stock market is it really possible to have a simple trading strategy that's profitable?

If it's simple, someone else is sure to have thought of it before and if it's profitable, they're going to already be using it thereby removing the edge.

What do you think?
More...

How would the edge get removed?

Unless you are trying to define edge as it exists for the successful scalpers of illiquid stocks where the person with the most buying power usually wins.

While I cannot throw out statistics for this, I would confidently guess that the majority of individual successful consistent traders follow very simple strategies.

The first example that comes to my mind would be an extract from a book by paulo coelho(if you dint know already its not about trading, it about humans). Skipping out trying to remember the complete story, the essence is that if the simplest thing is presented to a human, MOST will dismiss it or will start analyzing what it may mean and eventually have a whole series of books trying to reach the goal, without even trying the first strategy that could have been summed up in a single sentence.

The point is if you think its simple figure it out, try it, there is no point debating on it and maybe in a few years realize it (if it all): its was always that simple.
 
If it's going up, buy it. If it's going down, sell it. Cut your losers and let your winners run.

If you have the mental toughness to actually do this and stick with it through the many whipsaws and profit givebacks, you will be profitable long run.
 
Quote from lindq:

With many thousands of instruments that can be traded, on many markets, and all in constant flux, there are millions (billions?) of ways to make money from price movement. Or, lack thereof.

I wouldn't worry about somebody stealing your edge.
More...

I doubt there are so many ways to CONSISTENTLY profit from the trading...
 
Even a good trading system has drawdowns that most traders can't cope with. Moreover applying a system is really boring stuff which makes you quit also.
Ed Seykota sometime said: the only disavantage of a good tradingsystem is that you stop using it.
 
Quote from mag:

In a competitive game like the stock market is it really possible to have a simple trading strategy that's profitable?

If it's simple, someone else is sure to have thought of it before and if it's profitable, they're going to already be using it thereby removing the edge.

What do you think?
More...

Lehman Brothers Holdings stock symbol LEH is in the news lately. If I buy when price increases 10 %, sell when price decreases 10 %, 10 % risk, initial capital $ 100000, 14.30 years of daily price data these are the results:

Number of trades 74
Total profit $ 139457
Greatest draw down is 0.2929 (29.29 per cent).
Cumulative Annual Growth Rate (CAGR) is 9.65 per cent.

Is there a simpler method?
 
Same system, trading Fannie Mae stock symbol FNM this time. 31.67 years daily price data.

Number of trades 116
Total profit $ 326152
Greatest draw down is 0.6005 (60.05 per cent).
Cumulative Annual Growth Rate (CAGR) is 10.23 per cent.

Scary draw down.
 
You must log in or register to reply here.
Back
Top