Systematic/Mechanical Approach to SLA

HungryMind1200

HungryMind1200

I've recently made the move from part-time retail to full-time remote prop. I initially used a strategy that I built around vWAP, but for some reason, my strategy has not been consistently profitable after changing over to prop.

I believe the reason for this was that the strategy was never really consistently profitable to begin with.

So I started over again as a discretionary trader. I basically gauge who's in control (buyers or sellers), and trade accordingly in a discretionary fashion. I'm trading two stocks only, commodity-based ETFs (i'm basically trading the futures through these ETFs). I'm not consistently profitable. I tend to gamble on breakouts of other equities outside of my two ETFs, which only works in my favor some of the times. I journal everything. And while I recognize my repeat mistakes, I am struggling to correct them. It is a work in progress....

I've recently taken interest in Wyckoff's teachings as well as the SLA teachings of DBPhoenix. This has helped my discretionary trading greatly. Amazing how taking things back to the basics can yield such immediate results.

I could be wrong here, but I feel like I personally NEED a systematic approach. That way emotion is taken out of the trade. My vWAP strategy was a series of "if, then" situations that I put together. It was very easy to follow, very easy to trade.

Has anyone taken a similar "if,then" approach to SLA? While I call this a mechanical systematic approach, I will be trading without an algo, thus this will be all manual trading. Does anybody have any recommendations on where to start?

Thank you.
 
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This sounds like a very interesting premise. I made the SLA/AMT as mechanical as I could without relieving the trader of all responsibility so that struggling traders could "reset" themselves. However, leaving it all up to the market rather than exerting and maintaining control over what is controllable carries "mechanical" to an extreme and makes whatever system or method one develops -- whether based on the SA or not -- more certain to eventually fail.

It's up to you whether you leave this here or move it someplace else. I'll follow along regardless, if you like. In the meantime, I suggest you look at the journals maintained by gears and lajax. They are representative of the very few -- very few -- who have stopped or postponed trading long enough to go through the observation phase.

As for the "if, then", that's pretty much what the SLA/AMT is all about.
 
HungryMind1200 said:
While I call this a mechanical systematic approach, I will be trading without an algo, thus this will be all manual trading. Does anybody have any recommendations on where to start?

Thank you.
More...

Is your intention/goal to automate eventually? Or is your goal a strict, rule-based system that will rely solely on you to send in orders?
 
Thank you very much for your fast response, and thank you for continuing to share your knowledge thus helping to improve struggling traders like myself.


I've read a book recently. It was titled, "Market Rap: The Odyssey of a still-struggling commodity trader". The book was about a manager of a car dealer who left his position and took a seat on the CBOT. The book touched me as I can relate to the experience of walking away from secured employment in the hopes of fulfilling dreams as a trader. The author walks the readers' through some of his strategies. In this book, the author leaves everything completely up to the market. If the market does this, then do that. The approach was simple, elegant, and eventually became profitable (after years of the author failing and re-tailoring his systems). While the perception was that his systems were turn-key, the truth of the matter is that the author spent countess hours tweaking these systems via trail and error. There is no magic bullet.


Perhaps I need to reset my expectations. If there was a simple algo-type approach to trading (i.e.: if -> then), then I suppose everyone would be profitable traders. Certainly this is not the case.


I will review the journal entries as well as the PDFs that you have posted here, and in various other forums. Perhaps I will start my own journal contribution to the SLA/AMT thread.


Do you recommend taking some time away from the market for an observation phase? I feel a bit exhausted from trading, and if I were to take a back seat, now may be the time to do it. To be honest, I over trade at times. I see this in my journals. I need to start trading smarter. I have a bit of a theory that if I continue to trade, eventually I will learn how to be successful and consistently profitable. I've had this experience with tackling anything new in life. There is always a learning curve, but I feel that perseverance and fortitude will always help you eventually overcome any learning curve. I'm having doubts about this theory in regards to trading. If you practice a skill incorrectly from the beginning, and then continue to practice that skill incorrectly, I believe that you will form bad habits that you may never be able to defer away from.


As you can see, I'm struggling with the psychological aspect as well. I've read countless books on market psychology, but I'm still struggling with my own inner fear and greed. You're own words have helped me slightly with this (i.e.: don't trade to earn, trade to become a better trader - focus on trading, not P/L). Of course this is easier said then done for some people, but I think you hit the nail on the head with that statement...


I am an Engineer by trade. I've always been wired to approach things from a logical and best practice standpoint. Perhaps that is why this transition has been so difficult for me. There is some logic in the market, but not always. I view the market as a living, breathing organism, or ecosystem if you will... Logic does not always come into play when dealing with such an ecosystem...
 
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Automation is not an immediate goal as I enjoy real-time trading very much (even losses are enjoyable at times - if that makes any sense). It's like a sport to me. I fly out of bed like a rocket ship to trade. I've never done that before, with any job - even jobs that I was quite passionate about.

If a strategy is defined enough to the point where it could be potentially automated, then it supports the fact that the strategy requires very limited thought process. That's where I would like to be (limited thoughts - let the system do its job), but building an algo is not on my radar currently.
 
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"Do you recommend taking some time away from the market for an observation phase?"

Very much so. One can't profitably trade what he doesn't understand. One cannot understand something without observing it.

"I have a bit of a theory that if I continue to trade, eventually I will learn how to be successful and consistently profitable. I've had this experience with tackling anything new in life. There is always a learning curve, but I feel that perseverance and fortitude will always help you eventually overcome any learning curve. I'm having doubts about this theory in regards to trading. If you practice a skill incorrectly from the beginning, and then continue to practice that skill incorrectly, I believe that you will form bad habits that you may never be able to defer away from."

That you've discovered this for yourself will save you weeks to months to years of wasted effort and wasted time.

"As you can see, I'm struggling with the psychological aspect as well. I've read countless books on market psychology, but I'm still struggling with my own inner fear and greed. You're own words have helped me slightly with this (i.e.: don't trade to earn, trade to become a better trader - focus on trading, not P/L). Of course this is easier said then done for some people, but I think you hit the nail on the head with that statement..."

If you have not downloaded the most recent iteration of the SLA/AMT pdf, I suggest you do so as I added an appendix which focuses on fear.

"I am an Engineer by trade. I've always been wired to approach things from a logical and best practice standpoint. Perhaps that is why this transition has been so difficult for me. There is some logic in the market, but not always. I view the market as a living, breathing organism, or ecosystem if you will... Logic does not always come into play when dealing with such an ecosystem..."

There is not only some logic to the market but a great deal. I've found, however, that few traders understand that the stock/bond/whatever market is an auction market. It therefore seems mysterious. But if one understands auction markets, the mystery is largely dissipated. If one also understands fear (and its variants such as hope, greed, wishing, revenge, panic, etc), he can and often will begin to appreciate the logic behind the apparent irrationality he believes he sees in market participants' behavior.
 
Thank you again. I will review the latest SLA/AMT document. I think I'm going to take the week off from trading, maybe place "virtual" trades, where I will journal where I would have entered and why. Let's try that for a week or so while I review the material and try to fill in the areas that I'm missing/lacking/etc.

I imagine that it will be quite difficult to trade virtually versus entering actual orders on my DMA platform (the struggle with greed continues).

I'll be checking in periodically. Thanks again.
 
If you're going to place virtual trades, you may as well trade. The purpose of observation is to observe without thought of entry or exit, i.e., focusing on price behavior rather than the state of one's trade. Lajax was particularly good about this during this phase.

Think of going to a game for which you know nothing about the rules, much less about the players. If you observe the game long enough, you will begin to discern the rules and will enter a phase where you pretty much understand what's going on but have no interest in which team wins.

And if the teams are buyers and sellers . . .
 
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