TA - Objective or Psychological Skill?

[justrading]

Quote from cornix:

If I was offered to choose a method which has 80% winning rate of 1:1 risk:reward vs. a method which has 20% winning rate of 1:15 risk:reward I would not even think a second about it.

What would Surf choose?

That's easy, he'd take out his lucky coin and go for random entries.

 

[sheda]

1. I agree with you--- random entries ( within reason ) and you don't need the percieved advantage of TA that provides just a little over 40% winning trades. Are you saying that you don't even have 40% winning entries trading? I dont' understand what you mean here.

I dont know where to start in response to you sometimes, I said who needs an advantage (as you consider a 40% win rate to fall on the wrong side of advantage) when a 40% win rate is Plenty to turn a healthy profit annually if everything is handled correctly. If 40% is not considered an advantage in this market then no one needs an advantage to be successful.

An edge to me is simply making the most of what you are capable of, the more capable you become the more you become capable of, I wont believe anyone as having an "edge" or "advantage" if they turn their nose at 40% wins, because to get to the extreme side of trading efficiency they would have gone through a time with a lower win rate than that and could never have moved onto more unless they capitalised on it to the full, and if you capitalise on a 40% win rate to the full you will never turn your nose up at it, simply because you know what its capable of doing for your bank account.

 

[Lucrum]

Quote from cornix:

...If I was offered to choose a method which has 80% winning rate of 1:1 risk:reward vs. a method which has 20% winning rate of 1:15 risk:reward I would not even think a second about it.



What would Surf choose?

Why the one that garners him the most attention, of course.

 

[marketsurfer]

Quote from sheda:

I dont know where to start in response to you sometimes, I said who needs an advantage (as you consider a 40% win rate to fall on the wrong side of advantage) when a 40% win rate is Plenty to turn a healthy profit annually if everything is handled correctly. If 40% is not considered an advantage in this market then no one needs an advantage to be successful.

An edge to me is simply making the most of what you are capable of, the more capable you become the more you become capable of, I wont believe anyone as having an "edge" or "advantage" if they turn their nose at 40% wins, because to get to the extreme side of trading efficiency they would have gone through a time with a lower win rate than that and could never have moved onto more unless they capitalised on it to the full, and if you capitalise on a 40% win rate to the full you will never turn your nose up at it, simply because you know what its capable of doing for your bank account.

You need to ask yourself what win rate will a random entry method Will it be. Greater than 40%? and if not --- why couldn't the winners be larger than the losers? That's the job of money management not The TA entry.

 

[marketsurfer]

Quote from cornix:

Surf, ask your PhD wife if a bet with 40% chance of winning and 1:2 risk:reward contains an edge. That would make things clear.

Don't know about you, but I LOVE to take as many trades as I can which have chance of winning of 40% with risk:reward of at least 1:2. It's equal to having a cash-making machine in your hands.

I completely agree with you. But you are inadvertently agreeing with me. The risk reward ratio comes from the exit, not the entry. Therefore if you make random entries and cut every losing trade but let winners run--- the results will be the same as TA that doesn't provide a real edge.

 

[sheda]

Quote from marketsurfer:

You need to ask yourself what win rate will a random entry method Will it be. Greater than 40%? and if not --- why couldn't the winners be larger than the losers? That's the job of money management not The TA entry.

On what time frame? Do we use stops or just sit watching the screen?

 

[cornix]

Quote from marketsurfer:

I completely agree with you. But you are inadvertently agreeing with me. The risk reward ratio comes from the exit, not the entry. Therefore if you make random entries and cut every losing trade but let winners run--- the results will be the same as TA that doesn't provide a real edge.

Oh, we need clarification of one point here:

it's still the entry which gives higher or lower odds of not just the fact of the move, but also provides odds on likely magnitude of a move. Cause we obviously don't need entries with the most likely outcome of one tick move and rarely more, right?

So while exit itself is trade management procedure, it's the entry which in advance gives us likely odds of a move we would like to see upon the entry.

 

[marketsurfer]

Quote from sheda:

On what time frame? Do we use stops or just sit watching the screen?

As a thought experiment. lets say 5 minute time frame and time stops, so you do close the trade when its clearly not going your direction-- maybe 5 minutes?

 

[marketsurfer]

Quote from cornix:

Oh, we need clarification of one point here:

it's still the entry which gives higher or lower odds of not just the fact of the move, but also provides odds on likely magnitude of a move. Cause we obviously don't need entries with the most likely outcome of one tick move and rarely more, right?

So while exit itself is trade management procedure, it's the entry which in advance gives us likely odds of a move we would like to see upon the entry.

Ok, thanks. This is where we disagree--- clearly your entries sometimes give you nice moves in your direction, other times they do not. In fact according to your experiment, your entries are not even profitable 60% or so of the time--- so how is the entry providing higher odds of the move, let alone its magnitude? Sounds like your entries based on TA are actually negative to your expected returns.

 

[sheda]

Quote from marketsurfer:

As a thought experiment. lets say 5 minute time frame and time stops, so you do close the trade when its clearly not going your direction-- maybe 5 minutes?

So, how do you know when to enter and how many trades per day? Its a random entry, my entrys are governed by whats unfolding infront of me, they are a response to what I see there for the number of trades per day is governed by the way I see the market. Do you just decide, perhaps to make ten trades a day, maybe on a time table or perhaps just now feels like a good time to enter?