The Flip-A-Coin trading strategy and lessons learned from it

[SProbability]

Just out of interest did you test your strategy before trading it? The issues you raised seem to be symptomatic of someone who did not BELIEVE that their strategy will be proftable in the long run. And this is usually the case with people who have not tested their strategy in ALL market conditions.

About Trends. Ofcourse nobody would argue that trends don't exist. I think the point abrogdan was making is that ALL trends come to an END and NOBODY knows when this will happen. I would add that ALL trends have major & minor retracements BEFORE they end, and hence there is no reason to assume that a countertrend strategy is INFERIOR to a trend following strategy.

Good thread this.

 

[SProbability]

how did u identify resistance (support) prior to using fibs??

Quote from NET:

Since I had never traded in a bull market, I used bear market techniques; i.e., I shorted resistance (I was not using the fib calculator at this time), then, when a breakout occurred, (not believing it was for real) I waited to see if it was a fake-out

 

[NET]

Quote from SProbability:

how did u identify resistance (support) prior to using fibs??

Usually with trendlines; drawing up the charts using both, horizontal (previous highs or lows) lines and sloping channels. This is pretty powerful when there's confluence with fib numbers. I've also experimented with optimized exponential moving averages, MACD, etc., but have never taken a trade based on an oscillator reading.

 

[NET]

Quote from SProbability:

Just out of interest did you test your strategy before trading it? The issues you raised seem to be symptomatic of someone who did not BELIEVE that their strategy will be proftable in the long run. And this is usually the case with people who have not tested their strategy in ALL market conditions.

Testing... yes, in that I looked at hundreds of charts and plugged in numbers from those charts (sort of backtesting, if you will).

Quote from SProbability:

About Trends. Ofcourse nobody would argue that trends don't exist. I think the point abrogdan was making is that ALL trends come to an END and NOBODY knows when this will happen. I would add that ALL trends have major & minor retracements BEFORE they end, and hence there is no reason to assume that a countertrend strategy is INFERIOR to a trend following strategy.

Good thread this.

I think abrogdan did argue that trends don't exist (I'll have to review the posts) except for on much longer time frames. He compared using price and time charts to "picking patterns out of clouds" (read his earlier posts).

Abrogadan has been a real asset in this thread, because his assertions are very well reasoned. Well reasoned arguments provoke thought.

If you can have a reasonable debate as to whether or not patterns or trends even exist, then the conclusion is that anytime you're taking a trade--with whatever edge you're using, your taking a gamble with that trade (argument for money management and exit strategy). Trading is NOT gambling, but each individual trade IS a gamble--and has a probability based outcome.

It's the "not knowing" which plays havoc with traders (for sure, did with me). We don't want to think we're gambling when we take a trade. There is a desire for some level of certainty where none exists. To fill in the "certainty void," we create beliefs borne out of technical analisys and then project those beliefs into the trade (holding and hoping) or hesitate for confirmation (unwillingness to accept a probability based outcome). These are issues with trader psychology, thus, the post in this forum.

There are very smart people who will never be successful trading. My assertion is that this fact is not related to technical analisys, hard work, or even discipline in one's life. We all want to be successful as traders. This thread is an attempt to address that issue.

 

[Turok]

>Abrogadan has been a real asset in this thread,
>because his assertions are very well reasoned

You are very kind. Bless you.

JB

 

[Simba]

Quote from NET:

"At that time I was only trading my ROTH (long trades only) account, and the general direction of the market was down. I tried to capture intraday pullbacks to enter the trade."

Therein lyes the problem:
directional bias makes this experiment less objective.


"The failure: As the market was turning from bearish to bullish, I found myself exiting out of positions that really took off, which bothered me (greed--i.e., trying to get out on the top tick--by exiting with profit at the slightest evidence prices were starting to decline, not using trailing stops, and general inexperience). I stopped using the system and started trying different methods. It's not that the system failed, I failed to adapt myself and the system to a changing market."

Not using stop losses and trailing stop losses will evoke an emotional response in most traders (e.g. panic exits), and again compromise objectivity.

 

[Roxyman]

RE : By grouping different market participants by their reaction time to any price change I have constructed the Market Sentiment Spectrums. What are they? They are correlation functions of New sizes on either Bid Side or the Ask Side of the book followed by the price moves.

How is it possible to tell the difference between Liquidity traders, day traders, long term investors, and Institutional investors.

And if you can is one group more important than the other that will give you an edge on the price movement.

When I observe the Level II, the times I get killed is when I see the bids piling up and the ratio of bids to ask are way in the long favor. I enter the trade long and the bids get pulled or there are a ton of offers that are hidden.
Is there a secret to unlocking that mystery.

 

[abogdan]

Quote from Roxyman:

RE : By grouping different market participants by their reaction time to any price change I have constructed the Market Sentiment Spectrums. What are they? They are correlation functions of New sizes on either Bid Side or the Ask Side of the book followed by the price moves.

How is it possible to tell the difference between Liquidity traders, day traders, long term investors, and Institutional investors.

And if you can is one group more important than the other that will give you an edge on the price movement.

When I observe the Level II, the times I get killed is when I see the bids piling up and the ratio of bids to ask are way in the long favor. I enter the trade long and the bids get pulled or there are a ton of offers that are hidden.
Is there a secret to unlocking that mystery.

Its not easy to separate them. What we have is a Market Maker ID tracker that performs the grouping by traders activity. Its like filtering different harmonics in a white noise signal and presenting them in a form of a spectrum. Except, instead Fourier transformation we use spline interpolations with different length. These splines are running on the integral functions of Weighted Bid/Ask prices multiplied by corresponding sizes and the weights assigned to them depending on the level they came on the Level II.
Regards,

 

[Roxyman]

When I observe the Level II, the times I get killed is when I see the bids piling up and the ratio of bids to ask are way in the long favor. I enter the trade long and the bids get pulled or there are a ton of offers that are hidden.

Is there a secret to unlocking that mystery?

 

[snooptrader]

Quote from Roxyman:

When I observe the Level II, the times I get killed is when I see the bids piling up and the ratio of bids to ask are way in the long favor. I enter the trade long and the bids get pulled or there are a ton of offers that are hidden.

Is there a secret to unlocking that mystery?

The only secret is don't use Level II to enter trades.