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The Surf Report--part 2
- Thread starter marketsurfer
- Start date
Quote from Gabfly1:
So you don't add when your timing is demonstrably correct, but you add when your timing is demonstrably incorrect. Fascinating. Do you drive faster when you're lost?
Timing demonstratively correct? you mean the market moves in your direction instantly or the trade wins? I don't understand.
Let me see if I can explain this in a way you can understand.
The odds increase for a reversal the further a market moves away from the mean or your ill timed entry ( in most cases ). This applies if you are in the trade or not therefore averaging in when its against you for the reversal makes more sense than averaging in for a continuation. I have found that markets are more likely trade higher after a series of downs than after a series of highs--- the reverse is also true based on my experiences and extensive back testing on one of the largest data bases of trades in the world
surf
PS. here is an article I did for Trading Markets published on Yahoo Finance and other places on this idea and our study that backs it up---
<i>The stock you have been watching is starting to creep higher. As soon as it breaks above a certain point, you buy your chosen number of shares. Within a short time, the price starts dropping forcing you to take another small loss. What goes wrong in this common short term stock trader scenario? The first thing short term traders need to understand is that the market is designed to take your money. The set ups that look obvious are often traps luring in the unsuspecting and new traders to buy or sell at the worst possible time. In other words, the market is setting you up to buy when the professional money is selling, and to sell when they are buying. Realizing this fact is the first step in developing a successful short term stock trading plan. We decided to take a close look at this constant phenomenon. Buying when a stock is going up, or breaks out of common technical resistance feels good; however there is no short term edge to this strategy. Our extensive research since 1995 over literally millions of stock trades clearly shows that the edge in short term stock trading exists after a series of down days or lower lows. Buying after a stock has made 5 or more down days or lower lows is far from a feel good strategy. In fact, itâs somewhat scary to buy companies that have dropped for this length of time or longer....... but the research backs it up</i>
Instantly? Not quite. But if a current trade is in profit, then your timing is arguably okay. That's not to say that you should add automatically without any other consideration, but the trade is currently friendly. On the other hand, when a trade is underwater (or as you prefer to call it, "early"), then your timing is arguably less than ideal. At that moment, the trade is unfriendly. Speaking only for myself, if I am to stick my neck out a little further, by adding to a position, I would prefer to do so when the trade is friendly. It may turn, of course, so I will not just add arbitrarily. I would seek to time the addition almost as carefully as the initial foray. But if I'm wrong (or "early" in surferspeak) at the outset, I don't find much glamour in digging deeper.Quote from marketsurfer:
Timing demonstratively correct? you mean the market moves in your direction instantly or the trade wins? I don't understand...
Oh, I absolutely love the condescension. You must let me use that one. Here let my try. Let me see if I can explain your trading in a way that you can understand: Are you net positive yet?Quote from marketsurfer:
...Let me see if I can explain this in a way you can understand...
Gabby,
Per your post You have fallen into the classic trap of taking trades that "feel good"(friendly) trading, remember this mantra "if it feels good, don't do it". The title of the classic article I posted earlier, by the way.
Surf
Per your post You have fallen into the classic trap of taking trades that "feel good"(friendly) trading, remember this mantra "if it feels good, don't do it". The title of the classic article I posted earlier, by the way.
Surf
Quote from marketsurfer:
No.
I believe that is a dubious move for the following reason:
If you add to a winner, when it turns it will cut you twice as fast taking your gains, therefore in MOST cases its self destructive.
However, as you know, those who live in the past such as pretty chart painters, would of could of should of folks and others who use pictures of the past to trade can show example after example of the advantages of adding to winners. In the present, things are far different.
surf
But when adding to a winner there is a much better chance of the position continuing in that direction vs averaging down as the mkt is going against you. In one case price action is telling you that you are right, and in the other it is telling you that you are wrong. Which side of that equation do you want to be on?
Even more important is position sizing. With your thinking your best positions (the ones that go your way pretty quick) will be the smallest ones. While your biggest positions will be the ones that are the most against you.
Over the long run, the traders that add to winners WAY outperform the guys who average down into losers.In my 18 yrs of trading I have seen a lot of guys blow out.....and I would say that 92% blow out because they average down into a bad position and get wiped out when the mkt continues in that direction.
The mean reversion trade you like is good...until the one time the mkt does not revert to the mean. Then it's adios account.
I disagree with your first paragraph, but hey that's why the market works.
Yeah, you are right Prado if you average in without a plan. With a plan it's a powerful tool to turn poor timing into winners. Money management applies just like with any form of trading. I'll bet those blow out guys went on tilt ignoring their rules....
Yeah, you are right Prado if you average in without a plan. With a plan it's a powerful tool to turn poor timing into winners. Money management applies just like with any form of trading. I'll bet those blow out guys went on tilt ignoring their rules....
Yes, do continue trading on the basis of a throw-away soundbite. It also feels good not driving in the oncoming lane.Quote from marketsurfer:
Gabby,
Per your post You have fallen into the classic trap of taking trades that "feel good"(friendly) trading, remember this mantra "if it feels good, don't do it". The title of the classic article I posted earlier, by the way.
Surf
Quote from marketsurfer:
Gabby,
Per your post You have fallen into the classic trap of taking trades that "feel good"(friendly) trading, remember this mantra "if it feels good, don't do it". The title of the classic article I posted earlier, by the way.
Surf
And how's your plan working out right about now? Does it feel good? If so, then get out now and don't fall prey to that "feel good" thing. If you feel like you're going to throw up because you're losing so much, then, by your account, you should be adding to the position.Quote from marketsurfer:
...Yeah, you are right Prado if you average in without a plan. With a plan it's a powerful tool to turn poor timing into winners...
Did I get that right?
Quote from eudaemon:
Yo surferboy: Have you shared drinks, high fives, etc. with Victor
Sperandeo aka TraderVic, by any chance?.
What do you know about his gap rules?. Specifically Trader Vic Gap Rule.
No, I don't know TraderVic. I am close with the other trading Victor however. What does he say regarding the gap rule?
Thanks,
Surf