whatever. i have no agenda. i just layed out my 2 cents.
Trading WITH versus WITHOUT a system
- Thread starter Georgii
- Start date
ditto, no problem
I spent many years developing a system but after many years I realized that it takes more then a system to be successful. Im not saying you cant create one but after years of working on one I only came up with ones of varying degrees of success. What I learned is that my self I am better suited at using an amalgam of ideas.
1.) First, viewing the market on a Macroeconomic level to determine my long term trend of the market UP or DOWN, 6 months to 2 years out
2.) Look at the Socioeconomic view point to determine if we are in a general accumulation, distribution or trending phase (3 to 12 week phase)
3.) Use Technicals to enter, re-enter or exit positions
4.) Fully understanding options and how they can be used to protect and maximize profits
5.) Though I would say that the most important part is understanding how to Lose, akin to that of a top closer in baseball. You need to be able to take a punch in the face and come right back with your stuff. Your own psychological makeup is probably more important then any system you create.
Currently:
1.) DOWN
2.) Nearing a first leg distribution
3.) Everyone can tell you we are overbought but still awaiting that signal that confrms down.. Though you have to have full protection in at this point.
4.) Fully protected
5.) I got a few body punches on this last rally over the last couple days but feel good overall
If you find a system that works for you thats great but its not necessary if you understand how to get thru those 5 areas but ultimately you need to do what works for you.
Best of Luck
1.) First, viewing the market on a Macroeconomic level to determine my long term trend of the market UP or DOWN, 6 months to 2 years out
2.) Look at the Socioeconomic view point to determine if we are in a general accumulation, distribution or trending phase (3 to 12 week phase)
3.) Use Technicals to enter, re-enter or exit positions
4.) Fully understanding options and how they can be used to protect and maximize profits
5.) Though I would say that the most important part is understanding how to Lose, akin to that of a top closer in baseball. You need to be able to take a punch in the face and come right back with your stuff. Your own psychological makeup is probably more important then any system you create.
Currently:
1.) DOWN
2.) Nearing a first leg distribution
3.) Everyone can tell you we are overbought but still awaiting that signal that confrms down.. Though you have to have full protection in at this point.
4.) Fully protected
5.) I got a few body punches on this last rally over the last couple days but feel good overall
If you find a system that works for you thats great but its not necessary if you understand how to get thru those 5 areas but ultimately you need to do what works for you.
Best of Luck
Ghostdog, nice post in my opinion.
Point 5) is crutial, it deals with risk, and trader must understand risk, If a trader doesn't understand his own psychological makeup then that's a risk in itself, because the trader himself is the most important factor his trading. Trading system could be thought of as an extension of trader's psychological makeup, because he is the one who creates it, believes in it, and trades it.
Other points you've brought up also are very good.
Point 5) is crutial, it deals with risk, and trader must understand risk, If a trader doesn't understand his own psychological makeup then that's a risk in itself, because the trader himself is the most important factor his trading. Trading system could be thought of as an extension of trader's psychological makeup, because he is the one who creates it, believes in it, and trades it.
Other points you've brought up also are very good.
This sounds good, and it's what many members of this forum keep on writing ("over 90% of traders are not profitable", and so on), but what should be added each time is that on this forum the percentage of profitable traders is much higher, for the simple fact that not all traders write on forums, and not all traders write on this forum.
That percentage also changes according to which section of the ET forum you're in. I wouldn't be surprised if the "Automated Trading" section of the forum had a majority of profitable traders. Therefore Georgii should not assume that most of what is written here is nonsense (as you seem to imply), but rather the opposite.
Yes, create a system. Start with a simple moving average system and see how it works.
Test it across stocks from different sectors. A stock like US Steel trends differently than something like Disney. US Steel might work better on a trend trading system where as Disney might work better using a swing trading system.
You'll be surprised on how accurate a simple system can be. Don't try to tweak it too much or its most likely going to fail.
Don't bother with any of the MACD, Stochastics, etc. Thats all pretty much useless. Stuff like crossovers generally don't work too well because everyone knows it. For me, looking at price movement is the key.
Once you get a system that is producing good results, focus on reducing your drawdown. I reduce my drawdown by having a balance of longs and shorts that are not correlated. The overall direction of the market determines the percentage of my long and short positions.
I'm a discretionary trader but I still follow a system for entering and exiting a trade. I use one custom system for both my longs and shorts. I keep mental stops on my positions and size my positions based on price volatility. This way, no single stock can hurt you much.
I don't get the outrageous percentages seen on Wealth Lab but at the same time, I don't lose any sleep over the markets either. As long as I'm reaching my monthly goals, I'm happy.
Best of luck on your trading and getting out of the rat race.
(As a side note, I don't know if you guys watched Seinfeld. There was this episode where George does everything opposite of what he would think and it got him the world. I actually tried that in trading and ran a simple system using that theory. It had a 75% accuracy of wins to losses over the short term). Called it the reverse turtle.
"Never done it before, so I'm going to be on a demo account. "
That's a very good first step (not granted). Stay on paper trading until you find a consistently profitable method.
"I hear a lot about systems, discretionary versus automated (you decide versus it decides for you). Does ever trader have a strict "system" which they have rigorously backtested?"
Many traders misuse these terms. You're right in coupling "strict system" with "rigorously backtested", as the two things are possible together, and should be done. To the contrary, you can easily see that you cannot put together "discretionary" (by your definition: "you decide" system) with "rigorously backtested", because you can't "rigorously backtest" a system where your choices are made right there and then, and clearly that is not a "strict system". This has the consequence that you could say "this automated system has been profitable in the past ten years", but you cannot say "this discretionary system has been profitable in the past 10 years". You can only say "I've been profitable in the past 10 years as a discretionary trader".
Conclusion: automated is far superior to discretionary.
Think logically.....try to figure out the end first then devlop a method to achive that.
Oh and forget about get rich quick....you can get rich but it takes lots of time and money!
good luck. Most on ET are douch bags....odd few are good. you got to figure that out as well. OR keep away.
Oh and forget about get rich quick....you can get rich but it takes lots of time and money!
good luck. Most on ET are douch bags....odd few are good. you got to figure that out as well. OR keep away.