What are the questions you ask yourself in order to eliminate false positives?

[lovethetrade]

I don't, that should already be taken care of. Asking yourself questions before taking a trade is a recipe for disaster.

There's no such thing as a false positive with trade signals.

The conditions for entry are either True or False. If you're entering trades when the conditions are False then somethings not right.

Either your system is too complex to trade manually, you don't have the appropriate checks in place for manual trading or it's too discretionary and youre constantly changing your conditions for entry.

 

[Chris Mac]

I realize for experienced traders it might be second nature and may not be doing it consciously but I am curious what are the questions you ask yourself before getting into a trade in order to eliminate false positives?

The question you need to ask yourself is : why now and not later ?
You can be a scalper, a day trader, a swing trader : 9 times out of ten, timing is not adequate.
Patience is key.

CM

 

[lovethetrade]

The question you need to ask yourself is : why now and not later ?
You can be a scalper, a day trader, a swing trader : 9 times out of ten, timing is not adequate.
Patience is key.

CM

A signal means your conditions for entry are True. If you don't take the trade when you get a signal there's an opportunity cost. It's got nothing to do with being patient and waiting for the next one on the premise that this signal may be premature.

 

[Chris Mac]

A signal means your conditions for entry are True. If you don't take the trade when you get a signal there's an opportunity cost. It's got nothing to do with being patient and waiting for the next one on the premise that this signal may be premature.

In a perfect world with a perfect model, yes.
But in the real world, a signal is a signal, nothing more, nothing less.
If you take every trade when you got a positive signal, you ll be broke fast. You need confirmation.
For example, if you trade breakouts, and a stock makes a new high, should you buy ? Of course not, because for one real breakout, you will face 4 / 5 fake ones. Better wait and buy a real breakout rather than 5 times and lose 4 times.

CM

From Market Wizards:

Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame; only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading. – Mark Weinstein

 

[lovethetrade]

If you take every trade when you got a positive signal, you ll be broke fast. You need confirmation.

Lol, Ok then.

Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame; only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading. – Mark Weinstein

I'm not sure Mark Weistein would be too happy being referenced out of context.

 

[Chris Mac]

I'm not sure Mark Weistein would be too happy being referenced out of context.

You mean Mark Weinstein with "n"?
If you consider this quote "out of context" when I am talking about patience and timing in trading, fine. Maybe others would find some analogy.

CM

 

[lovethetrade]

You mean Mark Weinstein with "n"?
If you consider this quote "out of context" when I am talking about patience and timing in trading, fine. Maybe others would find some analogy.

CM

10 years of trading and you don't know a signal is comprised of confirmations.

Let's hope you're trolling and don't actually believe what you've posted.

 

[Grantx]

If you take every trade when you got a positive signal, you ll be broke fast. You need confirmation.
For example, if you trade breakouts

Confirmation of the confirmation also helps. Hate those false positive confirmations they invalidate my initial evidential bias and cause a neutralised directional perspective. To combat this I utilise a 3 dimensional confirmation of the confirmation of the confirmation strategy which sometimes results in the move being long over and me buying the top and selling the bottom. Often times I look back wondering what the original signal was and mull over the reasons I hesitate on perfectly good opportunities.

Seriously though, I am wondering what confirmation means? Your signal is only ever confirmed once the trade is over and you have made or lost money. Everything else is uncertainty and thats what we learn to live and deal with as traders.

 

[Chris Mac]

Seriously though, I am wondering what confirmation means? Your signal is only ever confirmed once the trade is over and you have made or lost money. Everything else is uncertainty and thats what we learn to live and deal with as traders.

Sorry but I won't spend my time explaining basics such as being selective with your trades, not taking every signal, choosing the best stocks / assets with the strongest signals and skipping the weakest signals, searching for convergence / divergence between your signals etc.
Of course, there is uncertainty, but you will learn (or not) that you can highly increase odds in your favor and decrease losing trades thanks to timing and patience.
But again, I don't have the will to explain this, or being trolled by wanna-be traders. I am out.

CM

 

[Grantx]

If you take every trade when you got a positive signal, you ll be broke fast. You need confirmation.

Dont take offence my friend. Lets try and make this a stimulating discussion. We all have different opinions and this is a great place to express them.

I am simply questioning your assertion that one goes broke without first waiting for confirmation. My interpretation is that a positive signal needs to be acted upon immediately. If you wait for confirmation then you are unsure of what you are doing. By the time you get your confirmation, the original signal will gone and you will be observing a different set of conditions.

You have heard of the observer effect? Observing a situation or phenomenon changes that phenomenon. You would likely retort that you are not directly acting on that phenomenon (the market) and therefore your observation is passive and couldnt possibly influence the market in any way. Good point Chris. But lets not forget that time plays a role here, the longer you leave it, the more removed you are from the original conditions that gave you the signal.

My opinion is that if you have done it repeatedly and know your edge then just take the darn signal when it is presented. You have a 50% chance of winning and heres the kicker, you still only have a 50% chance of winning even with your confirmation so why bother? You with me? You cannot escape the odds.