When Indicators Don't Lag

[dbphoenix]

Buy1Sell2 BTW has posted real-time calls with stops since he started his first journal on ET, so you are in no position to question his skills, no matter how basic they may seem to you. And no matter what his win rate may be - he is up consistently over the last 9 years? He is a conservative trader that manages risk and trades effectively. You don't like it for whatever reason, but would love to see you post real-time calls with whatever stops you choose for the next 9 years and let us see how you perform over the years.

There's a long-time ET member who is, or was, highly respected. Tons of followers. Made great "calls". But it turned out that he'd been trading only paper all that time. So the net benefit to him was zip.

As for not liking BS's trading, I couldn't care less. What I object to is his boorish interference in others' journals, insisting that they're doing it all wrong and that they should do what he says instead. Those journals are none of his business, particularly when the journalists repeatedly ask him to stop.

As for how I'm doing, thanks for asking. I've been investing since the 70s, trading since the 90s, and I'm doing just fine.

 

[dbphoenix]

Whatever it was, I bet it was a lot more sophisticated than yours, considering what people were designing the formulas. But then something happened, as you may already know, Russia defaulted and the fund went tits up, as we say in England. Chance of failure is always there.

Sophisticated doesn't mean superior. If you don't know what it was, you're not in a position to comment on it.

 

[SunTrader]

Whatever it was, I bet it was a lot more sophisticated than yours, considering what people were designing the formulas. But then something happened, as you may already know, Russia defaulted and the fund went tits up, as we say in England. Chance of failure is always there.

It was a lot more than Russia defaulting.

The geniuses (Nobel winners) out smarted themselves.

http://en.wikipedia.org/wiki/Long-Term_Capital_Management

 

[romik]

Sophisticated doesn't mean superior. If you don't know what it was, you're not in a position to comment on it.

I am not commenting on it, I am merely pointing out that any system's performance can and will fluctuate and may even eventually fail, no matter how extensively it's been backtested. Whenever you are opening a new trade there will always be an element of the unknown, as it hasn't happened yet, you just can't be certain of the outcome. You say indicators are rubbish and can't help see a change or continuation of sentiment, yet B1 has proven the opposite and so far I have too.

 

[kut2k2]

Whatever it was, I bet it was a lot more sophisticated than yours, considering what people were designing the formulas. But then something happened, as you may already know, Russia defaulted and the fund went tits up, as we say in England. Chance of failure is always there.

Their timing strategy may have been sophisticated but their sizing strategy clearly sucked. They took on an unreasonable amount of risk, hence the blowup. So much for PhDs having it all figured out.

 

[dbphoenix]

I am not commenting on it, I am merely pointing out that any system's performance can and will fluctuate and may even eventually fail, no matter how extensively it's been backtested. Whenever you are opening a new trade there will always be an element of the unknown, as it hasn't happened yet, you just can't be certain of the outcome. You say indicators are rubbish and can't help see a change or continuation of sentiment, yet B1 has proven the opposite and so far I have too.

A price action system cannot fail as it is self-correcting and self-adapting. Whether or not one has the discipline to follow it or any other system is another matter.

As for proof of one sort or another, that will come from something considerably more rigorous than message board posts. But I wish you the best of luck.

 

[kut2k2]

A price action system cannot fail as it is self-correcting and self-adapting. Whether or not one has the discipline to follow it or any other system is another matter.

I assume by "cannot fail" you mean the edge is permanent. That's the best start but not the complete plan. A bad sizing strategy can overwhelm a good edge and cause the trading to still result in failure. Hence, LTCM and probably some others who overplayed their edges.

 

[dbphoenix]

I assume by "cannot fail" you mean the edge is permanent. That's the best start but not the complete plan. A bad sizing strategy can overwhelm a good edge and cause the trading to still result in failure. Hence, LTCM and probably some others who overplayed their edges.

It's unlikely that LTCM was using a price action strategy. In any case, as I've said (repeatedly), the system must be thoroughly tested and consistently profitable to begin with. But the trader also has to implement it religiously. The system itself may be self-correcting and self-adapting, but a lousy trader can mess anything up. That's not the fault of the system. Bad sizing, overconfidence, overtrading and all the other traps that you and I are well aware of will sabotage any system, whereas in better hands the same system might work just like it's supposed to.

Not long ago we had a regular contributor who ran a trading room. He was very open about his trading plan and it was a good one. The only problem was his discipline: for whatever reason, he couldn't follow his own plan. So there you are.

But here we are, in the weeds again. I'm going to assume that the opening question has been answered, that indicators lag. If it hasn't, I can't think of anything more to add.

 

[kut2k2]

It's unlikely that LTCM was using a price action strategy. In any case, as I've said (repeatedly), the system must be thoroughly tested and consistently profitable to begin with. But the trader also has to implement it religiously. The system itself may be self-correcting and self-adapting, but a lousy trader can mess anything up. That's not the fault of the system. Bad sizing, overconfidence, overtrading and all the other traps that you and I are well aware of will sabotage any system, whereas in better hands the same system might work just like it's supposed to.

Not long ago we had a regular contributor who ran a trading room. He was very open about his trading plan and it was a good one. The only problem was his discipline: for whatever reason, he couldn't follow his own plan. So there you are.

But here we are, in the weeds again. I'm going to assume that the opening question has been answered, that indicators lag. If it hasn't, I can't think of anything more to add.

I didn't mean LTCM used PA, I meaning they (probably) had an edge, which they subsequently overplayed.

Moreover, my point is that edge is not enough. PA, indicators, PriceDrivers, whatever are not enough. Because those things are about timing, not about sizing.

The timing strategy provides the trader's edge, if he has one. But he still has to figure out how much to trade, and how much is a completely different question from when.

Most would-be traders never get to this point because they never figure out a good edge. And those who do usually just punt on sizing by going with the 2% rule, which means a lot of lost opportunity if the edge is a great one.

 

[Buy1Sell2]

Their timing strategy may have been sophisticated but their sizing strategy clearly sucked. They took on an unreasonable amount of risk, hence the blowup.

Correct. Trading is all about risk/capital management. That's the only edge in trading