Of course they have "emergency stops".
Another "armchair book reader" who simply does not understand.
"i talked to someone"
Yoohoo's guide to becoming a great trader
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Of course they have "emergency stops".
Another "armchair book reader" who simply does not understand.
"i talked to someone"
Do you accept everything people say at face value?
As you've found out and others have replied, stops are not compatible with a mean reverting system, profit targets are.
The opposite is true for trending systems, profit targets limit your profits while a statistically constructed trailing stop will keep you in the trade longer.
That aside, a stop loss well outside the market should also be used if you're doing interday trades.
%winners is irrelevant. What were the stats? PF? DD? Sharpe? etc.?
These are 5 simple keys? The high level stuff was useless, did not drill down into the "50-60 not so simple sub-keys..."
you need the following:
an edge with significant positive expectancy
superior money management skills
everything else is mostly fluff...
This seems very close to being a complete list. I would add one other thing - the bets produced by your system with an edge need to have a reasonably balanced risk/reward profile.
For example, suppose you have the opportunity to make $1 bets where one time in a billion you will get $2billion back. For sake of argument say you can bet any multiple of $1 you like and get a correspondingly bigger or smaller return, but you can only make 1 such bet per day.
This bets has a huge edge - your return is a whopping +100% on every $ bet. But your money management rules, if correct, will require that you bet very small to ensure you still have capital left when you finally hit a winner. Worse, you've got millions of trials on average before you see the first winner - the bet, while positive expectation, is in effect useless.
In contrast, give me a 50/50 coin flip with a 5% edge in payout once a day, and I'll ramp my account up in no time.
That said, I have no problem with the OP. There's a difference between what you need to win and how you go about developing the edge. You're talking about different things.
STOPS ARGUMENT
Good topic to use as an example of solving a problem. This falls mostly under the 2nd Key to great trading i.e. Don't listen to anyone else. By that I don't mean not to consider what they say at all. I simply mean the limitations imposed on them by their system is not related to your trading unless you trade exactly the same way they do. I am trying to teach you how to develop a fluid methodology that copes with anything you throw at it rather than a rigid rigid mechanical system like Connor's that dies a death trying to cope with percentage whipsaws.
So let's dig a little deeper into Connors trading style. Here are some of the system rules that led to his conclusions...
* Use 2 period RSI for entry
* Use the VIX to help time trades
* Don't use stops
* Trade at the end of the month
* Don't buy below the 200 MA
Here is what one user of the Connor System found...
âI have tested the 2 period RSI strategy by picking almost 50 stocks at random and found out that the strategy fails more than 50% giving sell signal during consolidation periods or when the stock is moving higher. I also noticed that failures are greater with weekly than daily charts. In this case most often the stock keeps moving higher even though the weekly 2 period RSI is overbought.â
Someone else takes a different approach to analyzing the Stops problem...
âAnother issue raised in the book is that stops hurt performance.
This is true because the market makers anticipate the location of the stops and can run through them. My experience has been that this situation can be avoided by placing stops in areas where most others traders are not likely to place them. I have done tests using almost 50 trades where stops are placed near support and in this case the authors are right in that the stops are run by the market makers creating further selling and when the stops are flushed the stock moves higher. On the other hand if stops are placed in areas not predictable by market makers, this situation does not occur.
Also note that on page 130 in the authors interview with the navy seal (MACH), the interviewee stresses on the necessity of using stops to help you reach your trading goals by avoiding destruction by a few bad trades. This seems contradictory to the authors earlier comments regarding stops.â
Here's my golden rule: find out how to break your trading limitations. First of all if a trader of mine was using this system to trade I'd be disappointed. Why?
1. Using mechanical percentage stops based on a system is not flowing with PA
2. Entering with a 2 period RSI is going to get you whipped
3. Only buying above the 200 MA means at times the energy of the climb above 200 is dissipated and the RSI will give a weak signal
4. Trade at the end of the month (I could add only buy when there is a full moon!)
Percentage stops are a way of saying I have not a clue where PA is telling me supply and demand is so give me am Excel spreadsheet and I will perform a back test to see what is the best distance away from entry to place my stop.
Guys, there are so many failings and limitations on this strategy, but if that's where you want to be then that's where you end up â in a box. My 5 Keys are to help you break out of the box.
Try trading a really volatile market without a stop and you will soon get your head handed to you or you allow wild draw downs that destroy emotions and limit increasing size. But if you don't know how to flow with PA then you will decide the problem is the stop and not with your trading.
We are told another 911 type even will happen but to expect even worse. There was nothing like today's level of algo trading on 911 and within a few seconds the liquidity will be gone. Try getting out of the market without a stop when there are no buyers, especially with size.
The issue is more than the question should you trade with or without a stop. The real issue is WHY the conclusion either way is reached. In this case Connors is correct. Trading with a stop doesn't work for him because of the design limitations of his system and using percentage stops.
If you understand PA, supply and demand, quality set ups, S&R and the tells of the market you will buy irrespective of where the 200MA is, disregard the time of the month, and qualify the RSI2 so you filter false signals.
Good topic to use as an example of solving a problem. This falls mostly under the 2nd Key to great trading i.e. Don't listen to anyone else. By that I don't mean not to consider what they say at all. I simply mean the limitations imposed on them by their system is not related to your trading unless you trade exactly the same way they do. I am trying to teach you how to develop a fluid methodology that copes with anything you throw at it rather than a rigid rigid mechanical system like Connor's that dies a death trying to cope with percentage whipsaws.
So let's dig a little deeper into Connors trading style. Here are some of the system rules that led to his conclusions...
* Use 2 period RSI for entry
* Use the VIX to help time trades
* Don't use stops
* Trade at the end of the month
* Don't buy below the 200 MA
Here is what one user of the Connor System found...
âI have tested the 2 period RSI strategy by picking almost 50 stocks at random and found out that the strategy fails more than 50% giving sell signal during consolidation periods or when the stock is moving higher. I also noticed that failures are greater with weekly than daily charts. In this case most often the stock keeps moving higher even though the weekly 2 period RSI is overbought.â
Someone else takes a different approach to analyzing the Stops problem...
âAnother issue raised in the book is that stops hurt performance.
This is true because the market makers anticipate the location of the stops and can run through them. My experience has been that this situation can be avoided by placing stops in areas where most others traders are not likely to place them. I have done tests using almost 50 trades where stops are placed near support and in this case the authors are right in that the stops are run by the market makers creating further selling and when the stops are flushed the stock moves higher. On the other hand if stops are placed in areas not predictable by market makers, this situation does not occur.
Also note that on page 130 in the authors interview with the navy seal (MACH), the interviewee stresses on the necessity of using stops to help you reach your trading goals by avoiding destruction by a few bad trades. This seems contradictory to the authors earlier comments regarding stops.â
Here's my golden rule: find out how to break your trading limitations. First of all if a trader of mine was using this system to trade I'd be disappointed. Why?
1. Using mechanical percentage stops based on a system is not flowing with PA
2. Entering with a 2 period RSI is going to get you whipped
3. Only buying above the 200 MA means at times the energy of the climb above 200 is dissipated and the RSI will give a weak signal
4. Trade at the end of the month (I could add only buy when there is a full moon!)
Percentage stops are a way of saying I have not a clue where PA is telling me supply and demand is so give me am Excel spreadsheet and I will perform a back test to see what is the best distance away from entry to place my stop.
Guys, there are so many failings and limitations on this strategy, but if that's where you want to be then that's where you end up â in a box. My 5 Keys are to help you break out of the box.
Try trading a really volatile market without a stop and you will soon get your head handed to you or you allow wild draw downs that destroy emotions and limit increasing size. But if you don't know how to flow with PA then you will decide the problem is the stop and not with your trading.
We are told another 911 type even will happen but to expect even worse. There was nothing like today's level of algo trading on 911 and within a few seconds the liquidity will be gone. Try getting out of the market without a stop when there are no buyers, especially with size.
The issue is more than the question should you trade with or without a stop. The real issue is WHY the conclusion either way is reached. In this case Connors is correct. Trading with a stop doesn't work for him because of the design limitations of his system and using percentage stops.
If you understand PA, supply and demand, quality set ups, S&R and the tells of the market you will buy irrespective of where the 200MA is, disregard the time of the month, and qualify the RSI2 so you filter false signals.
WOW unreal. I thought something happened to you. Thank God. This makes my night.
You have zero clue who you're talking about.
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