# Traders: Do you try to predict or react to market movements?



## ceasar73 (1 May 2012)

When trading, Do you attempt to i, forecast/predict market movements OR ii, react to the market's movements whenever they occur?

thanks
Ceasar73


----------



## CanOz (1 May 2012)

*Re: Question  for Traders.*



ceasar73 said:


> When trading, Do you attempt to i, forecast/predict market movements OR ii, react to the market's movements whenever they occur?
> 
> thanks
> Ceasar73




I think the best way to describe it would be to anticipate the markets _likely_ direction based on what it has statistically done in the past, and place yourself in the ideal position to benefit from it. This may be as a reaction to what the market  has just recently done. 

If you can do this about half the time, and cut your losses short and let your winners run then you may have a positive expectancy. Without a positive expectancy you cannot profit over the long term and your risk of ruin will be soon realized.

Cheers,


CanOz


----------



## ceasar73 (1 May 2012)

*Re: Question  for Traders.*



CanOz said:


> I think the best way to describe it would be to anticipate the markets _likely_ direction based on what it has statistically done in the past, and place yourself in the ideal position to benefit from it. If you can do this about half the time, and cut your losses short and let your winners run then you may have a positive expectancy. Without a positive expectancy you cannot profit over the long term and your risk of ruin will be soon realized.
> 
> Cheers,
> 
> ...




so its an i, for you.

thanks mate.


----------



## CanOz (1 May 2012)

*Re: Question  for Traders.*



ceasar73 said:


> so its an i, for you.
> 
> thanks mate.




I do not try and predict the future of the markets actions, only to be in place if it does what it has statistically done before.

CanOz


----------



## Mike Kshemaraja (1 May 2012)

ceasar73 said:


> When trading, Do you attempt to i, forecast/predict market movements OR ii, react to the market's movements whenever they occur?
> 
> thanks
> Ceasar73




No, I would not forecast/predict(guessing) or react(chasing).

What I would do is to constantly monitor and verifying the underlying condition of the market and take selective trades in the direction of the least resistance using various setups to enter.

Keep in mind that the actual setups bear no significance without the underlying condition.


----------



## Boggo (2 May 2012)

Mike Kshemaraja said:


> No, I would not forecast/predict(guessing) or react(chasing).
> 
> *What I would do is to constantly monitor and verifying the underlying condition of the market and take selective trades in the direction of the least resistance using various setups to enter.*
> 
> Keep in mind that the actual setups bear no significance without the underlying condition.




Huh !
Isn't that forecasting, predicting and reacting


----------



## burglar (2 May 2012)

Mike Kshemaraja said:


> No, I would not forecast/predict(guessing) or react(chasing).
> 
> What I would do is to constantly monitor and verifying the underlying condition of the market and take selective trades in the direction of the least resistance using various setups to enter.
> 
> Keep in mind that the actual setups bear no significance without the underlying condition.




Are you quoting a text book or your Professor?


----------



## Mike Kshemaraja (2 May 2012)

Boggo said:


> Huh !
> Isn't that forecasting, predicting and reacting




NO. Is being one with the flow.


----------



## Mike Kshemaraja (2 May 2012)

burglar said:


> Are you quoting a text book or your Professor?




Trolling? If you are, take a hike.


----------



## Boggo (2 May 2012)

burglar said:


> Are you quoting a text book or your Professor?




You seem to be on the money there burglar.

Mike has been a busy little vegemite since March 2012, popping up on numerous other forums since then with quotes from 'Bob's book'.

500 posts on trade2win in under two months and most of them quoting good ol' Bob including the one below as an example.
Not selling or pushing anything are you Mike ? We're a tough audience on here.

(click to view)


----------



## burglar (2 May 2012)

Boggo said:


> Huh !
> Isn't that forecasting, predicting and reacting




I too also am confused?? And why do I even care?


----------



## Boggo (2 May 2012)

burglar said:


> I too also am confused?? And why do I even care?




+1


----------



## Mike Kshemaraja (2 May 2012)

Boggo said:


> You seem to be on the money there burglar.
> 
> Mike has been a busy little vegemite since March 2012, popping up on numerous other forums since then with quotes from 'Bob's book'.
> 
> ...




LOL.

I find your post also very offensive, insinuating that I have other interests and disturbing that you took the time to research trying to expose me... and you still have not told us YOUR thought regarding the subject of this thread.

Did you see me somewhere trying to sell Bob's book? Is there something wrong respecting somebody's work? I do not trade like Bob does, but I think his work is outstanding.


----------



## wayneL (2 May 2012)

Guys 

Mike hasn't linked to any selling page for any book, so lets give him the benefit of the doubt ay?


----------



## Mike Kshemaraja (2 May 2012)

I also like to add that Wayne has rightly edited my last post on this thread, I can assure you it had a bit more colour.


----------



## Sdajii (2 May 2012)

Ever click on a thread, read it, and think "That's 30 seconds of my life I'll never get back?" then read a post like this and thought "Why did he turn that 30 seconds into 45?"

Well, that describes me, and then you.

I'm pretty sure if you're trading, you're trying to predict the future, based on what has been happening until the moment up to when you bought. Does anyone else think asking the question is redundant?

+1 Burglar
+1 Boggo

That's a bit over a minute now


----------



## skc (2 May 2012)

It's a bit like asking a boxer does he predict the opponent's swings or react to it.

A good boxer will study the tapes and try to understand how his opponent is likely to behave. This gives the boxer an edge in assessing the probability that a left swing will follow two right jabs. But if the left swing doesn't come, the boxer has to be prepared to counter whatever it is that the oppoenent chooses to do. 

Whether you call that prediction / reaction is unimportant imo.


----------



## Mike Kshemaraja (2 May 2012)

Sdajii said:


> Ever click on a thread, read it, and think "That's 30 seconds of my life I'll never get back?" then read a post like this and thought "Why did he turn that 30 seconds into 45?"
> 
> Well, that describes me, and then you.
> 
> ...




I do not understand this, if you are so stupid to comprehend why do you need to insult? Your condition is not my fault.

I have only expressed my opinion, you have the prerogative to not agree, but insulting and accusing shows only you are a loser as much as your friends.

Where is your thought regarding the subject, what about burglar's or boggo's. You do not have one and you will never have.

Now, do you know better than I the way I trade? The way I perceive thinks? The way I act on things?

Yes, it seems that you do. Losers always do know better.

Read this about a thousand time, maybe one day you will grasp it:

No, I would not forecast/predict(guessing) or react(chasing).

What I would do is to constantly monitor and verifying the underlying condition of the market and take selective trades in the direction of the least resistance using various setups to enter.

Keep in mind that the actual setups bear no significance without the underlying condition.

Two minutes.


----------



## ceasar73 (2 May 2012)

skc said:


> It's a bit like asking a boxer does he predict the opponent's swings or react to it.
> 
> A good boxer will study the tapes and try to understand how his opponent is likely to behave. This gives the boxer an edge in assessing the probability that a left swing will follow two right jabs. But if the left swing doesn't come, the boxer has to be prepared to counter whatever it is that the oppoenent chooses to do.
> 
> Whether you call that prediction / reaction is unimportant imo.




Great example. THe boxer is reacting, not predicting.Think about it.

thanks for the reply.


----------



## motorway (2 May 2012)

ceasar73 said:


> Great example. THe boxer is reacting, not predicting.Think about it.
> 
> thanks for the reply.




The Boxer is also initiating not just reacting.
He more accurately  is Engaging.



Engaging = * Identifying and Adapting *

Motorway


----------



## MACD (2 May 2012)

Trade what you see, not what you think!

This will keep you profitable and out of trouble


----------



## odds-on (2 May 2012)

skc said:


> It's a bit like asking a boxer does he predict the opponent's swings or react to it.
> 
> A good boxer will study the tapes and try to understand how his opponent is likely to behave. This gives the boxer an edge in assessing the probability that a left swing will follow two right jabs. But if the left swing doesn't come, the boxer has to be prepared to counter whatever it is that the oppoenent chooses to do.
> 
> Whether you call that prediction / reaction is unimportant imo.




"You don’t think. It’s all instinct. If you stop to think, you’re gone." - Sugar Ray Robinson.

On the boxing theme, I imagine that trading for income is like being a professional boxer. Endless repetition of basic moves to hone both skill and instinct.


----------



## Gringotts Bank (2 May 2012)

I also like the boxing analogy.  

Your opponent (the market) can hurt you, and you're aiming to score points against it.  Two things happening - defense and attack.  The mind can't focus on two things at once, but it can switch back and forth.  Successful traders seem to be defense focussed  (ie. capital preservation), occasionally switching to attack mode when the defense position is established..


----------



## Timmy (2 May 2012)

I have a George Foreman Grill. Does that count?


----------



## Boggo (2 May 2012)

Gringotts Bank said:


> I also like the boxing analogy.
> 
> Your opponent (the market) can hurt you, and you're aiming to score points against it.  Two things happening - defense and attack.  The mind can't focus on two things at once, but it can switch back and forth.  Successful traders seem to be defense focussed  (ie. capital preservation), occasionally switching to attack mode when the defense position is established..




An interesting article that is worth reading all the way through...
http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm


----------



## Sdajii (2 May 2012)

Mike Kshemaraja said:


> I do not understand this, if you are so stupid to comprehend why do you need to insult? Your condition is not my fault.
> 
> I have only expressed my opinion, you have the prerogative to not agree, but insulting and accusing shows only you are a loser as much as your friends.
> 
> ...




I think I love you <3

Please call me

xxx


----------



## CanOz (2 May 2012)

Boggo said:


> An interesting article that is worth reading all the way through...
> http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm




Thanks Boggo, I like Taleb, he's a bit over my head sometimes...I've read his second book 'The Black Swan', but not 'Fooled by Randomness'.

Reminds me of the level of intelligence that we're competing against.

CanOz


----------



## Gringotts Bank (2 May 2012)

Boggo said:


> An interesting article that is worth reading all the way through...
> http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm




I have the book Boggo, (Blink) and that section is highlighted and dog-eared from many re-reads.


----------



## tech/a (2 May 2012)

*For me*

When discretionary trading.
I firstly anticipate --- as a side from predicting.
I secondly react by either staying in a trade or exiting.

When systems trading.
I'm doing neither.
I'm following a set of conditions.


----------



## Gringotts Bank (2 May 2012)

The two main things I have highlighted are:

1. the bit about Soros trading by instinct (his back hurts), _and yet he makes up all these rationalizations about why he is acting a certain way with his trading decisions_.

2. This quote: "because to sell or to buy an option requires each party to confront the question of what it is he truly knows. Taleb buys options because *he is certain that, at root, he knows nothing*".

I think I once cited this book on the thread about trading books, even though it's not a book about trading.  There's a lot of wisdom in Gladwell's first two books, but unfortunately his latter books aren't worth buying.


----------



## Gringotts Bank (2 May 2012)

Sorry to harp on, but whenever I read this it gets me going... in a good way.

Traders talk about controlling risk, but in reality all you can do is control how slowly you bleed to death.  Position sizing and stops will determine whether you bleed to death in a week or over the course of 5 years - that is certain.   But what you can never control is whether you make money or not.  A system with a 15 year history of 20% pa and Sharpe ratio of 3.5 can suddenly and inexplicably stop working.  You can still lose everything.  

Acknowledging and accepting that risk on a really deep level is (to my way of thinking), the holy grail of trading.  It sets your mind free to see "what is", as opposed to "what should be".


----------



## CanOz (2 May 2012)

Gringotts Bank said:


> Sorry to harp on, but whenever I read this it gets me going... in a good way.
> 
> Traders talk about controlling risk, but in reality all you can do is control how slowly you bleed to death.  Position sizing and stops will determine whether you bleed to death in a week or over the course of 5 years - that is certain.   But what you can never control is whether you make money or not.  A system with a 15 year history of 20% pa and Sharpe ratio of 3.5 can suddenly and inexplicably stop working.  You can still lose everything.
> 
> Acknowledging and accepting that risk on a really deep level is (to my way of thinking), the holy grail of trading.  It sets your mind free to see "what is", as opposed to "what should be".




Great post and something that has been on my mind since i started developing and testing systematic trading methods. 

An equity curve switch, another way to control how slow you bleed to death. Handy if your system stops working, and eventually it will, its inevitable. How else do you prepare your self for that?

_CanOz_


----------



## Trembling Hand (2 May 2012)

Gringotts Bank said:


> Sorry to harp on, but whenever I read this it gets me going... in a good way.
> 
> Traders talk about controlling risk, but in reality all you can do is control how slowly you bleed to death.  Position sizing and stops will determine whether you bleed to death in a week or over the course of 5 years - that is certain.   But what you can never control is whether you make money or not.  A system with a 15 year history of 20% pa and Sharpe ratio of 3.5 can suddenly and inexplicably stop working.  You can still lose everything.
> 
> Acknowledging and accepting that risk on a really deep level is (to my way of thinking), the holy grail of trading.  It sets your mind free to see "what is", as opposed to "what should be".




Hows that all working out for you?


----------



## Gringotts Bank (2 May 2012)

CanOz said:


> How else do you prepare your self for that?
> 
> _CanOz_




I think the preparation is more to do with the mental attitude, as opposed to something that you action (even though action will spring from the attitude).  A constant dedication to being open to, and accepting of, the possibility of failure and disaster.

That's trading psychology, as I see it.


----------



## skc (2 May 2012)

Gringotts Bank said:


> Sorry to harp on, but whenever I read this it gets me going... in a good way.
> 
> Traders talk about controlling risk, but in reality all you can do is control how slowly you bleed to death.  Position sizing and stops will determine whether you bleed to death in a week or over the course of 5 years - that is certain.   But what you can never control is whether you make money or not.  A system with a 15 year history of 20% pa and Sharpe ratio of 3.5 can suddenly and inexplicably stop working.  You can still lose everything.
> 
> Acknowledging and accepting that risk on a really deep level is (to my way of thinking), the holy grail of trading.  It sets your mind free to see "what is", as opposed to "what should be".




Sounds like living knowing that you are guaranteed to be dead one day.

Does that set one's mind free to live in the moment, and hence achieve more than otherwise?

I guess it all depends on the individual.


----------



## Gringotts Bank (2 May 2012)

Trembling Hand said:


> Hows that all working out for you?




It's works ok when I remember to apply it, or when I am able to apply it with some level of skill.  

Remember that there are golf coaches who can dissect Tiger Woods' swing down to the _n_th degree, and they can apply that to their own game to some small level.  But they could never go a round in 15 under par the way Woods does.  It doesn't necessarily negate the theory if they blunder around the course at 10 over par.

As a contrast, if you asked Tiger how he does it. he may well answer: "I don't know, I just hit the ball long and straight".


----------



## Trembling Hand (2 May 2012)

Gringotts Bank said:


> Remember that *there are golf coaches who can dissect Tiger Woods' swing down to the nth degree*, and they can apply that to their own game to some small level.  But they could never go a round in 15 under par themselves.*  It doesn't necessarily negate the theory* if they blunder around the course at 10 over par.




So then its a waste of time. It certainly doesn't prove it either.


----------



## Gringotts Bank (2 May 2012)

A waste of time for most people, yes.  Although it depends on your commitment.  You could dedicate your life to it and be well rewarded.


----------



## tech/a (2 May 2012)

This thread is a perfect example of Humans complicating the simple.


----------



## Gringotts Bank (2 May 2012)

tech/a said:


> This thread is a perfect example of Humans complicating the simple.




Profitable trading is not simple.  If it was, we'd all be rich.  

Then you would come back with "well you just need to be smart about it and apply some maths and statistics".  How many quants make it onto the Forbes or BRW rich list each year?  None.  What percentage of managed funds beat the index year in year out?  A tiny fraction, and yet they have access to the best and brightest Ivy League graduates.

What I'm saying is that there's a missing element that never gets talked about.


----------



## Trembling Hand (2 May 2012)

Gringotts Bank said:


> Profitable trading is not simple.  If it was, we'd all be rich.
> 
> Then you would come back with "well you just need to be smart about it and apply some maths and statistics".  How many quants make it onto the Forbes or BRW rich list each year?  None.  What percentage of managed funds beat the index year in year out?  A tiny fraction, and yet they have access to the best and brightest Ivy League graduates.
> 
> What I'm saying is that there's a missing element that never gets talked about.




Whoops... wrong there matie,

http://www.nytimes.com/2007/04/24/business/24hedge.html?pagewanted=all



> James Simons, a 69-year-old publicity shy former math professor, uses complex computer-driven mathematical models to make bets on stocks, bonds and commodities, among other things.
> 
> His earnings last year were $1.7 billion.


----------



## tech/a (2 May 2012)

> What I'm saying is that there's a missing element that never gets talked about



.

Yeh

Knowing how to trade.


----------



## notting (2 May 2012)

Trembling Hand said:


> Whoops... wrong there matie,
> 
> http://www.nytimes.com/2007/04/24/business/24hedge.html?pagewanted=all




Published: April 24, 2007
I wonder how he faired over the next couple of years!

I am not taking a position on this debate just thought it was amusing to note the date of the article. Presumerably his systems would have allowed him to preserve the majority of his gains during the crash and following whipsaw from hell. Presumearbly.


----------



## Trembling Hand (2 May 2012)

notting said:


> Published: April 24, 2007
> I wonder how he faired over the next couple of years!




No need to worry about his returns,


----------



## CanOz (2 May 2012)

ROTFLMAO at Notting...forever the skeptic Notting? hahaha!


----------



## notting (2 May 2012)

Trembling Hand said:


> No need to worry about his returns,
> View attachment 46969




Very nice.  Thanks mate!!


----------



## skyQuake (2 May 2012)

notting said:


> Published: April 24, 2007
> I wonder how he faired over the next couple of years!
> 
> I am not taking a position on this debate just thought it was amusing to note the date of the article. Presumerably his systems would have allowed him to preserve the majority of his gains during the crash and following whipsaw from hell. Presumearbly.




More than just preserve capital...
80% in 08, 39% in 09, and 30% in 10.

And this is net of the incredible 5/44 fee!


----------



## sinner (2 May 2012)

notting said:


> Published: April 24, 2007
> I wonder how he faired over the next couple of years!
> 
> I am not taking a position on this debate just thought it was amusing to note the date of the article. Presumerably his systems would have allowed him to preserve the majority of his gains during the crash and following whipsaw from hell. Presumearbly.




Renaissance equity, MBS and other funds for instos to invest in got chopped in the late 2007 market vol, but nothing more/less than other similar funds.

Not that I checked, but I personally doubt the Medallion fund had any problems with robustness during the GFC, those trends are exactly where this fund will shine. I have heard one or two traders telling me they think Renaissance has been in trouble for a long time, but I had a hard time corroborating their info.


----------

