Beginner's Trading Blog

[Trembling Hand]

Re: Beginner's Blog

So I had a think.

If I look at a few charts, find one that I think there is opportunity (say for example, the
price and volume seem to be forming a trend, the rsi is oversold and we are at a level of strong support), instead of buying in my play money account I should just backtest whether those conditions would have made a profit over the last 1,5,10 years?

If it would have made a profit THEN I go ahead with the trade?

No. Back testing is about, firstly when you are a newbie, understanding what actually makes a profitable system. Secondly understand when your system is profitable and when its broken. The individual trade idea is a small part of having a profitable long term system.

 

[tech/a]

Re: Beginner's Blog

The idea with back testing is that there's no real need for a play money account (or atleast it greatly reduces the need)?

No thats paper trading

For example If I look at a few charts, find one that I think there is opportunity (say for example, the price and volume seem to be forming a trend, the rsi is oversold and we are at a level of strong support), instead of buying in my play money account I should just backtest whether those conditions would have made a profit over the last 1,5,10 years?

As an example this is a trading hypothesis.
Its an idea that you think "Could be profitable."
Many people actually trade Hypothesis and call them a trading plan.

If it would have made a profit THEN I go ahead with the trade?

No you will be in the position to evaluate the system.
It will give you a blue print which you can then consider if its suitable for your trading requirements.

Besides profitability if you Montecarlo test it youll find out if you have a single run profitable system or a multiple porfolio loser.
Youll also find out important information like.
Maximum Peak to Valley and Maximum inital capital drawdown.
Youll find out time it takes to regain losses.
Average length of trade.
Youll know if losses or Gains came from a few outlier trades.
Youll be able to determine sweetspots for number of open positions and capital available.
Youll be able to test the inclusion of leverage.
Youll see average and maximum string of losses V strings of gains.
Youll understand at last---RISK
Youll know avarge return / $ gained.
Youll get to understand expectancy.
Youll be able to determine your database (candidates) through testing various markets and instruments.
Among many other stats.

Finally as T/H says

Youll know WHAT makes a system profitable and how to identify if the market changes to such a degree that YOUR system trades outside of its blueprint to such a degree that it fails beyond know parameters.
Youll become pretty quickly one of those traders who actually KNOWS how Technical Analyisis SHOULD BE APPLIED

(Your hypothesis isnt profitable by the way)and I havent even tested it!

 

[kid hustlr]

Re: Beginner's Blog

Appreicate the help guys, seriously.

I think I'm getting it. All be it very slowly.

Last question, how does 'discretionary trading' fit into this? What about those guys who have a really good understanding of the drivers of a market/commodity/whatever and then trade of this? Do they even exist?

I feel like there is no need for someone who wants to be succesful to learn about 'the market' but rather they need to learn how to develop systems? Or perhaps having an understanding of what makes various markets work assists in devleoping systems?

I'd be better off playing roulette right now by the sounds of things

 

[tech/a]

Re: Beginner's Blog

Appreicate the help guys, seriously.

I think I'm getting it. All be it very slowly.

Last question, how does 'discretionary trading' fit into this? What about those guys who have a really good understanding of the drivers of a market/commodity/whatever and then trade of this? Do they even exist?

I feel like there is no need for someone who wants to be succesful to learn about 'the market' but rather they need to learn how to develop systems? Or perhaps having an understanding of what makes various markets work assists in devleoping systems?

I'd be better off playing roulette right now by the sounds of things

Its a journey.
One which will set you up for life.
Very very few do the years of apprenticeship and it NEVER ends.
Dont have pre concieved ideas as you currently have.
Let your education---educate you!

The first thing you need to do is understand what you need to do to actually develop a system.
Have a look at Howard Bandy's site.
http://www.blueowlpress.com/

Yes there are discretionary traders.
I existed as of a few minutes ago.
I know how to tilt the odds in my favor and know how to trade price action consistently profitably. But I started as a systems trader---Started Profitable trading.

Actually I started as an "expert" 17 yrs ago.
Lost 20K in the first few months.
Cheap learning experience just ask anyone who lost half their super in the GFC.

 

[Gringotts Bank]

Re: Beginner's Blog

Appreicate the help guys, seriously.



I'd be better off playing roulette right now by the sounds of things

Or stick with poker. Are you profitable at that? I knew a guy once who could make 3% per week, every week, year after year playing online about 4 hours a day after work.

 

[kid hustlr]

Re: Beginner's Blog

TA, Thanks.

Gringotts, my poker adventure was a very succesful one which lasted 5 years. It's a story for another day though.

------

Lots of reading and practice required from me moving forward by the looks of it. I'll report back when I have something substantial to say (or I develop more questions).

 

[Trembling Hand]

Re: Beginner's Blog

Lots of reading and practice required from me moving forward by the looks of it. I'll report back when I have something substantial to say

Hopefully it will not include the words "moving forward" :

 

[So_Cynical]

Re: Beginner's Blog

I'd be better off playing roulette right now by the sounds of things

Thing is you don't want to treat trading/investing like gambling, and yet its unavoidable....i like to treat the market like a special game of roulette.

Stock market roulette is a game played with a very large roulette wheel, a wheel with 1000 unique slots each being a different shade of red or black, the higher the % of colour the higher the % pay out or loss, half the slots winners of varying % amounts and half losers of same...with one slot representing a 100% loss.

And of course you can only bet on red or black (up or down)

Now the beauty of Stock market roulette is that at the end of every spin you get to choose if you want to accept the result or spin again free (as long as you have no leverage)...or you can add to or reduce your bet...and you can keep spinning for free as long as the 100% loss result doesn't come up.

 

[waza1960]

Re: Beginner's Blog

Re: Backtesting
I would not use Amibroker as the learning curve is too great IMO for a beginner.
You are much better off using one of the platforms with a Strategy wizard or GUI
interface for constructing strategies such as Ninja Trader or MT5 and others (no
coding required).
You can construct basic strategies that will allow you to explore different trading
approaches.

 

[Trembling Hand]

Re: Beginner's Blog

Re: Backtesting
I would not use Amibroker as the learning curve is too great IMO for a beginner.
You are much better off using one of the platforms with a Strategy wizard or GUI
interface for constructing strategies such as Ninja Trader or MT5 and others (no
coding required).
You can construct basic strategies that will allow you to explore different trading
approaches.

Agree 100%

 

[CanOz]

Re: Beginner's Blog

Re: Backtesting
I would not use Amibroker as the learning curve is too great IMO for a beginner.
You are much better off using one of the platforms with a Strategy wizard or GUI
interface for constructing strategies such as Ninja Trader or MT5 and others (no
coding required).
You can construct basic strategies that will allow you to explore different trading
approaches.

Hi Waza, I own and have used amibroker, ninjatrader, and multicharts. Amibrokers afl wizard is quite easy to use for basic coding. Ninatraders wizard is more difficult in my view.

Of them all, Power Language that MC uses is very similar to Easy Language of Tradestation fame, and is the easiest language to learn, in my view and I am not a coder by profession.

I would avoid ninjatrader until you become very competent at troubleshooting software issues as it is the least stable and proven compared to amibroker, tradestation, and multicharts.....in my view.

Cheers,


CanOz

 

[Trembling Hand]

Re: Beginner's Blog

Hi Waza, I own and have used amibroker, ninjatrader, and multicharts. Amibrokers afl wizard is quite easy to use for basic coding. Ninatraders wizard is more difficult in my view.

Nah? You cannot be talking about this wizard,



Simple as drag and drop price, indicator etc to a value and get an action. Then back test it. Perfect to start the journey. Can even use free data for stocks futs and FX. perfect.

 

[CanOz]

Re: Beginner's Blog

Here is the AFL Code wizard...like i said i thought it was easier to use...in my view.

NT is free EOD with data, so that's hard to beat. EOD is a good place to start as well.

I've spent allot of time on NT's forum trying to resolve issues that i just didn't have with Amibroker. Lots of issues were related to TWS fair enough, but Amibroker was a shorter learning curve for me.

On the bright side, once you become familiar with NT, the other platforms seem pretty easy


Cheers,


CanOz

 

[Trembling Hand]

Re: Beginner's Blog

Here is the AFL Code wizard...like i said i thought it was easier to use...in my view.

NT is free EOD with data, so that's hard to beat. EOD is a good place to start as well.

I've spent allot of time on NT's forum trying to resolve issues that i just didn't have with Amibroker. Lots of issues were related to TWS fair enough, but Amibroker was a shorter learning curve for me.

On the bright side, once you become familiar with NT, the other platforms seem pretty easy

Yeah fair enough. I don't actually know a lot about Amibroker. And agree NT can be furiously frustrating when you run into a problem that NT doesn't recognise. But its certainly one of the ones to consider for a newbie before they start trading while they are clueless.

With free world EOD data for FX, futs and equities and no platform cost beginners have no excuse for not backtesting before they start trading. Except that they don't really want to test anything just fly without a licence. :bricks1:

 

[boofis]

Re: Beginner's Blog

My 2c:
1. Get amibroker
2. Watch everything else in your life fall to the way side for the next 12 months while you become addicted learning how to use it lol.

But seriously, jump in and get the learning curve started. I'm only newish to this game also but Amibroker was the best move I've made so far. I also lost money at the start due to having no idea about anything but wanting to make the big money.

 

[waza1960]

Re: Beginner's Blog

I would avoid ninja-trader until you become very competent at troubleshooting software issues as it is the least stable and proven compared to amibroker, tradestation, and multicharts.....in my view.

Totally agree regarding issues/stability/reliability I have traded NT live and too many error messages So I am certainly not recommending it except to say its still a cheap easy way to explore basic trading strategies.
I also own Amibroker and have tried a demo of Multicharts and trade live on Metatrader 4.

 

[kid hustlr]

Re: Beginner's Blog

Appreciate the responses.

I d/loaded ninjatrader and the interface does seem a little easier to manage plus the fact that its free is handy for now.

One quick one, I uploaded the ASX 500 and it all works fine but I can't get the XAO/XJO indices to upload. Apparently ninja trader doesnt let you upload indices from Yahoo. Any other way I can upload the XAO?

 

[kid hustlr]

Re: Beginner's Blog

Nothing crazy to report.

Watching a whole bunch of ninja trader tutorials on youtube as well as playing around with all the functions. It's quite in depth but seems easy enough to use. I really can't wait to have a play around trying to design some system(s). walk before I can crawl though.

Still reading to and from on the bus, Am half way through the New Market Wizards and have also been reading some good material about system design by that guy from tradestation. Been tough to get much done lately however as I have a couple of exams next week which are my higher priority right now.

 

[kid hustlr]

Re: Beginner's Blog

Getting there.. slowly.

The elite trader website which I stumbled upon was really really helpful.

Playing around with ninja trader is a slow process but I'm slowly starting to get the hang of it.

I feel like I'm definitely doing enough reading + learning, the most important thing for me to do now is to get my hands dirty with Ninja Trader and play around/explore as much as possible.

 

[kid hustlr]

Re: Beginner's Blog

I feel bad not having much to report. I'm still reading and learning but I jsut havent had a chance to have a good detailed play around with.

I've been having random thoughts it my head though for example I like the idea of some kind of short and long term moving average signal, but I'd like to play around with maybe taking some profits before the exit signal as it looks like you can lose a lot of profits at the back end of the trade.

Also I want to try and develop some form of reversal bar strategy (or atleast incorporate them somewhere as a set up or entry) as I feel a strong reversal bar on high volume is a very strong indicator.

Lots of thoughts floating around my head, Once I have some numbers to support some ideas my plan is to post them here.

Also note to self to order one (if not more) of the books T/A suggested earlier in this thread.