Dump it Here

[divs4ever]

In a friendly way I often remind my daughter that buy and hold is for lazy folks that don't know what they're doing--she has a buy and hold approach.

Well this morning she asked me to check in on the performance of her holdings--much to our great surprise she is up almost 6% from 1 January. So today she is making me eat **** sandwiches for lunch

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buy and hold is for folks earning a healthy income elsewhere

that doesn't mean some don't WATCH and deploy extra cash strategically

 

[Skate]

Skate.

 

[Skate]

Skate.

 

[Skate]

Skate.

 

[Skate]

Skate.

 

[Skate]

Skate.

 

[Skate]

WTF, the language of some traders have changed
I have noticed the change in the language of discretionary traders where mechanical traders just winge about losses. Trading is all about riding trends that can vary to the extremes. Being a mechanical system trader I never have to use self-flagellation as the decision to enter or exit a trade is out of my hands.

I'm not going to take anyones side because I do both. My mechanical systems do better maninly because I am a poor discretionary trader by nature. I therefore allocate more funds to mechanical than discertaionary

Discretionary Trading & Mechanical Rules Based Trading
I'm not going to start a debate as to which is better as it's been done to death. Having the conversation revolve around one type of trading versus another only invokes emotions. Having a robust discussion is not my intent but it's a very interesting subject.

Mechanical system trading
This is a method for trading where all trade decisions are made according to an exact set of rules (a trading system). Traders do exactly what their system tells them to do, without deviating in any way based on instinct.




Discretionary trading
This is a method of trading where all decisions are made according to the instincts of the trader. In all fairness discretionary trading is all about being flexible with additional information deciding the trading decision process using a variety of tools in their toolbox.



Skate.

 

[Skate]

Tested & proven
Mechanical system trading has a solid basis for all underlying buy & sell signals, that have been tested & hopefully proven to have a trading edge. Mechanical trading does take losses at times & that is to be expected because you are letting your system make all your decisions.

To some degree, we are all discretionary traders
Oftentimes system traders do gradually develop an instinct for trading that helps them to be profitable so I'm not preaching we are all in or out when it comes to the way we trade, it is never black & white as many times there are grey areas. Because of these grey areas we need a "Trading Plan" that overrides a "Trading Strategy". There are times when you might notice something about a trade signal that tells you that you shouldn't be taking the trade, even if your system says that you should. Whether you skip that trade to save money or you alter your system to avoid those trades, that involves discretion.

Mechanical system trading relies on a trading plan (for sure)
I'm just pointing out if you get six buy signals it's okay to isolate one signal when it falls foul of your trading plan.



Skate.

 

[Skate]

Trading based on fixed rules
From entry to trade management, risk management & finally the exit oversimplified system trading but it's a start.

A discretionary trader always sees something
A discretionary trader is going to look at the market from many different angles using a variety of tools from their "toolbox" trying to form a well-argued opinion. The purpose is obvious. To come to the conclusion for the trade setup. Confirmation bias is one of our worst enemies because we want to see "what we want to see" & convince ourselves that the decision we are going to make is the correct one. But you can take it from me, there is always self-doubt trading this way (discretionary).

Skate.

 

[Skate]

Which is better - Discretionary or rules-based trading?
The answer might depend on your understanding & definition of "discretionary" as opposed to "rule-based trading". For me, it’s really simple, because "technical analysis" can be backtested to decide if the rule-based trading has an edge.

What's the definition?
I'll leave the definition of discretionary trading & rule-based trading to the Duc as he nails it in a few words.

It would be easier to define discretionary trading as subjective trading and mechanical or rule based as objective trading

Skate.

 

[Skate]

Trend Trading a "mechanical system" works best in a bull market (surprise, surprise)
Well, why have a system? That's a fair question & it is simple to answer "To help a trader make a trade"

Indecisiveness is a killer
If you leave that decision to some, they would never make a trade, doubt & indecisiveness is a killer. Also, a mechanical trading system can be designed to be adaptive to market conditions whereas using discretionary it's hard for you to "see the forest for the trees"

Summary
Instinct trading is not for me.

Skate.

 

[ducati916]

Which is better - Discretionary or rules-based trading?
The answer might depend on your understanding & definition of "discretionary" as opposed to "rule-based trading". For me, it’s really simple, because "technical analysis" can be backtested to decide if the rule-based trading has an edge.

What's the definition?
I'll leave the definition of discretionary trading & rule-based trading to the Duc as he nails it in a few words.



Skate.

Now there are many types of discretionary traders. @peter2 would likely classify himself as a discretionary trader. However I daresay he would not classify himself as 'subjective', trading quite definite chart pattern set-ups.

I'm subjective because I can trade (my rules allow me to) any stock, with any pattern, in any market (bull/bear).

Which is not to say I don't have any rules at all. My philosophy however is that the markets are largely random. That the future is unknown. That any given stock, can do anything. Given that belief, my system has to allow that belief to be expressed in a profitable manner. Which it does.

I like most, try to predict. Mostly for the intellectual stimulation that it provides. Partly, because being informed allows some landmines to be sidestepped. I focus these efforts more on the macro-big picture, rather than the micro day-to-day fluctuations. I tend to choose big themes, rather than individual stock narratives.

jog on
duc

 

[Skate]

Now there are many types of discretionary traders. @peter2 would likely classify himself as a discretionary trader.

@ducati916, I agree, Peter is different from most discretionary traders but I do believe his trading is "subjective" at times. After reading his recent couple of posts it was the first time he involved a money value to reinforce a point. The take-away for me was the loss was due to a series of subjective decisions.

Being subjective
Subjectiveness was the reason why he was extremely hard on himself to the point of self-flagellation. We are all wordsmiths to some degree but a change in his tone & word choices instigated this series of short posts from me today.

But before I finish
I want to make another statement that mechanical or rule-based trading has only two major rules. Those two rules are "precision & confidence". Both are needed to enter & exit a trade. The minor rules will look after themselves. If you’ve been worried about the volatility this week or the uncertainty it brings, it's only natural but "comfort" can be sort knowing a "mechanical system trading" will make the decisions for you "rather than your gut".

Skate.

 

[Garpal Gumnut]

@ducati916, I agree, Peter is different from most discretionary traders but I do believe his trading is "subjective" at times. After reading his recent couple of posts it was the first time he involved a money value to reinforce a point. The take-away for me was the loss was due to a series of subjective decisions.

Being subjective
Subjectiveness was the reason why he was extremely hard on himself to the point of self-flagellation. We are all wordsmiths to some degree but a change in his tone & word choices instigated this series of short posts from me today.

But before I finish
I want to make another statement that mechanical or rule-based trading has only two major rules. Those two rules are "precision & confidence". Both are needed to enter & exit a trade. The minor rules will look after themselves. If you’ve been worried about the volatility this week or the uncertainty it brings, it's only natural but "comfort" can be sort knowing a "mechanical system trading" will make the decisions for you "rather than your gut".

Skate.

So @Skate can you see if there is any place for all over the shop such as I who trade on the vibe.

But keep an account and desist if in danger of loss or not enough gain.

Ruthless as you with my baser emotions and Lady Hope.

gg

 

[Skate]

So @Skate can you see if there is any place for all over the shop such as I who trade on the vibe.
But keep an account and desist if in danger of loss or not enough gain.
Ruthless as you with my baser emotions and Lady Hope.

gg

@Garpal Gumnut what makes trading so difficult is that "there are no rules". The problem is that 'excess freedom' cause people to become "overwhelmed" losing money because they don't 'know' what to do next.

To answer your question directly
"It's your money & you can do whatever you want" - but for others let me take the time to explain why new traders struggle at first.

Why do new traders struggle?
Why? it's because most of the time they don't have "rules" to follow. Most people live their entire life around rules & most of them like being told what to do. People are conditioned from childhood to listen to authority & follow the ‘rules’. Living in a society you need to be a "conformist" or else you are punished. It's similar when it comes to trading.

With large amounts of money on the line
I'm saying it's better to have a structure, a set of rules that you will follow otherwise you will tend to break them along the way, solely for the purpose of justifying how you feel "in" the moment.

Simple message
If you are a system trader have a set of defined rules, keep the system as simple as possible, validate it (robust backtesting) & trade it with precision & confidence!

Skate.

 

[MovingAverage]

Which is better - Discretionary or rules-based trading?

The answer might depend on your understanding & definition of "discretionary" as opposed to "rule-based trading". For me, it’s really simple, because "technical analysis" can be backtested to decide if the rule-based trading has an edge.

Good series of posts @Skate.

Your comment on which is better really resonates with me. To me I’ve never understood why the two are often compared to debate which is better. I find those that raise the issue of “which is better” are naive and inexperienced traders. Take for example the recent series of posts on this thread by Ann suggesting she was capable of reading charts and had no need for your “holy grail black box approach”—completely ridiculous comparison. All approaches to trading that make you money are good—be it system, discretionary or whatever . The issue is more about understanding your own personal strengths and weakness as that will often determine what approach is better suited to you. For me, I honestly don’t trust my own subjective judgement so stay well away from discretionary as I can’t make money from it.

 

[qldfrog]

For me, I honestly don’t trust my own subjective judgement so stay well away from discretionary as I can’t make money from it.

I second that,same here.?
I will never be able to understand last night HOOD going up 10pc after release of abysmal results,and lower forecasts...
I let my statistically right system do the call..but i understand other people might be different

 

[ducati916]

Trading based on fixed rules
From entry to trade management, risk management & finally the exit oversimplified system trading but it's a start.

A discretionary trader always sees something
A discretionary trader is going to look at the market from many different angles using a variety of tools from their "toolbox" trying to form a well-argued opinion. The purpose is obvious. To come to the conclusion for the trade setup. Confirmation bias is one of our worst enemies because we want to see "what we want to see" & convince ourselves that the decision we are going to make is the correct one. But you can take it from me, there is always self-doubt trading this way (discretionary).

Skate.

About 15yrs ago I read a thread on EliteTrader (I think it still exists) featuring a chap named Maverick74. @wayneL will probably remember him, I think he even commented on the thread at the time, anyway...

The thread was talking about some rather esoteric options theory and application. Maverick74, at the time, was some form of market maker for one of the investment banks...not explicitly stated, but inferred.

Mr Maverick74 was (a) very profitable and (b) by some distance, far more informed than 99% of participants at EliteTrader at that time. Reading that thread was probably my epiphany moment in my trading to that point. Prior to that I had been a day-trader/swing-trader based on charts/technicals.

The 'key' to making huge dollars from trading is (a) the ability to trade significant leverage and (b) 100% guarantee that you will not blow-up your account.

The leverage allows you to turn lesser % returns into big real returns. The 100% guarantee costs. It is not free. Hence the lower absolute % returns (more than compensated for by the increased leverage).

This, I think was the thread: https://www.elitetrader.com/et/threads/writing-options-for-a-living.53037/page-2

What you eventually glean is that the markets are a very complex form of arbitrage theory.

Once you take this onboard, it becomes very clear why there are seemingly random movements in prices. Taking it to its logical conclusion, arbitrage theory (could) allow you to state that the unknown future is a random price, contrasted with the present known price, which allows a trade to be placed in the present. Purists will say an arbitrage is buying gold in London for a lower price than they can sell gold in New York for. The spread is the 100% guaranteed profit. Correct. Arbitrage theory takes that axiom theoretically to all manner of different applications.

I could give you the answer, but that would (a) not be appreciated, you only appreciate what you earn and (b) constitute quite a bit of work for me in explanations etc.

What category would this fall into? Probably mechanical.

jog on
duc

 

[entropy]

Tested & proven
Mechanical system trading has a solid basis for all underlying buy & sell signals, that have been tested & hopefully proven to have a trading edge. Mechanical trading does take losses at times & that is to be expected because you are letting your system make all your decisions.

To some degree, we are all discretionary traders
Oftentimes system traders do gradually develop an instinct for trading that helps them to be profitable so I'm not preaching we are all in or out when it comes to the way we trade, it is never black & white as many times there are grey areas. Because of these grey areas we need a "Trading Plan" that overrides a "Trading Strategy". There are times when you might notice something about a trade signal that tells you that you shouldn't be taking the trade, even if your system says that you should. Whether you skip that trade to save money or you alter your system to avoid those trades, that involves discretion.

Mechanical system trading relies on a trading plan (for sure)
I'm just pointing out if you get six buy signals it's okay to isolate one signal when it falls foul of your trading plan.

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Skate.

Nicely put Skate.
I like to look at three pairs of moving averages, a short term, a medium term and a long term. This throws up a list of candidate buys. I list these based on market capitalization: I don't think the market accidentally has say CBA as the top-priced bank.
Then I look at dividends paid: a company that has skimpy, erratic or no dividends sends me an alert (I know there are exceptions).
Next I scan the directors share holdings and their purchases and sales. Directors with no or little "skin in the game" or directors selling off their holdings sets off an alert

 

[Skate]

Nicely put Skate.
I like to look at three pairs of moving averages, a short term, a medium term and a long term. This throws up a list of candidate buys. I list these based on market capitalization: I don't think the market accidentally has say CBA as the top-priced bank.
Then I look at dividends paid: a company that has skimpy, erratic or no dividends sends me an alert (I know there are exceptions).
Next I scan the directors share holdings and their purchases and sales. Directors with no or little "skin in the game" or directors selling off their holdings sets off an alert

Now that's what I'm talking about
@entropy to have any chance in this game you need a plan & your plan is solid. If you keep your trading plan consistent you'll do okay as consistency is the name of the game.

In between the signals, just hang on for the ride
No matter what your selection criteria were, or what has motivated you to place a ‘buy’ order, you have to realise "everything is out of your control" from that point on till you elect to sell, so in the meantime just hang on for the ride.





Guppy's Multiple Moving Averages
Looking at three pairs of moving averages performs as a trend trading strategy. As trend trading strategies go, using "Guppy's Multiple Moving Averages" would be a suitable choice for you to have a look at as it's easy to follow & understand.

Sometimes more is better
I understand you use three moving averages whereas Guppy uses twelve EMA's. It's the relationship between the twelve exponential moving averages (EMA's) that tells the story of long & short-term buyers. The (GMMA) is composed of multiple lines that help traders see the strength or weakness in a trend better than if only using one or two moving averages or (EMAs). Compression to the expansion of the “lines of the ribbon” tells one story whereas the reverse (expansion to compressions) tells another. On the other hand, the "crossing" of the ribbons, is a whole other story in itself.

Skate.