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The timeless words of Buddha when it comes to trading
"Inflamed by greed, incensed by hate, confused by delusion"

1. Greed
Is an insatiable longing for more & more. Greed is a damaging emotion, especially in trading volatile markets. During these times traders need to control their urges or instincts. When left unmanaged, greed can expose you to high-risk situations.

2. Hatred
The symptoms of hatred can show up as anger. Trading when angry never ends well. Once the feeling of anger raises its ugly head, trading skillfully goes out the window.

3. Delusion
Basically, delusion separates good traders from all the rest. When you haven't got a grip on reality, you don't have a clear-cut path to positivity. Those who display delusional tendencies would do well to remember that "trading performance is a measurement of doing all the little things well".

Skate.
 
Two reasons why we make so many mistakes in trading
(1) By allowing our emotions to get out of control (being unchecked) is the reason we tend to make so many mistakes. (2) The other reason is trying to elude the pain of losing. At some stage, we all have the urge to sell positions that have increased in value, while keeping positions that have dropped in value.

I'll leave that last words to Daniel Kahneman
Daniel Kahneman once stated that “losses generate more emotional feelings which affect individual than the effects of an equivalent amount of gains”.

Skate.
 
I agree, emotions are the fundamental driver in the creation and destruction of wealth. I think the real function of a tested system is to give us confidence, then we use that confidence to power the actual trading. Seems very backwards way to do it though. Why not develop confidence without a system?

[edited+++]
 
Good afternoon
Intoxication can be a worry too ...

Kind regards
rcw1
 
What are you thinking on a psychologically-based approach to trading, @qldfrog? To me it seems an obvious truth, but I know the majority of traders are not on board.
 
Gringotts Bank said:
What are you thinking on a psychologically-based approach to trading, @qldfrog? To me it seems an obvious truth, but I know the majority of traders are not on board.
Click to expand...
I believe this is THE key but i am so not in line with the majority that i can not even understand the thinking of the majority.
Contrarian by nature is my definition, and my first reaction to anything is Why?
Got me in trouble with CC, Covid scam, Ukraine analysis,etc,workplace and education and obviously trading
This is costing me dearly with RE and discretionary trading.
The way it would work IMHO is trading as a result of mathematical analysis of media headlines, SM chats: analysis to determine the psyche/mood of both retail investors and the mood of the key fund managers etc playing with others money.
Put the lot in a tumbler and shake (AI) and Bob is your uncle.
I do not have the ability to do that so stick to price action/volume as a late sign,and use this in syatems
 
I don't think such a system would need to be complex. Under Musk, the new Twitter will offer paid subscribers a lot of powerful analytical tools. Not available yet, but that would be one option. Contrarianism makes perfect sense because the vast majority of traders lose (90% of them). If they're losing consistently, why would anyone follow the crowd? There is a time to follow the crowd, and that's when it's stampeding in a certain direction (trend following). Since 2020, the markets have stampeded, both up and down. They behave completely differently to pre-2020.

When I mentioned psychology, I had something different in mind altogether. If you give 100k to 100 different people, and tell them to pick one stock that they will hold for 12 months, the results won't be a random distribution. I think it can be predicted ahead of time what sort of person will win/lose.
 
Gringotts Bank said:
What are you thinking on a psychologically-based approach to trading
Click to expand...

qldfrog said:
The way it would work IMHO is trading as a result of mathematical analysis
Click to expand...

Gringotts Bank said:
There is a time to follow the crowd, and that's when it's stampeding in a certain direction (trend following). Since 2020, the markets have stampeded, both up and down. They behave completely differently to pre-2020.
Click to expand...

I'm surprised
That there has not been more interest in a topic that makes money trading & good money at that. With the lack of input, "I'll have my say & make a few comments in the affirmative of "why" systematic Trend Trading works & works well.

I'll demonstrate that Systematic Trend Trading actually works
The first half of this year killed the spirits of most trend traders. Even "The Chartist" results posted on Twitter have been less than impressive, showing how hard it was to "eke out a profit" during this period.

The HYBRID Strategy
Anyone that has followed this thread for a while would realise that "The HYBRID Strategy" is one of the mature strategies that I have traded since 2015. I have posted extensively about this strategy, meaning it's not a splash-in-the-pan strategy, but rather a proven profitable strategy

The first half of 2022
The All Ordinaries, over this period, has been a shocker, but with the correct strategy, it didn't have to be all that bad. I want to throw up a chart for the (XAO) for a visual representation of how tough it has been trading this index. I'm also going to post a backtest of "The HYBRID Strategy" from the 1st of January 2022 to the 30th of June 2022.

Looking at the chart below confirms it was a tough "first half" to this year
From the 1st of January to the 30th of June 2022, it's been a slippy slope as the "red line" indicates.




"The HYBRID Strategy" Backtest Result
The backtest result for this strategy has not been too shabby. The backtest period is from the 1st of January 2022 to the 30th of June 2022.


Then in the next few posts
I want to explain why systematic Trend Trading works.

Skate.
 
Combining my two favourite talking points
(1) Trend Following &
(2) System Trading

Systematic Trend Trading forms a path to financial freedom if you can pull it off
In essence, all trading is trend trading. A trend-following system is a relatively straightforward approach to system trading that can be readily developed & managed with little effort or time.

Entries during trends are a no-brainer
Trading has been tough this calendar year (2022) but there were glimpses that traders were able to capitalise on as shown in my previous post. Even trading a robust strategy offers little protection when the markets are unfavourable. Frankly, any trading system will perform well when the markets are being kind. When conditions are unfavourable, strategies “worth their salt” will simply step aside, waiting for the next rise. Trading has been tough this year but there were some good results for some.

Skate.
 
Trend Trading isn’t easy
Trend following might look easy in backtests, but it’s far from easy to trade this style of system "flawlessly" without behavioural mistakes. The main advantage of trend trading is its simplicity of jumping on & off trends. Trading this way doesn’t require a lot of time or work either.

"When the market isn't cooperating,"
You guessed it, nothing works well. Trading a quality system allows you the freedom from second-guessing the strategy & that's worth your weight in gold. In the end, it comes down to the confidence you have in your work, allowing you to have the correct mindset, so your decision-making process will be unaffected.

Skate.
 
Trend following always looks easy
That’s because the principles are very simple. The secret to success is staying “focused”. Trend Trading creates its own unique set of "problems", problems that don't need to be solved but rather to be accepted.

Profitability
Comes from "selling the losers quickly" & knowing "when to sell the winners" is the secret to trading profitably no matter the style or system you elect to trade.

Skate.
 
Trading is such an uncertain endeavour
Having "sound risk management", & "money management", with correct "position sizing" will be for naught if you don’t have the discipline to stay focused by "consistently" executing your trading plan.

Sometimes trading doesn't work
With "Trend Trading", you need to be able to accept that some trades just "don't work" & that's why you need to stay "focused & disciplined". There's no sugarcoating the fact, that at times "Shit_happens" so when it does, suck it up.

Skate.
 
Before someone asks
I have posted additional information for those who want to drill down further on the statistics. The time period has been cherry-picked (Jan 2022 to June 2022) as the markets were in free fall during this period. The issue that most trend traders experienced was jumping on false hope only to have their hearts broken when they held during the pullback.




Completed Trades
These are the twenty trades from the 1st of January 2022 to the 30th of June 2022. Below I have posted the chart for (CXO) the position marked by the yellow box.




Chart for the first trade in the trades list (CXO)
Of the three trades, the last trade is the one under review. The previous two trades were also winners. Trend trading is all about jumping on trends & riding them. Also, the execution on the buy & sell side was "sharp" resulting in all the trades being profitable.



I rest my case
Systematic trend trading works & works well (for me), taking a small bite out of a confirmed trends is the name of the game.

The old adage
"Little fish are sweet".

Skate.
 
Nostalgia (a post from the 28th of January 2019)
@divs4ever just "like" one of my my posts going back to 2019 in the (BVS) thread. It's a perfect example of how riding a selected trend makes money. I remarked at the time (BVS) had been good to me in the past, but it's totally out of favour at the moment.

The ROC indicator (yellow ribbon)
The yellow ribbon at the bottom is screaming to be cautious, remarking that nobody is loving this stock at the moment. At the time I was posting charts for an alternative perspective.

The yellow searchlight
Highlights the exit bar & the reason why the position "had to be exited". If you look at my charts long enough, there is no need for an explanation, as the chart graphics do all the talking.

Backtesting metrics
Even my backtests gives additional metrics, "metrics that are important" to me.

Out & back in
Notice my 'stale stop' kicked me out of the first trade, only to get back in on the next bar.

Selling is the best tool we have
If you follow your signals religiously you'll never be afraid to sell "because" you can always buy it back again. (small commission charge) that isn't a big deal.

This is the link to the post I'm referring to

BVS - Bravura Solutions

Bravura Solutions provides software products and services to clients operating in the wealth management and funds administration industries, with the majority of clients in Australia, New Zealand and the United Kingdom. Bravura's software products and services support the front-office...
www.aussiestockforums.com

Here is the chart for (BSV)



Skate.
 
I think these figures only work when there is a Buyer or a Seller at THAT POINT of TIME that you are referring to

What do you think of a "Forward Testing" for say the next 3 months exercise

Do you think it could work?

I would be prepared to help witness a few transactions in my real time
Maybe others could witness other time zones in their real times?

At least we will then be exposed to the Naked Truth IMHO

" Does Back Testing Work" in the future?


PS ; I understand that your strategy is BORING and that there may be nothing to do "At The Moment"
But there may also be a Bottom forthcoming?

Salute and Gods' speed
 
Last edited:
Captain_Chaza said:
What do you think of a "Forward Testing" for say the next 3 months exercise
Click to expand...
@Captain_Chaza that's called paper trading
Paper trading is a prerequisite before trading any system live. The minimum time to paper trade a new strategy in my view normally starts at 6 months & goes up from there. The reason to paper a strategy is to evaluate how the strategy performs on new (Out Of Sample) data. This is conducted to make sure there is no curve fitting of the strategy. Comparing the two, (1) the backtest results trading on "historical data" (in-sample data) versus (2) paper trading the strategy on (OOS) data. Taking the time & "not rushing this step" ensures the strategy will perform when under the pressure of live trading.

Amibroker beacktesting is informative
But paper trading the actual “Exploration Analysis” signals is more reflective of the strategy's worth. The Exploration Analysis spews out the ASX code to buy, the number of shares to buy at an offer price to trade in the pre-auction. This is the genuine test.

Paper Trading
Paper trading allows you to evaluate the strategy's true performance over a 6 month period or longer trying to capture the different moods of the market. Doing it this way & the actual results would be more reflective of the strategy's true performance.

The "Dump it here" thread is to inform, educate & stimulate
As you have been a member since 2007 you should be aware that what you are suggesting has been done to death over the last 4 years. A simple search will uncover not only simulated Backtests but actual live trades in real-time. All the information had been posted well in advance with buy confirmations (something we are restricted from doing these days). It should also be noted, there were other members who traded alongside me.

Skate.
 
Some wives can be bitches at times
Being "frisky" this morning, all I said was that her "bum" was starting to look like an "old washing machine".

Then she said to me:
"I'm not starting up the old washing machine for such a small load, you'll have to do it by hand"

Skate.
 

From one of your earlier posts, a variable not often discussed.

Luck is/are the tail events in a Gaussian distribution. They are often, the source of tremendous profits or losses (@Captain_Chaza gaps etc). There are 'systems' built/designed to profit from 'luck'. Taleb's ex-business partner, Mark Spitznagel runs that particular Hedge Fund (truly a hedge fund).

Therefore we have the type of system advocated by @Skate, which is a long, trend following system, with a highly defined exit or profit taking system as against a 'luck' based system.

As I tend to follow this thread and through the years 'mechanical systems' (TechTrader) I have noticed the shift in time frames of the exit parametres. TT was a system that sought to capture long trends. @Skate systems seem to catch very short trends within established trends.

This is interesting (to me) as I would characterise this as 'swing trading'. Swing trading is a short term trade with a highly defined profit target.

The question that should be being asked on this thread, I don't actually see (quite possible that I missed it in 350 pages) is: how do you calculate/define/probability/whatever an 'accurate' profit target?

Mr Skate has already provided the answer, albeit in his usual oblique manner. It is there however. Now of course there are any number of ways to do this, Mr Skate's is simply one way to do so.

Some charts that may be helpful:

The duc loves luck.

jog on
duc
 
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