Dump it Here

ducati916 said:

If you are primarily or exclusively a chart/technical based trader, which Mr Skate is and which dominates this thread, then your employment of risk management tools is even more critical than a trader who employs additionally macro fundamental tools.

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Further to @ducati916 remarks, the SAP Strategy uses a combination of powerful technical indicators, filters, and trading rules to generate buy and sell signals. The strategy is based on a mix of trend-following and momentum-based indicators, to identify potential trading opportunities.

The SAP Strategy is a rules-based approach to remove the emotional side of trading that identifies trends with momentum to take advantage of market movements while minimising risk. One of the key features of the SAP strategy is its extensive use of filters. Filters are used to weed out potential false signals and to ensure that only high-quality trading opportunities are taken.

Another important aspect of the SAP strategy is its use of market breadth. The strategy trades when 50% of the companies in an index are rising and exits when the positions fail to follow through. This unique approach helps to ensure that the strategy is only trading in markets that are exhibiting strength, rather than trying to pick tops and bottoms.

At this stage, I believe using a new and unique combination of technical indicators, and filters, with precise trading rules, the SAP Strategy will be able to generate high-quality trading signals that can help to increase the profitability of this portfolio.

However, it is important to note that no trading strategy is perfect, and traders should always use proper risk management techniques to ensure that they are not taking on too much risk.

Skate.

Skate said:

View attachment 158418



Further to @ducati916 remarks, the SAP Strategy uses a combination of powerful technical indicators, filters, and trading rules to generate buy and sell signals. The strategy is based on a mix of trend-following and momentum-based indicators, to identify potential trading opportunities.

The SAP Strategy is a rules-based approach to remove the emotional side of trading that identifies trends with momentum to take advantage of market movements while minimising risk. One of the key features of the SAP strategy is its extensive use of filters. Filters are used to weed out potential false signals and to ensure that only high-quality trading opportunities are taken.

Another important aspect of the SAP strategy is its use of market breadth. The strategy trades when 50% of the companies in an index are rising and exits when the positions fail to follow through. This unique approach helps to ensure that the strategy is only trading in markets that are exhibiting strength, rather than trying to pick tops and bottoms.

At this stage, I believe using a new and unique combination of technical indicators, and filters, with precise trading rules, the SAP Strategy will be able to generate high-quality trading signals that can help to increase the profitability of this portfolio.

However, it is important to note that no trading strategy is perfect, and traders should always use proper risk management techniques to ensure that they are not taking on too much risk.

Skate.

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@Skate this series of posts that you are doing is aimed at new traders and you are showing them the ins and outs of trading a mechanical trading system. New traders may want to know what would be the minimum amount money required to trade a system like the SAP system, and I wonder if you think the system would still work if your exposure was reduced. That is, instead of using all your funds in the market, would the system still perform if a trader used a percentage of their funds or a lesser number of active trades?

DaveTrade said:

@Skate this series of posts that you are doing is aimed at new traders and you are showing them the ins and outs of trading a mechanical trading system. New traders may want to know what would be the minimum amount money required to trade a system like the SAP system, and I wonder if you think the system would still work if your exposure was reduced. That is, instead of using all your funds in the market, would the system still perform if a trader used a percentage of their funds or a lesser number of active trades?

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@DaveTrade, when it comes to trading, one of the most common questions that new traders have is how much money they need to start. While it is conceivable, to begin with a small amount of money, keep in mind that anything less than $50,000 or $60,000 can soon be eaten up by commission and other expenses which can reduce profitability. That is why it is critical to have a trading system in place to assist limit these costs while maximising returns.

While some traders have been able to transform tiny investments into significant returns, these occurrences are uncommon and should not be depended on as a realistic conclusion. Instead, traders need to concentrate on creating a good trading technique and keeping to a calm, steady, and methodical trading approach.

It's also vital to remember that human emotions drive markets and that these sentiments tend to persist over time. While markets evolve, the fundamental laws of success stay mostly unchanged. That is why it is critical to create a trading system based on a reliable and thoroughly tested trading methodology that's capable of adapting to changing market conditions.

Finally, the secret to trading success is to concentrate on the process of good trading rather than worrying about the money. Even during periods of bad performance, it is critical to stay patient and focused, as well as to continue learning and growing as a trader over time.

While learning all of the complexities of trading can be tedious and time-consuming, the experience earned from time in the market is vital. Traders can gain the skills and knowledge required for long-term success by maintaining a realistic mentality and focusing on personal growth and education.

The SAP Strategy Backtest
The backtests are 365 and 730 Days so there is no cherry picking. Using a 10-position $50k portfolio.



Skate.

"Trading for Beginners - Skate's Practical Guide to Profitable Trading"
A daily series of posts aimed at those just starting out on their trading journey.

45. Self-preservation should drive trading decisions
When it comes to trading, it's important to keep self-preservation in mind. However, it's equally important to balance self-interest with empathy, considering the potential effects of our decisions on others, such as our families and extended families.

Effective decision-making requires a balance between self-interest and empathy. While it's natural to prioritise our own interests and financial goals, we must also consider the perspectives and needs of others. Empathy allows us to understand the potential consequences of our decisions and make informed and logical choices that align with our values and long-term goals.

To achieve financial security and build long-term wealth, it's crucial to acquire the necessary skills and knowledge to evaluate financial opportunities and risks. This requires us to take the time to educate ourselves and think critically about our trading options. By considering the potential effects on others, we can enhance our financial results and attain more financial security and wealth over time, benefiting not just ourselves but our families and extended families as well.

Continuous learning and trade reflection is the key to developing the skills and knowledge necessary to make educated financial decisions and achieve our financial goals. By doing so, we can strike a balance between self-preservation and empathy, making informed decisions that align with our values and long-term objectives.

To summarise, it's of the utmost importance to prioritise self-preservation in trading, have a clear trading plan, establish a precise exit strategy, diversify your portfolio, regulate your emotions, and remain up to date on the latest news and trends. These procedures can assist you in safeguarding your capital and achieving long-term success.

Skate.

"Trading for Beginners - Skate's Practical Guide to Profitable Trading"
A daily series of posts aimed at those just starting out on their trading journey.

46. We all feel a sense of entitlement
Human nature is complicated, and we all tend to take the path of least resistance. While this might be beneficial in some instances, it can also contribute to a lack of personal discipline and organisational skills in many people today.

Unfortunately, many individuals nowadays have a sense of entitlement and demand instant rewards. However, gaining trading success and financial security requires a long-term perspective as well as the desire to put in the time, effort, and discipline to achieve these objectives.

To improve our capacity to meet long-term financial goals and make disciplined, smart trading decisions, we must develop a personal framework that contains clear goals, a plan of action, and a commitment to them. This could include forming habits like budgeting and saving, as well as seeking trading methods and information to help and improve our trading knowledge and skills.

When developing a trading plan with clearly defined rules, a well-constructed and thoroughly tested trading strategy, and a commitment to money management, all help achieve long-term financial success in this game.

In conclusion, while a sense of entitlement is natural, it is critical to see its harmful consequences. We may overcome our sense of entitlement and achieve greater success by adopting a more disciplined and systematic approach to our trading. It takes time and effort, to change the sense of entitlement but when mastered the benefits are well worth it.

Skate.

Skate said:

"Trading for Beginners - Skate's Practical Guide to Profitable Trading"
A daily series of posts aimed at those just starting out on their trading journey.

45. Self-preservation should drive trading decisions
When it comes to trading, it's important to keep self-preservation in mind. However, it's equally important to balance self-interest with empathy, considering the potential effects of our decisions on others, such as our families and extended families.

Effective decision-making requires a balance between self-interest and empathy. While it's natural to prioritise our own interests and financial goals, we must also consider the perspectives and needs of others. Empathy allows us to understand the potential consequences of our decisions and make informed and logical choices that align with our values and long-term goals.

To achieve financial security and build long-term wealth, it's crucial to acquire the necessary skills and knowledge to evaluate financial opportunities and risks. This requires us to take the time to educate ourselves and think critically about our trading options. By considering the potential effects on others, we can enhance our financial results and attain more financial security and wealth over time, benefiting not just ourselves but our families and extended families as well.

Continuous learning and trade reflection is the key to developing the skills and knowledge necessary to make educated financial decisions and achieve our financial goals. By doing so, we can strike a balance between self-preservation and empathy, making informed decisions that align with our values and long-term objectives.

To summarise, it's of the utmost importance to prioritise self-preservation in trading, have a clear trading plan, establish a precise exit strategy, diversify your portfolio, regulate your emotions, and remain up to date on the latest news and trends. These procedures can assist you in safeguarding your capital and achieving long-term success.

Skate.

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So in the spirit of further education:


jog on
duc

Skate said:

Exit strategies. Basically when the momentum stalls or decreases I want to be off the sucker.

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If only you could exit the bet at any stage during the race
Yesterday I posted in the "Life on the Punt" thread that there was a horse worth watching as it was on the job. On reflection, the post encouraged a few members to have a flutter. For my contrition, I'll make a post to explain the nuances between trading and gambling today.

Trading and gambling are sometimes conflated
Yet there are significant distinctions between the two. Trading involves careful management of positions because of the uncertainty it holds, whereas gambling is entirely reliant on chance. Traders utilise risk management to maximise returns and can "exit a trade" at any time. Gambling, on the other hand, is a game of chance in which the odds are frequently stacked against the gambler, who must ride out the bet until the end.

I have apologised to @rcw1 and @wayneL going on to explain that the jockey gave "Ma Belle Grise" every chance in running, but unfortunately, she just wasn't good enough on the day, and there are no excuses for her fading in the run home.

Ma Belle Grise
Horse number 7 In the pink, crossed well from out wide, positioned perfectly turning for home but wasn't good enough on the day. I have attached the video for those who missed the broadcast to explain why "exiting when momentum fades" is an excellent exit strategy. If only you could apply the same strategy during the running of a horse race.

View attachment Race 2.MOV

However, it is critical to recognise that trading is risky, and even experienced traders can lose money even if they initiate an exit at the incorrect time. To be successful in trading, you must first understand the risks involved and then devise a sound strategy for limiting risk and maximising returns.

Finally, traders can achieve higher success and profitability in their trading activity by properly controlling risk and remaining disciplined with precise entry and exit conditions.

Skate.

ducati916 said:

So in the spirit of further education: Index investing is misunderstood

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In the spirit of providing diverse perspectives on trading, it's worth reading alternative views such as the one shared by @ducati916. The article challenges the common belief that index investing is a passive and low-risk option, arguing that index funds are not truly diversified due to their heavy concentration in a few large-cap stocks. This concentration can lead to increased risk if those stocks suffer losses or underperform.

According to the report, an active trading strategy involves carefully selecting specific stocks "within the index" that have the potential to outperform the market, which may be a preferable alternative for some traders.

The forthcoming SAP Strategy, for example, trades the "All Ordinaries Index" using a defined price filter to remove the handful of companies that dominate the (XAO index) to ensure price gains are not dependent on percentage growth for profitability.

By investigating other points of view, traders can obtain a more complete grasp of the trading and make more educated decisions regarding their own investment strategy.

Skate.

ducati916 said:

So in the spirit of further education: Disciplined Systematic Global Macro Views

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The second article shared by @ducati916 explains that the markets are dynamic and constantly evolving, making it difficult to identify consistent patterns or trends that can be exploited for profit. Additionally, many trading strategies rely on complex mathematical models that may be difficult to implement in practice.

The article suggests that traders can focus on a few key principles, such as diversification, risk management, and disciplined execution of a well-defined trading strategy to increase their chance of success.

The Sharp Ration between in and out of sample charts was an eye-opener as there is a significant performance difference between the two results due to the momentum variation.

Overall, the article highlights the challenges of trading that underscore the importance of careful planning, risk management, and disciplined execution for traders seeking to achieve their financial goals when trading systematically.

Skate.

ducati916 said:

So in the spirit of further education: Why You Believe The Things You Do

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The third article shared by @ducati916 relates to the psychological influences our decision-making process has on trading. It also delves into the concept of confirmation bias, where we seek out information that confirms our existing opinions while ignoring information that contradicts them.

In a nutshell, the article emphasises critical thinking in forming our decision-making processes and measures we can take to increase our awareness that influence them.

The article "could have been written" with the "Dump it here" thread in mind where it encourages others to seek out different points of view, challenge our assumptions, and be willing to change our ideas in light of new information being presented through the experiences of others.

Skate.

Skate.

"Trading for Beginners - Skate's Practical Guide to Profitable Trading"
A daily series of posts aimed at those just starting out on their trading journey.

47. Have a plan to expect the worst
Trading is inherently risky, and it's impossible to predict the market's movement with complete accuracy. However, there are steps you can take to prepare for the worst-case scenario and minimise potential losses.

Preparing for unexpected events is an important step toward achieving long-term financial security. When everything appears to be going well, it's easy to forget this step, yet without a plan, we leave ourselves open to financial hardship and uncertainty.

This is especially true for traders, who may fail to plan for unanticipated market developments, putting their money at risk. We can, however, take charge of our financial destiny by making contingency plans to deal with such circumstances.

Developing a long-term financial strategy that takes market volatility into account is an essential component of any complete plan. We can obtain more financial stability and remain dedicated to our financial goals by doing so, while also gaining the knowledge and discipline required to make sensible financial decisions and generate money over time.

Diversifying your portfolio by spreading your investments across a range of assets can reduce the impact of any single event on your overall portfolio. Being prepared for volatility is another crucial aspect of trading. Sudden price movements and market fluctuations can occur at any time, and it's essential to keep a cool head and avoid impulsive trades based on emotions.

It's natural for us to aspire to improve our financial situation over time and seek more stability and success. Many people, however, fail to make this happen owing to a lack of necessary skills, discipline, or motivation. We may overcome these difficulties and achieve our financial goals regardless of market conditions by formulating a good trading plan and sticking to it.

Staying informed is also essential. Keeping up-to-date with the latest news, market trends, economic indicators, and geopolitical events can help you make informed decisions about your trades and adjust your strategy accordingly. Sticking to your strategy and focusing on the long-term growth potential of your portfolio can minimise your exposure to potential losses and maximise your chances of success.

Skate.

Skate said:

View attachment 158418





The SAP Strategy is a rules-based approach to remove the emotional side of trading that identifies trends with momentum to take advantage of market movements while minimising risk. One of the key features of the SAP strategy is its extensive use of filters. Filters are used to weed out potential false signals and to ensure that only high-quality trading opportunities are taken.



Skate.

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Agreed.



Now I know that you can trade through drawdowns as you have demonstrated that on numerous occasions.

With the drawdowns in your backtesting and from your experience will: (a) your average new trader be able to comply or (b) will chart 1 supervene in either direction or will they sit optimally in the area of best performance?

Does your methodology incorporate chart 2? I suspect it does.

jog on
duc

ducati916 said:

With the drawdowns in your backtesting and from your experience will: (a) your average new trader be able to comply or (b) will chart 1 supervene in either direction or will they sit optimally in the area of best performance?

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@ducati916, I hope my daily posts will attract traders interested in the SAP Strategy and help demystify system trading. While both charts are interesting, I will focus on the first as it directly relates to explaining trading concepts in simpler terms. My goal is to show that trading this way is not as intimidating as it may seem, especially for those new to system trading.

Using the word "Homeostasis" in trading is an overkill but it simply refers to traders' capacity to maintain a calm and level-headed approach despite market changes and emotional triggers. Traders who retain emotional stability and a clear perspective are more likely to make sensible and educated trading decisions, which leads to improved long-term profitability.

A well-defined trading plan, effective risk management, and the avoidance of impulsive or emotional decisions are all required to achieve homeostasis in trading. Traders can limit the negative impact of stress and emotions and maintain a consistent approach to trading by sticking to a strategy and controlling risk, conditions that I have stressed throughout my series of daily posts

The SAP Strategy by my previous definition will have no problems with sticking to a plan that manages risk and drawdowns effectively, reducing the negative impact of stress and emotions to maintain a stable and consistent approach.

If you enjoy watching "paint dry" you will absolutely love the SAP Strategy.

Skate.

ducati916 said:

Does your methodology incorporate chart 2? I suspect it does.

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@ducati916 the second chart refers to the "Strengths and weaknesses of trading". I'm not sure it would be wise of me to debate the point being made that past performance "is indicative of future performance" even though I don't stand behind this premise 100%.

I'm in the camp that aligns with the second statement about the assertion about "previous performance" is a predictor of future performance based on the premise that "certain market trends and patterns tend to endure over time". I use technical analysis to discover possible buy opportunities and a few filters to eliminate false signals.

The SAP Strategy runs entirely on a handful of technical indicators that help detect trends and probable buy and sell signals. The SAP strategy uses a trend-following technique to capitalise on market trends and momentum, which I've found through my research to be a successful method if performed "correctly".

The second chart is a top-down technique for finding the market's strongest and weakest stocks, beginning with a review of general market trends and focusing down to specific sectors, industry groups, and individual stocks. This method can help traders identify prospective opportunities based on prior performance and trends.

Overall, my approach is a little simpler to identify trading opportunities. I prefer to focus on the All Ordinaries index and use a combination of filters and parameters to narrow down the field considerably. Trading a narrow range means rotating only those positions that exhibit the correct criteria.

Cutting positions early if they fail to follow through is at the very heart of the SAP Strategy design. This approach is designed for traders who may doubt their ability to trade systematically. I maintain a well-defined trading plan linked to a precisely coded trading strategy, with a series of exit conditions with effective risk management is an easy strategy to trade.

With this in mind, the SAP Strategy will achieve "homeostasis in trading", without a doubt.

Skate.

@ducati916 your post today struck a chord with me because it reminded me of something you posted a while ago. You noted that simply having access to a profitable trading strategy does not ensure trading success. The effectiveness of a strategy is greatly dependent on an individual's approach to using it. You implied the pressure of trading varies greatly from person to person, while some traders thrive in high-pressure conditions, others flourish in low-pressure situations. The SAP Strategy is designed to trade the latter.

It's worth noting that a trader under too much pressure can lead to trading paralysis, in which traders are unable to take "any action" despite having the required trading knowledge and skill. I'm a believer that traders must recognise their own optimal amount of stress and learn how to manage it successfully, as this can have a substantial impact on their performance and overall market success, something I keep banging on about.

As a result, traders must learn how to regulate their stress and discover the appropriate degree that allows them to trade at their best.
Trading paralysis would make a "perfect" post to be included in an upcoming daily series as "trading paralysis" can cause a feeling of excessive worry, which can impair a trader's ability to make trading decisions.

Skate.

Skate said:

@ducati916 your post today struck a chord with me because it reminded me of something you posted a while ago. You noted that simply having access to a profitable trading strategy does not ensure trading success. The effectiveness of a strategy is greatly dependent on an individual's approach to using it. You implied the pressure of trading varies greatly from person to person, while some traders thrive in high-pressure conditions, others flourish in low-pressure situations. The SAP Strategy is designed to trade the latter.

It's worth noting that a trader under too much pressure can lead to trading paralysis, in which traders are unable to take "any action" despite having the required trading knowledge and skill. I'm a believer that traders must recognise their own optimal amount of stress and learn how to manage it successfully, as this can have a substantial impact on their performance and overall market success, something I keep banging on about.

As a result, traders must learn how to regulate their stress and discover the appropriate degree that allows them to trade at their best.
Trading paralysis would make a "perfect" post to be included in an upcoming daily series as "trading paralysis" can cause a feeling of excessive worry, which can impair a trader's ability to make trading decisions.

Skate.

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So some more 'psychology':



Interesting.

jog on
duc

"Trading for Beginners - Skate's Practical Guide to Profitable Trading"
A daily series of posts aimed at those just starting out on their trading journey.

48. Hone your trading attitude
When it comes to trading, having the right attitude is crucial to achieving long-term success. A positive attitude helps us stay disciplined and focused on our goals, even in the face of challenges and setbacks.

To develop a positive trading attitude, we need to cultivate self-discipline and a proactive approach to managing our trades. This means taking control of our financial destiny by establishing clear financial goals that align with our values and creating a strategy to achieve them.

It's important to make careful, well-informed decisions based on a long-term perspective. This requires staying up-to-date with the latest market news and trends and learning the skills of "discipline and risk management" to increase our chances of trading successfully.

Unfortunately, some individuals lack discipline or prioritise short-term needs over long-term financial goals, which can lead to costly mistakes and setbacks. To overcome this, we need to stay focused on our goals and commit to disciplined habits like budgeting, trading, and saving to enhance the prospects of long-term financial success.

By staying positive and resilient in the face of challenges, we can avoid costly mistakes and achieve our financial objectives over time. With the right mindset and skills, we can modify and hone our trading attitude to become better traders and achieve financial security.

It takes time and dedication to achieve financial success through trading, but the rewards are well worth the effort. It's crucial to develop self-discipline with a positive attitude, making careful, educated long-term decisions that align with our financial plan and values.

Skate.

ducati916 said:

So some more 'psychology': Interesting.

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@ducati916 when I first started trading, I was focused on establishing a profitable trading strategy and learning from successful trading approaches. I didn't place too much emphasis on the psychological barriers that traders must overcome. Trend trading appeared to be the logical choice, as trends influence people's perceptions not only in trading but also in apparel, haircuts, and even weight loss programmes.

However, my first large trading loss taught me the value of controlling my emotions and following a well-developed trading method. It was a wake-up call that you have no idea what you're in for until you've experienced it. The psychological obstacles that traders encounter can be overwhelming, and it can be impossible to negotiate the emotional terrain of trading without a disciplined and focused trading plan and strategy.

Duc's post today has reminded me yet again of the importance of trading psychology. It is a broad field that includes everything from fear and greed to overconfidence and impulsiveness. Managing these emotions is critical to making sensible and objective trading decisions, and it requires a high level of self-awareness and self-control.

To overcome these psychological barriers, traders must develop a thorough trading strategy that takes into account risk management, entry and exit points, and other critical parts of their trading strategy. They must also be able to manage their emotions and remain optimistic in the face of large losses, even a run of small losses.

To summarise, trading psychology is an important part of trading that traders cannot afford to overlook. Overcoming the psychological problems that traders face requires a disciplined and concentrated approach. Traders can navigate the emotional battlefield and achieve long-term success by building a complete trading plan, regulating emotions, and having a good attitude all the time.

Skate.

Skate said:

It is essential to recognise the psychological aspects of trading & how they can impact your performance.

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@ducati916 post today allows me to expand on a subject not given due respect by those just starting out on their trading journey. Trading is fascinating and exciting which is potentially lucrative that provides traders with a great level of independence and freedom. However, it can be a complex and difficult endeavour to manage because it requires a thorough grasp of the emotional elements that can influence a trader's decision-making process.

The capacity to buy and sell at any time for as much or as little as you want may give you a sensation of complete freedom, but in trading, this freedom can lead to poor decisions. Humans require structure, not only in the real world but also in the world of trading.

Trading psychology includes anything from anxiety to rage. Traders will feel the entire range of these experiences and emotions after a few trades. One of the most common feelings that traders experience is fear which can take many shapes, ranging from the anxiety of losing money to the worry of missing out on a few dollars of profits. During times of market volatility or uncertainty, these emotions can be extremely potent, making it harder for traders to make rational decisions.

Another common psychological obstacle that traders confront is overconfidence. Overconfident traders may take on excessive risk or make hasty decisions based on hunches, limited incomplete data, or incorrect information. This can result in huge losses and make recovery from setbacks or failures difficult for new traders.

To overcome these psychological barriers, traders must adopt a disciplined and concentrated mindset. This includes developing a comprehensive trading strategy that takes into account risk management, entry and exit points, and other critical factors. Traders must also be able to manage their emotions and keep a positive attitude when faced with ongoing losses.

Building resilience is also important for traders. Resilience is the ability to rebound from adversity while retaining a positive attitude and outlook. This certainly requires a high level of self-awareness, as well as the ability to control emotions such as dread and concern.

To summarise, trading psychology is a complicated and broad area that demands traders gain a full understanding of their own emotions and mental processes. Traders can navigate the emotional terrain of trading and achieve long-term success by taking a disciplined approach and discovering ways to control their emotions, whilst gaining resilience.

Skate.