Dump it Here

[Skate]

So, is risking more in a bull market than a bear market an edge? Is applying commonsense an edge?

Apologies for this brief post. I was becoming frustrated by the increasing complexities in the discussion about a topic, trading for profit, that is best kept simple and uncomplicated.

@peter2, I hear your frustration and you raise a bunch of fair points. I was pleased with how the conversation was playing out. After some consideration, it is wise to avoid unnecessary complexity when discussing trading and instead focus on the core principles, that's what most are interested in.

The simplicity of the trading process can get obscured sometimes. To bring things back to the center, I agree the discussion should revolve around how to earn "consistent" profits over time through a rules-based approach. Using a rules-based approach is certainly not gambling or relying on luck, it just removes human involvement to some degree.

In saying all this, I believe @ducati916 raised a valid point about trading with a "TRUE EDGE or a PSEUDO-EDGE". As a trend trader, I believe my trading results are more to do with the markets than anything else.

Skate.

 

[Captain_Chaza]

Ahoy Skates
I think you said somewhere you need all the Ducks to lime up like wooden ducks
and Whenever in Doubt Stay Out

IMHO This Cinderella Event has never happened in ny lifetime

Please explain why I have had the best year of my life while you are still looking backwards at 5 year old data

Do you consider the 5 year past is more relevant than the Present OCTOBER LOWS

ie: What trades has worked for you in this Aust Financial year If any ?

As an Admirer of a MECHANICAL Robot trading conception I find it is hard to believe that your system as it stands cannot even cross the road in its present format Let alone go to Sea on the ASX

Did you know There are Shorting Instruments Nowadays?

All I am asking for is "How has your baby performed in this Financial Year"
Did the Ducks ever line up as you wanted to make a trade?

I love your Concept but I feel you need to instill a lot more COURAGE into your filters

 

[Skate]

I think you said somewhere you need all the Ducks to lime up like wooden ducks
and Whenever in Doubt Stay Out

Hi Captain, there is so much to unpack
First off, I appreciate you engaging as it turns the current conversation in a different direction. When it comes to system trading, all the parameters and conditions need to align before a buy or sell signal is triggered, like rows of ducks lining up. The system rules dictate whether a trade is taken or not, there is no guesswork involved.

'When in doubt, stay out' is a mantra I've lived by in my trading and in life. It's served me well to pause and process things when something feels off, rather than hastily reacting.

Regarding performance this past year, the system has navigated the volatility and trends as intended. I don't rely on hunches or try to time or outsmart the market rather I want to be an active only when I consider the time to be right. Simply put, my trading system identifies setups meeting criteria and acts accordingly that I have set.

Of course there's always refinement, but the mechanical approach has worked to capture upside while limiting downside risk in these market conditions. I'm confident in the statistical edge, even if some trades face headwinds in the short run. Not every year or market environment will be smooth sailing, but staying the course based on backtesting and sound risk management gives the advantage over time.

Skate.

 

[Skate]

All I am asking for is "How has your baby performed in this Financial Year"
Did the Ducks ever line up as you wanted to make a trade?

@Captain_Chaza, you have raise a fair question on my performance this finicial year. I prefer not to disclose specific numbers, but I can give you a general sense how I'm going so far. Over this short of nearly two months I'm in positive territory.

This year has certainly seen its share of market swings
July started off gangbusters. The first 3 weeks were hitting all cylinders. I got a bit ahead of myself enjoying the smooth sailing. Of course, the market had to throw some curveballs in the last week, giving back a chunk of those gains. Still, finishing July solidly positive overall.

August has been a bit of a rollercoaster
Some good days building the account up, only to hit rougher waters giving back profits. The market's testing my patience and resolve. While still in positive territory, I don't like surrendering hard-earned gains. Comes with the territory of trading though as there will always be ebbs and flows.

The key is maintaining composure and discipline, not getting euphoric or despondent
Sticking to the trading plan and risk management. Some months will be up big, some just marginal. Over time, the averages and compounding do their thing. Trade by trade, the probabilities and stats hopfully play out. Of course, always looking to refine the system too. But focusing on the process, not the outcome of any single trade or period.

So in summary
Trading this month is a bit of a rollercoaster, but still on a positive trajectory overall. The trading maxim "smooth seas don't make skillful sailors" comes to mind.

Skate.

 

[Skate]

I love your Concept but I feel you need to instill a lot more COURAGE into your filters

@Captain_Chaza, I appreciate your feedback. Courage is an important ingredient in developing effective trading systems and filters as there is a lot riding on how well I can perform these tasks. My trading results don't yet match the time and effort invested, but the journey continues.

Trading system development is an iterative process
There is always room for improvement as experience grows and new research emerges. I am actively testing ways to instill more boldness in the system filters and buy criteria - whether through higher profit targets, wider stops, or increased position sizing. The goal is to capitalise on the strongest signals while still managing risk.

It's a balancing act
With the inputs from yourself and others has me looking closely at the effects of being more aggressive on trades with an edge. My enthusiasm for mastering system trading persists after all these years. The passion drives me to keep evolving the mechanics and psychological elements. With continued discipline and refinements, I'm confident the performance will scale up to the next level over time.

Skate.

 

[ducati916]

1. Apologies for this brief post. I was becoming frustrated by the increasing complexities in the discussion about a topic, trading for profit, that is best kept simple and uncomplicated. The process is very simple, first we buy then we sell. Our goal as traders and investors is to earn profits that increase our capital over time. We can earn these profits either systematically or with luck. Relying on luck is a form of gambling and I'd rather discuss the systematic method of earning profit (ie. trading, investing).

2. My edge isn't just the probability of a winning trade. It includes both the probability of the wins and losses as well as the size of the wins and losses. My edge can be calculated on past results. I can identify the past market conditions and calculate my edge in the different conditions. The size of my edges vary greatly in the different market conditions. Knowing these stats allows me to risk more when the market conditions are favourable for a particular trading strategy.

3. I would agree with you that varying the amount at risk isn't an edge. It's not ony commonsense to increase the amount at risk when market conditions are favourable and the system edge is at it largest. Perhaps this is a skill learned from experience?

4. My edge is calculated from a past batch of trades and I know my edge in different market conditions. How do I apply this in the future? In the future, the edge becomes an expectancy and the size of this expectancy is unknown. It may even be negative for a while. It's my role as a trader to assess the current market conditions and to apply the appropriate trading strategy with the appropriate amount to risk in order to create my edge in the future.

Peter, you have gone from a very brief post, to a lengthy and complicated post that raises many issues.

1. Keeping it simple. Systematic as against luck. Buy then sell. For a profit. Over a time period (historical data and timeframe traded) and gambling.

Differentiating a systematic method from sheer luck, is, your edge. Do you have one? I agree simple is best. What exactly is simple? We have seen Mr Skate discuss any number of entry conditions and exit conditions to satisfy the criteria: buy then sell (for a profit). Is this simple or complicated?

The backdated test results suggest that it is profitable (as against the data tested). Is that 'test' an accurate representation moving forward? No-one really seems to know. Mechanical devotees seem to take it on faith that it will, possibly with a few tweaks after trading it forward in real time, represent an accurate model to trade.

Gambling takes many forms from professional to rank amateur. Trading (in my estimation) is gambling plain and simple. It just depends on how you approach it, which is what all the previous discussion on this thread addresses.

2. The 'edge'. Simply the single most important metric there is bar none. I'm not going to attempt to define it: at the end of the day arguing over definitions is pedantic. What I will do is use an analogy to show what a true edge is and it's inherent limitations.

Professional poker players play with an edge. They are odds makers and card counters first, psychologists second, playing the foibles of their opponents. They are still subjected to luck, in that the card they need or fear may appear.

Trading stocks is harder. The pack of cards = 52. The range of events that can impact your position(s) is wider/larger. Some traders believe that they can sense the psychology of the market, abstract as that is. Maybe yes, maybe no.

Your edge is that of or similar to the professional poker player, just not as defined. Different strategies involve different skills. This thread discusses essentially a buy stocks long strategy in exclusion. There are hundreds more strategies available. Risk arbitrage, event trading, earnings trading, bracket trading the open and many others.

Each strategy that is employed by traders in the markets has a specific edge, which can, impact your perceived edge. Hence an edge is or can be highly fluid. The more stable your edge, the more robust, the higher or more consistent will be your profits.

3. The amount of risk assumed.

The more robust your edge, the more risk that you can assume. However there are risks extrinsic to market positions: how robust is your brokerage? Many through the years have failed for any number of reasons. Currency risk is increasingly a 'thing'. What if the markets actually closed for a year or more? It's happened in the past.

4. Finding/developing your edge.

Of course no-one in their right mind will give you their edge. Markets are highly competitive. You will have to find/develop your own edge, while surviving the learning process. This will always involve competing against others that have more experience/knowledge/resources/etc than you.

Is there a holy grail?

Yes there is: it is finding/developing a true edge.

If your thing is buying stocks long, never confuse a bull market with an edge.

jog on
duc

 

[qldfrog]

So, is risking more in a bull market than a bear market an edge? Is applying commonsense an edge?

Was on the same mind reading the exchange, if my mechanical system let me in some averagely decent shares in bull market and get me out in bear market, I do think it is an edge, not great but good enough to beat a buy and forget or ASX etf

 

[Skate]

never confuse a bull market with an edge.

Being a long-only system trader
Developing a profitable trading system requires rigorously testing over a significant amount of historical data (how much data is subjective). This process of backtesting helps determine whether the positive results are due to skill or just randomness and luck. Continuously monitoring the strategy's performance in real-time as you move forward is also crucial. Simplicity in a trading system is generally better, but finding the right balance of variables and filters to create a sustainable edge is the key. There's no definitive answer for what's "too simple" or "too complex" - it depends on the market, and style of trading.

Trading is risky, and more so, when it's money you can't afford to lose
Trading does involve risks and unknowns similar to gambling. But through research, discipline, and effective risk management, the odds can be shifted in the trader's favour to make the endeavor financially viable over time. An "edge" in trading comes from developing a strategy that gives you a statistical advantage in the marketplace, pure and simple. This edge could stem from analysing data, understanding market psychology, leveraging technology and mathematics, or finding other ways to tilt probabilities in your favour. Edges are often small and need to be maximised via thoughtful position sizing, risk management, and an efficient buy filter. A small but consistent edge can go a long way with proper execution.

Finding a sustainable edge takes patience, commitment, and continual refinement as markets evolve
Expect setbacks along the way is all I say. Staying focused on your process rather than short-term gains and outperformance often comes. Finding less crowded edges and being willing to think creatively and differently will tilt the probabilities in your favour over time, by sticking to your edge through ups and downs. Success comes from effectively executing a positive expectation strategy.

I'm positive you don't need to be a gun trader
I'm sure with persistence, hard work & determination trading profitably is doable for those willing to put in the commitment. Becoming a successful trader doesn't require brilliance but rather a commitment to ongoing learning, to achieve long-term profitability.

Skate.

 

[Skate]

Becoming a successful trader doesn't require brilliance but rather a commitment to ongoing learning, to achieve long-term profitability.

For most of us, trading is a hobby
Becoming a consistently profitable trader does not require any special talents. There is ample money flowing through the financial markets, providing opportunities for those willing to put in the effort. With dedication, discipline, and a commitment to continuous learning, developing a successful trading approach is challenging but achievable for most people.

Persistence is key
When we first set out on our own personal trading journey we don't expect setbacks but don't get discouraged. After a while, you will learn to accept these setbacks and start rolling with the punches. My piece of advice is to study your losses and refine your strategy. Be willing to adapt as you gain experience. Don't fall into the trap of overtrading or revenge trading when you take losses. Patience and staying true to your "so-called" edge is critical.

Markets evolve and new challenges arise
By maintaining a beginner's mindset paired with the right mentality, anyone can become a steady trader. It just takes dedicating the time and energy necessary to turn trading from gambling into a long-term endeavor with realistic profit expectations. The path is there for those dedicated individuals willing to walk it.

Skate.

 

[Skate]

I wish to raise a question
"Does passing on trading information help struggling traders, or does it tend to become just talk with minimal real impact"?

I'm mindful that each trader has their own personal struggles
I'm starting to think, generalised information tends to have a limited impact. While well-intentioned, I'm mindful that the generic information I often pass on falls well short of what is required. When I post, I do so with the expectation the information will have some benefit. I'm just saying, it's a starting point, not a complete solution.

Skate.

 

[ducati916]

Trading is risky, and more so, when it's money you can't afford to lose
1. Trading does involve risks and unknowns similar to gambling.

2. But through research, discipline, and effective risk management, the odds can be shifted in the trader's favour to make the endeavour financially viable over time.

3. An "edge" in trading comes from developing a strategy that gives you a statistical advantage in the marketplace, pure and simple. This edge could stem from analysing data, understanding market psychology, leveraging technology and mathematics, or finding other ways to tilt probabilities in your favour.

4. Edges are often small and need to be maximised via thoughtful position sizing, risk management, and an efficient buy filter. A small but consistent edge can go a long way with proper execution.



Skate.

1. It is gambling.

2. Agreed.

3. An edge can be a strategy. But it needn't be:



This is rather a process, utilising (potentially) a number of strategies that can adapt quite quickly. This 'batch of trades' can be a regular watch list, a series of scans for set-ups, scans for events, etc. Statistically, this is (normally) too small a sample size to claim 'statistical significance' for and is therefore somewhat unquantifiable to others who might observe the trades taken.

For example a scan of the databases for the word 'settlement' (as in legal) can drive reappraisal/repricing, which are further filtered through XYZ set-ups/filters/charts/etc. This is (generally) a market neutral strategy. This can be backtested but it would be painful and difficult (impossible?) to automate.

So in @peter2 example above, possibly the adjustment to positions re. 'market conditions' is an adaption to volatility. (I don't know I'm just guessing, it could be 100 different things). But just using vol. as an example, volatility can effect position size (as 1 example) dramatically. Do you anticipate a change in volatility or trade the current volatility? Can make a huge difference.

4. My point being that an edge need not be a static strategy. It can be a rolling adaptation to the market. It can also be a static strategy.

Which brings us to the pointy end: a mechanical system is a static edge. Discretionary trading, when done well, is not so much a single strategy as a process of rolling adaptation (as in Peter's example) or flippe-floppeing through a number of static strategies based on X. This is what makes discretionary traders look a bit unhinged at times.

So sticking with volatility as an example: is a change in volatility a change in market conditions significant to warrant a change in the overall assumption of risk (direction, position size, strategy, instruments, stops, etc)? Are the parametres tested in a mechanical system able to adapt? Does it even matter?

jog on
duc

 

[peter2]

"A process of rolling adaptation." I like that description.

As a discretionary trader it's exactly what I do.

I can't wait to reply to anyone who asks about my edge (nobody does). I'll say, " It's a process of rolling adaptation."
Then I'll smile warmly and walk away.

 

[finicky]

.. Then I'll smile warmly ..

Help me picture that

 

[peter2]

IJBOL. I did type smugly first, then changed it to warmly.

 

[eskys]

The only poster who makes any sense to me is Peter.

I know I'm not the sharpest of instruments......the more I read, the more confused I get.

Captain said what's needed is courage. How can courage be incorporated when one is confused?

 

[rcw1]

The only poster who makes any sense to me is Peter.

I know I'm not the sharpest of instruments......the more I read, the more confused I get.

Captain said what's needed is courage. How can courage be incorporated when one is confused?

Hello esky's @ keyes...

Na... you got a keyes methodology that is executed at the moment it should. We all got courage, full stop, to dabble in the market. Luv it, if only you could 24/7 ha ha ha ha ASX trading. The thing is, all this banter is good stuff, what you take away from it might work for you in years to come, but the present is always the challenge, as it represents what you got in that moment, that skill set, to take on the market and win and never miss an opportunity to do so.

Oh the joy of it all.

Have a very nice evening. rcw1 been really busy of late ... Better that than moping around guessing ha ha ha
EDIT change mythology to read methodology! ha ha ha ha

Kind regards
rcw1

 

[Captain_Chaza]

As we all know
COURAGE is not given to all!

How would you Sell Something to the "Not- So-Brave"

What about the Idea that " She'll be right in the Long Term "
Do you think that would work?

Sometimes they Do
But Unfortunately in most cases
They do Not!
How then can you Sell the Concept that " She'll be Right in the LONG term "and make some Brokerage / Wages in all Sea and Weather Conditions

The Answer is Simple
Just design an Index of the Top 20- 50 Leaders and then overweight them in all other INDECIES

For Example As you all know by now
I have a great love for adventure on the ASX
Volatility to me is Everything

Instead of sailing the Top ASX 20
I decided to challenge the ASX 300
Guess What I found out?

The ASX 300 includes all of the ASX 200 and only 100 lower classed entrants to make up the ASX 300
If you don't call that MILKING the Public ?
You can call it what you like!

In Summary Beware of anyone who preaches " She'll be right in the Long term "
Or
"I bought it for the Long Term"

Salute and Good Luck

 

[Richard Dale]

Each index has its own reconstruction and methodologies - they are a little different, and indexing companies are now in the business of "banding" to prevent "excessive" reconstitution events.

That being said, index constituency is mostly a simple momentum system, so using such a universe is already a system-on-a-system.

Nothing necessarily wrong with that though - but there are also different ways of looking at different cross-sectional parts of the market for different opportunities. The challenge is developing a stastically-significant trading system using accurate historical data for those cross-sections.

 

[Captain_Chaza]

Each index has its own reconstruction and methodologies - they are a little different, and indexing companies are now in the business of "banding" to prevent "excessive" reconstitution events.

That being said, index constituency is mostly a simple momentum system, so using such a universe is already a system-on-a-system.

Nothing necessarily wrong with that though - but there are also different ways of looking at different cross-sectional parts of the market for different opportunities. The challenge is developing a stastically-significant trading system using accurate historical data for those cross-sections.

Why would you call the All Ordinaries "The All Ordinaries" when it is not nearly "All" but only ~2000 or ~ One Third of the ASX?
Please Explain !

 

[Richard Dale]

Indices, are (free float) market cap weighted, so going beyond the limits is a law of diminishing returns.

As far as "All Ordinaries" is concerned, these are simply historical names. It doesn't actually mean "All Ordinary Shares".

The All Ordinaries actually represents 2.5B of market cap. The S&P/ASX 200 is about 2.35B. The total market cap of the ASX is around 2.57B, so we're talking a pretty tiny percentage beyond the All Ords.

* Figures as at end Jul 2023