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A simple but fair way to indeed help in this choice
 

A dive into reported profits​


A dive into reported profits

Whilst large corporations generate large profits in dollar terms, these profits must be shared amongst millions of individual shareholders.
www.livewiremarkets.com

i hold several of the companies mentioned in this article
 
Why do trading gurus talk in riddles?
They all claim to possess exceptional knowledge and expertise in the financial markets, yet some struggle to make money themselves, which raises questions about the effectiveness of their current strategies. They often communicate their ideas vaguely, leaving me puzzled and intrigued at the same time. But why do they resort to speaking in riddles and what are some of the reasons for this behaviour. I've narrowed it down to four main reasons and I'm sure there are many more.

(1) Attention-seeking
Trading gurus often utilise vague language in their posts to captivate their audience, fostering curiosity and awe. By doing so, they aim to enhance their popularity and following, while simultaneously avoiding accountability by dodging questions. When faced with criticism or questions, some respond with sarcastic or ambiguous replies, deflecting scrutiny and maintaining an air of mystery.

(2) Marketing strategy
Trading gurus often use vague posts as a marketing tool to promote their products or services, encouraging people to purchase their courses, trading strategies, and books, they even encourage others to sign up for their free newsletters. Doing so allows them to monetise their reputation effectively making their products or services seem desirable.

(3) Ego protection
Some trading gurus resort to vague posts to safeguard their reputation and ego. When their trading performance is sub-optimal, they try to deflect criticism by emphasising that their strategy is within backtestable limits. This approach allows them to maintain their status as an expert, even when their trading performance is not up to par.

(4) Genuine expertise
It's important to note that not all trading gurus have questionable motives. While some may be driven by self-promotion and the desire to keep the money carousel in motion, others genuinely possess exceptional knowledge and skills that they want to share with others. These experts may offer valuable insights and advice, often for a price. However, it's essential to approach their content with a healthy dose of scepticism and critically evaluate their claims, as there's often a fine line between genuine expertise and clever marketing.

Skate.
 




Additional explanation
Below is this week's exploration analysis displaying "all the raw signals" can be overwhelming and difficult to decipher, and even my colour-coding interpretations can be confusing. To help with this, I've included a short walk-through to guide you through the information and make it easier to understand.



Below are all the raw signals from the "Exploration Analysis" (this week)
There are 6 signals but only one position is currently in the "Dual Breakout Strategy" portfolio. Theoretically, (TPW) would be placed in the pre-auction over the weekend at the offer price of ($5.76) to snag the opening price at the open on Tuesday as Monday is a holiday.




(TPW) Price Chart (colouring explanation)
The "pink down arrow" indicates a "Trailing Stop" exit - the worst exit to encounter. A "yellow down arrow" indicates that the previous stop was from a "stale stop" exit, indicationg that momentum has stalled or the "buy condition" is no longer true.




Chart examples of a "TakeProfitStop" (EMR)
The best exit is one indicated by a "green down arrow" being a "TakeProfitStop", an exit that locks in profits. Both (EMR) and (BOE) exited their relative positions with a profit.




Information overload - "TakeProfitStop" (BOE)
I find the chart's formatting personally beneficial, providing a clear visual representation of the trade details. The ASX code and company name are displayed on the left side of the chart header, while the right side shows the length of time in the trade, along with the High, Low, Open, and Closing prices.

Notably, the "trail stop" is colour-coded, switching from "red" to "pink" when the "percentage buy filter" changes status. The red line indicates that the "percentage buy filter is true," while the pink line shows that it is no longer true. This visual cue helps me quickly identify when the trade's conditions have changed.



Skate.
 


Being challenged
When presenting information, it's important to be prepared to provide additional explanations when challenged. For instance, I recently posted a price chart of (EMR) that showed two "TakeProfitStops" on the one price chart. Both exits were from a "TakeProfitStop."

Someone pointed out that if I hadn't used a "TakeProfitStop" exit, the profit would have continued to grow. While that's true in this particular case, the "TakeProfitStop" exit allowed me to lock in a profit and then re-enter the position to take advantage of the continuing momentum. By using a "TakeProfitStop" exit, I was able to manage risk and potentially increase my overall profit.

As it's late, I'll continue the discussion about the "TakeProfitStop" exit strategy tomorrow with more charts and backtest results, so we can dive deeper into the performance of the "TakeProfitStop".

Skate.
 
It's a fine line between being "challenged" and having a "difference of opinions"
In my previous post, I used the term "challenged" to describe a discussion I had with a fellow trader about the usefulness of a "Take Profit Stop" in trend trading. However, upon further reflection, I realise that it was more of a difference of opinions on the matter.

Let your profits run and cut your losers
The popular trading phrase "Let your profits run and cut your losers" highlights the importance of allowing profitable trades to continue while minimising losses by closing unprofitable trades early. This advice is based on the idea that it is better to take a small loss than a big loss and that it is better to let your profits run in order to maximise returns.

However, I believe that there is no one-size-fits-all approach to trading
Each trader has their own unique style and what works for one person may not work for another. As traders, we are constantly learning and trying to improve our techniques, and it's important to stay open-minded and adapt to new ideas and strategies.

In conclusion
The key to successful trading is finding a method that works for you and that you feel comfortable with. Whether you choose to use a 'Take Profit Stop' or not, the most important thing is that you have a clear strategy in place and that you stick to it. Remember, there is always room for improvement and learning in the world of trading.

Skate.
 
After a lengthy discussion
I wanted to share a recent trading experience that highlights the importance of using a "TakeProfitStop" exit in certain situations. I posted a price chart yesterday that showed a nice profit from a trade, and one of the comments I received was that if I hadn't used a "TakeProfitStop" exit, the profit would have continued to grow. And the person was right "in this particular case", as the profit would have continued to grow if I hadn't used a "TakeProfitStop" exit.

# 1. Price Chart - (ASX:EMR) - with a "TakeProfitStop"
The price chart was to explain the chart's formatting, which I find personally beneficial in providing a clear visual representation of the trade details. However, it was met with a "difference of opinion" regarding the usefulness of a "Take Profit Stop" in trend trading.

I believe having a clear visual representation of the trade details can help traders make better decisions and stay on track with their strategies. A "Take Profit Stop" can be a useful tool in this regard, as it allows traders to set a specific price level at which their trade will be closed once it reaches a certain level of profit.

However, I also understand that there are different opinions on the matter, and some traders may prefer to use other methods to manage their profits and losses. Ultimately, the key to successful trading is finding a method that works for you and that you feel comfortable with. In this particular trade, the "TakeProfitStop" exit allowed me to jump back in on the continuing momentum.




# 2. Price Chart - (ASX:EMR) - with "NO" TakeProfitStop
However, it's important to remember that the "TakeProfitStop" exit is a risk management tool that can help minimise losses and lock in profits in a variety of market conditions. Sometimes it works perfectly, and other times it doesn't. But overall, using a "TakeProfitStop" exit can give us an advantage in terms of both profit potential and risk management.

It's also worth noting that the "TakeProfitStop" exit can help avoid the temptation to over-trade or hold onto a position for too long. By setting a fixed profit target, we can avoid getting caught up in the emotions of the trade and make more objective decisions.

Of course, there are no hard and fast rules in trading, and every trade is unique. But in my experience, using a "TakeProfitStop" exit can be a valuable tool in certain situations. I hope this helps clarify my earlier post.



Skate.
 
Are "Extra Exit Strategies" Worth It?
As traders, we've all been there. We enter a trade with a plan, only to see it stagnate or even move against us. We nervously watch as our open profits dwindle, hoping that the trend will turn around and we'll be able to exit with a profit. But what if it doesn't? What if the trend continues against us, and we're left with a significant loss?

Additional exits can make a strategy shine
This is where extra exit strategies come in. In addition to a trailing stop, which follows the price movement and adjusts the stop loss accordingly, some traders also use a "Take Profit Stop" and a "Stale Stop" to manage their risk as I do. A Take Profit Stop is a fixed price level that is set at a certain distance from the current price and is designed to capture profits when the trend is moving in our favour. By setting a "Take Profit Stop", we can lock in our profits and avoid giving back a significant portion of our gains.

Skate.
 
Let's talk about a "StaleStop"
A "TakeProfitStop" has its place but on the other hand, a Stale Stop is used when the trend doesn't continue in our favour. If the price stagnates and moves sideways, it may be better to exit the position and reallocate our trading funds to a more promising trade. By using a "StaleStop", we can avoid getting stuck in a trade that's not going anywhere.

But what about the resistance to using these extra exit strategies?
Some traders argue that they can exit a position too early, and miss out on potential gains. And it's true, there's always the risk of exiting a trade too early and missing out on potential profits. However, backtesting has shown that having these extra risk assessments in place can be worthwhile. By using a "TakeProfitStop" and a "StaleStop" in conjunction with a "Trailing Stop", we can minimise our losses and maximise our gains.

In conclusion
While there are valid concerns about using "extra exit strategies", the benefits of having them in place can be significant. Using a "TakeProfitStop" and a "StaleStop" in conjunction with a "Trailing Stop" increases my chances of success in the markets.

Skate.
 



So it depends on what market you are trading. Stocks can trend for years. Commodities however are far more rangebound, the ranges derived from the value of currencies.

So with stocks it makes no sense to have a 'take profit' stop. With commodities it does.



jog on
duc
 
ducati916 said:
So with stocks it makes no sense to have a 'take profit' stop. With commodities it does.
Click to expand...

@ducati916, it's a fine line between being "challenged" and having a "difference of opinions". This is why I enjoy presenting information, from my perspective, and providing additional explanations and charts to display that it works for me. I'm not saying it's the "Duck's Guts" but it's better than the alternative of not using a series of exits. I maintain that profits are made on the exits but I do concede that the entry is important, but ultimately the profit is made at the end of the transaction.

I understand your point, and I appreciate the opportunity to discuss this topic further. While it's true that some traders may not find a "Take Profit Stop" useful in certain market conditions, I believe that having a clear exit strategy in place can be beneficial for several reasons.

# 1. Firstly, a "TakeProfitStop" can help traders lock in profits and limit their losses. This can be especially helpful in markets that are known for their volatility, such as commodities.

# 2. Secondly, a "TakeProfitStop" can help traders avoid emotional decision-making by having a pre-defined exit strategy in place, traders can avoid the temptation to let their emotions dictate their trading decisions and instead, focus on sticking to their plan.

#3. Lastly, a "TakeProfitStop" can help traders manage their risk. This can be especially important for traders who are managing a large portfolio or many portfolios.

I hope this helps clarify my perspective on the matter, and I'm eager to provide further insight by sharing some charts that demonstrate the value of using a "TakeProfitStop" in certain market conditions. Through a 730-day backtest, I'll showcase the benefits of incorporating this tool into your trading strategy, highlighting the difference it can make in optimising your performance.

Skate.
 
But @Skate and many others here trade on Australian shares, moreover essentially quite small caps and mostly for us mining related.so it might work.
I personally have never implemented a profit taking in my systems but always have a stale exit which worked for me .
I think the profit taking is only valuable with the small caps with huge volatility..mostly based on not much and market manipulations here on the ASX junior miners explorers
 


Based on the 730 day backtest results
It appears that the "Dual Breakout Strategy" marked as "strategy (a)" with the "Take Profit Stop" exit included outperformed the same Strategy, marked "strategy (b)" without the "Take Profit Stop" in several key metrics that I will list below with a self-evaluation of the results.



# Here are some of the main differences between the two strategies

1. Net Profit
Strategy (a) had a higher net profit of $69,717.45 compared to Strategy (b) which had a net profit of $55,633.73. This represents a difference of $14,083.72 in favour of Strategy (a).

2. Net Profit %
Strategy (a) had a higher net profit percentage of 69.72% compared to Strategy (b) which had a net profit percentage of 55.63%. This means that for every dollar invested, Strategy (a) made a higher profit than Strategy (b).

3. Exposure %
Strategy (b) had a higher exposure percentage of 54.14% compared to Strategy (a) which had an exposure percentage of 46.50%. This means that Strategy (b) had a higher percentage of its capital invested in trades compared to Strategy (a).

4. Risk-Adjusted Return
Strategy (a) had a higher risk-adjusted return of 149.91% compared to Strategy (b) which had a risk-adjusted return of 102.76%. This means that Strategy (a) had a higher return per unit of risk compared to Strategy (b).

5. Annual Return
Strategy (a) had a higher annual return of 30.23% compared to Strategy (b) which had an annual return of 24.72%. This means that Strategy (a) had a higher compounded return over a year compared to Strategy (b).

6. Maximum Drawdown
Strategy (a) had a lower maximum drawdown of -17345.63 compared to Strategy (b) which had a maximum drawdown of -20599.47. This means that Strategy (a) had a lower maximum loss compared to Strategy (b).

7. Recovery Factor
Strategy (a) had a higher recovery factor of 4.02 compared to Strategy (b) which had a recovery factor of 2.7. This means that Strategy (a) had a higher ratio of profitable trades to losing trades compared to Strategy (b).

8. Payoff Ratio
Strategy (a) had a higher payoff ratio of 2.38 compared to Strategy (b) which had a payoff ratio of 2.27. This means that Strategy (a) had a higher ratio of profit per dollar invested compared to Strategy (b).

9. Ulcer Index
Strategy (a) had a lower ulcer index of 5 compared to Strategy (b) which had an ulcer index of 6.18. This means that Strategy (a) had a lower maximum drawdown and a lower volatility compared to Strategy (b).

10. Sharpe Ratio
Strategy (a) had a higher Sharpe ratio of 0.51 compared to Strategy (b) which had a Sharpe ratio of 0.35. This means that Strategy (a) had a higher return per unit of risk compared to Strategy (b). A higher Sharpe ratio means that the investment has a higher return per unit of risk. This means that strategy (a) generates more excess return over the risk-free rate for every unit of volatility it experiences.

Overall, it appears that Strategy (a) outperformed Strategy (b) in several key metrics, including net profit, net profit percentage, exposure percentage, risk-adjusted return, annual return, maximum drawdown, recovery factor, payoff ratio, sharpe ratio and the ulcer index. This suggests that the "Take Profit Stop" exit included in Strategy (a) helped to improve the performance of the strategy compared to Strategy (b) without the "Take Profit Stop".

Skate.
 

@qldfrog, I hear what you say. I understand your point and appreciate your perspective. My trading is focused exclusively on the ASX:XAO, and I tailor my posts and comments to reflect my experience and knowledge of this index. While my strategies may not be directly applicable to other markets or asset classes, I'm always eager to learn from and adapt to different approaches that can enhance my trading performance.

Skate.
 

In stocks, the reason that you would employ a 'take profits' is that you have a sideways or bear market:



Which you do.

However, even in a sideways/bear, there will be stocks that undertake massive trends.

How do you reconcile a 'trend trading' system (strategy) with a 'taking profits' tactic?

Have you compared apples with apples?

That being all inputs the same except for (a) take profits and (b) gradually rising stop/exit.

*Edit

I see you ran the test for 730 days.
How about 10yrs?

Essentially what you are proving is that a strategy designed for market conditions is the best way forward. No argument there.

The question becomes: how quickly can you recognise market conditions to amend the strategy?

jog on
duc
 
Last edited:

@ducati916 let me expand my answer on the order you have raised them.

1. However, even in a sideways/bear, there will be stocks that undertake massive trends.
Click to expand...
#1. I agree, that even in a sideways or bear market, there will always be stocks that undertake massive trends. My strategy focuses on identifying and capitalising on these trends, while also employing a "TakingProfitStop" tactic to maximise gains.


ducati916 said:
2. How do you reconcile a 'trend trading' system (strategy) with a 'taking profits' tactic?
Click to expand...
#2. Reconciling a "trend trading" system with a "TakingProfitStop" is quite simple. In my strategy, I use a trend-following algorithm to identify and enter profitable trades. Once a trade is entered, I employ a "TakeProfitStop" exit strategy to lock in profits at predefined levels. This approach allows me to maximise my gains while also minimising potential losses.


ducati916 said:
3. Have you compared apples with apples?
Click to expand...
#3. Yes, I have compared apples with apples in my 730-day backtest. I tested the same strategy with the "TakeProfitStop" turned on as displayed in (Strategy A) and turned off in (Strategy B). The results showed a significant difference in performance, with (Strategy A) outperforming (Strategy B) by a wide margin. I went to great lengths to explain the metrics and the difference they made in my previous post.


ducati916 said:
4. That being all inputs the same except for (a) take profits and (b) gradually rising stop/exit.
Click to expand...
My strategies incorporate both a "Trailing Stop" and a "TakeProfitStop" and a "StaleStop" in all my strategies. The "Trailing Stop" is used to gradually raise the stop-loss level as the trade moves in my favour, while the "TakeProfitStop" is used to lock in profits at predefined levels. The "StaleStop" allows me to deploy capital elsewhere. By combining these three exit strategies, I aim to maximise gains while minimising potential losses.

Finally
All I can say "It works for me" and it might not be the same for others.

Skate.
 
ducati916 said:
The question becomes: how quickly can you recognise market conditions to amend the strategy?
Click to expand...
that sounds like a million dollar question to me

especially as the average trader is encouraged to resist fear ( the urge to exit early ) and acquiring the skill of parsing the information glut ( much of which is delayed or inaccurate )

PS imo the question is important to ( active ) investors as well

cheers
 
Sharing actual results
At times I'll share my ongoing trading results, allowing others to compare and contrast my performance with theirs. This year started strongly, but reality hit hard times in August, and I went from "hero to zero" quickly. It was a tough pill to swallow, but I'm proud to say that September has been a different story. Not only have I recouped my August losses, but I've also enjoying my best September ever. The graphics below give you an idea of my journey this financial year so far.

Before I finish this post
I want to take a moment to express my gratitude to the trading gods for their favour. As a hobby trader, I know that the universe can be unpredictable, and I'm humbled by the challenges and opportunities that come my way. I'm off to find my "rosary beads" now, seeking guidance and blessings for continued success in my trading journey for the rest of this financial year.






Skate.
 
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