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Dump it Here

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Which rather infers that you can accurately identify 'current market conditions', n'est pas?

I'm assuming (always a dangerous thing to do) that you have 'variations' of a long only strategy: ie. breakout, pullback, etc.

From Dave:



Which is essentially the same hypothesis.

The price chart is: Sentiment. It is not logic. It is not rational. It is emotional.

Which is fine. Nothing right or wrong with that.

Sentiment can change very quickly:




The usual response is: well I'd have a hard stop, exit, blah, blah. Fine. Then I could show you examples of where after a decline of X magnitude, the market just rips higher:



You have x3 false breaks higher.

Knowing the market conditions: bear market, doesn't make trading it any easier.

jog on
duc
 

@ducati916, I always value the diverse perspectives shared here. As I grow older, I find it increasingly challenging to articulate the intricacies of system trading in an engaging manner. However, I’d like to briefly touch upon the use of the “Switch Function” in trading strategies and during development.

The process of toggling between strategies is context-dependent, and explaining it in detail might be too time-consuming and potentially overwhelming for some readers. However, when it comes to charts, the concept is straightforward. You can switch "on the fly" to immediately observe the variations. In other words, making a certain change will yield a specific outcome.

Skate.
 


Again, I am making some assumptions:

(i) Context-dependent = market conditions
(ii) Switch on the flye = strategy
(iii) yield a specific outcome = 1+ 1 = 2

Lovely in theory. Of course the issue is; with how much time lag? Time lag = increased (potentially) risk. True if you are utilising some form of hard exit strategy.

jog on
duc
 

@ducati916, you’re correct in assuming that the context-dependent nature of strategy switching often relates to market conditions. The ability to ‘switch on the fly’ indeed refers to the adaptability of the strategy in response to these conditions.

As for the time lag you mentioned, it’s an important factor to consider. The speed at which a strategy can adapt to market changes can significantly impact its effectiveness and the associated risk. However, the use of advanced algorithms and technology can help minimise this lag, making real-time strategy switching a reality. Even a time-driven exit adds to this functionality.

Of course, it’s crucial to remember that while these tools can enhance our ability to respond to market changes, they don’t eliminate the inherent risks associated with trading.

Although my win rate hasn’t seen an uptick, my drawdowns have been mitigated. No single trading method consistently works for all the reasons you have previously discussed, but currently, the approach I’m employing has proven effective for me over an extended period of time.

Skate.
 


Embracing Positivity
With trading, maintaining a positive perspective, even when faced with challenges or unexpected results is so important. It’s a reminder that our attitude can greatly influence our perception of situations. So, even if things don’t go exactly as planned, we should focus on the positive aspects rather than dwelling on the negatives. This can lead to a more optimistic outlook and potentially better trading outcomes in the future.

Skate.
 


Bill Gates in 1995 kept enough cash in the bank to run MSFT for 12 months with 0.00 revenue.

Starting a business (in the 1980's) is a long term optimistic position.
Holding enough cash to last 12 mths in 1995 is short term pessimism.

Hope for the best, prepare for the worst.

If things are not going well in the short term, hope (optimism) is not a plan. Fix it.

jog on
duc
 
ducati916 said:
If things are not going well in the short term, hope (optimism) is not a plan. Fix it.
Click to expand...

A balanced view
Maintaining a positive outlook is a vital mindset in both trading and life. The ability to uphold a hopeful perspective is not only beneficial but also essential, as it plays a significant role in determining our success.

Trading, in particular, requires a delicate balance between optimism and realism. While it's important to remain positive, it's equally crucial to be prepared for any challenges that may arise.

Skate.
 
The excitement and unpredictability of trading
Trading is a thrilling adventure, that's not for the faint-hearted as short-term drawdowns can be brutal and even testing the most seasoned traders. Trading is all about hanging on for the ride while maintaining a resilient mindset.

In the wise words of @Captain_Chaza, "If you're willing to stay the course and weather the storms, the rewards can be substantial".

Skate.
 
MDWake said:
I wanted to start a thread on people's Daily Habits/Routines when it comes to their Technical Analysis. What are some must do habits or routines you've formed? Whether it be daily, weekly or even yearly.
Click to expand...

Habits & Routines

I wanted to start a thread on people's Daily Habits/Routines when it comes to their Technical Analysis. What are some must do habits or routines you've formed? Whether it be daily, weekly or even yearly. For example, reviewing your goals, reading the daily news, checking your watchlist...
www.aussiestockforums.com

I've reposted my response to consolidate my thoughts and ideas within this thread
"Thank you @MDWake for initiating this thread and to @DrBourse for bringing it to my attention, as I might have otherwise overlooked it. I firmly believe that sharing our daily habits and routines can be beneficial for both personal growth and the growth of our trading community, and I'm excited to contribute to and learn from this discussion.

My day starts at midnight with a thorough review of news reports and futures markets. I'm looking for patterns and trying to get a sense of what the market might do the next day. I find this helps me prepare for the day ahead and makes me feel more confident in my trading decisions.

After waking up, I check the Aussie Stock Forums for updates. I find that the concise presentation of information on the forum helps me stay informed and up-to-date without getting overwhelmed. As a weekly system trader, it's important for me to stay focused on my trading philosophy, and the forum helps me do just that.

During trading hours, I occasionally check in on the proceedings throughout the day. However, I've learned that once I've taken a trade, my job is to sit tight and wait for a sell signal. It's important to resist the temptation to act on "gut feelings" that go against my trading strategy. Instead, I make a note of these feelings and review them later to see if they are accurate or not. This helps me refine my strategy and avoid making impulsive decisions.

At the end of each day, I complete a record of my trading activity. This helps me keep track of my progress and identify areas for improvement. On Fridays, I send a summary of my weekly records to those who have an interest in the performance of their funds under my control. This helps me stay accountable and ensures that I'm always striving to do better.

During the weekends, I conduct a comprehensive analysis of my trading systems to ensure they remain effective and efficient. Additionally, I allocate time to brainstorm new trading ideas and strategies, as I believe that continuous learning and adaptation are crucial for success in the financial markets.

Furthermore, I enjoy sharing my insights and experiences in the "Dump it here thread" to give back to the community and help others who may benefit from my knowledge. By following these habits and routines, I have been able to achieve a high level of success in trading, and I hope that my experiences can serve as a valuable resource for other traders.

In summary, my daily habits and routines are centred around staying informed, focused on my trading strategy, and continuously improving my skills. I believe that following these habits has been my recipe for success".

Skate.
 
Skate said:
During the weekends, I conduct a comprehensive analysis of my trading systems to ensure they remain effective and efficient.
Click to expand...

Trading Strategies need to remain effective and efficient
One of the challenges in trading is the temptation to override a well-developed trading strategy. This can lead to uncertainty about whether the strategy itself is flawed or if the deviation from the rules caused a losing streak. It is important to recognise that poor trading outcomes can often be attributed to poor execution.

Those new to trading may be prone to bending the rules to align with their emotions and then become perplexed when their live trading results do not match their backtest results.

Adopting a mechanical trading approach involves strictly adhering to an exact set of predefined rules to execute trades precisely without deviating to promote consistency by removing the influence of emotions and biases from the trading process.

By following a mechanical system, traders can objectively assess the performance of their strategy over time and make informed adjustments if necessary.

However, it is important to note that mechanical system trading is not a one-size-fits-all approach. Traders should carefully design and thoroughly test their trading system to ensure its effectiveness. Regular monitoring and evaluation are also crucial to identify any potential shortcomings or necessary refinements in the system.

In conclusion, by recognising the pitfalls of overriding a trading strategy and embracing a mechanical system trading approach, traders can minimise the impact of subjective decision-making and increase their chances of consistent and successful trading outcomes.

Skate.
 
Achieving success when trading
All forms of trading requires the ability to endure temporary setbacks while waiting for your portfolio to grow. It's crucial to be able to handle the pain of losses or this game is not for you.

With system trading, it's important to recognise that for a strategy to fully capitalise on its "mathematical advantage," patience is required in spades. It often takes time for trends to develop and generate profits. The process can be slow, and it may take several months for a strategy to yield positive results. This is simply the nature of the trading landscape.

The performance outcome of any new strategy is heavily influenced by its starting date. While none of us can predict the future of trading, one thing is certain, it is vital to consistently follow your trading rules. Deviating from the rules can undermine the strategy's edge and potentially lead to its failure.

Consistency in timing the exit is a critical aspect of profitability. With trend-following strategies, there are usually abundant entry opportunities. However, success relies on executing the exit with consistency and precision.

In summary, trading involves both good and bad days, losing money is an inherent part of the game, and it is important to stay calm and focused during such times.

Skate.
 


Which is the crux of the problem.

How does one differentiate a methodology that is sound, but just fluctuating within normal and expected ranges, from a methodology that is now broken as its premise no longer holds?

The very rigidity of a mechanical system is either its greatest strength or its most dangerous flaw.
The fluidity of a discretionary system is either its greatest strength or its most dangerous flaw.

As traders, you pick one.

On this thread, the merits of mechanical are espoused.

How then do you differentiate the 'normal and expected' from 'broken' when the initial choice of mechanical is to test, prove and then execute without breaking any of the defined rules of the system?

Or is now an evolutionary system falling within the definition of 'mechanical'?

jog on
duc
 

@ducati916, thank you for your thought-provoking question. Differentiating between a sound methodology that is experiencing normal fluctuations and a broken one that is no longer effective can be a challenging task.

One way to approach this problem is to continuously monitor and assess the performance of the trading strategy, taking into account various factors such as market conditions, trade execution, and risk management. It's essential to have a clear understanding of the strategy's parameters, entry and exit rules, and risk-reward ratios.

When a trading strategy is mechanical, it's easier to identify when it's not performing as expected, not so with discretionary trading. You can analyse the trade history, identify patterns or trends that deviate from the expected outcomes, and determine if the strategy needs adjustments or if it's time to abandon it.

In my opinion, a mechanical system can be considered evolutionary if it's designed to adapt to changing market conditions. For example, a mechanical system can be programmed to adjust its parameters based on market trends, volatility, or other factors. In such cases, the system is still governed by predefined rules but can adapt and evolve over time, making it more robust and effective.

In summary, differentiation between a sound methodology and a broken one requires continuous monitoring, assessment, and adaptation. The key to success lies in understanding the underlying parameters, being aware of market conditions, and making informed trading decisions.

Skate.
 
Skate said:
"What factors contribute to the success of some traders, allowing them to generate significant profits from the markets, while others struggle to achieve similar results?"
Click to expand...
@Skate this is such a good question, thanks for asking it. A lot of members could put their answers to this question but the first person to hear from is the person that it was directed to, @ducati916 .
 
@DaveTrade I should make a series of posts around the "Principles and Challenges" to "Successful Trading" simply because trading is an exciting endeavour that offers huge financial opportunities.

However, it is important to approach trading with a solid foundation of knowledge and skills to increase the chances of success. By understanding these concepts, aspiring traders can develop a more informed and disciplined approach to trading.

Skate.
 
Skate said:
"What factors contribute to the success of some traders, allowing them to generate significant profits from the markets, while others struggle to achieve similar results?"
Click to expand...
Skate said:
@DaveTrade feel free to chime in with your insights. I have my own theories on this topic, but I'm eager to hear from others.
Click to expand...

@Skate I'm also eager to hear from others but in the meantime I'll try to answer your question. I think that a trader needs to have a methodology that they fully understand and one that harmonizes with their personality, they then need to build a complete system around that methodology and have the discipline to stick to it. These things are easy to say but hard to do, each element requires an extensive amount of knowledge and experience to understand the best way to combine the parts of the system correctly in order to produce the desired result. So I think that traders fail because they rush their learning taking shortcuts and subsequently start trading a system they don't fully understand. Unfortunately this is something that we all do, so a tip from my experience, if I entered a trade fully understanding why but then during the trade I found that I didn't fully understand what was going on then I learnt that the best thing to do was exit straight away. The natural tendency is to hold on and see what happens, usually a big mistake.
 
Skate said:
@ducati916 my question to you:

"What factors contribute to the success of some traders, allowing them to generate significant profits from the markets, while others struggle to achieve similar results?"

Skate.
Click to expand...

1. The person aspiring to be a trader/investor, must have an insatiable desire/motivation/interest in financial markets.

2. The trader must understand early that trading success will only accrue if the trading strategy/plan/methodology is (very) tightly aligned with their individual psychology.

3. That psychology must intersect at some point with how financial markets actually operate/exist/trade in reality. This is a more subtle point and it will remove certain people from ever being successful in markets as their individual psychology is not compatible with markets and how they trade.

4. That being said, components that can be manipulated are: risk tolerance, timeframes and of course strategies are multiple. Most should be able to find a fit with their psychology.

5. Leading on from #1: patience. Whatever the strategy, adherence to that strategy is vital. It is the strategy aligned to your psychology. Wandering off into the weeds through boredom, leads to trouble as you are no longer aligned with your strategy. Your strategy is designed to be BORING. Boring means that you are not pressured into decisions that will create excitement/stress/etc and inexorably lead to bad decisions.

6. Patience is tied tightly to timeframes. Timeframes are tied to capital. This is also an important, although under-appreciated point IMO.

7. The strategy must operate well in all market conditions in which it is employed. If it does not, then you must sit out in environments that are contrary to your strategy. Go to cash. Exhibit patience.

8. Expanding on #1: there are so many elements required here: a student of history, life experience, a certain level of numerate ability, the list is long.

jog on
duc
 
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