Example of my conservative trading strategy

[lukeaye]

I understand what you are saying tech, But from a discretionary point of view, not locking in my profits would have been suicide. The fact that my stop losses werent triggered, is a good thing at the moment, because i was allowed to lock in profits on all my positions bar 2, paladin and gold.

If in the case of mechanical system, none of the positions would have been closed and i would have now lost money instead of making money? i now know and understand the advantages and disadvantages of mechanical trading. but at some point you have to step in, in a discretionary manor, and say, enough is enough. i dont need a computer to tell me when im right or wrong, i can see it for my own eyes and analysis

And i will be keeping this diary up, whether the mechanical computer system tells me or not, i am turning a profit using my discretionary methods, with mechanical rules, and my diary shows me that.

I will keep trying to understand the confusing lingo of programming amibroker.

 

[tech/a]

Luke
I know you have benifited from this thread.
I have been confronting for that very reason.

I understand what you are saying tech, But from a discretionary point of view, not locking in my profits would have been suicide. The fact that my stop losses werent triggered, is a good thing at the moment, because i was allowed to lock in profits on all my positions bar 2, paladin and gold.

(1) Had the Dow not lost 200 pts but 50 pts would you have done the same.
Was this a rule in your discretionary trading?
(2) 12 hrs before you had a clear plan and stop was set--what happened to that plan? Is this a rule in your discretionary planing.
(3) What happens now if AMP now continues into profit?
(4) Is your idea of discretionary trading the ability to just do anything at anytime and for any reason you see fit?

If in the case of mechanical system, none of the positions would have been closed and i would have now lost money instead of making money? i now know and understand the advantages and disadvantages of mechanical trading. but at some point you have to step in, in a discretionary manor, and say, enough is enough. i dont need a computer to tell me when im right or wrong, i can see it for my own eyes and analysis

Luke really think about this paragraph.
Trading mechanically means you have a set of rules which have been tested over many portfolio's(In a Stock trading method) which if applied over and over and over trade after trade after trade should produce results within the range of the deviation from the average produced in your trade testing. You let it run EVEN if in YOUR mind you are letting a trade fall into a loss. WHY ---because you know that the next and the next and the next trade will cumulatively return figures within your testing. Below is a Montecarlo chart of one of mine demonstrating this point.

Click to expand



See you only know if your right at a point in time.You dont know if your decision will CONTINUE to be right for any length of time,what happens when the "Right" decision becomes incorrect still in the parameters of your "Plan"?
AMP still could!

And i will be keeping this diary up, whether the mechanical computer system tells me or not, i am turning a profit using my discretionary methods, with mechanical rules, and my diary shows me that.

I will keep trying to understand the confusing lingo of programming amibroker.

Only you know if that is the case.

From your diary then.
What sort of R/R are you getting then.
What is you longest string of winners and losers?
Why is your discretionary trading making $$s.What is your average winning trade
What is your average losing trade.
What is your biggest winning trade?
What is your biggest losing trade?
Do you position size equally?
EVERY trader should be able to answer this (in black)---if he cant then he's gambling.

 

[lukeaye]

Of course i am tech. I appreciate your input greatly, and by all means if you feel strongly about something, im happy to hear your view.

I do agree with what you are saying, i would love to have the ability to check all the different techniques and find what produces the best results historically, but i cant, i dont know how use these softwares. So i basically have to rely on my own analysis, and experience and backtesting. i know what positions i can take, and what positions i cant take, based on what im prepared to risk in a certain set-up in relation to its possible rewards.

I also know, that certain position sizing techniques (pyramiding) will allow me to enter a certain trade which may have slightly more risk then another or a higher failure rate then another once again based on my experience and backtesting. I do agree that my expereince can be nothing compared to the historical data a system can scan through for the last 40 years. i just wish i knew how to do it.

As to setting rules with when to exit trades in situations like this, when markets pull back, if i can see from my analysis, that the markets are pulling back, then that is an "edge" i have over the machine. I can filter in my own analysis, the difference, between a simple down day, or a pause, and a market pullback. I have rules which allow me to sit in trades through such pauses. For example, with the AMP position, i think i stated that if the market pulls back or pauses, this will be allowed, so long as, it is on lower volume, at lower ranges, and the broader market is still showing upward momentum.

None of these criteria or rules "mechanical" or "discretionary" were complied with, so this signaled an exit from AMP.

But as a whole, i agree it would be very adventageous, to have a system backtester that could show you the expectancy of your systems over longer historical timeframes.

 

[tech/a]

Have private mailed you.

 

[clayton4115]

hi Kam

like to know how you went with your AMP trade, after fridays 3% drop, AMP its looking quite bearish.

 

[nunthewiser]

perhaps scroll back

 

[clayton4115]

Fair enough then not 12 hrs later---not even another days trading and this-------



A trading method turns to panic and saving face---NO METHOD.
Point made.
Losses are common place----its how you deal with them.
NOTHING had changed from your post the night before only your mind set.

My posts are seen as harsh and confronting---when trading like this is seen people need stark reality not pussy footing rubbish.

hi Tech/a

i completely agree with what your saying, i'm sorry but luke DOES not have a trading plan, you decided to quit just because the market tanks 2%, a few posts back you were talking about how the fundamentals of the market will drive prices higher, yet a day later you say you quit all your positions and sitting on the sidelines.

Please do not take any offence but you need to re evalute your trading plan, Luke.

 

[lukeaye]

hi Tech/a

i completely agree with what your saying, i'm sorry but luke DOES not have a trading plan, you decided to quit just because the market tanks 2%, a few posts back you were talking about how the fundamentals of the market will drive prices higher, yet a day later you say you quit all your positions and sitting on the sidelines.

Please do not take any offence but you need to re evalute your trading plan, Luke.

I belive what i said was, the fundamentals should drive prices lower. and that i would evalute my positions, based on the broader market conditions, which was part of my plan? whether you agree with my plan or not, it was a plan.

Im not taking offence to anything, as i have said i am happy for everyones input.

 

[lukeaye]

hi Kam

like to know how you went with your AMP trade, after fridays 3% drop, AMP its looking quite bearish.

I exited the position for a profit of 2R i think it was. I dont know whether i stated it or not, but the reason i set that low first target was in case of a double top, which has occured, and my plan had considered that.

 

[kam75]

I exited the position for a profit of 2R i think it was. I dont know whether i stated it or not, but the reason i set that low first target was in case of a double top, which has occured, and my plan had considered that.

The last time I had a buy signal on AMP was on a break of 6.20 and pulled a quick CFD trade. Haven't touched it since. Like i said, I'm not fan of buying on support. Actually would not say that AMP is looking too bearish. The volume's still there. Just pulling back to the 6.00 level. So i reckon for all you support buyers, could be an opportunity next week.

 

[johnnyg]

Do you go back over your trades and reasons why you closed them out Luke?

Your Gold trade would be doing very well, and from your earlier posts, you closed it out for a loss, even though your original stop was not hit?

 

[tech/a]

AMP never hit stop either.

The urge to minimise loss is strong and not the worst habit Ive seen.
But to help off set this smaller position sizes normally do the trick.
Also a realisation that
(1) Stops are set t a point we KNOW our analysis is likely wrong.
(2) Stops being ht are inevitable.

I also noted that AMP made a double bottom further cementing that support level.
It is ranging however so the trade methodology---being discretionary maybe looked at.

Good though to work through these with Luke--takes a bit to cop it from the "critics".

 

[lukeaye]

Yeah, buy you know what, im really happy i put these trades up for crtisicm, because it will only make me better.

And looking back, i should have stuck to my guns, and trusted my analysis, and accepted a loss if it occured, because my analysis was right, but my emotions were wrong!

So i have leant a lot form this. thanks everyone

 

[tech/a]

You could also have bougt again on the double bottom which would have given a very low risk trade.
Your analysis hasnt proven correct yet as it may again resist at the highs.

I would prefer to see high volume wide range days BREAKING resistance than heading into it.

Anyway enjoy your trading.

 

[Sean K]

Yeah, buy you know what, im really happy i put these trades up for crtisicm, because it will only make me better.

And looking back, i should have stuck to my guns, and trusted my analysis, and accepted a loss if it occured, because my analysis was right, but my emotions were wrong!

So i have leant a lot form this. thanks everyone

You should keep putting them up lukeaye. You may come up with something that works just right for you. Looking forward to seeing how it turns out. And 'yes', to your earlier question.

 

[lukeaye]

yeah will do. if i have the time. just doing some more study and backtesting on some mechanical systems.

read nick radges adaptive analysis, what a great book. You can really take heaps from it, very simple easy straight foward stuff. anyone who hasnt read it, make sure you have a read

 

[chesl73]

Lukeaye - as a learning newbie I found your postings very interesting and quite brave for you to put yourself out there so thanks. It would be great if more people would do it.

Tech - I can see what you're getting at regards Lukeaye not following his plan and being 'discretionary' but can you please clear something up for me?

Are you saying that in order to consistently make profits from trading you need a completely mechanical trading system in which there is no 'human' input at all? If so, I don't see how anyone can mechanically come up with a system in different market conditions that is going to perfectly generate correct buy/sell signals?
Or, are you saying that you should have a very definite trade plan, and you must stick to it and understand why you are doing it, but there's still going to be some element of 'discretion' in whether you actually enter the market on a particular signal because for example, maybe from a top-down approach there's some broader market news that is likely to scupper your chances with the trade?

I hope this makes some sense. Thanks

 

[beerwm]

Hi luke,

when and @ what level did you close out AMP. stopped out?

i ask, because the support level seemed quite significant on the longer timeframe, did u move your stop, or just close it manually?

 

[tech/a]

Lukeaye - as a learning newbie I found your postings very interesting and quite brave for you to put yourself out there so thanks. It would be great if more people would do it.

Tech - I can see what you're getting at regards Lukeaye not following his plan and being 'discretionary' but can you please clear something up for me?

Are you saying that in order to consistently make profits from trading you need a completely mechanical trading system in which there is no 'human' input at all?

No I'm not.

Simply a mechanical method will give a blueprint or set of rules that you know with a great deal of certainty (Due to your lengthy and exhaustive testing) will if followed trade after trade return a profit somewhere within the parameters of those profits found during testing.

If so, I don't see how anyone can mechanically come up with a system in different market conditions that is going to perfectly generate correct buy/sell signals?

It can be done,but I would suggest there would be a number of systems.

Or, are you saying that you should have a very definite trade plan, and you must stick to it and understand why you are doing it, but there's still going to be some element of 'discretion' in whether you actually enter the market on a particular signal because for example, maybe from a top-down approach there's some broader market news that is likely to scupper your chances with the trade?

I hope this makes some sense. Thanks

When you spend time testing ideas for a trading plan, it wont take long and you'll realise what WON'T improve your trading. You'll also find that short and longer term methods dance to different tunes. So when your trading a mechanical method you don't need to evaluate all these nuances when you take a trade--you take the trade and follow the rules regardless of how you feel OR what conflicting analysis to your system suggests you do.

So at some point a good discretionary trader will be able to read the market with a high degree of accuracy in various time frames.
He will know what makes a short term method profitable ( high win v loss rates) and will adjust his analysis accordingly.
He will know what makes a longer term trading method profitable (Lower win rate but much higher Return on Risk).
He will know when to continue a trade beyond short term and when to take his profit (unusually high return V normalised market expectation.).
He will be able to combine all forms of trading short/long/short and long term/he will be able to use dexterity in adding to positions taking away from positions, compounding profits,constantly working to eliminate risk all which skew the discretionary traders business into profit---often spectacular profit---which comes more from the use of his capital than from his trading plan.

 

[Timmy]

This is a great thread