Help needed for beginner

[tech/a]

Re: Beginner here...

tech/a


I understand that you are approaching the analysis from a technical perspective, and that through extensive backtesting you have found that a technical entry provides an aggregate 50/50 outcome and therefore, have decided to examine the elements involved within the exit criteria.

Well not "Exactly correct". I have found that entries are "Right" for different periods of time and also that they are "Right or have influence" over a finite period of time. So if I have a trading method which holds for 30 days how important at that 30 days will my entry be? If my average exit time is 365 days at that point the entry has little impact.
Beyond entry the ONLY thing you can do to determine profit is EXIT. The very day you enter entry becomes meaningless.(See next block)

Your existing methodology, as far as I am aware currently relies upon one or two trades returning a huge %, which leveraged provides a very satisfactory dollar return, while numerous small winners, offset numerous small losses.

What we ---all of us---constantly try to do is make an entry that will place us in a position MORE OFTEN which will give us the OPPORTUNITY to find more trades that run longer and double in value more often.
So in essence you are correct Duc frankly I'm suprised at how many T/T has ridden over 100%---think its 8 and 4 over 400% but at the time of entry no one could have with accuracy said that the peaks of those stocks would be x or y.
All exits will give back some profit see below.

Some of the smaller % winners, were larger % winners, but due to the exit criteria of the 180ema give back profit.

Every single exit was a higher % winner at one time other than those stopped. Just as traders get hung up on being "Right" on entries they also get hung up on being "Right" on exit. The hardest thing for a trader to come to terms with is you'll very rarely be "Right" in the context of picking an exact entry or exit.
But you'll NEVER get a 100% or 400% winner taking small profits whether your fundamental or technical you simply have to have an exit which allows the trade the space to get to those heights--tight exits just wont do it. Most fundamentalists can turn a profit simply by adopting a buy and hold mentality.
No 100%+ winners have crashed to small winners due to the 180 day EMA incidently.
So the important part of any trade is the portion between entry and exit the wider the two points are the more profitable the trade.

Two points.
Entries are an important criteria, and cannot be ignored.
In the current methodology of TT, entries have been marginalized, and thus cannot provide juice to the "numbers". To get the juice, you need to re-examine the whole issue of entries.

They sure are you cant get off the ground unless you have one.
As for being marginalised I think you would be disappointed that as a tech analysts I would not answer with---
It is our view that price holds all that we need to know about the company its performance is reflected in price.If it continues to rise then the company is seen not only by the tech analyst as a sound investment but also by the fundamentalist. The more of us that agree and the longer that we agree then the more profitable the trade. You and I can sail on the same ship Duc the way we got to the ship and boarded it is of little consequence,when we get off the ship will determine distance travelled.

By tweeking the exits in TT, you run the risk of reducing the % return of the money trades. Will a "generalized exit" compensate you for this reduction in performance?

Well when it does then that tweek gets discarded. All traders need to work at increasing the number of winners and increasing the time in those winners that keep climbing. There are important issues not even touched here like opportunity cost--being stuck in trades which while the rise and keep above an exit do pretty much nothing. Others that dont get stopped but dont make a move into profit. Both cost the trader as that money cant be traded on other trades that could be performing better.
A generalised exit may not be as general as you might think. It is specifically correlated to either Market events or portfolio events. Does it improve performance significantly.There are signs that it may well, particularly in a prolonged down turn--where the method is not designed to perform---nor is any long method by the way.

I suspect TT will have to redesigned in its entirety. That currently it does what it does about as efficiently as it can do.

Well that would be a new method.I have 2 other both do better than T/T,neither have I been trading as long as T/T but will continue to trade T/T because leverage and compounding return have kicked in.More importantly I know how it operates better than my car, so my "blueprint" gives me the comfort I need when trading.

Finally.
I came to the realisation about a year ago,through the T/T exercise.
I'm never going to be able to pick every top and every bottom as hard and as long as I spend attempting to do that.I can and will consistantly trade middle bits (those between entry and exit). I reckon at best I'll be able to consistantly return 20-50% a year FLAT.
By using leverage ( I believe I know how best to use it in my trading) and compounding I will be able to consistantly return (For me at least) stellar returns.
There is far more to profitable trading and getting consistant return than ENTRY.But this is where pretty well every trader gets hung up!!

 

[bullmarket]

Re: Beginner here...

Hi ducati

re your comments below:

bullmarket


Quote:
From what I have seen I still believe that a 2 out of 3 long term winning trades ratio is achievable and maybe even higher if one is really skillful and has a successful trading plan.



From a purely technical point of view, yes it is possible for certain gifted individuals, however, in aggregate you will never escape 50/50.

Now if you are talking about fundamentals, then I agree, 8/10 is the upper end of the performance curve, arbitrage is 10/10, so why waste your time with technicals, unless you are one of the statistical few.

no problem, but I think we are just going round in circles now and repeating ourselves .

I acknowledged your view "in aggregate you will never escape 50/50." in earlier posts and I have disagreed by saying that there are successful and wealthy traders/investors out there who aggregate a win/loss ratio from charting which is much higher than 50% but they are few.

I don't accept that you can never aggregate more than 50% winning trades from charting as per your view.

I am in investor who uses fundamentals to determine whether a company is worth following and I then look at company price charts to help time buy/sell points. This strategy works for me and I'm happy to continue doing what I always have been doing. Whether someone uses just charting, fundamental analysis or a combiantion of both is a matter of horses for courses, personal preference and what works best for any individual given their aptitiude and ability to work with technical and/or fundamental analysis.

So rather than us making ourselves sound like a broken record in an endless loop, let's agree to disagree and move on

cheers

bullmarket

 

[tech/a]

Re: Beginner here...

Hi ducati

re your comments below:



no problem, but I think we are just going round in circles now and repeating ourselves .

I acknowledged your view "in aggregate you will never escape 50/50." in earlier posts and I have disagreed by saying that there are successful and wealthy traders/investors out there who aggregate a win/loss ratio from charting which is much higher than 50% but they are few.

I don't accept that you can never aggregate more than 50% winning trades from charting as per your view.

I am in investor who uses fundamentals to determine whether a company is worth following and I then look at company price charts to help time buy/sell points. This strategy works for me and I'm happy to continue doing what I always have been doing. Whether someone uses just charting, fundamental analysis or a combiantion of both is a matter of horses for courses, personal preference and what works best for any individual given their aptitiude and ability to work with technical and/or fundamental analysis.

So rather than us making ourselves sound like a broken record in an endless loop, let's agree to disagree and move on

cheers

bullmarket

Hahaha.

One down ducster!

 

[bullmarket]

Re: Beginner here...

Hi tech/a

I'm not sure what point you are trying to make.

I don't see either ducati or I being down.

Ducati obviously believes that you can never achieve more than a 50% aggregate in the long run and he's entitled to his view....I don't have a problem with that at all

I replied to his post saying I disagreed as traders have achieved a long term aggregate of much more than 50%, albeit they are few.

So I don't see any issue here....ducati and I both earlier agreed there are no certainties in charting as we simply disagree on what the long term possible achievements are ....seems quite simple to me and we are now both just repeating ourselves.

cheers

bullmarket

 

[tech/a]

Re: Beginner here...

Repetion shows its head when no new material is being added to a discussion.
In your discussion with Duc there is no new material coming.
Pity as I would and so would many others here I'm sure like to know some opinion on the following.

(1) Why is it that a "few" traders can achieve better than 50% entry success.(technically)
(2) Is successful trading dependant on achieving better than 50% success.
(3) At what point do you define an entry as successful.Next day,week,month.
(4) How long is an entry valid and when is it deemed invalid, in the 50% failure?
(5) If a trade went for 6 mths and reached 50% profit and then fell to a 20% loss is it the entry that failed?Is that trade deemed as one of the 50% failure and why?
(6) Does technical competence have a determinance on probability of a "Successful entry"?
(7) Fundamentally when is an entry deemed to have failed (Ie the 20% of Ducs 80%)

As discussion continues particularly with participants like Duc who has strong and in some cases researched views---new questions arise.

Agreeing to disagree simply denies the opportunity of both parties to gain better understanding of each parties view.
While I dont agree with much of your view and some of Duc's-----discussions like this give a great platform to enter my view as an alternative or even in some cases a correlated collaborator in the world of trading.

True many dont enter/continue discussions as they have little to add, this maybe so in your case.

 

[bullmarket]

Re: Beginner here...

Hi tech/a

I didn't bother reading all of your long post earlier in the thread but I thought you answered at least most of those questions yourself.

Also, I have never ever claimed to be a trader. I am retired now and have always been an investor and income and not capital gains is my #1 priority nowadays (but any cap gains are welcomed with open arms if they occur )
In the 04/05 financial year I bought/sold on 23 occasions only and so far this finacial year I have bought/sold shares on only 9 occasions and am not currently expecting to place anymore orders before end of June - barring any exceptional circumstances.

I primarily use fundamentals (of which I have discussed earlier in other threads for anyone interested) to determine whether a company is worth following for me and if so then I look at its chart to help time buy points.

In my dsicussions with ducati we both agreed that charts obviously give no guarantees and we simply disagreed on the extent of possible achievements from charting. I gave my views based on what I have seen from friends and aquaitances and obviously I cannot give other peoples' personal details in a forum like this. So feel free to either believe or not believe anything I say. At the end of the day what you believe or think of my posts is of no consequence to me whatsoever.

If you need more info on any of your previous questions then maybe ask someone who is a true trader and not an investor as in my case.

Good luck in your endeavours

bullmarket

 

[ducati916]

Re: Beginner here...

bullmarket

Ducati obviously believes that you can never achieve more than a 50% aggregate in the long run and he's entitled to his view....I don't have a problem with that at all

Pure charting, unmodified by anything other than "technical studies", viz. fundamentals, or quants, have a 50/50 outcome as regards the aggregate data. That you may know of an outlier, or three is fairly irrelevant, as I am sure I can find some outliers that managed a 90% failure rate on charts.

The point of a statistical figure being promulgated is that for the average, new trader, who is most unlikely (though not impossible) to emulate the outlier statistic of a 66% success rate.

This has nothing at all to do with the ultimate profitability of the trader in question, as there are methodologies that run 40% and lower of %winning trades, and yet still are profitable.

tech/a does not subscribe, or lend much weight to "entries" as a general trading parametre. I assign a weight of 50/50 to a chart based entry.
However I weight a fundamentally based entry much higher....circa 80%+

tech.........baby

I'll play.

(1) Why is it that a "few" traders can achieve better than 50% entry success.(technically) 2) Is successful trading dependant on achieving better than 50% success.

Technical trading, is really trading sentiment, psychology, momentum, call it what you wish. The results are thus generated not by the methodology of technical analysis, but from the methodology of capitalizing on momentum, or money management by any other name

(3) At what point do you define an entry as successful.Next day,week,month

At the exit when an actualised return has been banked.

(4) How long is an entry valid and when is it deemed invalid, in the 50% failure?

When you exit with an actualized loss. The timeframe is, or should be predetermined.

(5) If a trade went for 6 mths and reached 50% profit and then fell to a 20% loss is it the entry that failed?Is that trade deemed as one of the 50% failure and why?
(6) Does technical competence,have a determenance on probability of a "Successful entry"?

Assuming you exit and realize the loss, yes, the entry is a failure.
If you remain in the trade, and it returns to a 50% profit, and you realize the profit, it becomes a successful entry.

(6) Does technical competence,have a determenance on probability of a "Successful entry"?

No. Technicals are a complete nonsense.

(7) Fundamentally when is an entry deemed to have failed (Ie the 20% of Ducs 80%)

See all of the above, same as same as.

jog on
d998

 

[tech/a]

Re: Beginner here...

Duc.
Unfortunately my other life is calling.
Ive been told a few friends are waiting for us at lunch.

Are there any others out there who trade who would like to add to our discussion?

What by the way constitutes a trader?
Id have thought 23 trades a year would mean your making a decision both in entry and exit 2wice a month.Seems you would be in control or attempting control.

From your replies Duc much to add from the "Ducks end".

 

[bullmarket]

Re: Beginner here...

tech/a

Duc.
Unfortunately my other life is calling.
Ive been told a few friends are waiting for us at lunch.

Are there any others out there who trade who would like to add to our discussion?

What by the way constitutes a trader?
Id have thought 23 trades a year would mean your making a decision both in entry and exit 2wice a month.Seems you would be in control or attempting control.

From your replies Duc much to add from the "Ducks end".

Most of my 23 trades last financial year were around may/june last year and were due to me going more defensive by re-arranging my portfolio to include only LPT's and infrastructure/energy trusts for their high yields and hence boost the income from my portfolio to above our minimun yearly requirements.

My 9 buy/sell orders so far this financial year were solely a bit of fine tuning, again to increase the average yield of my portfolio. I'm averaging less that 1 buy/sell order per month if I don't place any more orders as I expressed earlier.

I certainly don't think the above quantities and reasons for my transactions entitles me to call myself a trader at all. But if you think it does then fine - it doesn't matter to me at all

cheers

bullmarket

 

[Wriggles]

Another damn beginner

Hey all....another newbie here.

Wife and i just had a lil daughter and have invested 10k into some shares for her in the future.

Dont know to much about the market so just go with what seems to be a good and stable company.

Some of u will prob say..sh*&^ , what has this guy done...lol...hence the reason im after some feedback.....So...we bought wbc..tts...flt...tox...bxp...and bil.

Only major concern in bxp and tox.......we dont watch the market much so dont really keep a good eye on it. Are these stocks ok to leave or r they ones to watch readily?

Thanks

 

[dutchie]

Re: Beginner here...

G’day all

I am of the opinion that the success or failure of an entry is a function of the general movement of the market.

If one assumes that the general trend is up, then the chances of succeeding with a bull entry (i.e. we want the share price to go up) is greater than the chances of bear entry.

For example assume that the market is such that on average it moves up 6 points for every 4 points down (i.e. over a long period it will move up).
NOTE: This 6 to 4 ratio is only assumed and has no resemblance to the actual ratio.

Lets assume we enter a bull trade at the end of day 0, the next day (day 1) there is a 60% chance it will go up and a 40% chance that it will go down.
Day 2 the chance that it will go up is 60% and 40% that it will go down.

Therefore the chances after 2 days:

1) that it has gone up on both days is: (0.6)^2 (0.6 x 0.6) = 0.36 (36%)

2) that it has gone down both days is: (0.4)^2 = 0.16 (16%)

3) that it has gone up one day and down the other : 2 x (0.4 x 0.6) = 0.48 (48%)

Therefore the chances after 3 days:

1) that it has gone up on three days is: (0.6)^3 (0.6 x 0.6 x 0.6) = 0.216 (21.6%)

2) that it has gone down on three days is: (0.4)^3 = 0.064 (6.4%)

3) that it has gone up one day and down two: 3 x (0.6 x 0.4 x 0.4) = 0.288 (28.8%)

4) that it has gone up two days and down one: 3 x (0.6 x 0.6 x 0.4) = 0.432 (43.2%)

(We could continue in this vane for x days when exiting from the trade.)

So after 3 days the chances of a winning trade is a minimum of 21.6% and the chances of a losing trade is a minimum of 6.4%.

What then of the other successes or failures:

We could end up with a winning trade even if we had one up day and two down days so long as the up day was bigger than the sum of the two down days. And the same applies for two up days with one down day so long as the sum of the two up days was bigger than the down day.

This is where the skill of the trader using T.A./ F.A./ dart board/ monkey etc will determine whether it is a win or loss but on average the long term success rate would probably be around 60% (in this particular scenario)

The long term average to short the market would be 40% (in this particular scenario)
But overall - depending on the ratio of the ups to the downs of the market.

NB. The chances of success in a bull market are greater than shorting in bear market.

I think …….

 

[happytrader]

Re: Beginner here...

Hi Dutchie

Your post is actually simplistic, obvious and very, very good. Well done.

Cheers
Happytrader

 

[ducati916]

Re: Beginner here...

dutchie

I am of the opinion that the success or failure of an entry is a function of the general movement of the market.

A common belief, but unfortunately not supported by the data;
In 50+ years;

Up days....................53.5%
Down days................46.5%

Decades......1950's......60's........70's.........80's.......90's......2000
Up days......56.9%......54.2........51.3........53.0.......53.7.....50.1
Down days..43.1%......45.8........48.7........47.0.......46.3.....49.9

Secular ...................Bear 1966-1982...........................Bull 1983-1999
Up days.......................51.1%...........................................54.0%
Down days...................48.9%...........................................46.0%

Recent.........1999...........2000......2001.........2002..........2003.......2004
Up%..............51.2...........47.6.....48.2..........44.2..........54.8........55.6
Down%..........48.8...........52.4.....51.8..........55.8..........45.2........44.4

Unfortunately, individual stockpicking is still the requirement if outperformance as measured by actualized returns is a requirement. If measured by relative returns, guess what, you still need to be a stockpicker.

Only if you wish to reproduce the market return, will you require the above.

happytrader

Your post is actually simplistic, obvious and very, very good.

Strike two baby...........one more and you're out.
Looks a bit like 50/50 to me, what do you think?

jog on
d998

 

[It's Snake Pliskin]

Re: Beginner here...

G’day all

NB. The chances of success in a bull market are greater than shorting in bear market.

I think …….

G`day Dutchie,

Shorting is a whole different ball game for people with large kahuna`s and and an understanding of RISK. Your potential for loss is unlimited. It is risky in the sense you can not adequately determine from a chart at what speed a stock will drop. Volume can play a minimal role, unlike going long, and when it does.....$$$

Shorting in a bear market makes sense, but the stage you do it in is more important. One can fundamentally short or technically short and be profitable.

Cheers
Snake

 

[happytrader]

Re: Beginner here...

Hi again Ducati

I actually based my reply on the only stock I trade. Your figures look most interesting and very work intensive however, they bare no semblance or meaning for the stock I trade. Out of interest, where do they come from? I certainly wouldn't trade that one.

Cheers
Happytrader

 

[Julia]

Re: Another damn beginner

Hey all....another newbie here.

Wife and i just had a lil daughter and have invested 10k into some shares for her in the future.

Dont know to much about the market so just go with what seems to be a good and stable company.

Some of u will prob say..sh*&^ , what has this guy done...lol...hence the reason im after some feedback.....So...we bought wbc..tts...flt...tox...bxp...and bil.

Only major concern in bxp and tox.......we dont watch the market much so dont really keep a good eye on it. Are these stocks ok to leave or r they ones to watch readily?

Hello Wriggles

Just wondering what selection criteria you used in choosing the above?

Julia

 

[It's Snake Pliskin]

Re: Beginner here...

(1) Why is it that a "few" traders can achieve better than 50% entry success.(technically)
(2) Is successful trading dependant on achieving better than 50% success.
(3) At what point do you define an entry as successful.Next day,week,month.
(4) How long is an entry valid and when is it deemed invalid, in the 50% failure?
(5) If a trade went for 6 mths and reached 50% profit and then fell to a 20% loss is it the entry that failed?Is that trade deemed as one of the 50% failure and why?
(6) Does technical competence have a determinance on probability of a "Successful entry"?
(7) Fundamentally when is an entry deemed to have failed (Ie the 20% of Ducs 80%)

I`ll give my views here and maybe someone can validate them

1. The balance of probabilities allows this to happen, luck, or other factors have been mitigated to determine the risks associated with an entry. For example: most people study a stock but it only represents a small proportion of the risk. Mitigate the other risks and maybe those entires will be successful more often.

2. No. Your positive expectancy will determine this.

3. Once the stock moves higher with your trailing stop following. Is this the sole factor determining your positive expectancy? No. It gives you more time to manage the holding period. One is still not successful at this point.

4. Refer to point 3 above.

5. No. It`s a failure of managing the trade - no exit strategy!

6. No.

7. ?

Snake

 

[123enen]

Re: Beginner here...

If there are just as many up days as there are down days then the chart lines, for the indices at least, while sawtooth in pattern ie. up down up down, would be pretty flat along a very narrow range.

Most, if not all indices, do not reflect this, they in fact show an strong upward trend over the last 50 years.

Perhaps the points gained in up days are greater over time than points lost in down days. So, does that give credence to entry / exit strategies?

 

[dutchie]

Re: Beginner here...

G'day Duc

Thanks for those statistics - very interesting - especially the first lot.

Are you able to determine the size of the rises and falls for that period?

Cheers

Dutchie

 

[It's Snake Pliskin]

Re: Another damn beginner

Hey all....another newbie here.

Wife and i just had a lil daughter and have invested 10k into some shares for her in the future.

Dont know to much about the market so just go with what seems to be a good and stable company.

Some of u will prob say..sh*&^ , what has this guy done...lol...hence the reason im after some feedback.....So...we bought wbc..tts...flt...tox...bxp...and bil.

Only major concern in bxp and tox.......we dont watch the market much so dont really keep a good eye on it. Are these stocks ok to leave or r they ones to watch readily?

Thanks

Wriggles,

BXP: I bought it an sold it back in November.

Are you going to show your daughter the Wiggles, Wriggles?

Snake