How much analysis is enough? Does complexity equal profitability?

[Timmy]

The short answer to these two questions is:

1. Depends on what you are trying to achieve & what you believe is possible.

2. Depends on what the individual trader is capable of applying.

On the first point...if you believed that 30-40% win percentages were the norm for a successful trader, and you accepted this and you could achieve profitability from such stats, via simple application and analysis, then you'd do it right?

But what if someone opened up your eyes to a world of 80-90% win percentages, and monthly winning trades that equate to money in the in the ball park of a moderate sized house deposit?

ASXGorilla - that is a fascinating post, the points you make about the subject matter of this thread, the questions asked, being likely to lead to only a certain range of responses is a perspective I had not considered. The strong likelihood (near certainty) of getting only a limited range of responses from a much greater possible range of responses is, thinking about it, a real shame for us all. I like to get perspectives/ideas that I had not considered possible (or had not even ever considered) so your arguments as to why the range of responses are limited strikes a note of frustration in me.

I like your comparison of the two traders, especially your talk of the second, unknown trader.

 

[MRC & Co]

I like your comparison of the two traders, especially your talk of the second, unknown trader.

Or unknown for a reason?

40% versus 80-90% of winners does not mean a thing, as discussed numerous times.

I also find the post by ASXGorilla interesting, but flawed.

Find me this mute, unknown and maybe then it will be known. Until then, the belief of some magic holy grail is exactly that, a belief.

 

[Timmy]

Or unknown for a reason?

40% versus 80-90% of winners does not mean a thing, as discussed numerous times.

I also find the post by ASXGorilla interesting, but flawed.

Find me this mute, unknown and maybe then it will be known. Until then, the belief of some magic holy grail is exactly that, a belief.

Thank-you MRC, I appreciate your point of view; I will keep my mind open to possibilities beyond what is commonly accepted.

 

[theasxgorilla]

I also find the post by ASXGorilla interesting, but flawed.

Find me this mute, unknown and maybe then it will be known. Until then, the belief of some magic holy grail is exactly that, a belief.

In any field of endeavour there are always exceptional human beings that are capable of such achievements as to be bewildering to the rest of us. To not realise this is ignorance. To infer that the application of simplicity over complexity is superior because you don't know of someone who uses complexity well is arrogance. You don't know what you don't know, that's all.

Take my profession. I work in the field of IT security. Hackers, viruses and the like. The fact of the matter, is that practically every single system in the world can be hacked, in spite of what most consultants get up and tell (sell) their customers. That a system which remains unhacked is said to be secure, is really just an unproven claim.

People try to prove the claim by hiring penetration testers...so-called white hats, bad guys turned good...whatever you want to call them. Just because these guys could not break into a system within the allotted time doesn't prove anything, except that a person with their skill level and that amount of time probably couldn't break in either. But if someone had more time or greater wherewithal, then what?

There are hacks conducted by people that have never seen the light of day. They can take many months, sometimes more than a year to carry out. The complexity of the systems penetrated is such that most people calling themselves experts in this industry can't comprehend them. Instead they just trust Microsoft et al when they're told to install a security patch...and they chant the same mantra to their customers, "patch your systems pronto", "install a firewall" , "update your virus signatures" etc.

I know there are people doing things on a daily-basis at complexity levels that most of us can't begin to comprehend. Realising this is the key to understanding why the rest of us have to aim for a 14 handicap, and follow mantras like "2% rule", "trend is your friend", "stocks are never too high to buy".

The bottom line is that for most people and situations we have to keep things simple because complexity doesn't scale as well.

 

[wavepicker]

Hello tech,

what I do might appear complicated to some, but for me and others I have taught(there are 3 here on this forum) it is actually quite easy.

The tools I use(EW, fixed cycles) actually depend on the type of patterns in play and the type of trading one strives to perform. The hardest thing to understand is the patterns, and unfortunately that has to be learnt by the brain. There are just some things that cannot be mechanized or programmed. The best computer is the one between the ears.

Every moment in the market is unique and the market is complicated. To be consistant reqiures much effort and focus. The psychological aspect however by far is the most difficult to conquer and really makes the analysis look insignificant.

My latest tool, The Cycle Trading Bands I use is the easiest approach I have seen on this forum or anywhere and can be coded very easily. It's much, much easier than Frank D's approach or even any Smiple MA crossover. I developed it specifically for trading FX but can be used for anything. It is the best I have seen anywhere bar none and my 5 y.o daughter can even use it. Those comments don't come lightly, and I am not even or have no interest in selling this approach. It's my edge, and will stay my edge.

Cheers

 

[tech/a]

The bottom line is that for most people and situations we have to keep things simple because complexity doesn't scale as well.

And what is seen as complex to some isnt to others.
Waves/Frank/perhaps some would see some of my methods complex.

My next question.

"Effective trade management equals profitability."

Is this true?

 

[Frank D]

Much much easier than Frank d’s approach?????

Much easier for whom??

The day trader who has to be glued to the screens all day, or the person who wants to look at the market once or twice a week?


My 5 year old can even use it….

So your 5-year should become a pro-trader before you then.


My latest tool…

I have a sneaky suspicion that your cycle bands are a tweak of other peoples intellectual property…

 

[MRC & Co]

Ok, I see your point ASX, but I would say a 'market' is FAR more complex than any human brain can comprehend, makes IT and golf look simple and pale in comparison IMHO.

Was in Black and Scholes who did however, develop a formula for price prediction and win a noble prize? After following on from some French mathematician academic from generations ago? And what was their conclusion after years of analysis? I am sure I saw the formula, and it was scaled down to the point of absolute simplicity as are most mathematican equations I have come accross in my study of statistics. The derivation is where the complexity lies, but not the end product.

This would be the closest thing to complexity I have found in the markets with an incredible end result, and it fell to it's knees infront of the fallacy of composition.

Perhaps the person using this complexity keeps quiet to avoid the same ends, however this is starting to sound like the Phantom of the Opera to me, "open up your eyes, see the fantasy unwind" !

I do not say it is the impossible, but I will say it is closer to fantasy and no matter where you posed the comments Tech/a did, he would find the same answer, unless he found this hidden enigma and posed it simply to he/she.

 

[wavepicker]

Much much easier than Frank d’s approach?????

Much easier for whom??

The day trader who has to be glued to the screens all day, or the person who wants to look at the market once or twice a week?


My 5 year old can even use it….

So your 5-year should become a pro-trader before you then.


My latest tool…

I have a sneaky suspicion that your cycle bands are a tweak of other peoples intellectual property…

As easy as watching a candlestick change colour Frank.

You come out with all this BS not long ago about how complex EW is because you just didn't get it, telling us your tool is the ants pants. Well good luck to you Frank. Tell that to the 3 others on this site whom I have taught and did "get it". Mind you I didn't charge them, and that thought never entered my mind just helped them as any other trader would, and they are close friends of mine now.


As for the Cycle Bands, the core concept is not my idea, have made that quite clear in other threads. The core concept has in fact been around for over 40 years and you can still buy the book on this approach to this day.
I managed to fuse together some seperate ideas from 3-4 other cycles technicians who based their approach on the original core concept. These guys have never divilged how their own IP so it's been impossible for me to copy it.
The simple fact of the matter Frank is that there are 5-6 different ways of doing what I am doing, and the way I do is vastly diferent from the way others do it. So at the very best there might only be a slight resemblence there but the mechanics and calculations and multiple timeframe analysis are very very different. It does not matter at all anyway Frank, because only I and one other person use this tool for own personal trading. It ain't and never will be for sale.

In the same way, the core concept of your tool was not 100% your idea either was it frank??

 

[chops_a_must]

How is Frank's method anymore complicated than using any other pivot point method?

Looks quite similar to hi/ lo systems in multiple time frames to me as well...

 

[wavepicker]

How is Frank's method anymore complicated than using any other pivot point method?

Looks quite similar to hi/ lo systems in multiple time frames to me as well...

Hello Chops, My point was that the tool I have been using is simpler.
I am sure tech is correct and that what frank is using is actually quite straight forward, but the layout and presentation at first glance for the newbie looks rather daunting. Just the thoughts of some other traders from another forum.
I have no doubt that Frank probably put togther a quality approach and I respect the fact that he has been kind enough to present it in such detail.

I personally have never had any problems with Frank or his approach, only his crticizm of my analysis in particular EW in the past without justification IMO especially when the analysis being put forward at the time turned out to be pretty well spot on.

Cheers

 

[chops_a_must]

I haven't seen it, so can't say which "tool" on here is simpler...

 

[theasxgorilla]

Ok, I see your point ASX, but I would say a 'market' is FAR more complex than any human brain can comprehend, makes IT and golf look simple and pale in comparison IMHO.

Precisely. All the more reason why exceptional human beings able to apply complexity will outperform. Stands to reason IMO.

FWIW, markets make golf look simple...but IT? Hmmm, with IT it's possible to be right...with markets its only possible to be on the right side of a probability. There in lies the difference, but both are complex IMO.

ASX.G

 

[wayneL]

Precisely. All the more reason why exceptional human beings able to apply complexity will outperform. Stands to reason IMO.

FWIW, markets make golf look simple...but IT? Hmmm, with IT it's possible to be right...with markets its only possible to be on the right side of a probability. There in lies the difference, but both are complex IMO.

ASX.G

I've been thinking about this question over the weekend and I think the first thing we (most of us anyway) have to acknowledge is that we are not individuals with superior intellect, capable of devising systems of extraordinary complexity. Nor do most of us have the tools (in terms of information and IT systems) needed in order to implement such complexity

Therefore, in our little private retail trader universe, I doubt complex systems outperform simple ones... unless we are talking about option traders. Here I have seen the superior intellect (and massive cajones) come into play and seriously outperform mug traders like us.

So yes, complexity can pay dividends, but not in picking direction. It works in arbitrage and derivatives

 

[MRC & Co]

But is it not now hard in the world of arbitrage to really make serious $$ Wayne? I was speaking to an Ivy League graduate who manages his own Hedge fund over in the States with exceptional intellect, and this rings true in his view.

Though I hear it is possible in Zimbabwe with their Government officials and currency

So the successful use of complexity lies in the use of complex option strategies and their non-directional bias in your opinion?

Names like Larry Williams, Jesse Livermore come to mind as very simple and very successful traders, I would say, these retail guys far more successful than most institutional traders............

Livermore was revolutionary, with his pyramiding as positions went his way, cutting losses instantly, using sentiment in a contrarian fashion..........however, emotions got the better of him, with some of his quotes ironic in every sense of the word!

I acknowledge, my intellect however, is not even close to being able to develope a revolutionary system!

 

[It's Snake Pliskin]

And then there is the "trend forecasting" gang vs the "trend following" gang.

Tech, you still haven't answered my question on how you came to the realisation of your comment.

 

[It's Snake Pliskin]

Names like Larry Williams, Jesse Livermore come to mind as very simple and very successful traders, I would say, these retail guys far more successful than most institutional traders............

Livermore blew up in trading and considered his life a failure in his suicide note.

Williams had a money management problem too and nearly blew up after making a lot of money, or so it goes in one of his books. I respect him more for his simplicity in approaching the markets.

 

[tech/a]

Snake.

Its a culmination over the years. As you understand what it is that REALLY makes you profitable you actually realise that its NOT the analysis.

While its a contributing factor (Analysis) its not the reason you'll make profit and less of a reason why you'll make outstanding profit.
It becomes pretty clear that most analysis isn't required to trade profitably.

Its great to know and in many cases absolutely fascinating. You can and some do spend lifetimes perfecting "Rightness". That's fine but that's not what you need to do to be spectacularly profitable.

I'm a builder and while I know all the ins and outs of building a house people don't have to know how to build a house to profit spectacularly from property---proven many times.

I'll bet there are analysts on this and other forums second to none,but there are traders here and elsewhere who's analysis isn't a speck on theirs---but I'll bet there are traders who profit way way beyond what these analysts think possible---because they know they DONT HAVE TO BE RIGHT! only profitable.

 

[Frank D]

Wavepicker,

My criticism of EW was because it was missing a key component to technical analysis, and that was Time.

Time is the only ‘thing’ in the markets that traders can forecast.

I said once you incorporate Time into your analysis it will be much better as a trading tool

So what did you do, which you weren’t doing before?

You introduced Time components, and not that long ago.


"Mind you I didn’t charge them".....


I have a thread over 200 posts of free friggin information knuckle head.

So I can’t charge a price for my intellectual property?

I’m not holding a gun to people’s friggin heads to buy my book.


Let me tell you, the majority of members on this site never heard of pivots until I started talking about them, The majority of traders never looked a higher timeframes until I started to talk about them. The majority of traders never looked at timeframes in multiple numbers (more than 1 ) using pivots until I started to talk about them. The majority of traders never heard of ranges bars until I started to talk about them, never heard of Spiral-points until I introduced them to day-trading, 3 and 5-day dynamic ranges.....and so on.

All this information is freely given on this site and others before.

The tool is a pivot, which is an indicator, just like a Moving average is an indicator.

You’ll not find, or ever find anything in technical literature anywhere that matches my model and principles.

However, theories on support, resistance, cycles, rotation and extension have been around for over 100 years, those ideas aren't mine.

My last post on this thread....

 

[MRC & Co]

Livermore blew up in trading and considered his life a failure in his suicide note.

Williams had a money management problem too and nearly blew up after making a lot of money, or so it goes in one of his books. I respect him more for his simplicity in approaching the markets.

Yes, I stated this above on the Livermore case, however, due to emotional problems and not following his own rules.

I beleive Williams still trades live infront of many people quiet successfully?