Hi Nick,
At the risk of extrapolating what you're are saying a wee bit too far, are you suggesting that you would be able to duplicate the level of performance that you have been demonstrating in your power setups by using your trade management procedures on say, a randm entry ?
At the end of the day, a random entry is pretty much 50/50 and if there aren't any TA techniques that offer above 50/50, then one should theoritically be able to generate returns approaching the levels reached by your power setups using trade management techniques alone.
Would appreciate your clarification.
At the risk of extrapolating what you're are saying a wee bit too far, are you suggesting that you would be able to duplicate the level of performance that you have been demonstrating in your power setups by using your trade management procedures on say, a randm entry ?
At the end of the day, a random entry is pretty much 50/50 and if there aren't any TA techniques that offer above 50/50, then one should theoritically be able to generate returns approaching the levels reached by your power setups using trade management techniques alone.
T/A setups are not about achieving higher than 50/50. A T/A edge comes from the favourable R:R not the win:loss.
Cannot speck for Nick but its about finding patterns that have probable targets larger than any expected loss.
TH,
I hear what you are saying, and pretty much agree with all of it. However, even with a random entry, isn't it possible to manage your trade in such a way that if the trade goes against you, to cut it off quickly and if it goes for you, to let it run, which is the essense of achieving a favourable R/R ?
I guess my question is, in the case of a really successful system, how much of the success is attributable to the setup (or the pattern) and how much of it is attributable to the on-going management of the trade once a position has been initiated.
TH,
I hear what you are saying, and pretty much agree with all of it. However, even with a random entry, isn't it possible to manage your trade in such a way that if the trade goes against you, to cut it off quickly and if it goes for you, to let it run, which is the essense of achieving a favourable R/R ?
I guess my question is, in the case of a really successful system, how much of the success is attributable to the setup (or the pattern) and how much of it is attributable to the on-going management of the trade once a position has been initiated.
Heh, I agree with the emotion part. So much involved in here right now.
Wasn't there a research article (from Van) saying the higher the IQ a group of traders are, the worse results they get. It seem "intelligence" is an impediment to successful trading. Of course, some complex PHD guru will disagree with me otherwise.
Also, isn't it true that simplicity is the key to successful trading and that humans often have a bias for doing "complex" things because it give them some sort of intellectual satisification?
In my opinion, no. The only reason I am a successful trader using TA is because I am a good manager of bad trades. I am yet to find any TA that offers any kind of edge above a 50/50 bet.
I will not get into a discussion on the fact that FA is any better. Its simply not. I can provide a weeks worth of reading as evidence.
The goal of participating in the markets is to make profits.
We all need each other to facilitate liquidity.
It's the exit that determines how much profit (or loss) you get per trade. Not the entry
At the end of the day, a random entry is pretty much 50/50 and if there aren't any TA techniques that offer above 50/50, then one should theoretically be able to generate returns approaching the levels reached by your power setups using trade management techniques alone.
What about this,
Maybeconfused one of TAs overlooked qualities is identifying that something is about to happen. That the punters are coming in.
It may not be the direction or magnitude you expect, but at least you will have an answer soon.
With a random entry you will still need a catalyst to get some action. Most TA will be based on some sort of movement or pattern.
Hi Nick,
At the risk of extrapolating what you're are saying a wee bit too far, are you suggesting that you would be able to duplicate the level of performance that you have been demonstrating in your power setups by using your trade management procedures on say, a randm entry ?
At the end of the day, a random entry is pretty much 50/50 and if there aren't any TA techniques that offer above 50/50, then one should theoritically be able to generate returns approaching the levels reached by your power setups using trade management techniques alone.
TA is scorned by academics because it, that is a price pattern, has no statistical predictive power. I agree. A company whose earnings continue to grow offers predictive power over time but one will need to wear the price volatility in between.
I like the idea of testing random entry and using it as a benchmark and then trying to beat it. If you can beat those results you have an edge, and if you can't you might still be winning in spite of yourself.
ASXG,
You've done a lot of work on Edge Ratio. Its not something I agree with specifically in regard to Curtis Faith and the Turtle system. What's your thoughts?
As for Zanger looking at earnings, I struggle with that relationship. Lets face it, since when will a 2-week view on a stock be impacted by earnings alone. I appreciate increasing earnings will to a stock price appreciate over the longer term, but tying that relationship together on a smaller time frame brings in randomness and market noise as well.
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