Positive expectancy and edge

[emerger]

if your risk is 100 bucks
when at 150 in profit move your stop loss to breakeven

and then expect (hope) for it to run on and not hit your breakeven stop out

get lots of stop outs this way and stuff up your entire plan ,,and often not re enter when price does run on cause you did your head in on yet another stop out,,,

i think it's all crud and designed to fail and not only that but the cfd provider's know where your stop is and will flick you all out ,,,,you can guarentee that you'll get the worst slippage possible,,

leaking boats eventually sink,,,
death by a thousand cuts

better of learning how to fade into a position on a stock where there are no warrents/options/shorts and steer clear of the big pricks


emerger

 

[stevo]

Expectancy is a measure of performance.

Edge is performance above average, or above what random trading might give us.

If a system gives the market average or a long period of time (> 5 years), or can't beat average random trading then it doesn't have an edge. An edge puts a strategy above the crowd.

But what a trader benchmarks themselves against is up to them.

If you are happy with the returns over the long term and can soundly beat bank interest, or other opportunities that the money could be used for is this not enough?

I just had a long lunch sponsored by a Bank, plied with wine and food, so if anything I say above doesn't make sense it wouldn't surprise me!

stevo

 

[theasxgorilla]

I just had a long lunch sponsored by a Bank, plied with wine and food, so if anything I say above doesn't make sense it wouldn't surprise me!

On the contrary Stevo...it ought to be making more sense than ever

 

[theasxgorilla]

ASX,

Does 1) mean that you get your trailing SL to breakeven as soon as possible ?? and could you explain 3) a little more ?

Thanks

Bingk6

Re: 1), not exactly, not manually or by way of a trigger at least.

Lets say you trade an x-day breakout entry and use some kind of trailing stop, again for the purposes of this example lets say its a moving average. You also use a fixed initial stop of 10%. This initial stop represents a 1R loss, the worst outcome for any trade, catastrophies notwithstanding. Even if price does not move up, over time the MA trailing stop will close the distance to breakeven and get inside your initial stop preventing a 1R worst case scenario loss. Shortening the number of periods in an MA will make it converge faster, but if you make it too tight you risk of not giving the trade sufficient room to find it's way.

The other way to speed up this convergence is for price to move higher after entry, thereby dragging the trailing stop toward breakeven (and hopefully beyond!). How can you encourage this? Great question isn't it??? Encourage probably isn't the right word, but maybe you can add a trend or momentum filter or some other tweak which helps you capture real breakouts which keep moving and avoid false ones that stall and collapse.

Re: 3) nothing fancy here, this is the ambition with most trading. Here's a question on this topic though...if a stock has increased 1000% in the last 12 months and your long only LTTF system gives you a buy signal, do you trade it? Or do you second guess or even reprogram the system? I know what the right answer is from a trading discipline standpoint. Altough how many stocks that have increased in price 10-fold over 12 months did something spectacular during their next phase of business? I don't know the answer, just asking.

 

[wealthlab]

Quote by Nick Radge 23/11/07..... buying a stock nearer its yearly low is statistically better than buying it near its yearly high from both a risk and reward perspective. Both have a positive expectancy but the yearly low strategy has an edge over the yearly high.

Hi Nick, I was wondering if you would care to offer any “Statistical” evidence to back such a statement, or is the statement more one of a personal opinion ?