Set up and trigger accuracy

[BBand]

Looking forward to receiving my "Definitive Guide to Position Sizing" (Van Tharp) book.
Should have it to-morrow - The Holy Grail ?????

 

[Cartman]

Looking forward to receiving my "Definitive Guide to Position Sizing" (Van Tharp) book.
Should have it to-morrow - The Holy Grail ?????

actually in my humble opinion, position sizing is possibly the most important aspect of trading which traders neglect ----- size of the punt relative to the size of the bank = the size of the stress level ------------- playing within the comfort zone is v. important for longevity !!

 

[Nick Radge]

I agree its a significant issue Cartman that is important to success. However, I also think that tenacity and understanding the trading journey will probably be of more harm to most new traders. Without patience, tenacity and a willingness to allow positive expectancy to run its course, many will not succeed.

 

[BentRod]

I agree its a significant issue Cartman that is important to success. However, I also think that tenacity and understanding the trading journey will probably be of more harm to most new traders. Without patience, tenacity and a willingness to allow positive expectancy to run its course, many will not succeed.

Nick,
This makes much more sense after seeing William Eckherts trading results that you showed in the DVD.
I found it a real eye opener that he had loosing years.

 

[beerwm]

regarding random entry;

say you place 1000trades, you decide to sell when the stock has made 10% gain or 10% loss. 500win/500lose.

you add an indicator

On Balance Volume, [a certain increase/ or MA crossover]

you do 1000 trades, 450 win/550 lose

you add another indicator

RSI [only oversold stocks]

you do 1000 trades with both indicators
350 win/ 650 lose.

so you have added to indicators which have made your system less profitable.

although if you choose to go short, you would of made your system much more profitable.

so aslong as your indicator/s deliver consitant results, then i cant see how a random entry could be a viable alternative.

 

[lindsayf]

actually in my humble opinion, position sizing is possibly the most important aspect of trading which traders neglect ----- size of the punt relative to the size of the bank = the size of the stress level ------------- playing within the comfort zone is v. important for longevity !!

your probably right..but for someone starting with a small budget and looking at futures day trading..it is a non issue...I will trade with a single contract and succeed or fail..if I succeed i will build up to a place where i can consider multiple contract trades...cross that bridge at that time...

 

[Cartman]

I think the most important things are pattern recognition and having some idea of when to hold and when to fold. that is NOT waiting for confirmation.

at face value, these points may seem simplistic and get overlooked Mirc ----- but these issues are at the forefront of my 'studies' atm ---- and from that pov. i feel like my journey is 'on track' ---- as ive said b4 --- i hope people read what u write ---------- and u r so young !! ---- lol ----

 

[Cartman]

your probably right..but for someone starting with a small budget and looking at futures day trading..it is a non issue...I will trade with a single contract and succeed or fail..if I succeed i will build up to a place where i can consider multiple contract trades...cross that bridge at that time...

Lindsay ----- r u trading CFD's ? ----- what is the value of the 'one contract' u mention? ----

hypothetical qu. ----- if u had three times the capital than u do atm would u increase yr position size by three times or trade the same ? ---- cheers.

 

[lindsayf]

Hi Cartman
No not CFD's, futures index-ES(emini). A contract is $50 US per point and each tic (minimum increment) is $12.50. What I am thinking atm is that, should I work out how to be profitable, that I wont trade multiple contracts until I am up at least $5000 on the single. Then I would look at a system where I would enter with 2 contracts, exit 1 of them on a predefined PT and then run the remaining one with a TS. ...But this is all a long way off for me at this stage...

Just re CFD's...a certain cfd MM has offered me a 'loss free' whole days trading...that is I can trade with up to 2 contracts on thier 'ASX200' and they will absorb any loss I make. The only condiiton is I need to fund an account with them...??seems a no brainer I wonder what the catch is?

 

[rub92me]

Hi Cartman
Just re CFD's...a certain cfd MM has offered me a 'loss free' whole days trading...that is I can trade with up to 2 contracts on thier 'ASX200' and they will absorb any loss I make. The only condiiton is I need to fund an account with them...??seems a no brainer I wonder what the catch is?

It's a bit like the free hotel rooms you used to get in Las Vegas; CFD providers love punters with no brains..

 

[Nick Radge]

errr...I think free credit on pokies was just banned. Surely free credit on a CFD account is within the same realms?

I wonder if they'll let you keep the days gains? You'd employ TH to go loose for the day!

 

[lindsayf]

have a read of the CMC site...you keep the gains, they wear any losses...u out there TH? go you 50:50...lol...............i imagine there is some fine print or a clause in the PDS that will cover them in the case of a big winning day.

 

[nomore4s]

I think they would let you keep the gains as you are using your own capital.

The idea behind it is by giving the average "punter" a sniff of winning or trading with no risk is afterwards CMC will get back any profits or eventually take money out of your capitial, as people will get hooked thinking its easy money, not a bad ploy really.

 

[MichaelD]

I would be interested to hear if MichaelD has moved away from his opinion of a year or 2 back

This should make for an interesting revisit. Let's see.

I said this 2 years ago:

1. Indicators are a waste of time because they are all merely abstractions of PRICE and thus provide no additional information above and beyond that inherent in PRICE.
2. PRICE is all that matters.
3. The exit makes the money by biasing the system towards overperformers.
4. A price which is going up is more likely to go up than one going down. That is the only prediction which has testable validity.

What I believe now:

1. This point holds. Indicators have no positive predictive value. Some people believe in indicators. THAT has positive predictive value.

2. Basically the same.

3. The exit makes the money by cutting out fat tail losers whilst holding onto fat tail winners. That's just a different way of looking at the same thing from a more risk-aware perspective.

4. Still valid.


Nick expressed it extremely well with;
"The WHY has nothing to do with the win rate. The WHY is the basic maths behind expectancy."

MRC also expressed it well with;
"Everything works, yet everything doesn't."

 

[Wysiwyg]

I said this 2 years ago:

1. Indicators are a waste of time because they are all merely abstractions of PRICE and thus provide no additional information above and beyond that inherent in PRICE.
2. PRICE is all that matters.
3. The exit makes the money by biasing the system towards overperformers.
4. A price which is going up is more likely to go up than one going down. That is the only prediction which has testable validity.

So far, I have only found 3 conditions on entry improve performance over random; CLOSE>Long Term Moving Average, enter on a white candle, and a three candle continuation pattern. Basically - price going up both long term and short term = BUY.

Hi Michael D., so you type that "Indicators are a waste of time" and yet you use one as entry criteria.Did you not explain that correctly?

What I believe now:

1. This point holds. Indicators have no positive predictive value. Some people believe in indicators. THAT has positive predictive value.

An even more accurate point would be that ... indicators reveal probable/possible outcomes...Nothing to hi tech. in that explanation really.

 

[MichaelD]

Hi Michael D., so you type that "Indicators are a waste of time" and yet you use one as entry criteria.Did you not explain that correctly?

For my long term system, the entry contributes a trivial amount to the overall system expectancy - of the order of less than 5%. 95% of the system expectancy comes from the exit and the money management. It's fairly self-evident where the hard work is done and thus where the development effort needs to be concentrated, and it ain't the entry indicators.

An even more accurate point would be that ... indicators reveal probable/possible outcomes...Nothing to hi tech. in that explanation really.

The same outcomes are revealed by a coin toss. Ergo, what are indicators actually doing except making YOU think you have some control over outcome?

 

[beerwm]

2. PRICE is all that matters.

what do u mean by price?

price at close, price over the whole day, price in respect to price 1/5/10/200 days ago? price in respect to the value of a company? movement in price? volitility of price of a day/week/month?

are you saying that the basic OHLC chart, is the only chart that is useful?

 

[Wysiwyg]

The same outcomes are revealed by a coin toss. Ergo, what are indicators actually doing except making YOU think you have some control over outcome?

I don`t think I have any control over outcome.My decision results in a profit, loss or break even and as can`t be repeated enough ... trade management is critical for continuity in this game.

 

[Cartman]

For my long term system, the entry contributes a trivial amount to the overall system expectancy -- it ain't the entry indicators.

i think long term is the key point here ---- eg. try running a short term system in the current market with crap entries and see how the capital balance shapes up after a few months ! ---- good entries are just as important as good exits in choppy markets unless ---

a) u have a strict 'position sizing/relative to capital' staking plan ----

i appreciate u have tested this stuff Mike, and are comfortable with your system, but these types of systems which often run with a wide ATR stop loss have the potential for serious losses unless (a) is taken into consideration ----- out of interest --- have u dropped yr position size per trade in the last 12 months? ---- i would suspect u have.

 

[MichaelD]

what do u mean by price?

price at close, price over the whole day, price in respect to price 1/5/10/200 days ago? price in respect to the value of a company? movement in price? volitility of price of a day/week/month?

are you saying that the basic OHLC chart, is the only chart that is useful?

Why complicate the simple by adding unnecessary information?

Price going up - buy
Price going down - sell

i think long term is the key point here ---- eg. try running a short term system in the current market with crap entries and see how the capital balance shapes up after a few months ! ---- good entries are just as important as good exits in choppy markets unless ---

a) u have a strict 'position sizing/relative to capital' staking plan ----

i appreciate u have tested this stuff Mike, and are comfortable with your system, but these types of systems which often run with a wide ATR stop loss have the potential for serious losses unless (a) is taken into consideration ----- out of interest --- have u dropped yr position size per trade in the last 12 months? ---- i would suspect u have.

My long term trend following system has dramatically decreased market exposure (as designed) - mainly by way of not giving pyramiding signals.

My short term systems are both profitable and therefore have increasing position sizes.