Short-term trading strategy discussion

[Trembling Hand]

Anything over 5 mins is a position trade for you!

Ok. I will leave this thread alone then. Best not to disturb a masturbating bull.

 

[tech/a]

With your sole input into this thread being----

That would hardly put it into the Short-term category?

Ok. I will leave this thread alone then. Best not to disturb a masturbating bull.

You'll be sadly missed.

{Mental note poster T/H---void of humor.
Cynic still upset there is no Santa.}

 

[Sir Osisofliver]

That would hardly put it into the Short-term category?

Um TH - I get the feeling that you haven't read the content of this thread particularly deeply, perhaps you just like to skim read.

1) I've mentioned several times that I'm just trying to get inside Tech's head, (or anyone's head frankly) who trades on a day trade or extremely short-term basis. It's not something that I do well. I know what works for me and at present it doesn't include this type of trading. I'm asking because I am nosy and interested in seeing other successful styles of investment. Who knows, in the future I might get bored with what I am doing now and decide I want to give short-term trading another swing.

2) According to my uncle three weeks is extremely short-term, a view probably held by the majority of buy and hold investors, so it's all relative. Synergy's question was a good one and deserved an answer. My current system has an average time in trade of 13.34 market days. Many would say this is short-term. Many would say that for a mechanical based system it's lengthy.

Cheers

Sir O

 

[Trembling Hand]

Well I guess the important word here is trading I would imagine your Uncle would call himself an investor? But I did lose your point within all the posts.

for what its worth I always though most trading sat under this headings in terms of periods,

scalping - seconds to a few minutes and large repetition.
Daytrading - minutes to hours, flat at the end of each day.
Swing trading - 1 to 5 days.
Momentum - anything out to a few weeks.
Long term trading - weeks to months.
Investors - whenever their prayers are answered.

But then my real question is why is there a perception that a short term trader does anything different than someone longer term? I often see things like "daytraders need a high win ratio" or "Short term trading system stats will look like XYZ".

From what I have seen of short term traders approaches that make money over the long term there is just as many different methods , and therefore stats, as there is different from say swing traders to active long term traders.

The only diff I have seen that matters is R won vs repetition. Short term'ers seem to have an edge not in win rate or any other stat/metric but simply in the compounding affect of turnover (given positive expectancy after cost).
A system that trades momentum may average 3R to 8R per trade and a short term'er may have the same stat or even a much poorer Rs won per trade like 1.5R but given they can repeat it 10 - 100 time per week will ultimately make more dough.

But then you come into a problem of scaling the method. To me that is the only diff. A long term approach works because you find a pattern and market that fits - same with short term, within that there is infinite variations.

 

[Mr J]

But then my real question is why is there a perception that a short term trader does anything different than someone longer term? I often see things like "daytraders need a high win ratio" or "Short term trading system stats will look like XYZ".

The same reason why anything more than 2% is too "risky", or short timeframes are "noise" - often-repeated cliches that become dogma.

 

[Sir Osisofliver]

Well I guess the important word here is trading I would imagine your Uncle would call himself an investor?

um no. He considers himself a trader, he only buy's and holds within the asx50during the worst of market corrections, and attempts to sell at the top of the market, but usually his holding period is about 5 years.

for what its worth I always though most trading sat under these headings in terms of periods,

scalping - seconds to a few minutes and large repetition.
Daytrading - minutes to hours, flat at the end of each day.
Swing trading - 1 to 5 days.
Momentum - anything out to a few weeks.
Long term trading - weeks to months.
Investors - whenever their prayers are answered.

I don't think my system fits neatly into any of those catagories and all my eggs aren't invested in the one basket. Given your headings I'd have to say that the majority of my share assets fall into the Investors heading, which I'm sure will make posters question my sanity yet again

But then my real question is why is there a perception that a short term trader does anything different than someone longer term? I often see things like "daytraders need a high win ratio" or "Short term trading system stats will look like XYZ".

From what I have seen of short term traders approaches that make money over the long term there is just as many different methods , and therefore stats, as there is different from say swing traders to active long term traders.

The only diff I have seen that matters is R won vs repetition. Short term'ers seem to have an edge not in win rate or any other stat/metric but simply in the compounding affect of turnover (given positive expectancy after cost).
A system that trades momentum may average 3R to 8R per trade and a short term'er may have the same stat or even a much poorer Rs won per trade like 1.5R but given they can repeat it 10 - 100 time per week will ultimately make more dough.

But then you come into a problem of scaling the method. To me that is the only diff. A long term approach works because you find a pattern and market that fits - same with short term, within that there is infinite variations.

Mostly agree but run out of puff. Will comment again if I can be motivated enough.

Cheers

Sir O

 

[tech/a]

.

for what its worth I always though most trading sat under this headings in terms of periods,

scalping - seconds to a few minutes and large repetition.
Daytrading - minutes to hours, flat at the end of each day.
Swing trading - 1 to 5 days.
Momentum - anything out to a few weeks.
Long term trading - weeks to months.
Investors - whenever their prayers are answered.

System/Systematic/Discretionary---on and on.

But then my real question is why is there a perception that a short term trader does anything different than someone longer term? I often see things like "daytraders need a high win ratio" or "Short term trading system stats will look like XYZ".

Short termers generally target higher win rates shorter holds and lower R.
Short term stats tend to look similar as do Longer term.

From what I have seen of short term traders approaches that make money over the long term there is just as many different methods , and therefore stats, as there is different from say swing traders to active long term traders.

The only diff I have seen that matters is R won vs repetition. Short term'ers seem to have an edge not in win rate or any other stat/metric but simply in the compounding affect of turnover (given positive expectancy after cost).
A system that trades momentum may average 3R to 8R per trade and a short term'er may have the same stat or even a much poorer Rs won per trade like 1.5R but given they can repeat it 10 - 100 time per week will ultimately make more dough.

But then you come into a problem of scaling the method. To me that is the only diff. A long term approach works because you find a pattern and market that fits - same with short term, within that there is infinite variations.

No arguement here.
So that was a short discussion.

 

[Trembling Hand]

Short termers generally target higher win rates shorter holds and lower R.

I just don't know where you get that from Tech?

 

[Synergy]

define "likely" with math for me.

You must have had a reason to enter the first trade, a target price or expectation of movement, otherwise you would never have entered it. Given what I would consider to be an appropriate level of diversification across your trades, you should have scope to enter a great many trades. I can only speak for my system (which uses leverage), but it's rare that I will use any more than about 70% of the available funds.

In many circumstances trading is a negative sum game in that you have to pay for brokerage to enter and exit. If you stop it out merely because you think you see something better, your opportunity cost is therefore the exit, entry and exit cost of your brokerage on the old trade and new trade. IE you increase your costs significantly to enter the new trade. That means that the new trade has to perform that much better to make it worth your while. I'd be hesitant to close something out just because something else looks better right now. Having said that I do have a time-orientated rule built into my system.

My way of thinking is this... The enrty is the point calculated to be the most appropriate place to enter a trade, and quite often the most profitable. From that entry I know that a trade is likely (on average) to progress at a certain rate. Say 1%/day on average for example.

At the end of the first day holding a stock, it is unlikely that the return rate looking forward will still be 1%/day. We now have more information about this trade - the price action of the day. If the stock has moved up to +5 to 10% since buying, I might expect 1.5%/day from this trade. If it's fallen 10% since buying, I may only expect .5%/day.

So depending on the point each trade is at, it will have a different average rate of return. While it may be still profitable on average to hold a trade sitting at -5% after 4 days, the likely rate of gain is less than that of a new trade.

So, once a trade is likely to increase price at a slower rate than a new trade, and there are new trades available, It should be sold. Obviously brokerage costs need to be taken into account.

It may sound like I'm chopping and changing my trades constantly with this method, but this is built into the system already. Trades are cut once they are likely to undererform a new trade.

More time should be spent matching the number of buy signals to what the system can trade. Excess buy signals means weaker trades could be filtered out. Insufficient signals results in lost oportunity. If the system is not fully invested, buy parameters should be loosened to allow weaker signals to be bought. If taken up, weaker trades should be sold to allow room for trades likely to be more profitable.

Once again define "weaker" with math for me. I firmly believe that the nature of our markets is not ordered and completely predictable. Rather it is chaotic in nature, and subject to influences that are beyond control. If I were to attempt what you describe in my system I would need to put some values around what I consider to be weaker and stronger trades and then back-test. I get the feeling I would be testing for a very long time for not very much additional return.

Generally, the more trades a system makes, the lower the average return for each trade. If when designing a system you can increase both rate of return per trade and number of trades taken then you're on a winner!

With my system I can turn down the number of buy signals I receive for a higher average trade, or increase the buy signals for a lower average trade.
Ideally, you want to get the balance right, so that you are 100% invested when you want to be. If you are 50% invested, why not expand your criteria and allow some 'weaker' signals to be taken. You know they are still profitable, and they are a better option than not buying anything at all. The opposite applies if you have excess signals.

Again it's not something I'm constantly chopping and changing, as the buy signals the system gives is roughly what it is capable of trading.

 

[Sir Osisofliver]

My way of thinking is this... The entry is the point calculated to be the most appropriate place to enter a trade, and quite often the most profitable. From that entry I know that a trade is likely (on average) to progress at a certain rate. Say 1%/day on average for example.

Math Synergy. Without math to justify it's just opinion. When you mention that you know a trade is likely ( on average) to progress... How do you know?

If you KNEW absolutely what a stock was going to do in advance you could position yourself to take advantage of it absolutely. You are positioning yourself for the most likely event, and hope that you get it right more often than you get it wrong.

At the end of the first day holding a stock, it is unlikely that the return rate looking forward will still be 1%/day.

Why? What if they make an after-hours announcement? What if it's revealed another company has just bought a 15% stake? What if I take an opposing view to you and decide to short a bucket load of stock? What if etc etc etc. Tell me Synergy in your experience is the market an orderly place?

We now have more information about this trade - the price action of the day. If the stock has moved up to +5 to 10% since buying, I might expect 1.5%/day from this trade. If it's fallen 10% since buying, I may only expect .5%/day.

So depending on the point each trade is at, it will have a different average rate of return. While it may be still profitable on average to hold a trade sitting at -5% after 4 days, the likely rate of gain is less than that of a new trade.

So, once a trade is likely to increase price at a slower rate than a new trade, and there are new trades available, It should be sold. Obviously brokerage costs need to be taken into account.

It may sound like I'm chopping and changing my trades constantly with this method, but this is built into the system already. Trades are cut once they are likely to underperform a new trade.

I disagree with your assessment

Generally, the more trades a system makes, the lower the average return for each trade. If when designing a system you can increase both rate of return per trade and number of trades taken then you're on a winner!

I tend to get a large amount of variation in my return. I accept this as I know I will not perfectly estimate the return before I enter the trade. **** happens. Best return in the 50 odd trades since I started the system was 375% on own funds, but normally achieve an average around 30% on own funds.

With my system I can turn down the number of buy signals I receive for a higher average trade, or increase the buy signals for a lower average trade.
Ideally, you want to get the balance right, so that you are 100% invested when you want to be. If you are 50% invested, why not expand your criteria and allow some 'weaker' signals to be taken. You know they are still profitable, and they are a better option than not buying anything at all. The opposite applies if you have excess signals.

Again it's not something I'm constantly chopping and changing, as the buy signals the system gives is roughly what it is capable of trading.

I'm quite comfortable using only 70% of my reserved equity in my system since I use a significant amount of leverage. But horses for courses Synergy. Use what works for you.

Cheers

Sir O

 

[Synergy]

Sir O,

The market is far from ordily, but i do believe in trends and probabilities amongst the disorder, and believe in exploiting these as much as I can.

My maths is simply a table with % gained accross the top, and days held down the side. Filling the grid is the average gain from that point of the trade onwards. (from testing results)

So i can see that a trade held for 2 days sitting at +10% is likely to outperform a trade at 0% after 5 days from that point in time. It may not be the case every time, but on average based on the data i've tested with, it is.

The only time i actually use this table is when i'm over bought and need to decide what stock to sell. Otherwise the the system just does its thing, which basically mirrors the data in the table.

I don't make any predicions about any trades. I just use probability to work out the best trades to be in.

 

[tech/a]

Sir O,

The market is far from ordily, but i do believe in trends and probabilities amongst the disorder, and believe in exploiting these as much as I can.

My maths is simply a table with % gained accross the top, and days held down the side. Filling the grid is the average gain from that point of the trade onwards. (from testing results)

So i can see that a trade held for 2 days sitting at +10% is likely to outperform a trade at 0% after 5 days from that point in time. It may not be the case every time, but on average based on the data i've tested with, it is.

The only time i actually use this table is when i'm over bought and need to decide what stock to sell. Otherwise the the system just does its thing, which basically mirrors the data in the table.

I don't make any predicions about any trades. I just use probability to work out the best trades to be in.

HMMM

 

[Telamelo]

Hey Everyone.. noticed "short term trading threads" here on ASF have all been asleep/inactive for many year's.... am I the only short term trader around !? surely not I hope.

I'd love to share some ideas/tip's as to potential momentum stocks to make a quick profit $ on so am keen to hear from other like minded trader's please... my definition of short term trading is anywhere between a day to say 10-30 day's on average (sometimes a bit longer stretching into a couple of month's at most).

Cheers tela

 

[divs4ever]

What is trend following and why do it?​

What is trend following and why do it?

Trend-following strategies have been around for a long time though they're still seemingly underappreciated. These strategies can provide diversification benefits and help protect downside risks to portfolios.

www.firstlinks.com.au

no i don't ( trend-trade) , but maybe some other members will see it's uses

 

[Dona Ferentes]

one trader:

"Short-term interest rates are easier to trade than anything else. Why? Because they trend. The Fed doesn’t typically cut, then hike, then cut, then hike. It gets on a rate-cutting or -hiking cycle that lasts for months or years.

"That isn’t to say there isn’t volatility in a short-term interest rates position, but it is a lot easier to hold a position than, say, in the Nasdaq or oil, where you are constantly being shaken out....