Technical Trading Exercise (Pavilion103 and tech/a) Discussion

[fiftyeight]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Haha just me getting ahead of my self as usual.

This has been asked before as I think I have read it, but think I can find it now?

What are some good free charting and data feeds that I can use to follow this thread?

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Haha just me getting ahead of my self as usual.

This has been asked before as I think I have read it, but think I can find it now?

What are some good free charting and data feeds that I can use to follow this thread?

Yahoo
Stockness Monster.

 

[pavilion103]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Out of interest, I was going over my trading stats prior to running this portfolio with Tech.

I had a similar winning accuracy and then obviously a similar losing rate as the Tech/Pav portfolio (with BE+losers)


The main difference was that over (a small) sample size of 20 trades I had:
- 8 wins
- 12 losses
- 0 break-even

If we look at the Tech/Pav porftolio the avg distribution over 20 trades would be:

- 8 wins
- 7.5 losses
- 4.5 break evens


Enormous difference in the percentage returns.
I was profitable over the 20 trades but only by 5%
Profit on this portfolio is closer to 50% (but over 35 trades).


One lightbulb moment for me when it comes to increasing expectancy is the impact of the breakeven stop. It had a HUGE impact on the expectancy of the system (also on the drawdown).

 

[waza1960]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

One lightbulb moment for me when it comes to increasing expectancy is the impact of the breakeven stop. It had a HUGE impact on the expectancy of the system (also on the drawdown).

That's really interesting, I have found with systematic trading that Breakevens are of limited value perhaps the discretionary angle gives them an edge ?

 

[CanOz]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

That's really interesting, I have found with systematic trading that Breakevens are of limited value perhaps the discretionary angle gives them an edge ?

Yeah, stops hurt systems...i wonder what it is about discretionary stops that are better? Better observation of volume perhaps?

CanOz

 

[sinner]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

That's really interesting, I have found with systematic trading that Breakevens are of limited value perhaps the discretionary angle gives them an edge ?

In a portfolio of instruments, break even stops can free up capital to take on more trades without increasing overall risk (as long as you believe the stops can be executed efficiently).

 

[Boggo]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Yeah, stops hurt systems...i wonder what it is about discretionary stops that are better? Better observation of volume perhaps?

CanOz

Not having them can hurt even more.
Example...
https://www.aussiestockforums.com/forums/showthread.php?t=16501&p=766395&viewfull=1#post766395

(click to expand)

 

[waza1960]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

(as long as you believe the stops can be executed efficiently).

There's the punchline.

 

[CanOz]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Not having them can hurt even more.
Example...

Yeah sure Boggo i understand that. Generally speaking i was saying that they hurt the performance of the system. They also have other positive benefits as well of course....

CanOz

 

[sinner]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Yeah, stops hurt systems...i wonder what it is about discretionary stops that are better? Better observation of volume perhaps?

CanOz

If you buy a breakout and it has been ranging +/-1% for 5 days, what are the probable returns for day 6, 7, 8, ... ?

If you buy a breakout and it's sitting +5% in 5 days, what's the probability price will retrace to your entry versus probability price has gathered some momentum?

 

[Gringotts Bank]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Yeah, stops hurt systems...i wonder what it is about discretionary stops that are better? Better observation of volume perhaps?

CanOz

To me it indicates that the trades taken are based on good entries. A good entry would be one where the stop can be moved to BE only because the SP continues to move up immediately. Otherwise you won't be moving any stop anywhere, let alone upwards!! I also believe in getting a good entry, and contrary to most commentators, think it's just as important as the exit. Average entries with tight stops results in an extremely high % of losing trades, and will likely be unprofitable overall.

To say "move the stop to BE" simply means that the price has gone up from entry and allowed it. In other words, you've picked a good entry. That's what needs to be discussed.

 

[CanOz]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

To me it indicates that the trades taken are based on good entries. A good entry would be one where the stop can be moved to BE only because the SP continues to move up immediately. Otherwise you won't be moving any stop anywhere, let alone upwards!! I also believe in getting a good entry, and contrary to most commentators, think it's just as important as the exit. Average entries with tight stops results in an extremely high % of losing trades, and will likely be unprofitable overall.

But its a bit like everything else in discretionary versus systematic trading... we think its better to have good entries, but yet when tested they're no better than 50/50 anyway. Like BE and Trailing Stops. the 20% Flipper uses only a 20% stop and an index filter, yet this works better than a BE and a trail because it gives the stock room to run.

Anyway, a bit off topic...looking forward to tech and Pavs examples, i know how Radge used to move his stops (more or less) but i'm keen to see how these guys do it.

CanOz

 

[Gringotts Bank]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

But its a bit like everything else in discretionary versus systematic trading... we think its better to have good entries, but yet when tested they're no better than 50/50 anyway. Like BE and Trailing Stops. the 20% Flipper uses only a 20% stop and an index filter, yet this works better than a BE and a trail because it gives the stock room to run.

Anyway, a bit off topic...looking forward to tech and Pavs examples, i know how Radge used to move his stops (more or less) but i'm keen to see how these guys do it.

CanOz

I think it's very much on topic!

Sinner asked if you want a small movement or big movement before breakout. I want small movement, low volatility right near the trendline is best. That would be part of my pattern.

 

[CanOz]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

I think it's very much on topic!

Sinner asked if you want a small movement or big movement before breakout. I want small movement, low volatility right near the trendline is best. That would be part of my pattern.

Some would argue that time has more significance that the range size...

CanOz

 

[Gringotts Bank]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Some would argue that time has more significance that the range size...

CanOz

I base my time stop on a percentage of the size of the pattern in most cases. eg. pattern size = 20 bars -> time stop 10 bars. But this is for swing trading,not momentum. I think this thread is only about momentum trades, not sure.

 

[pavilion103]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

I base my time stop on a percentage of the size of the pattern in most cases. eg. pattern size = 20 bars -> time stop 10 bars. But this is for swing trading,not momentum. I think this thread is only about momentum trades, not sure.

Yes momentum trades for this portfolio. Mainly continuation patterns.

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

I think it's very much on topic!

Sinner asked if you want a small movement or big movement before breakout. I want small movement, low volatility right near the trendline is best. That would be part of my pattern.

Absolutely I agree.
I'll comment more on this
Very important topic when I have more time.

Excellent discussion guys!
Very pertinent to what I'd like to get across.

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Hi Tech

Do you have conditions of the overall market to be met before trading these trades?

Long trades only or Long and Short trades?

 

[CanOz]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Hi Tech

Do you have conditions of the overall market to be met before trading these trades?

Long trades only or Long and Short trades?

Great question...Nick, Jason Leavitt and i'm sure others as well often review the over market for trend once a week...

curious as to how these guys will handle this too, i'm sure they've got it in hand as Tech has already posted on the XAO thread....

CanOz

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Firstly I have posted in the XAO thread and I believe we are at an important cross roads right now.

So Yes I do look at the background market.

But prospects tend to dry up as well and we have noticed that
in the last few weeks. To the point that those on watch lists aren't triggering.
We are having quite a few pattern failures.

To the main topic.
That where stops are questioned with regard to performance.

In a Systematic approach there are fixed entry/exit and stops. These don't float.
As such a value is returned for trading the system against your universe.
Its simply a repeat process which if adhered to should return something within the standard deviation of the results found when testing.



Its not about being right its about being profitable.


In a Discretionary trading method we have the ability to alter all 3
Entry/Exit and Stops. The single most important aspect of this form of trading---in my view.

Unlike a systematic approach we don't have to play trade after trade out to its known end.
We can move our Initial Stop. We can alter our entry and we can determine our exit with discretion.
To sit and wait for a stop to be hit as a stock reverses from well above---with clear signs of an impulse move
during a topping pattern or stage of the life of the chart---would be less than ideal.

Initial stops give us a target for Reward for Risk.
That is 1 R
But if we can over a number of trades alter that 1 R to less than 1 R it can and does have a dramatic affect on your results.
Our results were improved immensely.
At the other end exit timing can also ensure you retain more profit.

In the exercise presented we are looking at very short term trades.3-8 days.
We want to be in trades moving in our direction. More of them and more often.
In the end it is and was my intention to show Pav that you MUST be proactive in your trading.
to sit by passively waiting for a result from your set (Plan) parameters is disaterous for profits.

I want to make this clear.

People spend hrs looking for the perfect entry or exit.
They keep copious notes and review how they could improve their entries/exits and even stops.

In my view.



Its not about being right its about being profitable.

An important aspect in Technical trading.---In fact Id go as far as saying if your not trading a system trade to be profitable skewing your risk and reward as much as you can.
I hope when I post some charts that you'll not only see the achieved results but what you can do to make your trading more profitable.

If your looking for genius entries and exits and perfect stop placement--you wont find it here!
But you'll find profit!