Trading Chaos

lukeaye said:

I wouldnt short defensive stocks in a hope that when the market tanks they will cover your longs, because those longs will go down alot harder and alot faster then CSL or TLS.

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I don't hope anything.

I just trade the chart as the setups come along.

If you want to contribute some thoughts that would be great.

Until then, I will be sitting here quietly trading the plan posted each day before the market opens.

So far from a forex perspective, I have had absolutely no issues trading each individual setup on each individual chart and IGNORING the market bias. If I was paying attention to market bias I would've missed the awesome play that has been happening for weeks now: long comdolls short Eurozone, USD neutral. Because I probably would've been flip flopping between USD bearish and bullish and losing money like all the other idiots on forexfactory who are looking at the EURUSD chart to short AUDUSD.

What a rubbish way to trade.

sinner said:

I don't hope anything.

I just trade the chart as the setups come along.

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And i don't know what set up you saw. NCM down and CSL up, you have lost both ways. Doubled you loss. If you had of been long both, you would at least be making some money.

lukeaye said:

And i don't know what set up you saw. NCM down and CSL up, you have lost both ways. Doubled you loss. If you had of been long both, you would at least be making some money.

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Are you serious? As far as I can tell neither position has been stopped out yet and if they are so what? Move on to the next trade.
The set up was what it was and he traded it that way, so to say he should be long both because he's down a few cents on each trade is childish.

Sinner is trading his set ups with full explanation on why and how, if you don't agree with it leave the thread alone so those who are interested can learn.

lukeaye said:

And i don't know what set up you saw. NCM down and CSL up, you have lost both ways. Doubled you loss. If you had of been long both, you would at least be making some money.

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The signals for all orders have already been posted with charts so if you "don't know" you can just go back and look instead of posting rubbish "ifs" and telling me what I have lost.

CSL isn't a loss until my stoploss limit is hit. I am not even in an NCM trade yet (do you actually know what a buy stop is? Doesn't seem so).

In the money on 2 of the 4 trades I am in, despite receiving a 30c slip on my CBA entry.

For what its worth I tend to agree with Techs idea. With many "if" attached to that idea. To put some meat onto it as we all know I never make a statement without the stats to back it up rolleyes: yeah right). I have put together a back test of sorts to find the rolling correlation of each XTL (ASX20) constituents to the actual index. Have ran out of time right now but have got to these messy graphs for now. Not the XTL (thick black line) right in the middle of them all, no surprise there.

Trouble is though the time frame. Clearly over a long period you have stocks moving in separate directions. But over a short period say 20 - 40 days they are actually very closely correlated. This may be where your idea breaks down. If not breaks down maybe at least fights against the stats if you are actually trying to be long and short at the same time.

Will come back latta with the correlations over a 20 day period, if anyone cares about it.

Trembling Hand said:

For what its worth I tend to agree with Techs idea. With many "if" attached to that idea. To put some meat onto it as we all know I never make a statement without the stats to back it up rolleyes: yeah right). I have put together a back test of sorts to find the rolling correlation of each XTL (ASX20) constituents to the actual index. Have ran out of time right now but have got to these messy graphs for now. Not the XTL (thick black line) right in the middle of them all, no surprise there.

Trouble is though the time frame. Clearly over a long period you have stocks moving in separate directions. But over a short period say 20 - 40 days they are actually very closely correlated. This may be where your idea breaks down. If not breaks down maybe at least fights against the stats if you are actually trying to be long and short at the same time.

Will come back latta with the correlations over a 20 day period, if anyone cares about it.

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Thanks TH, great stuff. It would be nice if you post the 20 day slice, I would certainly appreciate it. Possible for you to post a few different slices from a few different market periods over the last 2 odd years?

It seems the main issue has been caused here because I posted a couple of reversal trades. To me this seems rediculous. It's not like I said, "hey I am shorting CSL tomorrow to see all time new lows". All I said was, "we are high up, supply has possibly entered at a resistance level, on a break of daily lows shorts to support could pay off". By the time we hit support I might be taking longs again on that stock. Or maybe by the time we hit support I will decide to take more shorts on a break of that support. Who knows! I'm certainly not going to ignore a great looking short signal just because the SPI is up on the year and RBA is hiking rates or something like that?

Frankly, I'm pretty surprised to see lukeaye dissing CSL shorts, as he is supposedly now using Volume Spread Analysis as his "example of conservative trading strategy"...if I was VSA trading CSL there is no way in hell I would be long today.

sinner said:

Lovely post tech, just come in here, spout some statement without any thoughts or reasoning to back it up, gee thanks for the insight. How come you aren't this helpful all the time?

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Always a pleasure.

Since you provided absolutely no thoughts at all, I am wondering why you believe I should bias my trading by believing the NCM share price is somehow related to the TLS share price is somehow related to the FGL share price?

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I have not stated that you should have a belief that shares are correlated.Only having a bias toward a direction may be more benificial and easier to trade. Of course timeframe related.

As I already stated in the above post, during periods of extreme market strength or weakness share prices across sectors are often strongly correlated. So what? I don't trade a bias, I trade the chart. When all the sectors are tanking or uptrending at once it'll show up on the charts. I won't need a bias, I will be following the same plan then as I am today.

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So you trade both long and short until the market shows a bias then you trade WITH that bias.

Until then, I will be happy to ignore the index, hold longs on CBA, shorts on CSL and whatever other setups my charts not my bias indicate.

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Fair enough as there is no distinct bias makes sence.

CSL
You may wish to work on your VSA with a 1.2% rise today.

G'day Sinner,

Thank you for taking the time to write such an in depth response. I very much appreciate it.

If you have faith in your system and know that over time it will be profitable then it's psychologically easier to make it through a drawdown period. This would be the case if you had backtest results indicating your system has an edge. If your system makes a 20% gain before going into drawdown then it's easier to wait out the drawdown period because you're handing back profits rather than losing initial capital.

My initial thought was that you are now starting to trade on a market you have no backtest results for (ASX20). If you now started off with a drawdown period, how long could you let it run before you start to worry that the system doesn't work on the ASX20 and that there might not be a recovery at all? A certain number of instruments in the ASX20 will trend nicely. A certain number of instruments will give you entry signals that suck you into a losing trade. The rest won't even trigger an entry signal. Do you have confidence that you will find enough trends to cover the losses of the rest? You answered this by showing me that you have faith that the system has an edge in any market that often trends and that you can reduce the number of the bad trades taken using the alligator. Your tolerance for drawdown will likely be high due to this faith in your system combined with your previous trading success. Beyond that, how much capital you're willing to throw into an initial drawdown period is a personal choice.

Thanks again. I'll be reading more about it all over the weekend.

Ok Sinner here are some stats,



And a rolling Chart. remember a correlation of 1 is locked together while anything above 0 is moving in a similar way, anything below 0 moving in the opposite direction.



I would say that mostly if you are long & short this group of shares you will be taking some heat on one side while winning on the other. A quick look at the occurrences when a share does move in negative correlation to the rest is, barring Dog TLS, is a surprise announcement and they are swift moves.

Anyway as an idea of trying to be long and short I would say - pain.

This is a beaut thread, and one of the best examples of chaotic thinking on ASF. Keep it up. Mandelbrot would be proud.

gg