Trading/Daytrading for a living

professor_frink · 23 May 2006

Re: Trading / Daytrading for a living

chemist said:
I agree. Yesterday your indicator said sell. What does it say today? If it now says buy (or hold), then closing or reversing your position is not being stopped out, it's a (rational) change of mind. OTOH if still says sell why close the position just because yesterday's trade has so far failed to show a profit? if we're trading our indicator we trust it. One random wrong day shouldn't change our minds.

The problem with that chemist, is I know any indicator I use is not trustworthy, most won't even get it right 50% of the time, but they will catch the big move when it comes. They will also catch the tops of smaller moves. That's why appropriately placed stop losses and position sizing(staking plans) are essential. You need to stay in the game long enough for your methods expectancy to play out.

Sorry I must have misunderstood you in regards to expectancy. When wayne posted the expectancy equation up before, you said the equation meant nothing. Looking back on that post now, after the recent posts you've made I can see why you said that and I agree. No position sizing method can turn negative expectancy into a positive one, but a poor position sizing method combined with not following stop loss signals generated by the system can turn positive expectancy into a failure.

Thanks for the links. I'll check em out today

tech/a · 23 May 2006

Re: Trading / Daytrading for a living

tech/a said:
Chemist.

It is not possible to calculate R/R without enough data to give a meaningful result.
As you say simply setting a stop with a percieved target price in itself has absolutley no meaning with regard to Positive expectancy---although many delude themselves into thinking that setting a tight stop and targetting a sale price of 5x stop is a positive expectancy trading methodology

Expectancy can and is calculated from a set of trades over a period of time given inputs and variables,when traded return results that can then be formulated into expectancy and a whole host of other results.

Prof are you falling into this trap?

How do you determine Positive expectancy in your trading?
More to the point how do you KNOW your trading is with a positive expectancy.

Waynes equation without tested numbers means nothing its simply a formula,with them then the calculation can be performed and a final figure determined.

professor_frink · 23 May 2006

Re: Trading / Daytrading for a living

tech/a said:
Prof are you falling into this trap?

How do you determine Positive expectancy in your trading?
More to the point how do you KNOW your trading is with a positive expectancy.

Waynes equation without tested numbers means nothing its simply a formula,with them then the calculation can be performed and a final figure determined.

God I hope not!

Expectancy in my trading is based on previous trades, so technically you'd be right.I don't know for sure that my future trades will still have it. But that's discretionary trading for you isn't it! I think(well at least I hope!) I've done enough trading and have enough results on the board(5+ years worth) to establish that I am trading with positive expectancy.

Ageo · 23 May 2006

Re: Trading / Daytrading for a living

tech/a said:
Prof are you falling into this trap?

How do you determine Positive expectancy in your trading?
More to the point how do you KNOW your trading is with a positive expectancy.

Waynes equation without tested numbers means nothing its simply a formula,with them then the calculation can be performed and a final figure determined.

So basically your saying you wont know your expectancy until you start trading? (i agree) But you have to have some sort of guide to have you on the right track. Perhaps trading very small amounts at 1st so you can see what your expectancy is and if it looks good increase the volume over time.

professor_frink · 23 May 2006

Re: Trading / Daytrading for a living

Ageo said:
So basically your saying you wont know your expectancy until you start trading? (i agree) But you have to have some sort of guide to have you on the right track. Perhaps trading very small amounts at 1st so you can see what your expectancy is and if it looks good increase the volume over time.

If you use a mechanical system that's been tested, like tech's system, then you can establish it before you start. with discretionary trading there's no real way of knowing until you start trading.

tech/a · 23 May 2006

Re: Trading / Daytrading for a living

with discretionary trading there's no real way of knowing until you start trading.

Here in lies the single most important problem facing discretionary traders.

Even with best intentions and hypothesis,you wont have a picture for months if not years---and if its not positve or positive enough then back to the drawing board.

This is why being able to test Ideas and being able to refine them is terribly important.

In the end not only positive expectancy will be known but a vast array of information which should be used as a blueprint for all future trading.

tech/a · 23 May 2006

Re: Trading / Daytrading for a living

Have loaded in for more AIM at 12.5c

This is not recommended for home viewers.
I'm punting on a support area and averaging down.

Bobby · 23 May 2006

Re: Trading / Daytrading for a living

tech/a said:
Have loaded in for more AIM at 12.5c

This is not recommended for home viewers.
I'm punting on a support area and averaging down.

Interesting to see you averaging down isn't this a no no ?

Also your buy at 12.5 was above support of 12c , but they are 13c now so what was your thinking at the time ?
Was it the depth strength 12c .

Bob.

tech/a · 23 May 2006

Re: Trading / Daytrading for a living

Bobby.

Yes it is a no,no.
I got caught with the gap down so changed the play.
what I'm doing is risky (if I get filled,still 3rd in the que at 12.5)
My intention is to mitigate loss. I may well add to it!!

I certainly dont recommend averaging down,this is a situation which fortunately I find myself in rarely as I take the loss.

Will see how it pans out.Now 13.5,will not chase the buy.

Sean K · 23 May 2006

Re: Trading / Daytrading for a living

Do you guys using Moving Averages to determine entry and exit strategy?

If so, which indicators do you use?

MACD (buy when there's a bullish divergence moving up through signal line for eg?)

Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)

Any other rules you work off, or you using other systems?

Bobby · 23 May 2006

Re: Trading / Daytrading for a living

tech/a said:
Bobby.

Yes it is a no,no.
I got caught with the gap down so changed the play.
what I'm doing is risky (if I get filled,still 3rd in the que at 12.5)
My intention is to mitigate loss. I may well add to it!!

I certainly dont recommend averaging down,this is a situation which fortunately I find myself in rarely as I take the loss.

Will see how it pans out.Now 13.5,will not chase the buy.

Thanks for being so candid !
Good to know your not going to chase it !

Bob.

tech/a · 23 May 2006

Re: Trading / Daytrading for a living

kennas said:
Do you guys using Moving Averages to determine entry and exit strategy?

If so, which indicators do you use?

MACD (buy when there's a bullish divergence moving up through signal line for eg?)

Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)

Any other rules you work off, or you using other systems?

No I generally trade Breakouts. Or volume spikes when trading in a discretionary manner.

My longterm trading methodology is here if you are interested

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=forum;f=74

Bobby · 23 May 2006

Re: Trading / Daytrading for a living

kennas said:
Do you guys using Moving Averages to determine entry and exit strategy?

If so, which indicators do you use?

MACD (buy when there's a bullish divergence moving up through signal line for eg?)

Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)

Any other rules you work off, or you using other systems?

Hullo Kennas,

I don't use the common indicators much any more, because when to many use something it becomes less affective.
I do pay attention to depth & volume plus other stuff.

Bob.

professor_frink · 23 May 2006

Re: Trading / Daytrading for a living

kennas said:
Do you guys using Moving Averages to determine entry and exit strategy?

If so, which indicators do you use?

MACD (buy when there's a bullish divergence moving up through signal line for eg?)

Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)

Any other rules you work off, or you using other systems?

most of my trades are based around the directional movement group of indicators. Don't use the macd, mainly the RSI and mainly to look for divergence. recently changed from having a 20 period sma on the chart to a 5,15 and 30 ema to help gauge the trend( If you read "your trading edge" magazine you'll know what I'm talking about with the ema's. A woman that writes for them who also uses the DM group, is always raving about them so I gave them a go for awhile, found it really helpful, so they are on there all the time now). Depending on how a trend develops will determine which one I pay most attention to. And it makes the chart look real pretty

chemist · 23 May 2006

Re: Trading / Daytrading for a living

tech/a said:
Prof are you falling into this trap?

How do you determine Positive expectancy in your trading?
More to the point how do you KNOW your trading is with a positive expectancy.

t/a

I don't KNOW anything so I use statistics. I never trade without backtesting. Once your profits are out past 10 sigma you can pretty much forget about the possibility that it is all down to luck.

cheers,
Chemist

tech/a · 23 May 2006

Re: Trading / Daytrading for a living

Chemist.

My post you have referred to was infact meant for Professor fink.

Prof for short

chemist · 23 May 2006

Re: Trading / Daytrading for a living

tech/a said:
Chemist.

It is not possible to calculate R/R without enough data to give a meaningful result.
As you say simply setting a stop with a percieved target price in itself has absolutley no meaning with regard to Positive expectancy---although many delude themselves into thinking that setting a tight stop and targetting a sale price of 5x stop is a positive expectancy trading methodology

Expectancy can and is calculated from a set of trades over a period of time given inputs and variables,when traded return results that can then be formulated into expectancy and a whole host of other results.

t/a,

I trust your health has improved. I don't disagree with anything you've said above. A positive expected profit (in excess of buy-and-hold) requires an edge over the market. Fiddling with your staking, stops, and targets moves you around on a risk-reward curve defined by the performance of your market direction picking. What most traders really want to do is move to a whole new (higher) curve because the one they're on now is a risk-loss curve.

cheers,
Chemist

tech/a · 23 May 2006

Re: Trading / Daytrading for a living

Chemist.

If you remove "Target" from any equation and replace it with an exit criteria,the remaining results and expectancy will be relative to that set of criteria.
"target" is the parameter which can limit profit,infact it can have the greatest detrimental effect as the old adage of letting profits run cannot occur beyond any set target.

Most are only interested in entry when it is exit which will govern return.

wayneL · 23 May 2006

Re: Trading / Daytrading for a living

chemist said:
t/a

I don't KNOW anything so I use statistics. I never trade without backtesting. Once your profits are out past 10 sigma you can pretty much forget about the possibility that it is all down to luck.

cheers,
Chemist

10 sigmas? Thats a lot of sigmas chemist.

Question: 10 sigmas from what?

chemist · 23 May 2006

Re: Trading / Daytrading for a living

nizar said:
Chemist those words were actually said by Peter Lynch in his book One up on Wall St

And i think it goes without saying that hes more pro than EVEN YOU

He said that most people make the mistake of locking in profits quickly, ull never get ur 10-baggers that way (he got PLENTY in his time), and that they hold on to losers hoping for a recovery. You should be cutting the weeds and let the flowers grow - not the other way around

Not sure which words you are talking about and I have barely heard of Peter Lynch. I don't read "hero" investment fiction for the same reason I never paid anyone for gambling advice. If they're writing a book or doing "seminars" or selling a "system" then they are probably snakeoil salesmen and certainly not professional gamblers or traders. People who are genuinely making money gambling on a long term basis hold their cards pretty close to their chest. I never met one who wanted to tell me his system, and I've never told anyone mine. Whether it's gambling or trading, there's only so much stupid money in the market, so why give some of it away?

cheers,
Chemist

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