Trading/Daytrading for a living

chemist · 24 May 2006

Re: Trading / Daytrading for a living

professor_frink said:
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.

Frink,

It is possible to think about this more clearly. Suppose your method M picks some profitable moves, but sometimes gets it wrong. Suppose further that if the day after a trading signal the market has moved contrariwise by X%, then it is more profitable to close your position regardless what M says. Then why not replace M by M', the same method but with the rule concerning the movement since yesterday factored in?

This produce the same behaviour in the case of a reversal, while making the method stronger overall. Under the "indicator plus stop-loss" system you were entering positions in circumstaces where, if you had entered the same position the day before, you'd be exiting it now!

cheers,
Chemist

chemist · 24 May 2006

Re: Trading / Daytrading for a living

Bobby said:
Hey Chemist its time to prove You !

Show us the formula to work this out .

Three urns contain respectively 1 white, 3 red, & 2 black balls; 3 white, 1 red, & 1 black ball; 3 white, 3 red, & 3 red, & 3 black balls.
Two balls are chosen from a randomly selected urn.

If the two balls are a white and a red, what is the probability that they came from the second urn ?

Don't try to bull **** me

Bob.

Bob,

You will be able to work this out if you apply Bayes' Theorem.

Chemist

Bobby · 24 May 2006

Re: Trading / Daytrading for a living

chemist said:
Bob,

You will be able to work this out if you apply Bayes' Theorem.

Chemist

Hullo Chemist,

Well done !

Thomas Bayes ( 1702 - 1761 )

Regards Bob.

wayneL · 24 May 2006

Re: Trading / Daytrading for a living

Bobby said:
Hullo Chemist,

Well done !

Thomas Bayes ( 1702 - 1761 )

Regards Bob.

Oh Gawd!

http://en.wikipedia.org/wiki/Bayes'_theorem

Black Scholes was enough to cause cranial fission for me.

What does it all mean?

professor_frink · 24 May 2006

Re: Trading / Daytrading for a living

wayneL said:
Oh Gawd!

http://en.wikipedia.org/wiki/Bayes'_theorem

Black Scholes was enough to cause cranial fission for me.

What does it all mean?

It means people like me should just step aside for the rest of this thread

Bobby · 24 May 2006

Re: Trading / Daytrading for a living

wayneL said:
Oh Gawd!

http://en.wikipedia.org/wiki/Bayes'_theorem

Black Scholes was enough to cause cranial fission for me.

What does it all mean?

PROBABILITY: elements of the mathematical theory

Have Fun
Bob.

wayneL · 24 May 2006

Re: Trading / Daytrading for a living

professor_frink said:
It means people like me should just step aside for the rest of this thread

LOL... Indeed!

Exit, stage left for me too.

tech/a · 24 May 2006

Re: Trading / Daytrading for a living

This produce the same behaviour in the case of a reversal, while making the method stronger overall. Under the "indicator plus stop-loss" system you were entering positions in circumstaces where, if you had entered the same position the day before, you'd be exiting it now!

Chemist.
This will largely depend on timeframe and in particular width of stop/number of occurences relative to the method being traded.So in some cases yes.

With longer term methods there becomes a balance between width of stop and occurence.To tight and your stopped out to early.
To wide and your often stuck in a trade somewhere between stop and entry price.
Then there is the validity of your entry -- at what point do you determine that the reason for entry is no longer valid,this in my veiw should be at around the same point as any stop.This is also a topic I have never seen covered by Fundamental traders who buy on percieved "Value" if the market trades the share down 20-40% or more is the trade "Better" value or worse?

Technically an entry generally has no relevence to value other than current or near price action,which remains valid or becomes invalid at a predetermined level.

For systems traders this level acn be tested andf results recorded,and if traded the same as the tested inputs and variables (provided the testing is using a significant amount of data over a long enough period) should return within the Sigma's of the results shown from Montecarlo testing.

The 3 I use have even in times like those we have now.

Results then are traded on a method rather than singular trades.The results of each trade cannot be known however the results of multiple trades can be tested and results recorded to give a trading blueprint.

Always interested in ways of increasing trade results.

swingstar · 12 June 2006

Re: Trading / Daytrading for a living

I don't know any day traders personally, but I do know a number of traders who trade for a living and have been for a good few years. I myself have been for over 12 months.

Worst case scenario, which I don't think will happen, is I get a job. I'm happy living this "fantasy" for now.

To the "realists", sorry to burst your bubbles...

It's Snake Pliskin · 12 June 2006

Re: Trading / Daytrading for a living

swingstar said:
I don't know any day traders personally, but I do know a number of traders who trade for a living and have been for a good few years. I myself have been for over 12 months.

Worst case scenario, which I don't think will happen, is I get a job. I'm happy living this "fantasy" for now.

To the "realists", sorry to burst your bubbles...

It may be a fantasy for some, and it may be a very good reality for others.

Certainly a bubble for others and big for a select few.

mit · 16 July 2006

Re: Trading / Daytrading for a living

chemist said:
Frink,

It is possible to think about this more clearly. Suppose your method M picks some profitable moves, but sometimes gets it wrong. Suppose further that if the day after a trading signal the market has moved contrariwise by X%, then it is more profitable to close your position regardless what M says. Then why not replace M by M', the same method but with the rule concerning the movement since yesterday factored in?

This produce the same behaviour in the case of a reversal, while making the method stronger overall. Under the "indicator plus stop-loss" system you were entering positions in circumstaces where, if you had entered the same position the day before, you'd be exiting it now!

cheers,
Chemist

Reply to an old message I know, but isn't this true only for a random market? I was inhabiting a forex forum for awhile and some people were talking about largely the same things (Grid trading a variation on Martingaling). I tested this against 7 years of minute data and found it didn't work. M' would have a chance of failure greater than the amount saved by getting in at a lower price. Using probability is good for getting a feel for the markets but when you look at the actual data things aren't quite the same.

This is different from a staged entry where you buy above a support and might buy some more closer to the support level if it drops further.

MIT

stink · 29 August 2006

HI All,

Well finally got through this thread, although i think only the first couple of pages stayed on topic

Anyway the main things i have picked up in reading this is "maximum Drawdown" i hope that the correct term.

How do you calculate this?

If i had 10k and was looking to use leverage "safely", how do i calculate the maximum drawdown? I understand the 2% rule etc when trading without leverage but i dont understand yet how to apply the same type of rules etc when trading margin.

Cheers Stink

tech/a · 29 August 2006

Ill make all clear on the other thread when I get more time.

Cheers

MichaelD · 29 August 2006

stink said:
If i had 10k and was looking to use leverage "safely", how do i calculate the maximum drawdown? I understand the 2% rule etc when trading without leverage but i dont understand yet how to apply the same type of rules etc when trading margin.

If you know the maximum drawdown of your system without leverage, then simply multiply it by the proposed leverage. i.e. if your system's maximum drawdown without leverage is 10% then with 50% leverage it will be 20%.

WARNING: Learn to trade well without leverage first or leverage will very quickly destroy you. Think not of the increased profits, but instead focus on the increased drawdowns that leverage will bring. Your psychology needs to be prepared for this before you use leverage.

stink · 29 August 2006

MichaelD said:
If you know the maximum drawdown of your system without leverage, then simply multiply it by the proposed leverage. i.e. if your system's maximum drawdown without leverage is 10% then with 50% leverage it will be 20%.

WARNING: Learn to trade well without leverage first or leverage will very quickly destroy you. Think not of the increased profits, but instead focus on the increased drawdowns that leverage will bring. Your psychology needs to be prepared for this before you use leverage.

So your basically saying that i just apply the same money management rules i would to a normal trade? So if i was only comfortable to lose $600 of my 10k before i would stop trading and slap myself around a bit, then with say 50% leverage i have 15k then my max loss i can take on this amount is $900??

With the leverage and cfd's is the leverage applied to my total account or each individual trade i.e i have 10k and want to open a position using 3k of my own money plus say another 3k of leverage making the position i have open 6k in total but i have to make sure that should this trade go against me i dont lose anymore than 900? or if i have two positions open say two parcels of 3k with 3k of leverage on each my stops etc have to be in place to ensure that i dont lose more than 900 should the trade go against me?? Arghhh no that cant be right cause that makes the position i have oen 12k, i think i am gonna !

Fugazi · 29 August 2006

I find it easier to just forget about how much actual hard cash you are using. All that's happening is you are trading a bigger bunch of shares for less real money. Just look at the profit/loss. If you enter a trade on the understanding that if it goes to pieces you could lose $1000 before you are stopped out, what difference does it make whether the trade cost $10 or $10K to put on. The risk is the same.

swingstar · 29 August 2006

Fugazi said:
I find it easier to just forget about how much actual hard cash you are using. All that's happening is you are trading a bigger bunch of shares for less real money. Just look at the profit/loss. If you enter a trade on the understanding that if it goes to pieces you could lose $1000 before you are stopped out, what difference does it make whether the trade cost $10 or $10K to put on. The risk is the same.

Exactly. The way I look at leverage is freeing up equity for more positions. Risk is the same no matter what. You'd be stupid to use leverage and not alter position size accordingly.

stink · 29 August 2006

Fugazi said:
I find it easier to just forget about how much actual hard cash you are using. All that's happening is you are trading a bigger bunch of shares for less real money. Just look at the profit/loss. If you enter a trade on the understanding that if it goes to pieces you could lose $1000 before you are stopped out, what difference does it make whether the trade cost $10 or $10K to put on. The risk is the same.

Good point mate i suppose its the thought of trading with money that i dont really have, but like you say as long as i consider the potential loss and have stops set accordingly and more importantly have ability to cover the loss then it should be fine.

MichaelD · 29 August 2006

stink said:
So your basically saying that i just apply the same money management rules i would to a normal trade? So if i was only comfortable to lose $600 of my 10k before i would stop trading and slap myself around a bit, then with say 50% leverage i have 15k then my max loss i can take on this amount is $900??

Yes, correct. In this situation you are trading 15K although you only have 10K but at the same risk level as you would have traded 10K - hence the increased drawdown from $600 to $900.

alwaysLearning · 1 May 2008

This thread is very intresting to a newbie like myself.

I'm very surprised at some of the comments but that just goes to show how ignorant I am about trading.

It sounds like a lot of you incline on going long and medium for most of your capital base. Doesn't sound like you guys go 'short' that much, otherwise you'd be busier during the day etc.

Trading/Daytrading for a living

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