Trading Plan vs. Black Box System

[TabJockey]

You could always give a fundamental view a go, I think it probably requires less education to make money with overall than technical trading. Fundamental's are closer to what we experience in the real world and are easy to get a good grasp on with some dilligent reading.

 

[Wysiwyg]

I have tried waiting for new trend confirmation but found that by the time the trend was confirmed it didnt have much run left. So I then tried looking for an earlier entry but am getting too many false starts, which is why I was back to a developing a new trading plan.

Looking for lower pivot points in a longer turn up trend for entry? First find an up trending stock. This is determined by the duration. Then the angular support or horizontal support or Fibonacci levels or MACD/Signal cross or high/low volume or RSI cross or whatever (not one method works everytime).

Search for up trending stock over whatever period one chooses using this code. Sorry, no put in, take out guaranteed entries I know of but that is what initial and time stops are for.

_SECTION_BEGIN("");

Lookback = Param("Look Back", 126, 30, 252, 1);

X = Cum(1);

LastX = LastValue(X);

C1 = ParamField("Field", 3);

Slope = LastValue(LinRegSlope(C1, LookBack ));

Pi = 3.14159265 * atan(1);

Slopeangle = atan(Slope)*(180/Pi);

Buy = Slopeangle > 0.15 & Cross(MACD(), Signal());

Filter = Buy;
AddTextColumn(WriteVal(Slopeangle, 1.2), "Slope Degrees");

_SECTION_END();

 

[tech/a]

For those interested portfolio update.
Youll note that a few days have passed we now hold less stock with an increasing un realised profit.
I have closed some non performing trades at very small losses.
I will over the break calculate this portfolios Expectancy and all the other numbers that go with it.
Ive been trading it a week befoire I went to FIJI Sept 28 ish.

 

[satanoperca]

Re: Trading Plan vs Black Box System

I dont bet on anything.

I can manage my trading its not win or lose.
I can govern how much I win and how much I lose in any one trade.
If I bet I either win or lose I can only govern the loss by position size
and the win by odds once bet is made I cannot alter this.
When I trade I can while the trade is going.
I know that by adding to the trade I can increase my total win and by decreasing or removing myself from a trade I can dramatically decrease my NETT losses V my Nett gains.

Once you understand that your not gambling if trading correctly it becomes very simple.

Brilliant - printing it out and posted on the office wall.

 

[Fishbones]

I heard lots of bizaare claims about many systems, and most of them come with a hefty price tag.....If I had something so wonderfull , then why would I even bother trying to sell it...Trading by just looking at charts equates to gambling. There is nothing wrong with gambling as long as one understands that. Personaly, I prefer Monte Carlo, with all that style and pizzaz...it would be lot more enjoyable the looking at charts and computer screen all day.
Another maxum: "Market is always right " is absolute garbage as proven by Graham, Buffet etc. .. if market was right they wouln't have found anything to invest in....

cheers !! and Marry Christmass !!

 

[pixel]

I heard lots of bizaare claims about many systems, and most of them come with a hefty price tag.....If I had something so wonderfull , then why would I even bother trying to sell it...Trading by just looking at charts equates to gambling. There is nothing wrong with gambling as long as one understands that. Personaly, I prefer Monte Carlo, with all that style and pizzaz...it would be lot more enjoyable the looking at charts and computer screen all day.
Another maxum: "Market is always right " is absolute garbage as proven by Graham, Buffet etc. .. if market was right they wouln't have found anything to invest in....

cheers !! and Marry Christmass !!

Hi Fishbones,

One misconception and one misinterpretation - if I may argue the points:

1. "Looking at charts" is not all a T/A trader does; in analysing the chart, we assess the current market trend and the relative odds of one outcome versus the other. As soon as the odds swing against us, we cut our losses or rake in whatever profit we can get. The comparison with gambling, e.g. Monte Carlo, is valid to the extent that winning or losing odds are concerned. It stops and becomes outright ridiculous where loss minimzation is the issue:
In Monte Carlo, you try and place $1000 on nymber 35, and just as the ball is about to drop into number 15 or zero, try and sell your position to the croupier or another gambler for $800. Or whack on another $5000 just as it hits slot 35. You can do the equivalent of both if your chart analysis is good enough and you have DMA from your system into the Market.

2. "The Market is always right" has to be taken as a metaphor, in the sense "No matter what you think an item should be worth, you can't force the Market to accept your notion."
For example, if you believe a stock is worth $1, but no buyer in the market is willing to pay more than 80c, your guess - no matter how fundamentally sound - is wrong and it's no use arguing about it. Moreover, if you paid $1 and keep insisting that's the correct value, "the Market" - being all other holders willing to sell for 80c and less - proves you wrong, even foolish (after the fact) for having paid too much. If in a week's or a year's time the price recovers to $2, you were still wrong paying too much, compared to a Buffet or any T/A trader, who tuned in to Market sentiment and bought the same share for 80c or maybe even 50c.

But in the last point I absolutely agree with you:
Merry Christmas and a Happy New Year to you and your loved ones - regardless whether they follow Technicals, Fundamentals, the Stars or chicken entrails

 

[Fishbones]

1. I do understand what T/A trader does, but taking a game of roulette is not a fair comparison...There are statistics out there, but I "bet" that the percentage of pro technical gambers are on par with pro horse or card players. I can provide evidence of many succesfull horse systems but just like T/A systems they carry a disclaimer; "past performance does not guarantee future profits..." or words to that effect.

2. Graham and Buffet have on many occasions bought stocks that had fallen in price before rising and giving them profit. The reason I am saying this is because of your comment :
" Moreover, if you paid $1 and keep insisting that's the correct value, "the Market" - being all other holders willing to sell for 80c and less - proves you wrong, even foolish (after the fact) for having paid too much. If in a week's or a year's time the price recovers to $2, you were still wrong paying too much, compared to a Buffet or any T/A trader, who tuned in to Market sentiment and bought the same share for 80c or maybe even 50c..."

Just for the arguments sake if I had bought at $1, Buffet at 80c and , you at 70c - that would make you a better investor then Buffet or me ?
No , I wouldn't think so...Not even Buffet claims that he picked them up at the bottom...what the question here is : wheather I am correct in my analysis that the stock is undervalued at $1? If I am correct( or Buffet or you , doesn't realy metter) then the market is wrong. I presume you have heard of another wisdom "that market is driven by sentiment" ....also the T/As, you have your MACD and overbought or oversold signals so therfore market CAN NOT be always right....right?

cheers,
insomniac

 

[pixel]

We may have to agree to disagree.
Roulette, two-up, dice, lotto, keno - those are gambling games.
I'm aware of some horse trades, where people "in the know" place the "right" odds on horses and win overall. Done properly and with a "technical" system background, I wouldn't call it gambling. Likewise, a skilled card player can remember discarded cards and recalculate the odds for his hand - a trick Casino operators hate and will actively "discourage".

Same thing with the second case: When we talk about the Market "being right" and a trader or investor finding a "right entry", we're using the same word for two vastly different concepts. That's a "tragic" feature of the English language that many monosyllabic words can have different, even contradictory meanings. Just imagine you hear someone, who is reading this, mutter "yeah - right!"
In the example, where you bought a share at $1, Buffet spent 80c, while I would wait for the price to hit, say, 60c, before turning, I would be "right" if I bought it at 70c after my consistent technical analysis suggested high odds for a further rise. The person that sold it to me, expecting it to fall further, could in that case be wrong. But neither of us could argue that the Market was "wrong" at any point in time. Because, as you put it yourself, the Market is driven by sentiment and each share's "value" is determined by all participants' perception of its current value. That perception integrates the entire width of "consensus" - another word for "average" - with intangible beliefs, hopes, interpretations of reports and management capabilities. It may be as fickle as "la donna è mobile" and change daily; but shares are bought and sold purely on that basis, which makes it "the right price."

 

[Fishbones]

Dear Pixel,
I have come to realisation that I have made a post in the domain of consistant tech. analysts. I, being of different "creed" should not have done so ( post) as it serves no purpose. The abys is too great for one to cross over, if you know what I mean.
Ultimately, accept my apology, and have a very, Merry Christmass !!!

 

[KurwaJegoMac]

For those interested portfolio update.
Youll note that a few days have passed we now hold less stock with an increasing un realised profit.
I have closed some non performing trades at very small losses.
I will over the break calculate this portfolios Expectancy and all the other numbers that go with it.
Ive been trading it a week befoire I went to FIJI Sept 28 ish.

View attachment 40468

If you don't mind me asking, on what basis did you close the non-performing trades?

I know you'd stop if it hit your original sell stop, but do you use any other stops/decisions when a stock is stagnant? So for example do you have a timed stop? Or do you close out on the basis that you have identified new and better opportunities?

 

[tech/a]

If you don't mind me asking, on what basis did you close the non-performing trades?

I know you'd stop if it hit your original sell stop, but do you use any other stops/decisions when a stock is stagnant? So for example do you have a timed stop? Or do you close out on the basis that you have identified new and better opportunities?

As you can imagine a bit busy today and tomorrow and Boxing day is another big one.

There is some interest in how I trade these so as I use a breakout formula for my entries and we have THIS thread going

https://www.aussiestockforums.com/forums/showthread.php?t=20906&page=5

I will run the method I use (which is predominantly discretionary) through its idiosyncrasy's when I get a chance.
Quickly though.
I expect positive movement pretty well immediately--if I dont then its on my radar next day.
Ill exit anything not continuing to trend and NOT showing a consolidation which displays continuing characteristics well before the Stop. Not fool proof but with a massive amount of new trades to choose from its worth the quick cull!

More with charts explaining the above later.
Have a great xmas everyone!

 

[KurwaJegoMac]

As you can imagine a bit busy today and tomorrow and Boxing day is another big one.

There is some interest in how I trade these so as I use a breakout formula for my entries and we have THIS thread going

https://www.aussiestockforums.com/forums/showthread.php?t=20906&page=5

I will run the method I use (which is predominantly discretionary) through its idiosyncrasy's when I get a chance.
Quickly though.
I expect positive movement pretty well immediately--if I dont then its on my radar next day.
Ill exit anything not continuing to trend and NOT showing a consolidation which displays continuing characteristics well before the Stop. Not fool proof but with a massive amount of new trades to choose from its worth the quick cull!

More with charts explaining the above later.
Have a great xmas everyone!

Appreciate the response Tech/a. Will continue this in the thread you posted. A Merry Christmas to you and everybody else.

 

[picker304]

Oh Yes a trading plan is most important don't know about a black box. I lost over 10000.00 while backtesting and finding a plan. Its now paying off but finding one is most crucial. Good luck to you.

Two things I hear a lot.
1. Black box systems dont work and
2. you must have a trading plan to be successful.

But isnt a trading plan that defines entry rules, exit rules and money management just a manual black box system?

I'm having a hard time develping a trading plan that gives consistent results and am wondering if its really worth it? Maybe I am on the wrong path?

Any thoughts?