On Sun, May 31, 2009 at 4:30 AM, brian_z111
<brian_z111@xxxxxxxxx> wrote:
First of all, I would like to thank for a post, which makes clear the amount of thought & time you spent on my post. To let be is always easier, especially when questions are from people who are obviously not your knowledge peers and the exchange is most likely to be one way street.
The only difference between the Master and the Chela is the question!
Hmmm...Questions & Answers always have been and will be. I personally believe what defines the master is the willingness & the skill to impart!
After five years of studying 'trading' 60 - 80 hours per week I have
found precious few 'mechanical systems' that work ... so few, in fact,
that I can not afford to give any away, as I would soon have none left
for myself.
I am not asking for one. All I am asking is something like "try MACD Crossovers with RSI confirmations" or "MACD would only be good in a trending market...try xxx with yyy" My target is not to get a trading system workable in a realtime but rather a specifically crossover position trade that would backtest in the black and learn from the issues encountered in the process.
<snip>
- "Trying to experiment with Crossover based buy/sell signal" AND "Swing Trading".
It is good to use one or two case studies and go over and over them to
find out why they do not work but in the long run do not 'limit' or
stereotype your thinking
I concur fully and thats my objective exactly.
<snip> e.g. What is "Swing Trading"
exactly .... you assume that you know what it is, or that I know what
you are talking about ... in trading reality the term doesn't mean
anything, at least nothing worth thinking about.
Probably the person who first coined this term wasn't even a successful trader ... just a successful author.
I don't know....and frankly I am yet to read literature on minute differences between different types of trading. Before getting interested in TA, I was an Investor who had two investment styles:
- In a trending market keep buying and averaging as markets fall and keep partially selling as markets rise (ensuring that I never bought or sold at the optimum price obtainable at what I know as a Top and Bottom, but I did get profits most of the time and if my investment got too much or the trend was too steep for two long, I simply went to sleep and waited to average when trend reverses noticably and start selling as prices climb and as I dealt with only cash segment with delivery, strategy was workable.
- In a rangebound market, I bought at lower end of the range and sold at the higher end and if market brokeout to my detriment, I simply averaged out and went along the same lines.
To me these points where I changed my policy were swing points where I changed my policy from hold to buy or sell. To me a swing trade is a trade where I buy & sell between swings of price, earlier for me they were in months, now I know them in days & weeks too.
Regarding the TA definition, I will study more on it, since this has been pointed out to me ;-) and in future when I am giving a term, I will try to explain what I am interpreting that term as ;-)
GuruBrian says, "Read one hundred times and believe once".
Guruji, this I fervently disagree with.....rather....Read one hundred times, test it out a few times and then believe and thank your author/guru ;-) and make sure you test the belief periodically before it outgrows you!
<snip> Maintain a position 100 Shares Long or Short ... Cash in
hand 3 times the initial ... Draw-down should not be more than 50%
<snip>
Good trading philosophy comes before good results.
None of the above are relevant to good trading.... they are all part of incorrect Money Management schemes.
Mine was an exercise...I am yet to form a trading strategy/style. Keeping the number of shares fixed at 100 because a variable number would have put complexities in analyzing results. Three times cash-in-hand was a top of the head figure and 50% loss of capital was the finish line with a resounding defeat of strategy. 50% loss of 300% of initial trade is a strategy that Allies needed the Germans to trade before World War Two, to avoid the War itself ;-)
First you need a trading system with a proven edge (+ ve expectancy)
Thats what I am trying to do with a crossover trade strategy which is supposed to be the simplest strategy. I want to build a base of lowest possible loss, then ad bells & whistles to bring the strategy to profit or as near profit as possible. In the process I need to learn all types of crossovers and their pros & cons and what they need to be supplemented with. In this exercise I will learn all the suggested supplementary pivots or oscillators or indicators.
then you apply correct MM and Portfolio Management theory
I am not doing any money-management or Portfolio Management. I seem to have imbibed some terms, which I believe made you think I was doing so.
(I suggest
you bypass all of the would be MM teachers and go straight to
RalphVince .... use his books as a workbook ... perform all of his
exmamles in a spreadsheet etc ... take your time ... it takes years for
it all to sink in ... after you understand Vince go back and read the
rest to see if they are worth the effort compared to Vince's work).
Will do. Thanks, a most wanted advice.
<snip>Carry positions overnight<snip>
Yes, this does affect outcomes ... overnight moves represent a win or a
loss and they vary in magnitude ... the same 'hold overnight' strategy
will perform differently on different instruments e.g. I have posted
and example here of how some 'markets' gap more overnight than others
... this can apply to instruments within markets too (I haven't posted
the explanation as to why but that might come later):
http://zboard.wordpress.com/2009/04/12/stock-profile/
Very Interesting. Is that your blog? No name or About Me on it...not the norm ;-)
<snip> stop-loss at say 20% loss ??,<snip>
Yes, stops are a very important part of trading.
Hmm...I rather expected a range of percent or theory of how you like to put stops. Won't you please be like all the average people and expound a bit on it? Many people use the 7% rule from somewhere. To me it seems to be getting caught quite frequently, wasting a rather promising assumption, which proves true, except for the issue of getting hit by the stop. I rather like to hear how people like to put stops & why and then try to extrapolate on the divergence.
You need to learn how stops shape the profile of your system where
profile == W/L and ave%W/ave%L (part of Core Metric Evaluation, or CME,
and BinomialSimulation, or BiSim ).
Now that I have the terms, be sure I will research them out. Thanks again.
One good way to get feel for this is to experiment with stops and consider:
- benchmarking for mechanical systems
- how much the entry signal is contributing to the final result
- how much the exit signal is contributing to the final result
Howard Bandy's book, QuantitativeTradingSystems is one place where AB
users can get a headstart towards understanding these vital concepts.
Again, very much wanted advise. Will do.
<snip>Reverse position on Crossover <snip>
I recommend caution with this strategy. for various reasons ... I can't
say anymore about that because it is advanced and complex and therefore
not suitable for a general forum discussion.
I really would like to know why you say caution with this strategy. To me it seems people lose when they fail to be in the market and by the time they get into it, the trend is already halfway through to its destination.
It also depends on a case by case analysis e.g. 'the trend is our
friend' so if the reverse trade tends to go against the trend I am
cautious (of course defining the trend is one of the most challenging
tasks facing a trader).
Well, I have to say I do agree with it. Thats why I chose crossover for my strategy basis. If I do take a wrong position the crossover & subsequent reversal would rebalance it, with maybe money lost, but thats why I am looking for suitable bells & whistles to correct & supplement the reversal triggers.
Overall:
- I suggest that you shouldn't be fixated about what trading is e.g.
value investing is a succesful method .. value investors waited years
for the opportunities presented to them by what was a crash for most
others i.e. last years markets.
Warren Buffet sat on the sidelines with cash until the market presented him with some 'not to be repeated in a hurry' bargains.
The caveat is that this proven method suits his temperament, and
carefully considered objectives..... it doesn't suit me, for several
reasons (too boring is one of them).
IMO there are a handful of successful stockmarket investing styles ...
mechanical system trading is just one of the claimants to that title.
Thats the one I am trying to understand and expect to use in a year or so or maybe sooner ;-) Otherwise I am OK with my so-called Swing Investing style...notice I do not call it trading...trading is what I want to do with help from mechanical systems.
I am happy with my progress, after 5 years, but you won't read about my
'style' in the textbooks, or this forum, however you will see a
sprinkling of 'traders' who are obviously 'in the same camp'.
Sometimes I call myself GuruBrian but that is only in fun.
One of my mottos (for the NewAge) is:
"I don't deciminate creeds ... only information".
GuruBrianZ
I really appreciate that thought.
Once again, let me thank you for your post. Hope you give more feedback.
BTW, what do you think of newbie list members doing some exercises together? Though I'm sure they would differ on what kind ;-) A few list members have asked me details off-list, so it seems there is some interest in that sort of thing, but people seem to be hesitating on the list. Please do comment on this.