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Walter
I seem to have stirred things up here quite unintentionally even
if I was stirring <g>
.
> I understand that you and other trader's like to go contrary to the funds,
> but why are the funds where they are in the first place? A major fund move
> can take 3 days to place in the markets. Why are they placed there? They
> have the money and talent for best information, the best historical
> analysis, etc. what's going on? what are they trying to capture?
That's easy... they're trying to capture the big moves. If it takes 3 days
to position yourself you're hardly going to be trading a week long pattern.
But don't try to tell me that a fund that takes days to position itself doesn't
leave it's footprints all over the market. (More like muddy boots in the grains).
That footprint is what Steve "sees" with his oscillators. This is unfortunately
only the easy part of trading as far as I'm concerned. The really tricky part
for me is translating a move in my predicted direction into profits. That usually
boils down to undercapitalization which means I have no option but to use
stops which are a double-edged sword on which I often end up impaled.
Steve wrote a very good piece on this a while back which I think will put this
thread to rest finally:
> [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of Steve Karnish
> Sent: Wednesday, 15 December 1999 5:08
> Subject: Re: First a "freebie" then open your wallet!
> I don't use stops. I used to be very vocal about the "need" to use them.
> Over the years, I've changed my mind. I don't even want to get into a
> discussion about it (I've heard it all and even contributed to the "other
> side of the argument"). Nobody should even think of approaching these
> markets unless they are well capitalized. Also, things go a lot better with
> diversification. Drawdowns ALWAYS occur, no matter what your approach may
> be. One should spin their Optimal F's and money management software on the
> numbers and decide if "any" approach suits your "risk to reward" fantasies.
>
> So, rule #1: start with adequate funds.
> Rule #2: diversify among as many markets as you can.
> Rule #3: try to forget the propaganda about "stops" that you've been fed
> your whole trading life
>
> This approach is not for the undercapitalized, nor is it for the faint of
> heart. Each mechanical approach has its own Achilles heal. Some traders
> will scream that because of the "no-stop" rule that this is not a credible
> approach. Who am I to argue?
> Anyone trading a "Mini S&P" needs a minimum of $25,000 to safely trade this
> approach. To segregate less than that to trade this system would be very
> foolish. Also, please understand: my clients that trade the S&P "do not"
> use this BB Histogram to position themselves. I have a number of approaches
> that I share with my traders that I will not make public. Each approach
> shows a much greater return than what can be realized with the BB Histo
> formula.
>
> I wish I had "one stinkin' dollar" for every time I have called a
> "direction" properly...only to be stopped out by a tick or two and then
> watched as the market appreciated/depreciated in the direction of my
> technical work. Stops have cost me more money than drawdowns (period).
> What I do is rather simplistic: momentum oscillators, averaging positions,
> and no stops. I totally understand the risks and at times it has caused me
> to sacrifice a bit of sleep. Both my proprietary approaches have performed
> above the 80% level during 1999 and applying "fail-safe" stops (in an effort
> to improve the profitability) has not improved the winning percentage or the
> bottom line. Recently, I've allowed "Dr. Ag-Econ" and "Mr. MBA" to try to
> improve on the approaches by applying any safety nets they can conjure. So
> far, the phone is not ringing off the hook with suggestions about how to
> increase the productivity.
>
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