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Superfragalist's lively post below encapsulates some of the most
important and basic ideas (and traps) about successful trading, with
regards to developing a suitable strategy to the individual trader.
It's a pity that this excellent post will get buried under the 99% of
rubbish to follow.
Curve-fitting to past results, looking for this or that indicator that
will make us into a mega-trader, in short, looking for the edge in the
details - all this and more is akin to looking for that oil well under
every pebble on a desert landscape.
Post Q:
"Anyone know if there could be any oil under there small stones shaped
like a pretzel? What would be the best size/ratio/parameters for them
pebbles?"
Reply:
"Hey Joe, I've run my MetaExplorer Percolator XVI through my
historical database, and just found that 100 billion barrels of oil
previously discovered had pea-shaped stones on top of it! Forget
pretzels man - look under peas, small longish ones..."
Take the sharp advice from Superfragalist while it lasts.
Take the time to read this great advice:
http://www.elitetrader.com/tr/index.cfm?s=17
There are no short-cuts to successful trading strategy development.
The most successful trader in the world could give us all his secrets,
and we wouldn't know what to do with this easily-acquired wisdom.
Don't be lazy, don't waste time on short-cuts, do the work, dig deeper
than the parameters/indicators/etc, and you *may* just be on your way
to a chance to make it, and perhaps even strike wealth as a side
benefit.
jose '-)
From: superfragalist
Date: Thu Oct 21, 2004 3:32 am
Subject: System Tester, Number of Bars, and Trading Systems
Your questions are typical of people who want to be traders. These
are the most frustrating questions there are to answer, and frankly
in my experience a total waste of time to answer. (Sorry boys, that's
been my experience!)
Research done by the SEC and academics have concluded that 95% of all
traders lose money. Now why is that? Is it because they don't have
good systems? Or they didn't read the one right trading book? Or they
didn't ask the one key question on this site? Or maybe they're just
dumb. No, it's because trading is a business and 95% of the people
who get into any business have no idea how to run it, especially one
like this one.
A lot of people confuse part time trading with having a hobby. When
you have a hobby, you aren't doing it to make money. When you start
trying to make money with it, it's no longer a hobby--it's a part
time business.
I posted a reference to a group of articles by Charlie Wright that
explains very clearly how to develop a trading system, how to use it
and how to make money trading.
A total of probably 5 people bothered to read even one of the
articles, much less all of them. And the 5 people who read them are
the very people who don't need to read them.
Here's the reference again.
http://www.elitetrader.com/tr/index.cfm?s=17
These articles will fill you in on the fundamentals of developing a
trading strategy for all ten of your stocks. It's a good place to
start. From there you only have another 100 or so books to read, 5
years of applying what you've learned, and a lot of tuition to
graduate school in trading, and then you've arrived---or you've lost
your capital and found a new hobby.
The debates on this site are nearly worthless, just like that last
discussion on the number of bars to test. You have no idea if the
opinions being expressed are backed up by knowledge and experience,
or if, like most opinions, they're just hot air. No one has to post
their trading resumes. Just because someone is say an engineer, or a
Ph.D., or Albert Einstein that doesn't mean they know squat about
trading quarters with their grandmother.
The vast majority of opinions aren't backed up by anything like
knowledge or experience. Opinions are cheap, success is expensive.
People post questions pleading with someone to give them some little
piece of code. They don't have time read the manual, study the
formula primer or learn how to do things for themselves, because if
they just had this one piece of code they could make money trading,
and after all, that's all they want to do. Those suckers are the
worst of the lot. Don't be one of them.
There is an individual trading system for every person who becomes a
successful trader. For those who survive long enough, it's arrived at
through education, trial and error, countless hours of work, and some
luck. No single trading system works for every person. You notice I
didn't say there is no single trading system that works for every
stock. The trading system is about the person using it, not the
symbol it's applied to. A trading system is only one part of a
trading strategy. Most want-ta-be's never get far enough to even get
close to having a trading strategy.
If you read Wright's articles, you'll find out that a trading
strategy is not, "I'm going to trade breakouts based on the price of
spam tomorrow." Far from it. Just that one little piece of knowledge
will put you ahead of most of the pack.
Nearly everyday I talk to successful traders and systems developers
and some of them are doing just the opposite of what I'm doing. The
only thing we're both doing is making money, and have for a long
time. Neither of us tries to convince the other one we're right.
The bottom line is, whether you're trading 1 stock or 500 stocks,
it's a business. Learn the business. It's a brutal business. There
are more people selling information on how to trade successfully than
there are successful traders. That ought to give you a clue.
Just remember, if some simple system, formula, charting technique or
whatever worked really well, everyone would be doing it, and they're
not.
The magic is in the way the system fits you. That's it. That's the
secret.
Read the articles and start learning how to tailor a suit of clothes
that fits you and you alone, not your ten stocks.
If things don't work out, buy a copy of The Four Pillars of Investing
by William Bernstein. It's the best buy and hold book ever written.
And please remember, if you're going to lose your money, at least
have some fun while you're doing it!
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