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"...3) At this point, what would the typical causes of failure be?..."
There are a couple of problems to be on the look-out for.
The first one is that the system you've come up with underperforms an
appropriate benchmark in an honest test. Until you test it, either
with a software program or by hand, you simply won't know if it makes
money or not. You'd be shocked at the number of systems (including
ones in the books you mention) that sound as if they ought to be a
license to print money, but can't even beat an easy benchmark like
the SP500 (or T-bills).
This was the primary reason that I failed for years, BTW, by not
having a system that actually worked.
Once you have a method that tests well, a more-subtle problem comes
up: Trusting the system. It's vital that you understand WHY and HOW
your system works, so that you can have the confidence to continue
using it when it goes through a large drawdown (and if it's any good,
it will).
>From here, though, it gets a lot more fun.:) Once you get a deep
understanding of why your system works and observe how it behaves
under a variety of different conditions, then you'll be able to
safely tweak it to improve its performance.
I can't even remember how many dozens of books about trading I've
bought, read and discarded. IMO, you shouldn't bother with any
more. Generate your own trading ideas, test them, and try to stay
away from all the mainstream indicators and their look-a-like
derivatives. If you're trading stocks, learn as much as you can
about how the markets work, how institutional money operates, what
information the Fed uses in its decision-making, very basic economic
theory, like that.
JMO and FWIW.
Luck,
Sebastian
--- In equismetastock@xxxxxxxxxxxxxxx, "metastkuser"
<andysmith_999@xxxx> wrote:
> I have a question (unrelated to Metastock) for the experienced
traders
> on this forum.
>
> I have now read a dozen books on trading -- not the foo-foo books
that
> promise $10M in the next trade, but ones by Tharp (my favorite),
> Chande, Le Beau, Stridsman, Elder, Covel, Schwager (and O'Neil,
> Link,...) and a couple of Tharp's IITM publications on money
> management etc. Will get to Kaufman next. And of course every issue
of
> Roy's MSTT which are simply marvellous.
>
> I've put a couple of hopefully positive expectancy systems together
> (discretionary at this point so it's not easy to use the system
> tester). The systems have four stages: 1) setup (to identify market
> trend and stock trend but not entry), 2) entry (looks at timing), 3)
> exit and 4) money management. I have spent quite a bit of time on 3)
> and 4) because I believe they hold the key to being a successful
> trader. I use volatility as a significant determinant in all 4
stages.
>
> So I've done my homework. The odd thing is that none of this has
been
> difficult to understand -- not just for me but I'm sure for anyone
who
> takes the time and has some patience.... and now I am confused.
>
> 1) Why do so many traders fail? Have they not read these books?
> (Please don't reply that they are undercapitalized and/or they have
> the wrong psychology for trading).
>
> 2) What do reading the next 50 books buy me (besides the enjoyment
of
> reading them)? Surely the law of diminshing returns kicks in right
> about now.
>
> 3) At this point, what would the typical causes of failure be?
>
> 4) This is a Metastock forum. Can someone point me to a more
> appropriate forum for this type of discussion (I have not found
one).
>
> Thanks!!!
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