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Thanks Mark and thanks Lawrence,
Very useful contributions again.
Lawrence; "to trade outside of the noise is a powerful idea". I agree with
your statement. But..........trading on guts and feeling can be supported by
noise. That gives you the edge to buy the low and sell the high. The exact
low and high I am talking about here. Of course you need to be on the floor
or be a market maker on an electronic exchange and trade directley into the
maincomputer/exchange.
Trading a system is something different. Trading a system will be disturbed
by noise. Whenever in a trend someone will be mislead by noise. After a
while in a trend we think and hear from others "This is it. This must be the
high. I am selling". But this is one of these days and the market goes
higher and higher. This is one of the days only one buy signal will be
followed by a nice trend all day long. And with noise you will keep on
selling highs. Without noise you will follow your system and have one buy
and one sell that day. With a huge profit in the middle.
I have been on the floor as a broker and as a trader. I have been behind a
computer as a broker and as a trader. And all four jobs react to noise. A
floorbroker puts his coffee aside when the noise increases. There will be
baskets to do. A trader on the floor can sell when the noise of the
shortsqueeze ends. I mean selling the high. A broker behind the computer
hears the neighbour broker and sees the bids and offers and changes his
voice into the direction of the market. A futures trader trading on guts and
feeling behind a screen, I mean directly linked to the exchange, hears his
dealingroom mates. And sells two seconds earlier than goodwilling privateers
with their Interactive Brokers screens.
Now that I am starting to trade according buy and sell signals I find noise
is disturbing. My system tells me a different story than my feeling and what
my roommates tell me. They still trade guts and feelings. We as a group are
going to split. I will be trading my system without noise.
Mark; "this is an act of nature and can not be violated else the essence of
humans will be changed." This proves you are able to think deeper. The real
deep thinkers the world knows are Europeans. Very old Greek and Roman
thinkers though. And since I am Dutch I do not belong to that group. Anyway,
what you say is true and I suppose you are not an ancient Greek or Roman.
Chapeau for your thoughts.
And then your exercise. This is a very, I mean VERY handy trick. Thanks. Now
that I am writing this I test your idea immediately on todays 5 minute bar
action on the Eurostoxx. And guess what?
There were 8 break outs today in my system. One was false but that leaves 7
good signals. Today is a moderate day without real nice trends. I am
counting till 15.30 hours my time, the time the S&P's open and volatility
comes into the market with a lot more false signals.
Out of these 7 good signals there was only one signal that told me to buy
and right after it the market did not kick back. It gave a buy signal and
immediately the market went higher.
That leaves 6 signals where your little trick worked. The system generated a
buy signal, dropped back below the buy signal but was not stopped out. I
could have bought one future on the buy signal and an additional one on the
temporary pull-back. And after that the market went higher than the original
buy signal. To close the two futures on a nice price with even a better
entry price than the original buy signal.
Mark, I have to make you a compliment. Out of 8 trades; one false signal,
one buy signal and an immediate run up by the market and 6 signals where
your trick worked. I am going to trade tomorrow with two futures. I will buy
one on the break and in case the markets falls back without hitting my
stoploss level I will buy another one. Or a little more futures for the
whole trade but you know what I mean.
In fact you answered a lot of my previous questions concerning risk
management & position sizing. Talking about contribution.
It is raining in Amsterdam but I guess Texas is shiny. I wish you a nice
day.
regards,
Ed Kiers
----- Original Message -----
From: "Lawrence Price" <lprice1023@xxxxxxxxxxxxx>
To: "Mark Brown" <markbrown@xxxxxxxxxxxxx>
Cc: "omega" <omega-list@xxxxxxxxxx>
Sent: Wednesday, January 24, 2001 4:00 PM
Subject: Re: daytrading & money management
The most important part of this post is the phrase "trade outside of
noise". Reading this exchange has been very interesting, since my
background is from the professional side of the business. But finding
ways to trade outside of the noise is a powerful idea, and it is perhaps
the core of a truly profitable system.
Lawrence Price
Mark Brown wrote:
> Hello Ed,
>
> where you are now in the scope of things and your background creates a
> vast distance from where i could help you. especially your
> psychological make up and perceptions are going to make it very
> difficult for you to ever gain confidence to trade outside of noise.
>
> without an open mind and preconceptions how would anyone ever learn
> other methods to replace and or enhance a plotted course, that is
> deeply ingrained into heard mentality. in short you are asking for
> help with a method and or perception that "may" be wrong in the first
> place.
>
> specifically you are buying when you are thoroughly convinced you
> should be buying and selling when you are thoroughly convinced you
> should be selling. you and everyone else in the world are thinking the
> same, great methods of trading do just the opposite. how then can you
> possibly become anything more that a facilitator of this event?
>
> you and all other's of mass mentality are doomed to tirelessly hold
> out your values as legitimate and worthy of being profitable. based
> upon your education your association and anything else you can mention
> here other than actual successful experience is of no value at all.
> this is an act of nature and can not be violated else the essence of
> humans will be changed. those anomalies of nature who understand this
> all too well can cry the warning till blue in the face only in vein.
>
> exercise: next time you have a break out buy or sell - rather than buy
> the breakout - wait - wait until the price pop expires and collapses
> down as it is breaking down against what you would have previously
> bought. then buy - as the price is now going the opposite direction
> (down) that your whole being is fully committed to - can you do this?
>
> your thought might be now why would i buy while now the price is
> moving in the opposite direction that i am convinced that it was
> moving. my thought would be exactly my point.
>
> --
>
> Have a Great Day, Mark
>
> http://www.markbrown.com
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