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for a trading system to be stable, it cannot operate
on a level that has fluctuation of prices that can
easily affect the overall performance.
such fluctuation of prices (like spikes in 5 min sp or
nd) are noises. those who trade noise are scalpers.
there are trading systems that take noises as a way to
their advantage, such systems/methods are not stable
in general. You may have 90% winners and 10% losers,
but the 10% losers will cost you all the profits most
of the time. data feed speed does not matter here
because there will always be a time you get the needed
info late (like a news break, CME system failure,
etc.) :) remember 90% of new locals in the sp pit are
goner in a month or two - direct access means nothing.
models that are not affected by noise - are the ones
"trading outside of the noise". in terms of sp or nd,
you need to operate on a bigger timeframe and put the
expected volatility of higher timeframe into account.
for a hourly model, expect 10 to 15 pts sp swing as
part of the normal behaviour - most scalpers cannot
take such heat ...
simply put - consistency + stability = less noisy
model
--- Bob Tate <analytix@xxxxxxxxxx> wrote:
> Can someone please explain the meaning of the phrase
> "trade outside of
> noise"? And, in this context, what is the operative
> definition of
> "noise"?
>
> Lawrence Price wrote:
>
> 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 Chan http://www.tickquest.com
Innovative Analytical Software for Trading Professionals
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