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Neal,
At Date: Mon, 11 Feb 2002 17:35:01 -0800, you wrote:
From: Neal Hughes <neal@xxxxxxxxxxxxx>
Subject: Re: Strategies for Trailing Stop-Losses
Are you speaking from inexperience?
The best technique for stop placement (and believe
me I've tried many) is to apply Fibonacci studies
to price action. Then project future probably support
and resistance. Tat way you can place your stops
in logical places, protected by support or resistance.
-Neal.
Thank you for the question and for sharing your insight.
It is nice to have a public message which is not immediately dismissive
but questioning and sharing of ideas.
Others responses seem to have been from some who have taken impersonal
emails personally. But it would be churlish
to complain about crowd behaviour, for it is the emotional trader that
places most of the profit I take off the trading table.
I respect what you say about trying many techniques - what works for you,
works for you.
I have much experience of trend following and associated trailing
stop-loss techniques - about 12 years.
But I place a low value on my experience because I was not good at trend
following - only managing to break even at best - and it took 10 years of
effort to get to that point. I later discovered
that this is a reasonably common experience for those that persist and
survive.
That is why I respect the opinions of several I know that trade a trend
following style and regularly make substantial profits (over 50% per
annum), and do not give them back - a rare breed I might add.
They advise me that the two approaches I mentioned have provided the best
results for them (compared to several other approaches including variants
of phi ratios and support/resistance and average true range and pivot
points and ...) but as I suggested before it is not entirely clear if
this due to the skill of the trader or the validity of the
technique.
So you are partly correct, I do not value my own experience or opinions
for trend following techniques - just the experience and wisdom of others
who regularly achieve much in that difficult field of trading - wisdom
that I shared with the group.
Since I moved on to styles of trading that need less expertise to
succeed, I have gone from strength to strength in terms of
profit. I consider myself to have below average trading
skills - so I need to leverage methods that are inherently more
profitable to make money trading. My only claim to fame is
that compared to most I seem to learn rapidly and I can withstand a
barrage of emotional outpourings better than most.
Perhaps that is why I can make money trading in a market making style so
easily - the more the crowd bays, the more money I end up
making.
As a traders coach I am fortunate to be able to compare my results with
many other traders results - this confirms my assessment of being of
below average skill, but I still make more than probably 99% of trend
followers and 95% of traders - because fortunately no great skill is
involved with my preferred styles of trading - the crowd just throw the
money at me as I provide the service they most emote for.
It has all been sufficient to retire at age 48 on the profits in my
pension fund built from savings out of employment. I know I
am most fortunate and now have the time to repay my fellow
traders.
I have probably tried to trade every popular style of trading system I
have seen or heard of in one form or another over about 20
years. The only major class of popular trading styles I have
not traded is the class of volatility break-out trade styles.
This is because it has a trend-following component and I feel my profits
lay elsewhere - one day I will try them just for completeness.
I have also traded many categories of underlying: stocks, commodities,
stock indices, currencies, various forms of interest rates...
I have also traded many instrument types: cash, forwards, futures,
options.
I have traded from the long and short side of all of the above roughly
equally.
The major category of instruments types I have not traded is exotic
options - I plan to get round to them one day when available in small
trading units - just for a bit of fun.
I currently trade on a quarterly to yearly time horizon in my pension
fund and all the time-frames down to intra-day. I select
markets by optimum combinations of spread opportunities, available
volatility and dealing costs for each time
horizon. I have never traded longer term than
yearly - something I also plan to experiment with.
So in summary, I feel it is not the amount of experience you have - it is
what nourishment is extracted from that experience. My
lessons were limited from 10 years of experience with trend following
styles - not quite wasting my time - but close. I extracted
much more in my first two years of experience with spread and market
making styles.
It is necessary to digest the experience to get any real sustenance from
it - obviously you have used your experience wisely.
Each person has differing taste buds and digestive skills.
But it is amazing how the majority of traders who regularly make 50% p.a.
or more seem to come from other than the trend-following group.
I am still working on gaining more experience and extracting as much
wisdom as I can, step by step whether directly or from others.
You obviously feel the same or similar. May this continue to lead
you to as much joy as it has given me.
Unconditional regards, Ric.
www.traderscalm.com
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