My "Blackjack Strategy"

[brownsfan019]

Originally Posted by cooter There is an opportunity cost to not taking a valid setup when, and if, you can. But is there a real, fixed dollar cost? IMHO, if your setups are valid, then it shouldn't matter which one you take. You contend however that every such valid setup should be taken whenever you see it. This could lead to overtrading, in my book. Discretionary trading implies that traders use some sort of discretion when choosing the setup to enter on, does it not? If not, why not just auto-trade your setups instead, and rely on the programming to do it for you?

How can it not matter? Unless you win 100% of the time, it matters big time. If your win % is 60% assuming you take everything, as soon as you eliminate a winning trade(s), your % changes drastically.

How can you possibly screen your valid patterns out then? Gut instinct? Just because?

And if you are screening out your valid patterns, perhaps it's the pattern that you are trading that is not good, not the fact that you randomly decide when to take your setups. If you have 100% confidence in your trading methodology, you should WANT to be in EVERY setup. If you are somewhat confident, very different story then obviously. There's no reason that a trader that knows their setups are solid and produce over the long haul that would WANT to pass on some trades.

I'd love to know why you would want to screen out valid setups. That's kind of contradictory though - if you are screening out your valid setups, are they even valid to begin with? :rolleyes:

I'd love to auto-trade all my setups if I found a programmer that could program how I trade. Easier said than done.

[Don4]

Originally Posted by brownsfan019 In the end, consistency is key to success.

I agree with u 100% brownsfan!!

[Don4]

In my opinion this is what makes the simple systems work,and most dont even realize it. Simple systems forces you to be more consistant in the way you trade.

[brownsfan019]

Originally Posted by Don4 In my opinion this is what makes the simple systems work,and most dont even realize it. Simple systems forces you to be more consistant in the way you trade.

Good point.

[torero]

I will have to agree with Brown here on the fact that if you cherry pick your trades (like most system traders who interfere with their own systems after testing long and hard enough to find that it has a chance of making money), you will lose because the system requires all the trades to come up with the stats you have. I learned this from system testing, not from discretionary trading. The market gives us a certain amount of right and wrong market conditions where a system will work and will not work. Missing one can be the one that would make up the losses if not more. You have to take the losses and the wins. This has happened to me where I decided to take one and sit out the ones I think the market was too strong to short and vice versa. Well, I was proven wrong time and again. This cherry picking is called Optimizing, basically trying to weed out the bad trades. But the performance results will give a totally different picture (usually worst than before the optimization).

I'm speaking from the experience of testing and trading auto systems. Overtrading happens when you trade in small timeframes, but if you trade a system that gets a 2-4 signals a day (I prefer less), your chances are better on NOT getting eaten up by commissions and slippage.

[brownsfan019]

Originally Posted by torero Overtrading happens when you trade in small timeframes, but if you trade a system that gets a 2-4 signals a day (I prefer less), your chances are better on NOT getting eaten up by commissions and slippage.

Good point tor. The fact that you take every signal your system produces does not mean that you are trading 100 times a day. It might, but there is no correlation between taking all your setups and overtrading.

[cooter]

Originally Posted by brownsfan019 ... there is no correlation between taking all your setups and overtrading.

Really.

So I place a trade early in the session, in accordance with my trade setup. It's a winner, and following my exit strategy, I take profits. In fact, it's so good that I've modestly exceeded my profit target for the WEEK.

But wait, I see yet another setup forming. And it looks valid too! What do I do?

A. You know it's valid, according to your parameters, so you take the setup with your regular position size

B. You follow choice A. but with a reduced position size - after all, why give away your gains

C. You follow choice A. but with a increased position size - after all, you now have more $$$ to risk

D. You've already handsomely exceeded your daily profit target, so why bother - wait until the next trading session tomorrow

E. Do nothing, sit aside and enjoy the $$$ - take the rest of the WEEK off

All thoughts are welcome....

[torero]

If the position sizing has been planned out ahead of time in your trading plan or system, then by all means trade with it. But if you don't take the next trade, it'll skew the results of the performance of the system. This next trade may be the one that will make up for the 4, 5, 6 etc trades that will turn out to be duds. If the system has been tested and proven ahead of time that the positive expectancy is there, why deviate from that? All these parameters have to be in place as part of the system such as trade only a certain amount of time everyday, a maximum number of trades allowed per day. You can even test if a maximum $$$ has been reached each day and stop trading, find out if it does get a positive outcome. All these have to be prepared in the trading plan before so there's no feeling of "now what do I do? Go with my instinct or intuition?" You know how that turns out.

[brownsfan019]

Originally Posted by cooter Really. So I place a trade early in the session, in accordance with my trade setup. It's a winner, and following my exit strategy, I take profits. In fact, it's so good that I've modestly exceeded my profit target for the WEEK. But wait, I see yet another setup forming. And it looks valid too! What do I do? A. You know it's valid, according to your parameters, so you take the setup with your regular position size B. You follow choice A. but with a reduced position size - after all, why give away your gains C. You follow choice A. but with a increased position size - after all, you now have more $$$ to risk D. You've already handsomely exceeded your daily profit target, so why bother - wait until the next trading session tomorrow E. Do nothing, sit aside and enjoy the $$$ - take the rest of the WEEK off All thoughts are welcome....

If you have a daily or weekly monetary goal in place, you take that. I personally do not like that strategy at all.

Assuming you are not done trading based on a $ goal, then YES you take EVERY single trade that your system produces b/c you have NO IDEA which ones will work. What if you stop after 1 and you later see that 5 more would have produced profitable? You just left a ton of $ on the table.

Again, if you truly believe in your trading system, this should make perfect sense. If the trading system is more or less a 50/50 shot, then I would hesitate as well.

This is my opinion from my personal experience. I think it's good for new traders to look for a $ goal and then quit. But for those of us that have been around for awhile, we realize that you have to strike while the iron is hot. That may mean that one day produces profits for your entire month. It happens. If you bypass those extra trades b/c you were afraid to give back money, it will cost you in the long run.

Maybe others have found that just taking one or two a day and see what happens is best. But, whether you are a trend follower, counter-trend, chop, etc. I believe you must strike and strike hard when the conditions that you are waiting patiently for present themselves b/c there's going to be plenty of times where not much is happening in your trading world.

Along the lines of another thread, we were discussing the common traits between a sales career and trading and this fits right into that. As a sales person you realize that all it takes is ONE sale to make your day/month/year. I don't think you can hit one trade to make your year, but the idea holds - you can hit a handful of trades during the month that make your month. You can hit those all on the same day. So, one day of trading could very well make your month. If you eliminate those big winners simply b/c the first trade of the day made money, you just set yourself back in a large way.

[Anonymous]

B.F.;

There is a very basic flaw in this idea: Not all situations are equal. That is, not all price action is created equal.

In keeping with the blackjack idea, you need to include card counting. Card counting basically says, while there is a "set" way to play each hand, the best play actually needs to take the "count" into it. Simply, while hitting a 12 vs. a dealer's 7 is correct. It is not correct if the count is -5. The -5 means more face cards to bust you and thus one should do the opposite of what basic strategy says. So 95% of the time you may follow basic strategy and hit your 12, there are those times 5% when standing is better.

Card counters can be banned by casinos.

Casinos will gladly teach basic strategy.

Simply, Basic strategy. only gets one to close to a 50/50 proposition. Knowing when to deviate gets one the real edge and puts fear in the hearts of the pit bosses.

Not every moving average cross is created by the same price action or volume or volatility. One's edge comes from being able to discern the differences.