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SIUYA
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Posts posted by SIUYA
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Hi There.In the normal market cycle, accumulation, mark-up, distribution, mark-down, etc; how exactly does mark-up/mark-down occur? If we take mark-up for example, when all the floating stock has been removed from the hands of “weak holders” in a phase of accumulation, what causes the stock to rise, if the people who want the stock to rise considerably have all the stock? Won’t it just go sideways at the trading range price for ever? Do you understand my confusion; where does the demand come from - whose buying?
I mean, if they (strong holders) keep raising their offer price from the breakout of the accumulation trading range, they have to keep selling back to someone (presumably weak holders again) to be able to keep the price slowly rising, and if that’s the case, surely by the time they reach a reasonable level for distribution all their stock has gone anyway.
If anyone could clear up this question, another piece of the puzzle would slot into place.
Many thanks in advance.
DGC.
I dont use Wyckoff but just from a simplistic point of view....... (stocks and futures are different here as stocks have limited amounts whereas futures dont but the makret mentality is the same.)
stocks can go up from a level as NEW/Late entrants enter. These are often referred to as dumb money (ignore all these names). Focus instead on a simplistic idea of being a late entrant......
You want to buy, someone will sell, but you have to hit the offer..... your desire to buy may over ride your sense of value, so you will bid it up....
Now take your ideas/mentality and multiply it by the many people in a market.
then add people who wish to short a market, people who will buy and sell, people who will trade intraday, people who will arbitrage, some of the original entrants will take profits, some of the original entrants will buy more and average in.
The extreme of this relies on the greater fool theory.... that is you will buy in the belief that someone else will buy at a higher price..... its at this stage supposedly all the smart money/strong hands have already departed and you are riding a ship of fools. This is ultimately who is buying at extremes.
Once you have a liquid stable market happening, there are more than just one set of players..... its dynamic, living and not reliant on a few players.
Its often great to think about extremes..... what happens if there are only two market participants.... what happens if there are unlimited numbers of participants, what happens if the market trades continuously, what happens if the market only trades once a day, once a week, once a year...... what then happens.
(NB - ignore all the silly names - its really just a liquid market)
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open an account in a discount broker that offers the SPI - there are many out there - OEC, Interactive, MB - just to mention a few. (no affiliations)
Ensure the account is based in AUD
Be aware that the instruments may or may not be based in USD ( in this case the SPI is not so everything should be kept in AUD)
Also be aware that many overseas brokers will not offer the same discounts.
eg; the S&P is still less than the SPI
But you should be able to get it cheaper..... it almost sounds like you are going through a stockbroker to trade futures.
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i cant believe i am saying this but - "I am envious of a ten year old"
(for all the right reasons)
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Or remember that no one style works or the time but that consistency on a well researched theory/model/style that has an edge should win over the long term......
there are plenty of so called professionals and experts getting chopped up at the moment.
Short term survival sometimes is the best form of long term survival.
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Another related concept as food for thought. - Psychology and scalping v longer term trend following......
(related to the post by Midknight and KeytotheCastle, and the milipede plus Zdo will like this)
The scalping black hole we get sucked into (while it can be done, and is a method to make money, its not for everyone, and yet, the scalping black hole is an apt description for those who know its not for them, and yet constantly are pulled back into it)
Think about this (and I am paraphrasing/taking from "Stumbling on happiness" - Daniel Gilbert here)
Why its so hard to sit on winners.....
Delays are painful. When people imagine the pain of waiting, they imagine it will be worse if it happens in the near future than in the far future and this can cause odd behaviour......
example; most people would rather receive $20 in 1 years time than $19 in 364 days time, and yet will generally choose $19 today rather than wait for $20 tomorrow. In economic theory this is irrational as the expected waiting time between receiving 19 and 20 is the same in both case, hence changing what we would chose is irrational.
The point is - waiting for tomorrow (or one day) now is more painful than waiting for tomorrow (or one day ) in one years time. Even thought the pain of waiting one day in both cases should be the same.
(think about it this way - people will pay $1 now to avoid the pain of waiting, but will not if the payoff is in one year time as they think its so far away)
This definitely contributes to the lack of patience of sitting on a winner.... many would rather pay to take profits. its comforting - or less painful. We want instant gratification (?). Our immediate imagination is possibly our worst enemy.
One way to get around this is to set the stops at breakeven, and then give it to someone else to manage..... out of sight out of mind. So the concept is not so much on money management, entries exits, etc..... the normal stuff, but in tricking ourselves by deceiving ourselves even more than we already do everyday. ( a related experiment I have always wanted to try (or variation of) is have one person always put on longs, another always only put put on shorts, another just takes trades off at a stop loss or BE - separate them all. )
This however does not get over the issue of adding to winners but is clearly related. Every time you put on a new buy or sell after the very first day you do a trade in a particular instrument it is likely to be at a higher or lower price than the original trade. So first you need to get over the issue of it being a trade that adds to a position..... every trade should be a new trade that stands on its own merit.
Now this is slightly different thinking from the general concept of many trades either being a "series of trades", it also is different to any martingdale strategy, or the idea of averaging in.......
Also if adopting the millipede example......having no idea of the reward element of the R:R concept..... and hence letting the market decide, maybe just maybe Dr Van Tharp has actually done many traders a disservice by popularizing the concept......(maybe he works for the broker conspiracy and they just want us to day trade more and pay extra commissions)
It seems to me often the concepts that we traditionally/continually look at or focus on for trading are actually doing more harm than good (better money management, better entires, exits, indicators, more focus, more discipline, new trading idea)...... a bit like continually asking how to make a horse/car/plane go faster rather than asking why we are trying to go somewhere and is there an easier alternative than traveling. The issue is not in new trading ideas, but rather in ways to avoid thinking or tinkering too much.
(thankyou and Damm you Daedulus - for some reason this thread has struck a chord.)
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Cornhusker - why the EU dropped.
Actually I did not see it, as I was doing other things, however while in the thread of re thinking concepts, one of the the things I have always thought about which may give food for thought and actually agrees with Cornhuskers idea.....
while everyone gives a variation of "markets fall because there were more sellers than buyers, more aggressive sellers etc etc"
think about it in terms of the market will go down as there are no buyers at certain levels, or up as there are no real sellers. Its a little bit semantics but this can be particularly true when many of the participants setting the price levels are market making (spreaders).
As a theoretical example try an think of what would happen if a market opened for 5 mins, then closed for 55 mins, then opened again for another 5 mins, then closed again for another 55 mins...... what would happen.
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Ah finally..... while it has been known by some for a while it has always amazed me by the amount of people who think there is a global conspiracy of bank traders who know everything and make all their money trading...... There are very few real speculators or true traders.
Most take the clip, most are market makers or client order operators, or managing structured products. So when you see any investment bank reporting that its trading division made money on 95 days out of the last 100, it feeds this image. You cant actually delve into many of the internal divisions and see who makes what, and with all such endeavors, the internal workings have everybody claiming they made the money, and they forget the brand of the bank and the associated products which brought in the clients. A lot of it maybe be about the definitions of a trader v speculator v broker v operator, but think about it this way - its all marketing and perceptions.
The bank traders push the idea that they make the money, so they get the bonuses, they like to feed their own egos, the banks also like the idea of a gun trader, management will attach themselves to them (until they blow up). Also in order to attract the clients, the banks push the idea of trading as a way to make instant riches, so they get them to pay them commissions, and trade their products. (imagine if a car seller said, statistics show 95% of you who actively purchase our product will crash!)
if 95% of traders loose money, do you think the banks have a monopoly on most of the good traders - just so they can give them 10% of what they make....
(hedge funds are a slightly different story - but the internal workings here can also be similar)
This is not meant to be a rant, but its good to see it brought up and its topical as its a concept a lot of retail traders(and even bank employees) dont get, and I am glad its been brought up by others.
As an example to think about - the investment banks are meant to divest themselves of their trading divisions - how many people do you think that will cause to leave the banks, how much will it affect their profits..... far far less than many would like to guess at.
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MK - you nailed what is the hard part - the scalping black hole that sucks you in.
We constantly try and capture too much, yet we are constantly reminded by all the great traders - the money is in the sitting and waiting - Patience is often undervalued in trading.
Plus the point of a lot of these things is R:R ---- for the time being --- ignore it if you want to sit and run things - you need to free the mind of the idea of the reward. How many times have you heard great traders say they are look for low risk entries, or they just watch what they can loose and they dont mention their reward.... problem is its fricken difficult to sweat drawdowns and the constant break evens.
Applying a simple Thales/123/ABC entry with a quick move to break even and then just letting it ride is part of all thats needed.
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I am Spartacus, no I am Spartacus
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Thanks daedalus
The equity millipede - I like - for some reason it really reminded me of Jim Rogers. While he is a fundamental analyst and sefl confessed terrible trader some of the portfolio management seemed similar. He may keep a net short in something - eg; the EUR, but will also recognize when to build a long, with some small stops, with the idea that the market may turn and he can then ride that. Its the separation of positions into "bundles" that is more portfolio rather than money management.......
See post #47 for an interesting theoretical example.
plus post #53 "you need to know when a good setup is forming for a low risk entry. This is something you need to accomplish first. Position management will come to you when your ready." - an important issue.
ultimately it is a matter of running profits for when a large trend occurs...... if no trend occurs, then you will ultimately get chopped up - but you only need one or two large trends to pay for a multitude of losses.
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What's particularly interesting to me is how you were able to convey the contextual considerations (in addition to basic concepts of charts/timeframes/how to physically trade with a platform, 123's & 2b's, position sizing, R-multiples, risk:reward, etc.) to your daughter in such an extremely short period of time (a month!). It has taken me months and months and months of full-time dedication to the approach to be able to show signs of consistency.see, post #5368..... first you may have had to un-learn, and get rid of preconceived ideas. An often repeated idea in trading before actually accepting some things.
Marko23 - interesting viewpoint .......I never thought of the 3 pushes up in a larger time frame - often it looks more to me as 5 waves........ same thing - also interesting using a simple Tom Demark count as well (not 100% accurate but helpful)
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I dont believe you..... what are you trying to sell :haha:
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that DIBS method is an interesting one - you are right Kiwi, the take profit on one is more the mental crutch that helps as some people tested to show it is net unprofitable.
Reminds me of the Joe Ross - buy three, sell, one, sell one, run one.... then add buy three, repeat.....
Problem then always becomes of when to take profits....how long to run things, how to trail the stop?
Is one of the reasons scalping appeals is that this avoids these issues?
The never ending trade off!
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something that has been going round in my head - its one of those things that probably has a simple answer but I am stuck in one of those loops.
If you have a system that is 80-90% accurate, then shouldn't the stop loss be quite small? Probably as you are taking small gains without the opportunity of letting them turn into a loss.
Otherwise, is it only 80-90% accurate because you let any losses become quite large until they reverse and then become profits?
A similar question was raised once before, whereby it as asked.... which is better.
The risk of losing $100 3 times, or risking $300 just once......
While mathematics may show out based on expectancy, reality, R:R, etc; etc; I would imagine the real answer may be just in the gut feel and 'comfort' level of the risk taker.
So I guess you need to really look at why its accuracy is so high - what is the expected drawdown before a profit? Will you get stopped out prior to making a profit? are averages a good measure to look at, or absolute maximums..... as they say you biggest drawdown has yet to come.
(I also agree with you Dude - writing options works really well if you approach it from an insurance point of view - using a broad, diverse and conservative portfolio - looking to scalp small gains to build a pot large enough that will not get wiped out by large one of hits. This is extremely hard to do from an individual trading point of view. Directional trading using options is a different approach, and then, why would you sell out of the moneys - a favourite for the steamroller victims.)
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The one good thing about human irrationality is that our irrationality can be measured, and we can in fact be reliably predictable in our irrationality.
A good related read is "Predictably Irrational" - Dan Ariely
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Daedalus - "focusing on what we can predict about that next bar or two"....
If you believe that markets are basically fractal (without getting into debates about it) then really intraday (or smaller time frame) trading is really just larger time frame trading in fast forward.
Given this invariably by dropping down your time frames (or range bars) then you will naturally scalp. (and then the commission, slippage and spread will become a larger component of a unsuccessful or successful system)
However if you approach the scalping from the point of view of trying to capture the bigger moves but then be prepared to drop down the time frames to improve the entry and exits, then are you scalping, or are you just managing the position you want based on the larger time frame via micro managing? - problem here is that then you may miss the move, you may have lots of small losses to pay for when a bigger move occurs, mentally it may require more focus.... same old issues.
Point is if you are scalping it would appear you should then ignore everything else except the next bar or two. I would suggest then, while many scalpers look to fade markets, and look to go both ways and capture all a market has to give, that a better approach is to look to always go the same way - the one way each time. (an approach TRO mentions) You will still then have ample opportunities, the focus is not confused and unbiased, the rules simple.
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I was just reading the July 2010 issue of scientific American there was an interesting article on how babies think.
In it there is a small paragraph that I think is interesting regards trading, pattern recognition, context and systemised rules based trading, recent threads and Thales' teaching of the young un'.
So as I only had the hardcopy from a newsagent....the basis is on how babies learn and process things.
A basic theory is they adopt a very statistical Bayesian type model - others can describe it better than this but - "the Bayesian model comparison does not depend on the parameters used by each model. Instead, it considers the probability of the model considering all possible parameter values" Wkipedia
Basically it weighs up the odds of things occurring, rather than definite occurrences.
"Children reason in complex and subtle ways that cannot be explained by simple associations or rules. Further more, when children unconsiously use this Bayesian statistical analysis, they may actually be better than adults at considering unusual probabilities......."
(during an experiment using a machine) "adults seemed to rely more on their prior knowledge that things usually do not work that way, even though the evidence implied otherwise for the machine (in the experiment) in front of them."
In other words, when it comes to trading maybe as the great guidebook to life derived from the Simpsons suggests - "be like the boy".
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Johnny- "Also, if you traded in the pits then you know that many guys make their money from commissions. And when they do trade it is often a hedge against their business."
On this point and generally this is what I believe (Again just a matter of definitions)
- there are very few traders out there. Many people who claim to be traders are actually either market makers, brokers, or operators of other peoples orders.
- anybody with a good set of rules that they apply and are profitable could easily give away those rules/ teach others those rules and the other people still will not necessarily be profitable. This includes systemised computerised accounts.
- when it comes to courses and seminars etc; its buyer beware. No matter how many times people are told - if it sounds too good to be true then it probably is - they will always generally pay for something rather than receive the same information for free. For some reason they assign more value to something if they pay for it. Or is it that people think that paying for something will save them doing the work?
- nothing is impossible, even if its improbable.
- when something is improbable but it does work/come off, the payoff is usually huge
- personality is vital, so either fit the personality to the task, or change the personality
- context is king (everything is relative)
- luck plays a greater factor in everything than most of us give it credit for.
- luck is what you make of it.
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its likely to be a trade off between - the number of ticks you can capture v the number off opportunities provided.
Are you better waiting for a low occurrence trade with with R:R or lots of trades.
But wait...is not this the issue with every style, hence why many go for less trades with a higher R:R? Damn these circular arguments confusing me.:crap:
What about a simple random test if you are prepared to scale in?
buy or sell risking 10ticks (say the average expected range on a day is 100 ticks), on every stop, cut and reverse and increase the position? Once in some profit, take it.
Or only go one way (determined by some trend filter) and increase the size each time?
(have not done any testing on this, but could be interesting.)
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Johnny - "My argument is that it is a foolish move when it is the sole trading plan."
You may be correct from the point of view of offering an individual 'life advice' , but equally so, if someone sets their heart at something then just because something is difficult (or improbable) does not mean its impossible.
There are plenty of people who waste time and effort trying things throughout their life..... but so what?
and what is a small amount in terms of what they are risking. which is riskier or less advisable....taking a year or two off to focus on trading, risking $20,000 OR risking 5% of a lot of money and trying to trade part time, OR doing a 2 year degree coming out with a heap of debt and then changing your mind for what you want to do as a career?
who knows - it depends on the person and their situation.
Also if you can take a small amount and get lucky and make a larger amount then great, maybe you then get smart and manage to make this luck sustainable....
Point is you are right - its tough, its improbable, there are scammers who will promise the world charge for it and deliver crap, yet no-one appreciates being told something is wrong or impossible when others have shown it is not (maybe/maybe not people here but the mkt wizards)..... lets keep the dream alive !
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I would have thought 'rate of return' from investments is more a relative term related to 'efficiency of the money spent' and helps determine where to 1) spend the money in terms of a companies expenses, or 2) where to invest the money for the greatest rate of return.
If you are speculating the rate of return is a crappy marketing term used to suck in people.
I used to work on an options floor and when you had a good trade/day the joke was always "annualise that".
Speculating does not equal gambling does not equal investing. The terms applicable to each while many use interchangeably have different definitions and hence different conclusions.
This is an interesting thread as it incorporates a lot - beliefs, ideas, commitment to these - as well as definitions forming and/or resulting from those beliefs. As well as how the physc affects this. Its one of those things that I feel every one is correct in their own ways - but arguing two different points by trying to apply the same definitions to different things....and unfortunately is devolving into name calling. (while fun, is not necessary).
(I would happily take 15% annualized return on the bulk of my investments (this also is probably not achieved by 95% of investors), while I would also be happy to speculate wildly on a smaller percentage.)
Nothing is impossible, however improbable.
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yes - such methods certainly work. But I think you have to be aware that there are still many of the same issues attached that have to be taken into consideration.
These are just food for thought......
- you still need to cut your losses. If you dont have small losses to cut, does it get harder to cut larger ones, once you start doubling down... for some the answer is yes. Also as the point is not so much cutting losses, but cutting blowouts, you will need a bigger bank for this type of trading, as you will have some rather big blowouts.
- as you are basing it on expectancy - you need to make sure you have a consistent method of taking quick profits. Now this will mean that you will constantly kick yourself when you take profits early and it keeps running...this may not wok for every personality.
- entries are still important. the expectancy relies on this, otherwise, you may be constantly sitting on a lot of losses early on....this can be difficult to stomach. Also are you likely to be trying to still then chase the holy grail?
- Why does this necessarily have to be contrarian? I would suggest a better short term one looks to get on the trends still and allow quick profits. Or do many traders want to be right as a primary consideration - being that they want to pick tops and bottoms?
- consistent profitability gives a great method to simply increase from 1 to 2 to 4 to 8 contracts to massively and quickly increase absolute profitability. But are people willing to up their scale this quickly. Some traders will thrive on this - many blow up, when they go too hard too quickly - or when they massively increase their size and have a big loss and dont cut it.... other traders find it hard to increase the size.
Ultimately it still boils down to the personality of the trader, as many of the issues will remain the same.
(As an extra note, many market making firms, hedge funds, and prop houses use this method..... lots of small wins, increasing the risk for good traders, and then increasing the markets traded, the number of traders employed etc; Rather than trying to catch big trends to make more in absolute dollar amounts. Some of these traders doing this have an overall risk manager ensuring they stop them selves out and dont get too cocky and large....via risk controls and unemployment!)
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welcome jjr
first, well done for realising most things that are advertised as scams. You can get pretty much most of the information they offer for free on the net. While there are many legitimate tools that are for offer - books, indicators, platforms. The information is largely available via the net or books. Dont spend good money on seminars unless you have thoroughly researched them....then still dont do them.
There are also plenty of webinars and seminars offered by exchanges, and data providers and brokers that are generally free or very, very cheap. These should help on the mechanics. Also if the mechanics are new to you, practice on a Simulator trading account first.
Threads here to look at for someone such as yourself will usually involve some market psychology, references to helpful books, some simple trading styles (dont get caught up too much in indicators and one particular style at the start)
Also ignore all the personal bickering that can occur between participants....it occurs and distracts.
As a guesstimate, 2-3 years of much reading, screen time and learning to get competent is what it takes according to general consensus to be profitable. good luck.
When Your Stop Loss Doesn't Execute
in Beginners Forum
Posted
however - just using a stop at market order can also result in some really crappy fills.
Flash crash !
there is no substitute for really understanding the system you use, the risks involved with it.
there will be variations between brokers, definitions and your desires.
eg; does the market have to trade below your stop trigger, does it merely need to be offered below, where does the trigger go off, where is the stop order held - on your computer, at the broker, at the exchange?
Ask, ask, and ask again.