BlueHorseshoe

Great, thanks! BlueHorseshoe

Yep - that guy's definitely "all-in" !!!

Hi SIUYA, I'm very interested in watching this, but the URL seems to bounce. Could you message me with any terms that would bring it up on a google search? Many thanks, BlueHorseshoe

Hi, Just to be clear, I wasn't recommending going 'all-in' - I was just using an extreme example to try and argue a point. My basic point was that the 2% risk per trade rule has been abstracted from traders who typically hold simultaneous positions in multiple markets, and who therefore often have a greater net risk to their equity than 2%. Trying to apply this rule to the trading of one market is misguided. Risk management is a personal thing anyway, so you are quite right to say 'I wouldn't want to put myself in that situation'. You should trade within your comfortable limits, as should we all. BlueHorseshoe

There are also several good books - Curtis Faith's and Michael Covel's. I don't want to get into debates about what a poor manager Faith was after the Turtles experiment ended, or what a slithering little turd of a fraud Covel may or may not be; if you want a thorough outline of how the Turtles traded then either book does a decent job. As for the pyramiding, if my memory is correct then this was combined with the trailing of a stop-loss on prior entries, so that the earliest units became risk free by the time later ones were added. BlueHorseshoe.

Why not visit the MastertheGap website and read everything on there? There's also an old, forgotten blog by the same name with plenty of useful information on it, including statistical information on frequency of same day closure for different types of gap. In other words, you can get plenty of value from the website with handing over any money. Hope that's some help in getting started. BlueHorseshoe

It's really quite unclear what 'amateur'/losing traders do. Certainly some will always want to buy a market cheaper than where it currently is, and thereby forego the opportunity to participate in many breakout trending moves such as Hull is describing, but another type of amateur will 'chase' the market, buying it once a trend is underway, only to have the trend reverse and stop them out. Where does the problem lie? In my opinion it has nothing to do with entries (which are fairly insignificant) and everything to do with exits. Either of the above approaches can work if properly and consistently applied. But amateur breakout traders are apparently often unable to withstand the large strings of small losses that accumulate whilst awaiting a decent trend, and those who wait to buy a market cheaper are often looking to capture a greater portion of the trend than is really feasible when entering on pullbacks. To trade modern markets effectively in the way that Hull seems to be suggesting requires deep pockets, resilience in the face of sequential losses, and a portfolio approach in higher timeframes. BlueHorseshoe

You'd go all-in if you were 100% certain of something, wouldn't you? What if you were 99% sure of something? I realise that these examples aren't too realistic (though certain forms of pure arbitrage, assuming you can guarantee perfect execution, are pretty much risk free), but the point is this - the more certain you are about the outcome of a position, the more you should risk upon it. BlueHorseshoe

I was just about to make a post stating this exact same point. The 2% figure is something you'll here over and over again in books like Market Wizards. But those traders are almost invariably trading multiple markets portfolios. The Turtles, for example, used something like a 3% per trade rule, but could hold positions in countless markets concurrently. In fact, they had a seperate rule for total net exposure across their portfolio, which was something like 30%. If you're trading just one market at a time, as most retail traders are, then that market is your entire portfolio. This doesn't necessarily mean that you'll want to risk 30% per trade in that market; portfolios also reduce risk through diversification, where single markets do not. The Dude's advice to go 'all in', however, stretches things a little too far for me! BlueHorseshoe

That's really great - I'm so pleased for you. Now where do we fit in to this picture? BlueHorseshoe

There was a good book published last year by Peter Brandt called 'Diary of a Commodity Trader'. Brandt trades purely from chart patterns. What's interesting about him is that he operated very successfully as a CTA for several decades (hence lots of audited accounts proving he's not just another vendor/huckster). He also has a blog where he posts a lot of his analysis - a google search should pick it up. Hope that's useful to you. BlueHorseshoe

Having just glanced at this site I have three observations: 1) The bots didn't seem to make much money on Friday: they were long falling markets as much as rising ones, and short rising markets as much as falling ones. 2) The bots (assuming the site's software effectively identifies their activity) are most likely doing something far more sophisticated than trading trends intraday (in fact they're probably engaged in stat arb and market-neutral approaches) - therefore there is little merit to identifying their activity as a measure of trend. 3) The website caused my browser to crash within a few seconds of loading. BlueHorseshoe

Thanks for a useful post Obsidian. So does anybody have any ideas about how one can go about sidestepping all of the above regulation (which I seem to remember is prohibitively expensive) if trading for a handful of other people? For instance, what would happen if I were to establish a limited company with five shareholders, and then the company traded futures? Would the NFA intervene to prevent this? And does the CFTC/NFA have any remit to intervene outside of the US? BlueHorseshoe

Hi Karoshiman, You're absolutely right, and the situation obviously gets a whole lot more complicated in a whole load of other ways besides. For example, you mightn't give up the whole twelve ticks every time depending on where in the 'buy zone' you enter (I wasn't assuming mechanical entry at precisely 12 ticks above the level Y, as this just becomes another 'buy level' rather than a less determinate 'buy zone'). Your profit objective of $300 from level X might leave a lot on the table - maybe even 12 ticks per trade - so then a profit target of $300 in the second scenario would be feasible (though why not then trade with level X and a $450 profit target?). The other thing to consider is that Joshdance is bound to be more sophisticated in his entries and exits than entering purely because the market falls to some specific level or zone. So yes, my example was grossly over-simplified (as these things always are), but the main point I was hoping to make was that less determinate planning can feasibly lead to more frequent opportunities for profit. Thanks, BlueHorseshoe

Hi Josh, I think that there is another overlapping issue here besides how 'good' the planning is, and it's the issue of how expectancy and opportunity interact. To give an example, two simplified scenarios might be something like this (and in the example I'm substituting percentage win rate for expectancy): 1. You have near-perfect pre-market planning, and can identify the day's lows pre-market to within a few ticks; if price gets down to level X on any given day then that's a buy signal and you're right 90% of the time, for a $300 profit vs a $300 loss. Most days, however, price never quite makes it down as far as level X and you miss many opportunities. In a year you get 50 trading opportunities at level X and have 45 winning trades. Your net profit will be (45 x 300 = 13,500) - (5 x 300 = 1,500) = $12,000. 2. Your pre-market planning is a little more vague, and you know you can approximate the day's lows to within 12 ticks of a level Y pre-market; if price draws within 12 ticks of level Y then that's a buy signal and you're right 65% of the time, for a $300 profit vs a $300 loss. Most days price comes within twelve ticks of level Y and you have many trading opportunities. In a year you get 200 trading opportunities at level Y and therefore have 130 winning trades. Your net profit will be (130 x 300 = 39,000) - (70 x 300 = 21,000) = $18,000. What you are hinting at in your post would seem to me to fit the second scenario more clearly, and this is obviously the more desirable of the two scenarios in terms of dollar profit. By having a less determinate pre-market plan (for example identifying a 'buy zone' rather than a specific 'buy price') your expectancy for each trade (or percentage win rate in my example) may well be reduced, but you'll have more opportunity to exercise this reduced edge, and therefore a greater net profit. There are certain market scenarios that are almost certainly 'sure things', but they're very rare - way too rare to make a regular living from. Significantly less sure things tend to occur far more frequently . . . Expectancy and opportunity tend to be inversely proportional, I think, and of course with increased opportunities comes increased slippage, commissions, and arguably exposure to risk. Nevertheless, there is often a slight disjuncture between the two, and I think that finding this will maximise the potential of your approach. I hope that's of some help to you in thinking this through. BlueHorseshoe

I would certainly be very interested to discuss pairs trading or any kind of stat arb - unfortunately I know very little about it. Maybe you could start with some broad definitions, some words on market selection, and a few examples of how to implement market neutral concepts? If you've been doing this for about five years, then this would mean you started out around the time all the quant funds at the investment banks went belly-up trading this way, is that right? Have market neutral approaches become more forgiving again since that time? Many thanks, BlueHorseshoe

Can anybody tell me who DbPhoenix is, why he/she has been away from the forum for so long, and why his/her return last week has garnered so much enthusiastic response from all the other old hands and maket wizards on here? I feel as though there is some history that I'm missing here . . . BlueHorseshoe

I seem to remember reading an article or post that argued that the COT report for currency futures wasn't really indicative in the same way as it is for commodities etc. This had something to do with the fact that only specific types of market participant trade futures as opposed to the cash market - unfortunately I can't remember any more detail than that. Might be worth thinking about before employing currency futures COT reports though. BlueHorseshoe

Hello, I think how I would approach this would be to set up a variable that counts the number of bars since you began to plot the line, and then use this variable as the lookback period to inform a second variable, which increases by one each time price intersects with your line. Someone else may suggest an easier approach though, so I'd stick around until you've had a few replies from more experienced programmers. BlueHorseshoe

Hi Onesmith, That seems to have done the trick - thanks again! BlueHorseshoe

Hi Onesmith, I'll give this a go, thanks. Not sure why the image isn't appearing as I can see it within the thread without any problems. How would I overcome this same problem in terms of strategy code and backtesting? Cheers, BlueHorseshoe

It's taken me a while to get around to this, but here is some more information about this 'problem'. Data2 Indicators.bmp The screenshot above shows two charts. The one on the right has Data1=60min. The indicator plotted beneath it is a 2-period RSI. The chart on the left has Data1=15min, Data2=60min. The indicator plotted beneath it is a 2-period RSI, with the input set to 'Close of Data2'. The two indicators are clearly displaying differently, and the one on the left hand chart is clearly wrong. So what I am hoping for is a suggestion as to how this (or any other) indicator could be correctly displayed using the close of Data2. Hopefully now I've been a bit more specific you'll be able to help me more easily. Many thanks, BlueHorseshoe

This is all very interesting, but can you provide any evidence to support your claims? If I had done as you suggest above in the USD/JPY spot market at every available opportunity over the last five years, say, then what would have been the outcome? Until you provide something more specific than what could essentially be a load of made up nonsense (not that I'm suggesting this is what it is, just that there is no evidence to the contrary), then this is just a nice idea and not something that has obvious value. BlueHorseshoe

You could always do both! If you only trade end of day then you could also work full time, which could include starting and running a business. BlueHorseshoe

Hello, Thanks for your reply and for the video clarification. I'm finding this thread very useful (and this despite the fact that I don't trade the Russell, I don't trade intraday, and I don't trade with the kind of discretion that you do). If you're still open to suggestions for videos then I would be really interested to see something on order execution. Do you use limit orders for pullback entries, or just enter at the market each time? Kind regards BlueHorseshoe