[TheDude]

This is a tricky point (rules).

Some rules you must stick to - mostly those are around the running of the business. e.g. risk limit per day, how/when to increase size.

Rules regarding entry and exit however aren't worth the cyberspace they're written in. The market is constant flux as we all know. No 2 conditions/opportunities are ever the same. There will be different participants in the market, there will be different influences in the market etc. Trying to apply a rule to such an environment is a fools errand in my view. It's just way to mechanical. Sure, it will be useful to have a set of guidelines, but rigid rules is a big no no in my book. Context is far far more important.

Tying to find a 'rule', 'set-up', whatever to give that elusive edge is a hiding to disaster. The market cycle is always changing and to expect a rule to apply all the time and generate serious coin just aint going to happen - in my humble opinion.

[MadMarketScientist]

TheDude - you do make an excellent point. I think part of the problem is many people come up with trading rules that are completely inflexible and not dynamic to market conditions as they change.

What I might disagree on is the fact that there are many who can trade successfully without having a number of clear cut rules and an exact trading plan. While context and subjectivity can be quite powerful, I haven't seen many traders in my time possess those skills to the level necessary to succeed. If you do or someone gets that level it can be fantastic but it would probably end up being the exception.

What I think most need are those clear rules, almost mechanical perhaps up to 90% and then use experience for the other 10% and flexibility. Or, ensure their mechanical system is not rigid, meaning it can adapt immediately to changing market conditions, as in more volatile markets with bigger range it adjusts targets and stops, when it's quiet those contract. I feel that can work. You only have to look at Wall Street and the fortunes the big firms are making off of their program trades to know it's possible. But that's a whole other conversation....

Thanks for your input.

[TheDude]

MadMarket- Yes, I think I agree there. Perhaps it may help to put some context from my own trading?

Generally, I have levels that I am looking at. Whether I take a fade or a break out of that level will depend on the context of the market. Volume may play a part in that, so in effect, is that a set up? Not in my book, as I'm looking at the context of the activity v recent activity. You cant predefine that in a list of attributes that create a 'rule'. I'm not being mechanical in that I wait for 3 bars of pull back or less, an indicator to be at a certain level, etc. I've made that error before. For me it's too ambiguous. I started off years back looking at Joe Ross and his TLOC ideas. Great on paper, but for me it just didn't work. How many times did a 1-2-3 turn in to congestion. Same with hooks.

You raise a good point about programme trades. Yes, thats another area - and correct me if I'm wrong but it tends to be based around market microstructure and logical relationships. Are those relationships often based around equivalents 'rules', or 'logic'. Now were (well, me anyway ) playing with semantics......

Cheers.

[MadMarketScientist]

I think we're on the same basic page, just coming at it from different directions.

I always think there's a place for "art" in trading -- call it a 90/10 rule for me. But, I think that 10% is the hardest thing for most to master, and if we're ever going to see more people succeed than fail it probably has to be as a result of some fairly strict rules that keeps them "alive" and then hope the art can be developed. Most tend to washout before that I think, and many times either chasing a bogus EA or having no clue of whey they are buying or where they should exit. Just doing a transaction.

Funny you mention Joe Ross, years ago I did same, bought an expensive book that looked really cool -- but I could never make any money at it -- maybe not being the author and in their head was the reason -- I had high hopes but didn't make it for me. It's on a shelf or packed in one of many boxes packed with books, systems, software - I could open a museum.

[TheDude]

lol - Good post! You cant learn to ride a bike by reading books either!!!

rule 1. turn pedals.
rule 2. turn handle bars in direction of corner
rule 3. apply brakes to stop
.....

Just doesnt seem right does it?

[emg]

here is my rule #1. control emotion

[Attila]

1: DO NO PREDICT (a.k.a. having a BIAS not based on what is actually happening)

Today trading NQ I figured once past 1920 1940 and 1950 were a given.. I got long 1922 and allowed an 11 pt gain become 1pt gain.. Went long again 1919.25.. this time a 6 pt gain became a 1.75 loss... Went long 1894 for an 8 pt gain a few minutes later..

Point is once I had that 1922 entry I KNEW I would have an EASY 10 to 20 points to 1940/1950.... I had decided I WAS GOING LONG whether NQ liked it or not. If I hadn't predicted due to the daily channel and my emotions I would have reaped 30 POINTS in the other direction.. My system was screaming short on the 1920 break but I COULD and WOULD not see due to my premarket bias...

[SIUYA]

Attila - interesting point..... re pre market bias.

I think the best plans are ones that say -
if this does this, then I will go long as I think that this is the most likely outcome.... however if this does this instead then the least likely outcome that I thought would happen is occurring then I will go short.

Amazing how many times the move that occurs from the least likely action occurring can be very profitable.

Its a fine line between having a plan that is biased, and also having the flexibility to add that extra dimension to the plan to then actually listen to the market. Of course then there is the third dimension of "I cannot see what is happening in the market today, so I dont need to be there, walk away"