Trading Systems - A Complex World with Simple Answers

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Old Nov 17, 2008, 7:08pm   #1
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Trading Systems - A Complex World with Simple Answers

We've just published a new T2W article called "Trading Systems - A Complex World with Simple Answers" by Sam Seiden.

Quick Summary: One of the many recipients of faster and stronger technology is system trading. In the world of professional money management, I have seen plenty of trading systems, most don't seem to work and of the ones that do, they typically work for a bit and then f

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Old Nov 17, 2008, 8:01pm   #2
 
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Sam I like simplicity in life and your article to trade simply excellent, but I rated it 7 as I would put another couple of points if you explained what time frame you used on those charts, and what if the 50 ma looked a little horizontal on 1 min chart. and why 5 min trend looks different then 1 min trend and do you use any of these.
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Old Nov 18, 2008, 7:15am   #3
 
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To have the proper foundation, you must have a solid understanding of how markets work and why price moves as it does.

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Turning Failure Into Success
I see the vast majority of traders that go down the system path spend years form-fitting indicators and oscillators based on back tested hypothetical results (numbers). I see very few people develop strategies based on the simple logic of how and why price moves as it does in any market. From my reality based market experience, trading is a simple transfer of accounts from those who don't understand simple market logic into the accounts of those who do. Trading systems just expedite the process.

Great article, but they still won't understand.
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Thanks! The following members like this post: nine
Old Nov 18, 2008, 8:16am   #4
 
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I loved the principle but was negative about the execution - too many indicators still.

Rather than using a stoch (which is just a measure of where the close is in the (say) 6 bar range double smoothed with 5 period mas (for a 6,5,5 stoch)) it would be better to look at the price bars. How many bars is required in a good first retracement in a trend out of consolidation say? How many for second or further retracements? Do you need a signal and then a failure of that signal (generating a more reliable second signal once the first bunch get washed out)?

So, 7. Good principles but still too many indicators. New trader, I think that some will get it but they will tend to only get it - and my hints above - when they are the right stage in their learning.

Thats not meant to be arrogant but it does seem that people have to make a series of mistakes before some things become obvious.

Last edited by nine; Nov 18, 2008 at 11:31am.
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Old Nov 18, 2008, 2:01pm   #5
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Great article, but they still won't understand.
If everyone knew what they were doing, would it still work?
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Old Nov 18, 2008, 2:30pm   #6
 
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Although I am relatively inexperienced compared to many who post here, I too think it is a great article (for what that's worth ). It also fits in with a lot of what I've been reading lately (and I've deliberately been doing more reading than trading just recently).

I'll throw in a naive question (aimed at the author if he is reading this and cares to reply, or else anyone else who cares to comment): What to do if the MA is flat, i.e. if it is no longer trending? (I assume the answer is "Nothing").

Thanks,
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Old Nov 19, 2008, 10:38am   #7
 
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Originally Posted by montmorencyt2w View Post
Although I am relatively inexperienced compared to many who post here, I too think it is a great article (for what that's worth ). It also fits in with a lot of what I've been reading lately (and I've deliberately been doing more reading than trading just recently).

I'll throw in a naive question (aimed at the author if he is reading this and cares to reply, or else anyone else who cares to comment): What to do if the MA is flat, i.e. if it is no longer trending? (I assume the answer is "Nothing").

Thanks,
Yes I think nothing is the correct answer. I have found it hard and still do, but doing nothing is an essential part of trading.
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Old Nov 25, 2008, 3:39pm   #8
 
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Yes I think nothing is the correct answer. I have found it hard and still do, but doing nothing is an essential part of trading.
...and I'll add one more, which is by one of the 'enlightened' traders and basically sums the last two thoughts up: "I wait until there's money lying back in the corner and then I just go and grab it; otherwise I'm doing nothing."

Doesn't trading sound just wonderful when put in that way?
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Old Nov 25, 2008, 4:04pm   #9
 
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lol, that was the quote from Market W's that I was thinking of when I wrote that!
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Old Nov 25, 2008, 4:38pm   #10
 
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lol, that was the quote from Market W's that I was thinking of when I wrote that!
Yep And I couldn't resist to throw it in ... I, for one, prefer theses advertising simplicity to the ones talking a load of monstrous systems and elaborate equations ...
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Old Dec 25, 2008, 9:23am   #11
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Thank you and my experience with using a similar method...

First I would like to say thank you for mentioning your basic strategy/method. This is the first time I have posted anything on the net regarding trading. But I wanted to share my experience so far, since it relates to your post.

First a little about my background and experience I think would be relevant. I got into trading (mainly intaday and short term swing) less then three months ago. In the last two months I have read over 1000 pages contained in books (I still have four more books at home I have not read yet) and countless posts and sites on the net. Other then the recent trading I have done, also have purchased stocks for medium term holds in the last 15 or so years. What I think also helps me is previously I did make a good living playing Poker for about 6.5 years.

Now the real reason for my post. Almost three months ago I took $18K and opened an account to trade stocks. The reason I opened the account is because I was at a friends home and was looking at a chart of a stock (I think the stock was Intel) he was looking at and saw pretty much what you described, minus the indicators. I saw basically what you described in 15 mins looking at a daily chart. It looked really simple to me at the time. There is obviously more to trading then simple price action like Discipline, Money Management and a complete trading/action plan (which I am working on now). Here is the interesting thing about all this, so far I have made a total of 25 trades (round trips). Of which 6 have been losers, which I got out fairly quickly (either stopped out or voluntarily closed the trade) and were fairly small loses. From $18,000 start to $21,700, this trading was during a period of two months. More active now then in the beginning. I just placed another $10K in my account today to cover the minimum SEC "Pattern Day Trader margin account Minimum of $25K".

For Clarification a few key points regarding the above.

* I am a tad more cautious and get in when I think the move is already started and confirmed.

* I use MACD with Histogram, Volume and RSI

* I use Candlestick charts with a 20 day EMA. While analyzing for a trade candidate I will look at a 100 day, 50 day, 20 day, 5 day, 3 day, then yesterdays and todays (5 min) chart. Looking at all the above charts takes maybe 2 mins, generally less. I enter and exit based on intraday 1 min - 3 min charts.

* I constantly and naturally read what is going an and will read (and guestimate) what will happen. An example would be when I see a resistance or support level, based on price action, what will happen if the resistance or support level is or is not broken. Just like constantly reading people at a poker table for tells. This immensely seams to help me. Lately even the one minute charts seems to really slow down to the speed of a five minute chart. This exercise is improving my accuracy in reading the price action.

* I will short or go long, but more longs then shorts so far. If I am unsure, I just pass on the trade.

* The position sizes I have taken so far have been between $3K to $13K. With most positions between $5K - $7K.

* As mentioned above mainly intaday and short term swing trading.

* I mainly focus on Nasdaq stocks that are between $1 and $20 a share. I like the less then $12 stocks the most. A $3 stock that moves .30 cents is 10%. Only trade stocks that are liquid (at least 2.5 million shares traded a day) and provide the volatility I want.

* Generally no more then two trades in play at a time. Although I am constantly looking for opportunities.

* The platform and charting package I use is Power E*trade PRO.

Anyways, thanks again and Happy Holidays!

Chris
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Old Jan 11, 2009, 6:18pm   #12
 
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Thank you for this post for how to trade with the trend..
What are your thoughts on how to spot a trend change?
Thank you
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Old Jan 14, 2009, 9:27am   #13
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I am very new to active trading, mostly swing trading stocks, and it strikes me how simple successful trading systems can be (should be?) and this article pretty much comes out and says it, "trading is simple." Perhaps people get it into their head that trading must be a terribly complex endeavor because there are so few who are good at it? I am beginning to think that the reason so few are good at it is because so few can master their emotions, either because they don't do enough work and practice, or because they simply don't have it in them. I wonder if I do, but I can pretty much guarantee that if I fail it will not be for a lack of study and practice as that is the one thing I can control. In any event, is trading mechanically/physically simple and emotionally/mentally difficult?
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Old Feb 2, 2009, 9:28am   #14
 
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excellent article but when do we exit,is it the reverse of the stochastic/cci
also what size stop would we use.
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Old Jul 1, 2009, 3:18am   #15
 
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I like the simplicity. I have read and studied for years and came to the conclusion that simple is more effective. Trading is not about getting "IT RIGHT" however a simple system that gives a 51% or greater is the way to success!
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