Bottom Up or Top Down?

Liquid validity · Apr 6, 2012, 11:11am

Quote:

Originally Posted by DionysusToast

Good link....

I like this bit...

I agree.

Quote:

Try scalping off of the order flow without watching the charts at all. Turn your charts off and try to see support and resistance on the ladder alone.

Many prop firms ask new recruits to initially start to trade without access to any charts; that is to say no indicators, no trend lines, no patterns and, as a result, no temptation to seek the technical analysis holy grail that does not exist. You need to be comfortable executing trades with nothing more than the market depth at your disposal. It is this ability, developed as a result of many hours of intelligent observation and interaction with the market, which actually enables you to employ technical analysis effectively! Technical analysis is a decision support tool for traders. The charts themselves represent a very small percentage of the total, available information upon which elite traders make their decisions.

What do you think about this bit?

Quote:

6. On a real-time chart flip a coin to take a short or long entry when the latest bar is half formed (eg: half an hour into a one hour bar or five minutes into a ten minute bar etc etc). Once you’re in, manage the trade to gain the best result over the next 10 bars.

This exercise gives you with a chart-full of info, but takes away any entry consideration making you focus on the relatively short term action from a given point in the context of managing what you’ve got to best advantage (or least dis-advantage) utilising the info you have in the chart.

BTW, I still don't know why you don't just sell your software outright to ninja,
or negotiate a royalty deal.
Correct me if I'm wrong, but 3rd party plugins are pretty rare in this area aren't they?
Could be putting people off with the machine ID transfer problem if you decide to knock it on the head?

Shakone · Apr 6, 2012, 12:11pm

Quote:

Originally Posted by DionysusToast

I've been chatting recently to a prop trader that has an interesting philosophy when it comes to day trading.

Basically, it is his view that unless you can just sit down and trade in and out of a market with a co-equal stop & target, just based on the rhythm of that market - you might as well forget adding in anything else to your day trading strategy.

Now - he's not saying that you should be able to make a ton of money doing this. On a market like the ES for instance, take 6 tick target and stop and trade in and out based on the flow of the market. If you can't make a profit doing that, then your chances of day trading with the addition of other analysis techniques are slim.

I hear other people saying a top down approach is better, to refine those higher level methods of analysis before looking at the lower level ones.

Any thoughts?

Basically what this says to me is that if you don't have an edge on entry that's sufficient to overcome costs and spread, then you won't make it. I disagree with this. There are two parts to the trade, the entry and then the exit. If you have a good edge on entry, you could make money with fixed stop and target same size, like the prop trader suggests. If you have a good edge on exit then you can make money from a random entry system. If you have both, then you can make a lot of money.

However, I suppose he has a point, in that if you can't find an edge with entry, you're unlikely to find one with exit, since that's harder imo.

robster970 · Apr 6, 2012, 12:27pm

Quote:

Originally Posted by DionysusToast

Are you saying that throwing it all in the pot right from the start is the best approach?

I think so, Lord Toast although I would probably err on the bottom first if I was doing it all over again.

Mike Kshemaraja · Apr 6, 2012, 7:15pm

Quote:

Originally Posted by Shakone

Basically what this says to me is that if you don't have an edge on entry that's sufficient to overcome costs and spread, then you won't make it. I disagree with this. There are two parts to the trade, the entry and then the exit. If you have a good edge on entry, you could make money with fixed stop and target same size, like the prop trader suggests. If you have a good edge on exit then you can make money from a random entry system. If you have both, then you can make a lot of money.

However, I suppose he has a point, in that if you can't find an edge with entry, you're unlikely to find one with exit, since that's harder imo.

Well said.

MoonRocket · Apr 6, 2012, 8:01pm

A very successful trader said the exit was more crucial then the entry.
I think he maybe right although I myself get very focused on entry and then grab the profits when available.
I'm slowly coming around because I realise if too much focus is on the entry, it is harder to except that the trade could be going wrong.

Mike Kshemaraja · Apr 6, 2012, 8:24pm

Quote:

Originally Posted by MoonRocket

A very successful trader said the exit was more crucial then the entry.
I think he maybe right although I myself get very focused on entry and then grab the profits when available.
I'm slowly coming around because I realise if too much focus is on the entry, it is harder to except that the trade could be going wrong.

Well, excepting that the trade could be wrong is very important in my view. Is part of the development and maturity of the trader. The outcome of the last trade is not important but the overall one is to be taken in much consideration. We take our trade if is a valid one that is part of our plan, if the trade goes wrong, that is good if taken with the knowledge that losing is part of the business.

The problem arises when we take an invalid trade because our emotions kicks in (revenge, greed, fear,frustrations on so on) specially when that invalid trade turns to be a winner.

VielGeld · Apr 6, 2012, 9:24pm

To say that the entry is not important is pure bull, imo. Proper entry reduces risk.

It's once you've entered that the exit matters. Good entry = stay the course, bad entry = bail asap. But a good entry will always provide a better opportunity to minimize loss, and maximize profits.

Mike Kshemaraja · Apr 6, 2012, 9:31pm

Quote:

Originally Posted by VielGeld

To say that the entry is not important is pure bull, imo. Proper entry reduces risk.

It's once you've entered that the exit matters. Good entry = stay the course, bad entry = bail asap. But a good entry will always provide a better opportunity to minimize loss, and maximize profits.

Absolutely.

And I would like to add that entries are more important specially for scalper than longer span ones.

Apr 6, 2012, 8:01pm	#21
MoonRocket Senior Member Member Since Oct 2011 328 Posts	Re: Bottom Up or Top Down? A very successful trader said the exit was more crucial then the entry. I think he maybe right although I myself get very focused on entry and then grab the profits when available. I'm slowly coming around because I realise if too much focus is on the entry, it is harder to except that the trade could be going wrong. __________________ "Human beings are best understood as being risk-averse when making a decision that offers hope of a gain but risk-seeking when making a decision that will lead to a certain loss." - Daniel Kahneman "Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn." - Jesse Livermore

Apr 6, 2012, 9:24pm	#23
VielGeld Legendary Member Member Since Jul 2011 1,225 Posts	Re: Bottom Up or Top Down? To say that the entry is not important is pure bull, imo. Proper entry reduces risk. It's once you've entered that the exit matters. Good entry = stay the course, bad entry = bail asap. But a good entry will always provide a better opportunity to minimize loss, and maximize profits. __________________ To lose is human, to win is divine, to draw is an art. ~Tom Wiswell

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