Bottom Up or Top Down?

This is a discussion on Bottom Up or Top Down? within the General Trading Chat forums, part of the Reception category; Originally Posted by Shakone Basically what this says to me is that if you don't have an edge on entry ...

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Old Apr 7, 2012, 2:19pm   #29
 
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Re: Bottom Up or Top Down?

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Originally Posted by Shakone View Post
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.
Good point but I think you are thinking too much.... Or rather, being too literal...

It wasn't a case of "set your target and stop and don't under any circumstances tighten either of them".

It's about - giving yourself a goal and a stop of say 6 ticks and trading the ebb & flow. Of COURSE you can get out early. It would be a bit daft to have an exercise where you tune yourself into the market and don't react when you are tuned into the fact it's going against.

It's about getting into the flow of the market, getting into the way it moves, of course if you get in and it moves against you, you need to get out. The skill of course, is to recognise 'moving against' and 'just wiggling about'.
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I cannot see., however why we should expect to find a "system" which will work in the stock market; surely the possibilities of profits for the student justify the time and effort required to learn market interpretation.

Humphrey B Neill - 1931
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Old Apr 7, 2012, 2:22pm   #30
 
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Re: Bottom Up or Top Down?

DionysusToast started this thread Finding flow | Psychology Today

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AGINE THAT YOU ARE SKIING DOWN A SLOPE and your full attention is focused on the movements of your body and your full attention is focused on the movements of your body, the position of the skis, the air whistling past your face, and the snow-shrouded trees running by. There is no room in your awareness for conflicts or contradictions; you know that a distracting thought or emotion might get you buried face down in the snow. The run is so perfect that you want it to last forever.

If skiing does not mean much to you, this complete immersion in an experience could occur while you are singing in a choir, dancing, playing bridge, or reading a good book. If you love your job, it could happen during a complicated surgical operation or a close business deal. It may occur in a social interaction, when talking with a good friend, or while playing with a baby. Moments such as these provide flashes of intense living against the dull background of everyday life.

These exceptional moments are what I have called "flow" experiences. The metaphor of flow is one that many people have used to describe the sense of effortless action they feel in moments that stand out as the best in their lives. Athletes refer to it as "being in the zone," religious mystics as being in "ecstasy," artists and musicians as "aesthetic rapture."

It is the full involvement of flow, rather than happiness, that makes for excellence in life. We can be happy experiencing the passive pleasure of a rested body, warm sunshine, or the contentment of a serene relationship, but this kind of happiness is dependent on favorable external circumstances. The happiness that follows flow is of our own making, and it leads to increasing complexity and growth in consciousness.
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I cannot see., however why we should expect to find a "system" which will work in the stock market; surely the possibilities of profits for the student justify the time and effort required to learn market interpretation.

Humphrey B Neill - 1931
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Old Apr 7, 2012, 3:50pm   #31
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Re: Bottom Up or Top Down?

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Originally Posted by MoonRocket View Post
Of course the entry is important.
My point is.......When a trader (particularly myself ) has become extremely focused on the entry he has already tilted his psychology into a certain direction.
How many times even after all your focus there was actually a better price or time to enter....almost every time.
But be assured VielGeld, I take my losses quicker then you, going by a couple of live trades of yours that I noted.
I try to find the best entry for the morning, afternoon or day if I can. What is that? The high or low. because, then, the risk can be just beyond that and the rewards can be very good.

However, I find that high or low may involve several entries and so it is essential to be very disciplined on the exits. If you think that the high/low is x, then any point beyond that means that the trade has not gone as planned and the reason for being in it is no longer valid. It is very difficult not to wait those extra few points but that is were discipline comes in. The trade has gone wrong.

You are right on the point that you can get in at any time but where should the stop be and is it at an acceptable risk?
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Old Apr 7, 2012, 3:56pm   #32
 
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Re: Bottom Up or Top Down?

Quote:
Originally Posted by DionysusToast View Post
Good point but I think you are thinking too much.... Or rather, being too literal...

It wasn't a case of "set your target and stop and don't under any circumstances tighten either of them".

It's about - giving yourself a goal and a stop of say 6 ticks and trading the ebb & flow. Of COURSE you can get out early. It would be a bit daft to have an exercise where you tune yourself into the market and don't react when you are tuned into the fact it's going against.

It's about getting into the flow of the market, getting into the way it moves, of course if you get in and it moves against you, you need to get out. The skill of course, is to recognise 'moving against' and 'just wiggling about'.

You must be right, I am being too literal. Because now it sounds like the exercise is to take an entry with a direction based on your understanding of the flow of the market and - with certain predefined risk limits - manage stop and target. This now sounds like normal trading to me, so I've obviously missed the point.

I think the 'always be in the market' exercise is a good one.
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Old Apr 7, 2012, 5:09pm   #33
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Originally Posted by DionysusToast View Post
Funny - that topic came up in the conversation. To some extent I agree with what Mr Hare claims.

Get in on a coin toss & manage it.

Now - we didn't discuss tossing but we did discuss the way your focus entirely changes once you are in a trade.

In short "I wish I could read the action when I'm not in a trade as well as I can when I'm in a trade"

There is something about being in a trade that gives you a very accurate feel for whether it will work out or not. Now, whether you act on that is a different matter. I just can't get the same feel for the market without having any money on.
Yeah that makes sense, I'd say the same thing applies with an algo to a certain extent.
By that I mean unrealised profit / loss provides an easier framework to base trade management programming on.
Its a solid reference point.
Trying it to base trade management and exit off price alone is harder to program
(and makes no sense anyway), thats also why the entry has a random element.

I don't really think for a minute that anyone who trades randomly allows every
parameter to be truly random.
Time is a prime example, a random entry at 0430 GMT for instance doesn't make much sense.
My entries are really pseudo random, some parameters are totally devoid of randomness.

As for ninja, been a while since I looked at the 3rd party add ons...grown a fair bit:
NinjaTrader stock, futures and forex charting software and online trading platform. NinjaTrader Partners.

Quote:
Originally Posted by VielGeld View Post
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.
Completely agree, as mike said, entry, trade management and exit are all equally
important in short term trades or scalping.

Random entries can still work, obviously they will not be as efficient and are more suited to longer trade duration.
That also means the focus is firmly on managing the trade.
Thats the real purpose of the coin flip experiment in general,
and why its mentioned in that prop trader exercise list.

A coin flip entry is basically a trade management exercise.
It can also be the basis in part for an algo for the reasons I mentioned above.
When you consider typical strike rates of 40-60% (i.e. coinflip territory) you have
to wonder if that is any better than random anyway...(hardcore tape scalpers aside before anyone mentions it )
The real reason for discretionary trade being more efficient is not strike rate,
its trade management.

Last edited by Liquid validity; Apr 7, 2012 at 5:17pm.
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Old Apr 7, 2012, 5:32pm   #34
 
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Re: Bottom Up or Top Down?

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Originally Posted by Splitlink View Post
No, neither can I, no matter how small the stake. It sharpens the senses!

Mmmm, sounds a bit emotional. Not many people can keep themselves totally together under pressure. I think retailers stress themselves out, waiting for action to happen. Makes me feel all edgy just thinking about it.
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Old Apr 7, 2012, 10:30pm   #35
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Re: Bottom Up or Top Down?

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Originally Posted by DionysusToast View Post
YES, YES, YES. This is it:

"The best trades are made without thinking, when you surpass the concepts, the knowledge and you reach the subconscious, where creativity and instincts lays and connects you to Greater Energy. Once you there you flow, there is not contraction but only expansion to enter the doctrine of vibration. Yes, trading is very much knowing yourself and the realisation of one helps the other."

But you cannot get in the "flow" without a constant search of "yourself".
Yoga, meditation, breathing exercise do help, but more importantly the issue of "no mind versus heart".
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