Suggestions for mastering speculation

This is a discussion on Suggestions for mastering speculation within the General Trading Chat forums, part of the Reception category; Jaydee, For f*ck's sake, new_trader is actually trying to tell you something. Don't be so stubborn. He's trying to help ...

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Old Oct 8, 2008, 9:07pm   #25
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Jaydee,

For f*ck's sake, new_trader is actually trying to tell you something. Don't be so stubborn. He's trying to help you and you're throwing it in his face with your pointless questions, you're asking the wrong questions and should just be listening . . .
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Old Oct 8, 2008, 10:16pm   #26
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Originally Posted by Joey25 View Post
Financial markets are often characterized by non-constant variance (heteroscedasticity), and tend also to be backward-looking in nature (autoregressive).

In the case of the indices, forward volatility is a function both of previous volatility and trend - i.e if the trend (or drift) in the time series is up, volatility tends to fall.

eg of how historic volatility can be useful...re sp cash over the last 3 days we've had lower lows, red candles and the range (ie the volatility element) has contracted. this has occurred 17 times since 1998, in all trades we have bounced in the next 24 hrs (ie before 2115 tomorrow)....without giving everything away, im now long biased, expecting to hit 992-97 min tomorrow . dyor, fwiw, this is data mined, im also hedge with deep otm puts, so risk reduced in case of meltdown
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Old Oct 8, 2008, 11:01pm   #27
 
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Originally Posted by temptrader View Post
Jaydee,

For f*ck's sake, new_trader is actually trying to tell you something. Don't be so stubborn. He's trying to help you and you're throwing it in his face with your pointless questions, you're asking the wrong questions and should just be listening . . .
Oh come on, I wasn't throwing anything in his face or looking for help. I simply wanted to get his opinion on how he would base his stop in the long term and if a stop is purely down to ability. I was looking for something a little more tangible and to the point than what he wrote, that's all.

He disagreed with the volatility idea Timsk put forward and then said volatility had nothing to do with his trading - he uses a 1.25 point stop regardless. I was curious how he thought and have been asking questions (sorry you didn't like them) which seemed very reasonable for me to get an understanding of how he approached things. I wanted to know if his 1.25 point stop would be set for a longer term trade for example.

All he was saying was effectively 'I have a stop based on my experience' which tells me nothing. My stops are based on my experience too, but I can tell you almost exactly how they work for me and I can tell you how I'll place them on trades across multiple time periods. Based on this, my line of questioning doesn't seem all that unreasonable really.

Sorry it riled you so much that you felt you had to get involved.
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Old Oct 8, 2008, 11:10pm   #28
 
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I don't think either of you have an argument with one another, you're just talking at cross purposes.

Have a w...
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Old Oct 8, 2008, 11:30pm   #29
 
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Originally Posted by Jaydee View Post
Oh come on, I wasn't throwing anything in his face or looking for help. I simply wanted to get his opinion on how he would base his stop in the long term and if a stop is purely down to ability. I was looking for something a little more tangible and to the point than what he wrote, that's all.

He disagreed with the volatility idea Timsk put forward and then said volatility had nothing to do with his trading - he uses a 1.25 point stop regardless. I was curious how he thought and have been asking questions (sorry you didn't like them) which seemed very reasonable for me to get an understanding of how he approached things. I wanted to know if his 1.25 point stop would be set for a longer term trade for example.

All he was saying was effectively 'I have a stop based on my experience' which tells me nothing. My stops are based on my experience too, but I can tell you almost exactly how they work for me and I can tell you how I'll place them on trades across multiple time periods. Based on this, my line of questioning doesn't seem all that unreasonable really.

Sorry it riled you so much that you felt you had to get involved.
No, you still don't get it. I said the 'stop' is a function of proficiency, not time, resistance, support, pivot points etc...it is not a mechanical issue, at all. You persist in getting some sort of concrete, tangible answer which doesn't exist. What will it take to make you understand what is meant by proficiency? I use a 1.25 point stop now. I used to use a much larger stop. Nothing has changed other than my ability to judge my entry point better. What more do you want?

I also didn't say volatility has nothing to do with my trading. I am saying it shouldn't have anything to do with anyoneís trading. If you are proficient you will be efficient. If you are efficient you trade with close stops because your trades move immediately in your favour after entry and almost never put your stop at risk. Is this making it clearer? If you can only do this using wide stops, then you should endeavour to improve your timing. If you donít want to or donít feel the need to, then donít. But donít say itís function of volatility because it is not.

The art of speculation is recognising what has occurred and as a consequence, what will occur. It is knowing what to expect and then acting accordingly with coolness and precision. It is not taking guesses and adjusting stop size to account for 'volatility'. Like I said, cause and effect, action and reaction. Either you understand or you don't.
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Old Oct 8, 2008, 11:31pm   #30
 
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Originally Posted by arabianights View Post
I don't think either of you have an argument with one another, you're just talking at cross purposes.

Have a w...

Has it helped your trading?
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Old Oct 8, 2008, 11:40pm   #31
 
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9A. Vary the size of the position (and the placing of your stop) based on the volatility of the instrument being traded. Using ATR is as good a means as any for evaluating volatility and appropriate position size, IMO.
Spot on and well said,,

Many traders look at historical levels such as support and resistance , cycle as an indication of future performance and there is no reason why volatility should be any different and hence your ATR comment is spot on specially for novice traders,,

For more seasoned traders who are into perhaps more mathematical estimation of future volatility they can look into GARCH model .

Foundation of TA is based on deriving forward looking analysis based on historical evidence,,, Hence ATR can be a simple and reliable start for pos sizing

I be talking about the GARCH model in my next seminar for those who are interested in more advanced and mathematical side of the trading which is only suitable for fast PC execution of the model and hence better estimation of projected volatility

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Old Oct 8, 2008, 11:52pm   #32
 
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Yes, ATR....makes you wonder how traders can get so messed up in market like we've experienced the last few weeks. I suppose ATR works when it does and doesn't work when it doesn't. Just trade the days when it works and avoid the days when it doesn't and you will make millions.
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