Suggestions for mastering speculation

Jaydee · Oct 8, 2008, 7:04pm

Quote:

Originally Posted by new_trader

I also didn't say volatility has nothing to do with my trading. I am saying it shouldn't have anything to do with anyone’s 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 don’t want to or don’t feel the need to, then don’t. But don’t say it’s function of volatility because it is not.

What I get is that you are talking about a particular type of trading where the market moves in a favourable direction as soon as you enter. In such a situation, you can have a very tight stop - I get that.

However, I can't see how you can say no trader should even consider volatility. With increased volatility, the margin for error becomes much larger no matter how good at entries you are. Therefore, you risk being stopped out all the time and not making anything. It's not unusual for a market to tip the balance one way and then whipsaw at the next moment - the DAX springs to mind.

I'm glad your method works for you and I'm not putting it down but I think you are wrong to say ALL traders should ignore volatility and that by including it a trader has a weaker technique than yourself or isn't addressing the important idea of timing. Your style of trading seems to be all about getting as many winners as possible and tiny risk - that's fine, but there are some styles which don't require such precision and still do very well.

I don't guess which way the market goes. Like you I have rules and a setup that I follow which gives me a good percentage chance in the direction I choose - it's just a favourable possibility though, nothing more. I feel you are almost saying that if a trader had perfect timing, he would never be stopped out and always get 100% winners. That is impossible as there is always an element of chance involved with any trade.

leovirgo · Oct 8, 2008, 7:12pm

Quote:

Originally Posted by new_trader

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 anyone’s 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 don’t want to or don’t feel the need to, then don’t. But don’t say it’s 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.

I tried to go Long INDU with 20pt STOP. Target is at least 200pts. 5minute ATR, today, was at least 60pts. So, theoretically, I should use Stop Loss 2.5xATR= 150pts. First time, it was stopped out. Second time, it was successful. I knew it should be successful in 2 attempts. I used perfect 1minute entries to do that. So my expected R:R is 200/ (2x20) = 5.

For pure ATR based calculation, it would be 200/150 = 1.3

It means, an experienced trader can take better R:R trades with minimal risk. That's how I understand about what you've been trying to talk about. does it make sense?

Grey1 · Oct 8, 2008, 7:20pm

Quote:

Originally Posted by new_trader

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.

Your comments are non technical and irrelevant. Understanding volatility is crucial in risk assessment and hence directly correlated to pos sizing,,,
Personal un justified views such as ATR works when it does and does not work when it does not is not a type of defence that one should put forward in acceptance or denial of theoretical concepts specially when it comes to volatility..

If you feel pos sizing and volatility are not a measure of risk analysis please refer me to some theoretical papers so I can update my knowledge,

Grey1

Joey25 · Oct 9, 2008, 3:48am

Quote:

Originally Posted by new_trader

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 anyone’s 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 don’t want to or don’t feel the need to, then don’t. But don’t say it’s 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.

Unless I'm missing something, all you've done is deduce that a stop of 1.25 will suffice for winners of 1pt or less. Of course volatility seems irrelevant for this type of "micro-scalping".

http://www.trade2win.com/boards/gene...ad-week-2.html

All credit to you for posting those results, new_trader, and I'm sure in a prop environment you would do very well, but don't make it out to be something it isn't.

Joey

counter_violent · Oct 9, 2008, 3:54am

Quote:

Originally Posted by new_trader

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 anyone’s 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 don’t want to or don’t feel the need to, then don’t. But don’t say it’s 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.

Have you set a date yet to go live ?

new_trader · Oct 9, 2008, 4:17am

Quote:

Originally Posted by Jaydee

I don't guess which way the market goes. Like you I have rules and a setup that I follow which gives me a good percentage chance in the direction I choose - it's just a favourable possibility though, nothing more. I feel you are almost saying that if a trader had perfect timing, he would never be stopped out and always get 100% winners. That is impossible as there is always an element of chance involved with any trade.

No, I am not saying a trader will always get 100% winners. There is always the chance of misjudgement and this is why a trader must use tight stops. Capital preservation is paramount. As the trader progresses and makes new discoveries and has new realisations they will modify their behaviour and the result will be their stops are being hit less often and their entries are improving and they are becomming profitable. This is irrespective of ‘market conditions’ because the trader becomes aware of what is what and what is not. Simple.

jm99 · Oct 9, 2008, 4:19am

Quote:

Originally Posted by jm99

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

fwiw, targets hit.

grey - spot on

new_trader · Oct 9, 2008, 4:23am

Quote:

Originally Posted by counter_violent

Have you set a date yet to go live ?

Do you always make spurious inane comments?

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