Is There a Strategy or System that I should Use and where Can I Find it?

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Old Nov 14, 2013, 4:37pm   #25
 
Tyger's Avatar
Joined Dec 2003
There are thousands of websites and companies offering trading systems with seemingly fantastic profit opportunities. None of these are real. For two reasons:

1). If you discovered how to make geese lay golden eggs, would you really tell anyone?

2). The market is, in mathematical terms, a Complex Adaptive System (CAS) (see Wiki) which means that if anyone starts making excessive profits then the market will adapt. In a nutshell, if you find that buying IBM at the open consistently makes profit, then before long the people from whom you bought the shares will stop selling them to you because they consistently make a loss.

Thus the only way ahead is:

Option 1. Insider knowledge/other illegal means

Option 2. Practice discretionary/intuitive trading until you develop sufficient expertise to be able to compete (est 10,000 – 15,000 hours work – see Matthew Syed’s book, Bounce). I actually think it would be quicker to become a golf pro or tennis pro.

Option 3. Develop your own trading ideas and test them (using Excel). Creativity and original thought are already there as part of the brain's toolbox. Using these tools you can compete without getting a science PhD or spending 15,000 hours watching charts.

So what should you do?

1. Think of a novel idea.

2. Test it to see if it works (I use Excel to test trading ideas/strategies). If it doesn't, go back to step 1.

3. Paper trade it to check you haven’t made a mistake.

4. Start live trading small amounts to check it works in real life.

5. Gradually increase your position size.

6. Provided that your position size remains a tiny portion of total market volume, then you can avoid the feedback loops inherent in Complex Adaptive Systems (see next page). So, keep it small – trade multiple stocks/futures (which will provide some robustness anyway) and don’t tell anyone else what you’re doing!
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Old Nov 14, 2013, 4:45pm   #26
 
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Joined Nov 2001
sound advice often falls on deaf ears on T2W

Quote:
Originally Posted by Tyger View Post
There are thousands of websites and companies offering trading systems with seemingly fantastic profit opportunities. None of these are real. For two reasons:

1). If you discovered how to make geese lay golden eggs, would you really tell anyone?

2). The market is, in mathematical terms, a Complex Adaptive System (CAS) (see Wiki) which means that if anyone starts making excessive profits then the market will adapt. In a nutshell, if you find that buying IBM at the open consistently makes profit, then before long the people from whom you bought the shares will stop selling them to you because they consistently make a loss.

Thus the only way ahead is:

Option 1. Insider knowledge/other illegal means

Option 2. Practice discretionary/intuitive trading until you develop sufficient expertise to be able to compete (est 10,000 – 15,000 hours work – see Matthew Syed’s book, Bounce). I actually think it would be quicker to become a golf pro or tennis pro.

Option 3. Develop your own trading ideas and test them (using Excel). Creativity and original thought are already there as part of the brain's toolbox. Using these tools you can compete without getting a science PhD or spending 15,000 hours watching charts.

So what should you do?

1. Think of a novel idea.

2. Test it to see if it works (I use Excel to test trading ideas/strategies). If it doesn't, go back to step 1.

3. Paper trade it to check you haven’t made a mistake.

4. Start live trading small amounts to check it works in real life.

5. Gradually increase your position size.

6. Provided that your position size remains a tiny portion of total market volume, then you can avoid the feedback loops inherent in Complex Adaptive Systems (see next page). So, keep it small – trade multiple stocks/futures (which will provide some robustness anyway) and don’t tell anyone else what you’re doing!
Bet the usual gang of pudding heads, seeking wealth seeking opportunities for sale, will ignore your sound advice. But sound advice nonetheless and kudos to you for trying to keep the stupid from the jaws of sharks,
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neil
....Indicators show the past. Price Action "Indicates" the future.
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Old Mar 26, 2015, 7:50am   #27
Joined Mar 2015
Traders often look for the holy grail, there isn't one!!

The problem traders face is that they do not realise it is themselves to blame.

There are many strategies that are profitable but it is often the user trying to implement them that is the problem.
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Old May 24, 2015, 11:50am   #28
Joined May 2013
There are many strategies that work well in some markets. Some good websites out there that include articles describing some of them and also offering free code. Examples:

http://www.systemtradersuccess.com/

http://www.quantocracy.com/
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Old Jul 10, 2015, 9:07am   #29
Joined Aug 2013
Of course you can find strategies searching in web. But first you need to test them in demo account, and choose which one is better for you.
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Old Jul 10, 2015, 1:27pm   #30
 
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Joined Jul 2015
This question reminds me of one that I've come across so many times:

"Which style of martial arts is the best?"

Well, my usual response to that question would be "What kind of person are you?"

Trading is an art in its own right and there is no "best" way to do it, you simply have to find a way that makes money for you based on your ability to read the market, spot opportunities and hold your nerve once you place that trade.

I've been trading professionally for almost two years now and have tried many different approaches, some of which have been more successful than others. This game isn't easy by any means and a lot of traders make the mistake of focusing only on fundamentals or technicals. That's all good and well as a starting point, but neither will make you a profitable trader. Sentiment is also a huge factor in this game because humans are by large irrational beings, and we all know how quickly sentiment can change especially when big fundamental or political issues play a role (look at how Greece has been holding the world markets hostage even though it's only 0.5% of the global economy) . And finally, you need to have a good understanding of who you are as a person in order to adjust your trading style according to your personality and willingness to take risk.

One of the big things that I still with struggle in my trading career is to act upon my gut feelings because I often try to rationalize why I want to do a trade, and more often than not it has caused me to either lose money or miss out on a trade. Never underestimate the importance of instincts in trading, but do keep in mind that your instincts only become more accurate after you have traded for a while. So keep that in mind as you progress in your career/journey.

Use YouTube and read financial sites as well as forums to learn from the pros and test all the techniques and tips they have to offer, but above all else you need to focus on what works best for YOU.

Apply the principle of "adopt what is useful, reject what is useless, add what is uniquely yours."
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Old Jul 10, 2015, 2:19pm   #31
Joined Feb 2002
Sensible advice Adrian. Care to share what's your style, favourite strategies, most useful sources?

Anyway, I feel bad that no one has ever asked me anything about martial arts.
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Old Jul 10, 2015, 2:27pm   #32
 
3 Posts
Joined Jul 2015
Hi there,

No problem, that's why I'm here.

Hahaha, I like using martial arts metaphors as now casual practitioner of Brazilian Jiu-Jitsu and I think there are quite a few similarities with trading itself.

Personally, I consider myself to be a position trader, though I do day trading every now and again. The only problem I have with day trading is that the algos are so rife that they more often than not screw you over. I have made most of my money by simply taking a view on a stock and either take profit at selected resistance levels or add more to my position at support levels. Usually I do this by buying or selling in tranches.

It's not a revolutionary approach nor what most people would call a typical pearl of earth shattering wisdom, but it has worked for me so far and I find that's what I stick to. Personally I don't have a volatile personality that can cope with wild up/down swings of day trading, I leave that to the algos and the people who feel they are happy to be near-constant nervous wrecks. Each to their own as they say.

As for sources, once again I have a simple approach. I look for quality stocks in sectors that are experiencing good growth as well as overall positive sentiment, pick my levels where to buy and just ride the wave for a while until I feel it's time to take profit. So I look at a few fundamentals such as P/E ratios (both FWD and TTM), cash ratios, YOY growth in sales and profits (Personally I avoid the analysis paralysis that so many people fall into) and based on that data I look at charts to see where the best levels are to buy at.
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