Trading Plan

This is a discussion on Trading Plan within the Trading Journals forums, part of the Reception category; Originally Posted by Brumby My question is do you always have a reason identified for the trade in determining your ...

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Old Oct 8, 2017, 3:25pm   #17
 
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Originally Posted by Brumby View Post
My question is do you always have a reason identified for the trade in determining your trade set up? If you do, I would be interested in understanding the thought process you use leading to your trade selection decision. Do you document your thought process into your trade plan?
Yes, absolutely, the core of my system is based on the a fundamental observation I have made + years and years of back testing data to prove it (covering few market cycles) and I am confident it will work as long as people are trading the market, e.g. everything is based on psychology: fear and greed...

One day if we have AI system - and I am not talking about the current rule based and other systems programed my real people, but a real AI driven and build trading system, it might not work anymore or who knows, maybe the AI would be as greedy and fearful as us humans, (which will not be a good thing for the humanity, but this is another topic for discussion)...

So maybe I'll know when the singularity occurred, based on my trading system stop working :-)
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"If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway.

My number 1 trading rule: EDUCATE YOURSELF!

Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Oct 8, 2017, 7:54pm   #18
 
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Hi Kaeso, first let me state I am very paranoid when it comes to computer systems ( occupational hazard - leading a team in the security/systems space), so I would not trust and put my trading system into off the shelf trading providers, most of them are startup (loosing money) companies with hedge funds as primary investors, so even though they state that they do not look into their clients trading systems, there is no verification system, audited by 3rd party, so it takes only one disgruntled employee to get your winning system exposed... not to mention hackers, as Google said in a statement, there are only 2 types of companies: those that were hacked and those that don't know it yet... If one day I decide to move to the dark side, those would be my primary targets and would be much easier to get hacked that a multi billion hedge fund for example and this would be the perfect crime, just copy the winning systems - e.g. nothing to steal or to ransom...

What I am using is the god old python (+ APIs) - had to learn it, which was a bummer, since I am not a developer, but if I can do it (being as lazy, as I am), every one can and lets face it computer programing is the 21st century literacy, so everyone should know how to do it and I am sure you'll find portions of your trading you can automate, like stock screeners, alerts, position sizing, etc.

I am running everything on redundant servers "in the cloud", so I don't have to to even have internet connection, which is great when I go to my favorite spots in Cuba or travel in Europe, even when I go fishing around the corner, the feeling is great, when I get notifications on my phone about trades making money...

That's why I am advocating the next logical step after having a systematic trading plan - AUTOMATE and you'll make your life much easier and enjoyable and you can do that until you are either dead or senile and the good part is you can train and live it to your children after...

Hope this helps...
oh i see this sounds great - you are living the dream! its interesting to learn about your setup thanks. if i find something i can to automate ill look into it but i want to continue what im doing for now and keep developing.
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Old Oct 8, 2017, 9:11pm   #19
 
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oh i see this sounds great - you are living the dream! its interesting to learn about your setup thanks. if i find something i can to automate ill look into it but i want to continue what im doing for now and keep developing.
Not yet, but in a few years when the kids are out of the house, the house is sold and I am on my dream boat sailing the world, then we can say I am living the dream... Cheers!
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"If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway.

My number 1 trading rule: EDUCATE YOURSELF!

Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Oct 9, 2017, 9:20am   #20
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Originally Posted by Quantt View Post
Yes, absolutely, the core of my system is based on the a fundamental observation I have made + years and years of back testing data to prove it (covering few market cycles) and I am confident it will work as long as people are trading the market, e.g. everything is based on psychology: fear and greed...
Back in 2005, I paid $5000 for a mechanical system that basically trades fear and greed as measured by extended RSI readings. The whole mechanical system was based on more than 10 years of research data. Essentially the money was for the research data on the universe of US SP500 and Nasdaq stocks. I traded it briefly and abandoned it primarily because it requires no protective stop for it to deliver the expected results and also the trading hours were just in conflict with mine in Australia. The premise of the system was for a reversion to mean. Although the research period and population size was extensive, I don't think it caters for a black swan event. No research data ever does.
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Old Oct 9, 2017, 9:26am   #21
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Originally Posted by barjon View Post
If you don't have a reason you're probably relying on luck or very clever money management, so it's probably better to have it identified.
I completely agree with your comments that there needs to be one.

Interestingly 99 % of trade ideas posted on this forum don't have a trade rationale. Is my observation too unreasonable or traders just don't care?
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Old Oct 9, 2017, 1:06pm   #22
 
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Originally Posted by Brumby View Post
Interestingly 99 % of trade ideas posted on this forum don't have a trade rationale. Is my observation too unreasonable or traders just don't care?
If one believes that the market is random, why bother with a trading plan?
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Old Oct 9, 2017, 2:28pm   #23
 
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Originally Posted by Brumby View Post
Back in 2005, I paid $5000 for a mechanical system that basically trades fear and greed as measured by extended RSI readings. The whole mechanical system was based on more than 10 years of research data. Essentially the money was for the research data on the universe of US SP500 and Nasdaq stocks. I traded it briefly and abandoned it primarily because it requires no protective stop for it to deliver the expected results and also the trading hours were just in conflict with mine in Australia. The premise of the system was for a reversion to mean. Although the research period and population size was extensive, I don't think it caters for a black swan event. No research data ever does.
Someone selling a system should have been the red flag, working system is the quintessential lifestyle business with no customers, no employees and no investors and location independent... so I am yet to meet a sane person selling a good system...

For the "black swans", it always matters how "black" is the swan isn't it? For example if the market opens tomorrow let's 50-60% down, I am going to be OK and can even make money, but if the market don't open anymore, I don't think making money will be the problem... in this case you'll need good friends and a lots of guns to hunter/gather whatever you need to survive...
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"If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway.

My number 1 trading rule: EDUCATE YOURSELF!

Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Oct 9, 2017, 3:06pm   #24
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Someone selling a system should have been the red flag, working system is the quintessential lifestyle business with no customers, no employees and no investors and location independent... so I am yet to meet a sane person selling a good system...

For the "black swans", it always matters how "black" is the swan isn't it? For example if the market opens tomorrow let's 50-60% down, I am going to be OK and can even make money, but if the market don't open anymore, I don't think making money will be the problem... in this case you'll need good friends and a lots of guns to hunter/gather whatever you need to survive...
discipline vs. skill/system accuracy
discipline wins hands down every time. You get over ambitious in the beginning then you realize you're swimming with sharks. I think that it's wise that we devote more time to risk management and how to increase position size week by week and less time on "my system is this accurate".
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