Best Thread Firewalker's Journey: A path of discovery in search for enlightenment

[firewalker99]

You're breezing by all the prerequisites as if they are givens and wading back into the theoretical. What evidence do you have that "defining" your stoploss based on anything you've posted has any value?
Db

I have no evidence whatsoever, I was merely hypothesizing about what perhaps could be a way to do it. I'm listening to any suggestions or examples that have a proven track record. If you have any evidence that anything I've posted has no value at all, then don't hesitate to tell me if I'm wasting my time.

How would you set your target? What evidence would you have that you had set it properly? What's the probability of your setup? What, as far as that goes, is your setup?
In any even, shouldn't all of this be in First Steps or in your journal?

A while ago you said you didn't find any ways to calculate a target. My point of view was I used ATR. As for the journal part, I was only replying to the questions you stated, no problem if you'd rather see them elsewhere.

About all the maths, you asked why? Well, to gain confidence, to have something to rely on. To see what the longest losing streak could be so that when I take to step to realtime trading, the light goes on when I would detect something statistically signifcant.

 

[dbphoenix]

Yes, you are hypothesizing. And if you remain rooted there, then, yes, you are wasting your time unless and until you go beyond that to finding a setup, testing it, and so on. You aren't going to gain confidence by fiddling with formulas. You're going to do it by finding, defining, testing, and trading a setup.

Db

 

[firewalker99]

Yes, you are hypothesizing. And if you remain rooted there, then, yes, you are wasting your time unless and until you go beyond that to finding a setup, testing it, and so on. You aren't going to gain confidence by fiddling with formulas. You're going to do it by finding, defining, testing, and trading a setup.

Db

If I recall correctly, hypothesizing, testing and experimenting are some of the first stages in finding a setup following the "scientific method". This is exactly what I'm doing, not? I fail to see how I can answer your questions while I'm still searching for answers empirically. So let me ask you then what possible pathways are they I could walk or investigate finding a resolution to the following problems:

- How would you set your target? You yourself said you had not found any conclusive evidence of this or that strategy.

- What evidence would you have that you had set it properly? Only the results of the testing that would show a certain probability...?

- Would you have no contingency stops? What exactly do you mean by this, can you give an example?

- Would you make no changes to how you scale in or out? Have you found it useful to change or use scaling entries/exits depending on what happened in the past to your trades? I would say yes, if there's a possibility to enhance or refine your signal, but no if those changes were merely based on the result to your account size.

 

[dbphoenix]

If I recall correctly, hypothesizing, testing and experimenting are some of the first stages in finding a setup following the "scientific method". This is exactly what I'm doing, not? I fail to see how I can answer your questions while I'm still searching for answers empirically. So let me ask you then what possible pathways are they I could walk or investigate finding a resolution to the following problems:.

Yes, hypothesizing, testing, and experimenting are some of the first stages in finding a setup. But you aren't doing any of that. What you're doing is regurgitating what you've read about expectancy. Chatting on message boards about expectancy formulas has nothing to do with the task of detecting patterns.

- How would you set your target? You yourself said you had not found any conclusive evidence of this or that strategy.

It doesn't matter what I or anyone else does. All that matters is what you've found to contribute to a consistently profitable strategy through your own testing and your own trading.

- What evidence would you have that you had set it properly? Only the results of the testing that would show a certain probability...?.

The evidence would be a consistently profitable strategy, which you would create through testing and trading.

- Would you have no contingency stops? What exactly do you mean by this, can you give an example?.

It doesn't matter what I or anyone else does. All that matters is what you've found to contribute to a consistently profitable strategy through your own testing and your own trading.

- Would you make no changes to how you scale in or out? Have you found it useful to change or use scaling entries/exits depending on what happened in the past to your trades? I would say yes, if there's a possibility to enhance or refine your signal, but no if those changes were merely based on the result to your account size.

It doesn't matter what I or anyone else does. All that matters is what you've found to contribute to a consistently profitable strategy through your own testing and your own trading.

You're not going to get anywhere until you stop waiting around for somebody to tell you what to do and start the work. If you have absolutely no idea how to locate a pattern, try the First Steps forum. Or hire a mentor. But all of these "what would you do" questions are pointless.

 

[Grey1]

. Being satisfied with a win rate of 50% or less is usually a beginner's rationalization for being too lazy to find something better (experienced traders know what risk:reward really means*).

Db

*.

DB ,,

Firewalker is talking a lot of sence. Listen to what he says because his views are foundation of many many program trade's that I know of and not only is not a biggerner's rationalisation , it is a pro approach to trading ..

Firewalker May i invite you to our technical Trader Forum ( Home page/control panel ) as we have very high calibre traders there. I trade the market myself daily and post all MY P/L daily on that site directly from Broker's screen .

Just one point regarding expectancy ... you said ... apart from psychological side of trading there is no difference what so ever between 40-60 and 60-40 system .. You are spot on how ever the psychological side of trading nearly always kicks in when the trader's loss rate increases and traders cut their winning trades unless their strategy is 100 % coded. Even if the strategy was driven by 100 % piece of software a 40-60 system could result in massive drawdawns that the winning trade has to run for a LONGGGGGGGGGGGGG time to compensate the losses which would make the trade subject to more adverse NEWS( upgrade/down grade/geo political issues/macro economic projections ) ..Saying that , I KNOW mathematically you are correct. I myself developed few trading algorithms based on mathematics you refered to ..

IT IS HUMAN NATURE TO WANT TO WIN MORE TIMES THAN LOSE .. EVEN IF THE TOTAL WIN IS SMALLER COMPARE TO ONE TIME BIG WIN .. We are all human ....

Grey1

 

[Grey1]

As for a setup that occurs once a week and has an 80% expectancy with a reward of "only" five points, how is that inferior to the beginner who overtrades every day and watches his equity dribble away? Those five points, if played with size, will look pretty good.

Db

The above text should read " 80% win probability " and not "80 % expectancy "

Also , the rest of the above quotation supports what FIRE has been saying which negates all of your own argument.. Please correct me .. Or did ya mean some thing else

thanks

Grey1

 

[ymonly]

the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of my entries will be losers are u kidding me? if more than 80% win then guess how much stress is in the right now moment of mashing the mouse button...not as much.....i prefer over 90 for comfort .......and profit.....emini daytrading......if 50 % is okay then use the coin flip method.....just as good as 50 percent loser or winner.....6 trades per day and 1/2 will lose.......that is a grade of 50 means u r a failure or an expert trader with nerves of steel.....and those are few and far between, if that many.

 

[dbphoenix]

DB ,,

Firewalker is talking a lot of sence. Listen to what he says because his views are foundation of many many program trade's that I know of and not only is not a biggerner's rationalisation , it is a pro approach to trading ..

Grey, if you believe all of this, then I encourage you to take FW by the hand and teach him how to trade. You are very likely just what he needs.

Db

 

[ljyoung]

the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of my entries will be losers are u kidding me? if more than 80% win then guess how much stress is in the right now moment of mashing the mouse button...not as much.....i prefer over 90 for comfort .......and profit.....emini daytrading......if 50 % is okay then use the coin flip method.....just as good as 50 percent loser or winner.....6 trades per day and 1/2 will lose.......that is a grade of 50 means u r a failure or an expert trader with nerves of steel.....and those are few and far between, if that many.

The coin-flipping analogy makes no sense since the probability is the same each time (0.5W/0.5L) and one could have a rather long and nasty stretch of losses before the law of large numbers kicks in and things even out. Clearly what is of consequence, as everyone knows, is what one does with one's losers and equally as important is what one does with one's winners. To quote the Phantom of the Pits (I haven't the foggiest idea who this guy is, but IMO what he says makes sense):

1. In a losing game such as trading we shall start by assuming we are wrong until proven correct (We do not assume we are correct until proven wrong). Positions established must be reduced and/or removed unless or until the market proves the position to be correct.
2. Keep your losses quick and small.
3. Press your winners correctly without exception.

Easy to say - hard to do but if you don't do it you will blow up. The ego must be removed. It's not how often you make money (your %winners) but rather how much money you make. So if one can make lots of money with a "90% winners" system, cool. But it is entirely conceivable that someone could make just as much money with a "50% winners" system.

ljey

 

[dbphoenix]

So if one can make lots of money with a "90% winners" system, cool. But it is entirely conceivable that someone could make just as much money with a "50% winners" system.

Theoretically, yes. But practically is another matter.

But theory is so much easier to argue than application, and it's highly unlikely that the transition from the one to the other will ever be made, at least not here.

Too bad.

Db

 

[firewalker99]

the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of my entries will be losers are u kidding me? if more than 80% win then guess how much stress is in the right now moment of mashing the mouse button...not as much.....i prefer over 90 for comfort .......and profit.....emini daytrading......if 50 % is okay then use the coin flip method.....just as good as 50 percent loser or winner.....6 trades per day and 1/2 will lose.......that is a grade of 50 means u r a failure or an expert trader with nerves of steel.....and those are few and far between, if that many.

Like I said, and you're only confirming this, it's a question about being able to handle it emotionally... Not saying I could handle a 50% win system, but what are the odds of coming up with a 90% system where signals occur frequently enough to make a sustainable profit?

 

[Grey1]

the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of my entries will be losers are u kidding me? if more than 80% win then guess how much stress is in the right now moment of mashing the mouse button...not as much.....i prefer over 90 for comfort .......and profit.....emini daytrading......if 50 % is okay then use the coin flip method.....just as good as 50 percent loser or winner.....6 trades per day and 1/2 will lose.......that is a grade of 50 means u r a failure or an expert trader with nerves of steel.....and those are few and far between, if that many.

WHat we are saying is this..

A 80% win system with negative expectancy bankrupts traders
A 20 % win system with postive expectancy is the foundation of riches in stock market .

IT IS ALL ABOUT EXPECTANCY ..

you are how ever correct in bringing the emotions into it . Hence my own view is unless the LOW WIN rate strategy is driven by machine and not human then it is the way ahead( not diffiult to design such systems ) . TURTLE TRADING SYSTEM IS ONE OF THESE SYSTEMS. THEY ARE ALL TREND FOLLOWING.

What about a 80% system with POSTIVE expectancy ? These systems are extremley difficult to design but they can be done.. MY OWN VWAP ENGINE is one of them . My system has well over 80% win rate ( proven by real time trading and not back testting ) with postive expectancy which supports me emotionally with a long term profit.

grey1

 

[firewalker99]

ven if the strategy was driven by 100 % piece of software a 40-60 system could result in massive drawdawns that the winning trade has to run for a LONGGGGGGGGGGGGG time to compensate the losses which would make the trade subject to more adverse NEWS( upgrade/down grade/geo political issues/macro economic projections ) ..Saying that , I KNOW mathematically you are correct. I myself developed few trading algorithms based on mathematics you refered to ..

IT IS HUMAN NATURE TO WANT TO WIN MORE TIMES THAN LOSE .. EVEN IF THE TOTAL WIN IS SMALLER COMPARE TO ONE TIME BIG WIN .. We are all human ....

Grey1

Couldn't agree more. Maths are one thing, practical trading is another, taking into consideration the human nature, emotional and psychological aspects.

 

[firewalker99]

IT IS ALL ABOUT EXPECTANCY ..
grey1

I'm not usually a fan of quoting others to support my own views, but in this case I think Van Tharp is very applicable. If you've read his snowball metaphor you know what I'm talking about. Quote:

… your trading system should have a positive expectancy and you should understand what that means. The natural bias that most people have is to go for high probability systems with high reliability. We all are given this bias that you need to be right. We’re taught at school that 94 percent or better is an A and 70 or below is failure. Nothing below 70 is acceptable. Everyone is looking for high reliability entry systems, but its expectancy that is the key. And the real key to expectancy is how you get out of the markets not how you get in. How you take profits and how you get out of a bad position to protect your assets. The expectancy is really the amount you’ll make on the average per dollar risked.


And just for the record:
Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)

 

[Porks]

db quote,

'You're not going to get anywhere until you stop waiting around for somebody to tell you what to do and start the work. If you have absolutely no idea how to locate a pattern, try the First Steps forum. Or hire a mentor. But all of these "what would you do" questions are pointless.'

I think you're wrong here....it's not pointless at all.

Learning by example is effective for many people.

But hey it's your thread so up to you.

Just consider whether your approach is working, because although your theoritical explanations make a lot of sense, turning this into a profitable approach seems very difficult, even for those who are willing to study the market until their eyes bleed.



Porks.

 

[Splitlink]

The coin-flipping analogy makes no sense since the probability is the same each time (0.5W/0.5L) and one could have a rather long and nasty stretch of losses before the law of large numbers kicks in and things even out. Clearly what is of consequence, as everyone knows, is what one does with one's losers and equally as important is what one does with one's winners. To quote the Phantom of the Pits (I haven't the foggiest idea who this guy is, but IMO what he says makes sense):

1. In a losing game such as trading we shall start by assuming we are wrong until proven correct (We do not assume we are correct until proven wrong). Positions established must be reduced and/or removed unless or until the market proves the position to be correct.
2. Keep your losses quick and small.
3. Press your winners correctly without exception.

Easy to say - hard to do but if you don't do it you will blow up. The ego must be removed. It's not how often you make money (your %winners) but rather how much money you make. So if one can make lots of money with a "90% winners" system, cool. But it is entirely conceivable that someone could make just as much money with a "50% winners" system.

ljey

A good post. Loss control is of the essence. It isn't easy to do and I am inclined to be a little too fast sometimes. That is better than looking at it, though. Some traders say that if the trade does not go the way they expect within minutes, they are out. That means that if they do not want a stream of losses they had better learn to be good at selection and timing. An incentive to do some serious studying, no coin flipping here...

Split

 

[firewalker99]

Catch 22 (2)

db quote,

'You're not going to get anywhere until you stop waiting around for somebody to tell you what to do and start the work. If you have absolutely no idea how to locate a pattern, try the First Steps forum. Or hire a mentor. But all of these "what would you do" questions are pointless.'

I think you're wrong here....it's not pointless at all.
Learning by example is effective for many people.

Porks.

I'm not looking for ALL of the answers, I was merely trying to figure out what could be possible starting points. I'm not expecting to be told what to do, but as someone adviced me to go to T2W to look for advice, I was hoping to get back on track in the right direction. Honestly, when I read some comments to novices (like myself) in the likes of "just study the market", "just look and observe and feel the flow", "forget about everything you've learned",... I begin to understand why people spend so much money on books and trading courses, they are left over to finding it out all by themselves. And although some people are perhaps able to succeed without any help, I believe most of us do need something to get a grasp on.

I do get agitated when more experienced traders call those novices "lazy" because there not willing to spend hours swimming in the worldwide ocean without having a clue what to look for. Seems like looking for a needle in a haystack for most. Personally, I've started off the wrong foot, I'd be the first to acknowledge that I've never should have started trading without a tested plan and I've be punished for that in more ways that only financially.

On the other hand, I've been looking at realtime charts without trading for 10hours a day, for over months now. Dozens of books, articles, interviews... some harder to digest than others. And then when you're trying to make something useful of it, you're mixing it all up exactly because the overload of information. People tell you to forget of all that and start from scratch all over. I'm still continuining in my efforts, but I wonder at what point they may seem in vain, if it results in nothing more than wandering around in circles. But perhaps that too is a process we must go through, although I'm certain others have found better ways [with better I'm not implying faster].

Having read a lot of posts from the First Steps, the following sounds all too familiar :|


...there are many new members on T2W and many of those will be new to trading as well. ... I was merely enquiring on behalf of newbies how experienced members might go about the process of learning how to trade. To say things like "but what you really want is to be told what to do" is offensive... To say "what's required is not "attitude" but the willingness to do the work" implies that I am lazy, which I don't believe I am.... if you really wanted to learn how to trade, then you'd be learning how to trade". How on earth does such a banal comment help a novice trader?

 

[firewalker99]

So why do the not-so-novice traders on this forum who have the experience and knowledge, refrain from posting (just a thought) a simple practical example: a chart of the previous day with realtime trades, where and why they took an entry, where and why they exited the trade, why they have fixed or variable targets, what they do if the trade doesn't seem to go in the right direction, and so forth. Apart from wasps journal (who uses MA crossovers), I still have to look at the first PV with that kind of annotations made in realtime, not a hindsight analysis. I think this would encourage others to do the same, but instead newbies are fired with questions like "what is your trading plan? describe your setup in detail? what kind of testing did you use? why would you enter there, what is your target" which they are unable to resolve, exactly because they are still in the process of figuring that all out. The participant's perspectives are clouded while the bystander's views are clear.

That reminds me of a Chinese proverb:
“Tell me and I'll forget; show me and I may remember; involve me and I'll understand.”

 

[SIMA]

db quote,

'You're not going to get anywhere until you stop waiting around for somebody to tell you what to do and start the work. If you have absolutely no idea how to locate a pattern, try the First Steps forum. Or hire a mentor. But all of these "what would you do" questions are pointless.'

I think you're wrong here....it's not pointless at all.

Learning by example is effective for many people.

But hey it's your thread so up to you.

Just consider whether your approach is working, because although your theoritical explanations make a lot of sense, turning this into a profitable approach seems very difficult, even for those who are willing to study the market until their eyes bleed.



Porks.

1. You are right Porks& FW in many ways, although there is quite a lot to learn regarding P/V on this thread, it can be quite daunting for relative newbies.

2. Interesting to note that there are over 900posts in here with hardly any examples of real live trades or practical applications, however whenever a general topic is posted(setups, forecasting, expectancy blah,blah,blah), suddenly everybody emerges out of their caves to engage in esoteric ratiocinations, but if a chart is put up with a question "what next", deafening silence , adopt the familiar strategy, bombard and grill the chap who posted it in the first place with questions without bothering to provide some pointers.

3.If folks really believe that their "Edge" is unique to them and that even if they explained it, others would not automatically be able to implement it without real hard grind, then there should not be any problem posting them. Whichever instrument you are trading , the principles of demand and supply work across the board on any timeframe, why not put up a chart of yesterday , marking the relevant S/R levels, then during the day post a couple of realtime trades, with some explanation, others will then be encouraged to follow the same route generating much more worthwhile practical discussions.
4. This must surely lead to exchange of ideas, tactics, and enhance one's own trading, not to mention the benefit the newbies would derive.

A CANLDE DOES NOT LOSE ITS BRIGHTNESS BY LIGHTING ANOTHER CANDLE

 

[superfly]

So why do the not-so-novice traders on this forum who have the experience and knowledge, refrain from posting (just a thought) a simple practical example: a chart of the previous day with realtime trades, where and why they took an entry, where and why they exited the trade, why they have fixed or variable targets, what they do if the trade doesn't seem to go in the right direction, and so forth. Apart from wasps journal (who uses MA crossovers), I still have to look at the first PV with that kind of annotations made in realtime, not a hindsight analysis. I think this would encourage others to do the same, but instead newbies are fired with questions like "what is your trading plan? describe your setup in detail? what kind of testing did you use? why would you enter there, what is your target" which they are unable to resolve, exactly because they are still in the process of figuring that all out. The participant's perspectives are clouded while the bystander's views are clear.

That reminds me of a Chinese proverb:
“Tell me and I'll forget; show me and I may remember; involve me and I'll understand.”

Because Im not allowed to give you any more creditpoints I will have to do it this way