I don't know what I am doing

[robster970]

I'm not knocking discretionary trading btw. IMHO to be a good discretionary trader you have essentially distilled lots, and I mean lots of market conditions to the point where you understand them on an incredibly sophisticated level. This takes years and a huge amount of experience and exposure I suspect. So it's easier to hit a mechanical system that statistically is in your favour up until the point where your understanding of the markets can allow you to trade discretionary in a profitable way. The gap between good discretionary and well executed mechanical is a gulf of understanding, a life's work and incredibly hard to bridge from what I can see.

 

[megamuel]

Anyone heard of Thomas Bulkowski? He's done some interesting work relating to charts patterm statistics and their failure rates etc. Here is his site The Pattern Site.com Don't know if thats of any use to anyone?

Sam.

 

[Charlton]

Anyone heard of Thomas Bulkowski? He's done some interesting work relating to charts patterm statistics and their failure rates etc. Here is his site The Pattern Site.com Don't know if thats of any use to anyone?

Sam.

It is the easiest thing in the world to mould price into chart patterns and to imbue them with meaning, or to map onto price any one of a multitude of fibonnaci levels and to imbue it with meaning, or to measure the spread, volume, close, high and low of a single bar (VSA) and to imbue it with the precise intentions of the "herd" and the "smart money".

The real question is whether this is just "curve-fitting" after the event or bears any statistically significant predictive edge that can be used consistently for a reasonable period of time.

There are many who just follow price action and "go with the flow" by just having pre-formulated plans that are put into action depending upon where price leads them.

There have been some recent posts that aim to show that a purely random method of choosing entries and exits may be profitable as long as it is accompanied by excellent money management techniques.

Robster has brought up an interesting point about using mechanical systems until you can learn to trade discretionarily. This of course requires a decent enough mechanical system that provides some kind of edge. Conversely to really trade well with a mechanical system I think you need to be a discretionary trader first. This will enable you to understand any mechanical limitations that can be bypassed using discretion or enable you to change the mechanism based on knowledge gained via prior discretionary trading.

Charlton

 

[bbmac]

I'm pretty sure I know what and why I am doing it in respect of trading activity.

The What ? is looking for the 'technical confluence' ( potential support/resistance with individual price action trigger at some repeating indicator based patterns ) and the Why ? is because this confluence indicates a high probability trading opportunity or overall 'set-up' that has repeated and repeated and over any given sample of those set-ups produces a net gain. That is the trading edge

It should be as simple as that, but of course emotions play a part to the extent that it is very difficult to play the edge with impunity because there is always a subjective element, howsoever hard you work to diminish/eliminate this by a rigid set of rules/guidleines. On the flip side it could be this subjectivity and discretion that adds an indetreminable factor to the trading edge ?

 

[new_trader]

I'm not knocking discretionary trading btw. IMHO to be a good discretionary trader you have essentially distilled lots, and I mean lots of market conditions to the point where you understand them on an incredibly sophisticated level. This takes years and a huge amount of experience and exposure I suspect. So it's easier to hit a mechanical system that statistically is in your favour up until the point where your understanding of the markets can allow you to trade discretionary in a profitable way. The gap between good discretionary and well executed mechanical is a gulf of understanding, a life's work and incredibly hard to bridge from what I can see.

Unfortunately it is opinions like this that scare people away and prevent them from even trying to develop a discretionary methodology. IMO, You can never make the transition from mechanical system trading to skilled discretionary trading simply because a very large proportion of mechanical systems are based on little more than simple price thresholds which require no thinking or judgement at all, in other words, they are no better than guessing . You will achieve much, much more with 6 months invested in proper study and practice than you would in 6 months of trying to develop a mechanical system that is statistically in your favour. In the very long run, discretionary trading will pay greater dividends because you will develop a skill that will last your entire life. But there are those who continue to be baffled by the markets and make idiotic statements like "There is nothing to be gained by study or screen watching"...hilarious it is, really funny...morons they are and should be ignored.

 

[robster970]

I think anybody who has got to the point of developing their own mechanical systems through learning how to discretionary trade (myself here included) is in it for the long haul and to the point where discretionary takes over from mechanical. I genuinely think becoming good on a discretionary basis does take time, commitment and sacrifice. Promoting anything other than this just continues to reinforce a "quick buck" mentality. I can see what you mean NT about mechanical systems being presented as a panacea in my post but I genuinely don't believe that to be the case either. Merely the mathematics of a positively biased mechanical system are a safe haven whilst learning.

 

[oiltanker]

yes MM

because we don't know what we are doing [ie ignorance of outcome] the saying is to keep the many losses small. if we knew what we were doing [ie 100% knowledge of outcome] then why have a stoploss because its not going to be a loser -ever

 

[new_trader]

Merely the mathematics of a positively biased mechanical system are a safe haven whilst learning.

I disagree. The only 'safe haven' during the process of learning is keeping your losses small. This is done by using a close/tight stop. This is what people who are motivated by learning do. Those who are motivated by the want of money blunder about with 'systems'.

 

[HaloTrader]

Is pivot theory a big part of your 100% system then

No not at all.

 

[forker]

this has been an interesting thread. New_trader i have a question for you, what exactly is discretionary trading. i guess if i ask myself this question i see it as a trader who has worked his or her A55 off to grasp enough understanding to weigh results more towards consistency than failure. over time as this trader takes trade after trade after trade eventually getting to know the method and markets so well that the small details that most traders miss become very clear. this clarity would then lead the trader into a sense of skipping some setups over others because even though the setup looks like any other, the small details weigh towards a lower probability of success. now to other traders this could look like discretionary trading but the nuts and bolts of the situation is the finely tuned eyes that come from experience. this is where i am now in my experience of trading and the way i see it at least

what is your thinking on this ? are your beliefs more towards gut feel where you dont take a particular setup because you dont have a good feeling about it?

 

[dr.blix]

Who was it who said that doing the same thing over and over again, expecting a different conclusion is a sign of madness?

sorry if i've taken this out of context.

wouldn't the above apply only if you were constantly losing?

to repeat the same thing over and expect some losses and some gains isn't expecting the same thing, it's expecting the possibility of both outcomes.

 

[lewtz]

Who was it who said that doing the same thing over and over again, expecting a different conclusion is a sign of madness?

Albert Einstein


And how can ANYONE come in here and say that discretionary or mechanical trading doesn't work? Are you that fking stupid? Everyone banters on about, "There's a million ways to skin a cat." then go on to say, "THAT DOESN'T WORK!" Shut up.

A trading plan is a model of the markets built around the mind who perceives it. That might be 100% discretion, that might be patterns or it might be something 100% mechanical. There is no one way, there are ways and there aren't ways.

 

[TheBramble]

lewtz, is there perhaps something you want to get off your chest?

 

[lewtz]

Done and done.

 

[TheBramble]

Yes. Well done.

 

[robster970]

I disagree. The only 'safe haven' during the process of learning is keeping your losses small. This is done by using a close/tight stop. This is what people who are motivated by learning do. Those who are motivated by the want of money blunder about with 'systems'.

Why you think a 'system' does not include good money management makes little sense to me. Oddly enough I don't disagree with anything you've said either. I just seem to think you see mechnical=bad and discretionary=good in an incredibly binary way, and like most things in life I think this whole area is grey.

 

[Windowsill]

. On the flip side it could be this subjectivity and discretion that adds an indetreminable factor to the trading edge ?[/QUOTE]

And thats what needs developing.....but it means losing control or letting go of all the various constraints that stop you just going with the wind.

 

[elitejets]

Hey Trendie
FWIW here is my opinion.
I'm one of those people who watches too much news, reads too much and I would love to be a discretionary trader. But as soon as I start being discretionary with the mechanics of my trading it hits my P&L.
My best success has been when I use discretion to decide what I trade and what direction but the rest of the trade is completely mechanical, i.e. my entry trigger, stop, TP, etc.

Doing this has also helped my grip on reality and less like I don't know what I am doing.
Everyone is different, this is just what has worked for me.
Nic

 

[Skill Leverage]

It's kind of like the difference between an artist who paints freehand, and one who draws an outline in pencil on the canvas first. The freehand artist may seem sexier than the other guy to the public eye, but that's not to say that both can't produce great results; it's all about what works for you as an individual.

 

[Paul71]

OR:
What I am doing is one-step removed from reality, and I am trading a restricted vision of reality.

Markets move.
They rise, fall or range.
They move, sometimes gently, sometimes sharply.

My indicators are an abstraction of, and a form of proxy for the underlying reality. They are not the reality.

It is dawning on me that my rules are arbitrary, and curve-fitted. However, the curve-fitting is relatively robust. So far.
Even the Turtle rules for 20 and 55 day breakouts must be a form of curve-fitting.
And, any mathematically derived formulae, must, of necessity, be a lucky happenstance.
For example, the ACD pivots. (Mark Fisher)

Even patterns are an attempt to contain reality into a structure we can recognise.

Its all money management, isn't it?

I have two types of understanding. One type makes my profits, and the other type keeps me out of what i don't understand. One type is about understanding the market and the other is about understanding that i don't understand. I can only manage my money around my two types of understanding. Even so, my personality is naturally set to only take what it percieves as being right. Maybe if i had a different outlook on my understanding i would make more, maybe i would make less. It's all relevant.

I've not supped Rum for over ten years, now i know why.



Paul.