Permanent edge

[FXSCALPER2]

It's not the pattern that 'works', it's what the trader does with it and the principles that create it in the first place. Those principles will continue to work, because they are created by trader behaviour, not because there are a great number of people focusing on that pattern.

There's a chance you might have a different definition of pattern than I have. So perhaps you could give an example of what is a pattern and what is not, to make sure that we are talking about the same thing.

Anything that you can find in a book like Bukowski's (?). H%S, flags, pennants, etc. Some of these definitely make you money but the skill is in knowing when to use what.

Show someone a flag and they will be trading it all the time without knowing what the hell is going on in the markets. They would lose and then go to trading MA crossovers which would work for a bit and they lose and then they go to trading double tops and make money without knowing what the hell is going on and then they lose... You get the point. The skillful trader knows what to do when and knows that there is no permanent edge. He has the skills to aquire the knowledge neccessary to adapt to what is happening now. He is the one that will be around for years.

This game is not about some edge present in the markets, which is what I was trying to demonstrate with my casino exmaple. The casino owner doesn't even have to think about the probability on his table: it is fixed. The trader, on the other hand, has to be able to duck and dive, adapt, be aware of what is going on, look to see what to do today, as opposed to what happened yesterday. If you have a permanent edge, you are like the casino owner. You turn on the lights and off you go.

 

[firewalker99]

Anything that you can find in a book like Bukowski's (?). H%S, flags, pennants, etc. Some of these definitely make you money but the skill is in knowing when to use what.

Show someone a flag and they will be trading it all the time without knowing what the hell is going on in the markets. They would lose and then go to trading MA crossovers which would work for a bit and they lose and then they go to trading double tops and make money without knowing what the hell is going on and then they lose... You get the point. The skillful trader knows what to do when and knows that there is no permanent edge. He has the skills to aquire the knowledge neccessary to adapt to what is happening now. He is the one that will be around for years.

This game is not about some edge present in the markets, which is what I was trying to demonstrate with my casino exmaple. The casino owner doesn't even have to think about the probability on his table: it is fixed. The trader, on the other hand, has to be able to duck and dive, adapt, be aware of what is going on, look to see what to do today, as opposed to what happened yesterday. If you have a permanent edge, you are like the casino owner. You turn on the lights and off you go.

Thanks. Then we are in agreement
Like I said I'm not a pattern trader in that sense, but I was playing devil's advocate.

PS: Bulkowski has an encyclopaedia of patterns, analyzed in depth: The Pattern Site.com

 

[Crap Buddist]

If Carlsberg handled problem resolution then....

Is there such a thing?

I thought I had one and up till a couple of weeks ago, it had been solid for a year and a half. Not actually checked prior as yet but it was a simple recurring price action that gave consistent returns with minimal risk and high strike rate.

I had concentrated on primarily a single market but it also works on others too as checks are made (spot FX at least)....

Whilst it still continues to work on some, the original market of choice has dramatically changed over the last few weeks to the point I hardly recognise it, yet still it works on others.

This could be down to a number of things and it could just be a mute period for the original market and swings and roundabouts are inevitable.

Anyhow, not that I wish this to be about me but rather;

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

Hi wasp, just to extract detail further for the discussion. Is the edge you have developed purely dicretionary based on reading price knocking about a chart /reaction at S n R.

OR/ AND (as the case may or not be) does the edge involved the use of any indicators overlayed .

I remember you mentioned the eurjpy chart hourlies a few weeks back. Which turned down then reversed long all week. So for example that week did you have some indies that didnt tally with the price action etc but you follwed the strat anyway.

I getting 3 options popping up.

The 3 crazy's which are worth looking at to see which it is.

1) The markets been crazy.
2) The method used is crazy.
3) The trader has been crazy.

<In your best Stephen Hawkins voice if you will>

"The worlds problems can be solved if the world can see the problem which contains the solutions.The problem is the solution. The world does not know the problems exists so how can they know the solutions exist? <Bleep, bleep> Having a cold one can often aid in identifying the problem in which lies the solution to the problem. <bleep, bleep> Problems, solutions, problems ,solutions, calculating, calculating .The solutions to the problems -Need more beer, need more beer!"

END

 

[wasp]

Hi wasp, just to extract detail further for the discussion. Is the edge you have developed purely dicretionary based on reading price knocking about a chart /reaction at S n R.

OR/ AND (as the case may or not be) does the edge involved the use of any indicators overlayed .

Price only, no indicators. Incidentally I have identified the problem I had, which, was too stop having an opinion. I cannot help being a bear and strong rising markets are not a good mix for me. Diversification is also necessary, as since that fatal week, the EJ has been tight yet cable has been wondrous. The same 'edge' through experience and understanding of price movement carried over, but sods law meant whilst I traded EJ and beat myself up over it, I should have been trading cable too.

I remember you mentioned the eurjpy chart hourlies a few weeks back. Which turned down then reversed long all week. So for example that week did you have some indies that didnt tally with the price action etc but you follwed the strat anyway.

I getting 3 options popping up.

The 3 crazy's which are worth looking at to see which it is.

1) The markets been crazy.
2) The method used is crazy.
3) The trader has been crazy.

Bit of all 3!!

<In your best Stephen Hawkins voice if you will>

"The worlds problems can be solved if the world can see the problem which contains the solutions.The problem is the solution. The world does not know the problems exists so how can they know the solutions exist? <Bleep, bleep> Having a cold one can often aid in identifying the problem in which lies the solution to the problem. <bleep, bleep> Problems, solutions, problems ,solutions, calculating, calculating .The solutions to the problems -Need more beer, need more beer!"

END

The solution is in tequila IMO, not beer! :cheesy:

Enough about me though...................

______________________________________________________________

Overall, it sounds to me that the general opinion is whilst patterns re occur, price moves in certain regular style, and the participants still trade similar to how it has been for a many years... Its not the 'pattern' that makes the edge, rather the understanding behind what is actually happening.

 

[Newtron Bomb]

The edge, apart from being on the menu at pizza hut, the edge can come in many forms.

For me one of my edges is knowing when not to trade and assessing a trade for "POTENTIAL"

On the back burner I also run different trade management tactics that I like or have used in the past or are testing. When the current preferred money management tactic no longer works (and after more than 5 years trading I find myself in that situation at present) I'm ready to make adjustments based on ongoing research.

I think the edge is being on top of your game, like a sports person, practice, develop new techniques and the most important one after many years of trading and teaching is to "HAVE A TRADING PLAN"

I speak to so many people who dont have anything written down to detail what they are going to do and when they are going to do it.

 

[wasp]

.......... the most important one after many years of trading and teaching is to "HAVE A TRADING PLAN"........

Surely a trading plan is based on the reoccurance of a event that has happened regularly in the past, which, according to may here, will not and can not last

 

[firewalker99]

Price only, no indicators. Incidentally I have identified the problem I had, which, was too stop having an opinion. I cannot help being a bear and strong rising markets are not a good mix for me.

Funny you should mention that... I think I had the same problem somehow... couple of weeks ago... short positions very 'short-lived' and market making a U-turn intraday to close near the highs etc.

I was too focused on whether this market is a bear or bull, while I shouldn't care. There are short/long opportunities each day, despite whatever the major trend is. I think we are all relative short-term trades, even swing trading is short-term if you compare it to the average investor.

Strong rising markets caught me out too. I said the hell with it two weeks ago, and since then I've gotten back on top of my game.

 

[Paul71]

Surely a trading plan is based on the reoccurance of a event that has happened regularly in the past, which, according to may here, will not and can not last

The best plan exploits the best edge, efficiently as possible. IMHO.

 

[Newtron Bomb]

Surely a trading plan is based on the reoccurance of a event that has happened regularly in the past, which, according to may here, will not and can not last

If history doesnt repeat itself then anyone who uses technical or fundamental analysis is wrong.

We would also not see repeating economic cycles, wars famine, animal migrations.. etc.

As traders we run a business and ALL business should have a plan. It lays out what you are going to do and when you are going to do it. If your plan it to throw a dart in the stock listings...
when are you going to do that?
which paper?
what type of dart?
buy/or sell... coin toss maybe, heads buy tails sell?

All in good fun, history does repeat itself... the hard part is knowing when those re-occurring patterns resemble something we have seen in the past and when that pattern changes with new information

I think it was Gann who said always be prepared to have a change of heart.

to me that means dont stick to an opinion based on old data... with new data that opinion can and will change.

 

[Crap Buddist]

Use The Shocker Indicator So You Dont Get Fried!

Price only, no indicators. Incidentally I have identified the problem I had, which, was too stop having an opinion. I cannot help being a bear and strong rising markets are not a good mix for me. Diversification is also necessary, as since that fatal week, the EJ has been tight yet cable has been wondrous. The same 'edge' through experience and understanding of price movement carried over, but sods law meant whilst I traded EJ and beat myself up over it, I should have been trading cable too.

Yes shedding our opinion, forgetting we count or exist in a trade is a challenge. Socrates mentioned that when something unexpected happens in the market, then it comes as a shock to the trader. Who then acts. The trader stops the position. (something like that, sorry socs) Whether the trade that has been stopped results in a negative gain or not depends on where and when the shock is delivered in relation to the traders entry of course. But act he must and does.

Not letting go (because we think we are still important! or we count in this trade ) means we are creating lagging situation . This length of this lag is unpredictable . So what about developing a SHOCKER INDICATOR? This indicator although perhaps lagging?(MAYBE IT DONT?) , its a predictable lag and likely to react quicker than the TRADERS LAG! This is the shocker.

So say the traders been trading a bit of trend an chop, and is getting frustrated as a market contracts up down, up down, then bang, the down bit aint coming, hang on the price bars are consolidating up near my entry, 1 ,2,3,4,5 of em... the price is holding up under that resistance, look at the closes, I can even visualise a steeply sloping upline , its going higher, i'm short, its going higher. Thats when the trader needs to eyeball THE SHOCKER INDICATOR. As at this point the trader is at great risk of lagging even the lag. (ideally the trader would close his short and position long, but hes holding his opinion over the markets action, he is ignoring the price action, but maybe he will listen to the SHOCKER INDICATOR)

THE SHOCKER- Dont lag the lag. So whats makes the best SHOCKER INDICATOR, hmm well number 1 has to be the price, but trader doesnt always take note of that !(because he is putting himself before the market, he thinks hes more important than the market but we know the market has a nice BIG STRAP-ON in place ready to deal with that !) so in at number 2 is ? Thats down to the trader to develop.

Maybe a thread on Contsructing a good shocker indicator will help.Myabe people can quietly construct their own shockers,behind closed doors!

USE THE SHOCKER INDICATOR SO YOU DONT GET FRIED! :idea:

 

[wasp]

My problem with being a bear is all down to the market, whichever pair, always moves better on the downside with upside moves fast, hard and infrequent IMO. Thus I'd rather be short as it is ingrained in my head that my profit will better on the short side.

Just another of those personal issues one needs to let go and forget. One would better meditating before and throughout trading to produce mindlessness so nothing but the market and its actions enter the conciousness.

But, we are only human and to be that in tune and care free to the point that nothing else matters, is not easy.

But, we are only human and to be that in tune and care free to the point that nothing else matters, is not easy. That said, this is business and without an edge, trading the market as is will be harder and especially after a bad run.

 

[jm99]

each market continually moves through different phases of trend and volatility. an edge/system/plan (all the same in my book) that worked in one particular market will likely cease or under perform when the market condition change, so it sounds like the market & timeframe you have been trading has moved to an unfavourable condition for the particular edge/system/plan (obviously without knowing the system it's impossible to say).

would agree with what many have said here, that an edge is having the skill in knowing when to apply certain systems to markets that are in favourable conditions. the main drawback with this method is that it is difficult to properly backtest such a method as a degree of discretion is involved, which is subject to all the bias associated with trading. i also think there are systems that have an edge (that work on all markets, all conditions), but these are v.simple methods, think trendfollowng, where the success is due as much to the mm and diversification among instruments.

 

[wasp]

each market continually moves through different phases of trend and volatility. an edge/system/plan (all the same in my book) that worked in one particular market will likely cease or under perform when the market condition change, so it sounds like the market & timeframe you have been trading has moved to an unfavourable condition for the particular edge/system/plan (obviously without knowing the system it's impossible to say).

would agree with what many have said here, that an edge is having the skill in knowing when to apply certain systems to markets that are in favourable conditions. the main drawback with this method is that it is difficult to properly backtest such a method as a degree of discretion is involved, which is subject to all the bias associated with trading. i also think there are systems that have an edge (that work on all markets, all conditions), but these are v.simple methods, think trendfollowng, where the success is due as much to the mm and diversification among instruments.

Whilst I don't want this thread to be about me in particular, I'll just note that further study has shown that the problem is volatility (lack thereof) and I shall be concentrating on other markets until the ranges on EJ increase again. You live, you learn, you adapt.

I agree though that an edge's performance will be affected by market conditions and one must adapt to those changes.

 

[Priceman]

A good friend of mine told me to invert the chart and then see what you see.... you can then be short where you were long

Seriously it will change your opinion on what you're seeing... which is really the problem. You're opinion needs to change very quickly ; when X happens you should do Y. The edge is you. Forget thinking this usually happens and all the news is bad, etc, etc. Follow the beat of the market. And it changes often, so you need to be prepared to change with it. Think outside the box.

All IMO of course and how many of us skin the cat in a million different ways to achieve the outcome.

 

[Crap Buddist]

Mental gymnastics, with double whip whops...

A good friend of mine told me to invert the chart and then see what you see.... you can then be short where you were long

Sounds like you have nicer friends than me. A good? friend of mine said to me "stand on my head ,give me 20, now what do ya see ?"

Who's the daddy now ?

The markets the daddy ,always has been, when daddy says ,jonny jumps, else daddy gonna open up a big can of whoop ass and spank little jonny.Over and over and over.

Traders are chumps! (hmm hang on ,genius) When traders work the markets, its prostitution, the markets the pimp, traders the bitches, shakin that ass. We gotta shake our little touche's on the platform! Yeah on the platform, I shake my little touche' on the platform. (I feel like bursting into song).

All the worlds a stage but the market aint?

Tradings not about self expression its about self control ? But people need to express themselves (or their selfs).They need freedom of expression? yes( well it would be nice for peeps). But the market aint the place to do it. In a thread ,yes, on a stage yes, in ya graden or at the pub maybe yes,dancing gayly on the streets,yes . But the market ? No.


TRADING IS A RELIGION ?

 

[Paul71]

A good friend of mine told me to invert the chart and then see what you see.... you can then be short where you were long


Good point, and also very true. The same action(s) happen.

 

[firewalker99]

A good friend of mine told me to invert the chart and then see what you see.... you can then be short where you were long

Seriously it will change your opinion on what you're seeing... which is really the problem.

One more thing that helps imo, is to ask yourself before taking a short(long) position: "would I reverse if I was long (short)?" In the past I found myself more than on one occasion answering the question by "no", keeping me out of what would have turned out to be a losing trade. It also helps you in getting a more neutral point of view, free of any bias.

 

[Paul71]

A good friend of mine told me to invert the chart and then see what you see.... you can then be short where you were long

Seriously it will change your opinion on what you're seeing... which is really the problem. You're opinion needs to change very quickly ; when X happens you should do Y. The edge is you. Forget thinking this usually happens and all the news is bad, etc, etc. Follow the beat of the market. And it changes often, so you need to be prepared to change with it. Think outside the box.

All IMO of course and how many of us skin the cat in a million different ways to achieve the outcome.

The Cat! We all want to skin The Cat. First we need to observe it's behaviour, is there a time or a place which is best suited to catching The Cat, and skinning it?

Do we use option traps, futures snares or whatever.

So the edge becomes multi faceted wthin the expertise of the trapper and their knowledge of Cat traits, but, they still need the Cat, without the Cat there can be no edge to Cat Trapping.

Sorry about the analogy.

 

[Dinos]

Is there such a thing?

I thought I had one and up till a couple of weeks ago, it had been solid for a year and a half. Not actually checked prior as yet but it was a simple recurring price action that gave consistent returns with minimal risk and high strike rate.

I had concentrated on primarily a single market but it also works on others too as checks are made (spot FX at least)....

Whilst it still continues to work on some, the original market of choice has dramatically changed over the last few weeks to the point I hardly recognise it, yet still it works on others.

This could be down to a number of things and it could just be a mute period for the original market and swings and roundabouts are inevitable.

Anyhow, not that I wish this to be about me but rather;

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

Hi Wasp,

fwiw, if it worked for you for such length of time, then perhaps, yes, you had the cutting edge, however, as like most things in life change is inevitable and you have to change and/or adapt to current conditions to continue to reap the rewards.

I have traded full time for 8 years, I had a set up which like yourself, delivered the rewards with minimal risk, however, in the last 6 months the returns % had diminished and I went back to the drawing board to re-evaluate myself, my trading style and the effectiveness of the system I employed, the result, a complete change of set up was required to meet todays tradings requirements, its delivering similiar rewards to those I enjoyed a few years ago.

Perhaps revisit the drawing board, and re-assess what your methologies are/need to be, certainly a worthwhile exercise every few months to ascertain the effective of what you employ to deliver the required results.

 

[wasp]

Agreed Dinos, a vital process.

Thankfully, TBH, ATM, its volatility plain and simple. It's not so much the edge ceased to perform but the instrument I was trading reduced in size (due to the credit crunch and the 'big boys' trading more USD crosses ATM IMO). The same process working fine on EU and cable but not so well on yens, all because they are going nowhere.

PS: I wasn't actually trying to see how many abbreviations I could get in one post LOL!