Mate as a 12yr old living rough and on instincts it's survival of the fittest, and it's no different in the markets, sink or swim. Cheers John1
DionysusToast
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I'm not really sure what "holy grail" actually means. Is it crazy profits or just consistent profits? If the latter, then it is possible for sure.
I don't think it's a matter of simple/complex but more a matter of looking in all the wrong places. Most retail traders are led to follow squiggly lines on a chart and not really consider the 'cause and effect' aspect of trading. So you can end up analyzing effect looking for cause. No matter how many different ways of doing that you try, you are sort of doomed.
You do need a plan for sure, at least at first.
You do need experience, trading is a skill, it is subjective but that does not mean you click the button based on gut feel. Most people start out looking for a mechanical solution and think that anything that isn't mechanical is just shoot from the hip. Some trades fit the bill but experience tells you to pass on them, sometimes you wait a little extra before entering just to make sure, sometimes you just know a trade you are in is going to fail.
If trading is a skill, then it follows that when you adopt a new technique, you will be crap at it to start with. Mechanically minded people will try something 6 times, see it doesn't work and blame the technique, not their skills. Again. doomed to failure.
In terms of the guy I had lunch with on Sunday. He uses market profile to organize historical data, after all he did start out as a runner for the guy that invented Market Profile. With this view of the market to hand, he will do his best to assess if the days high/low is in yet and try to buy/sell as close to that as possible.
- this is the ES which tends to give you second chances unlike treasuries which will just move away without a retest
- he has been watching this market for decades and so has a good feel for when it is running out of speed and when it's not likely to get closer to the high/low before failing
- he uses wide stops and he prefers to be leaning on areas where a lot of trading occurred previously because the market is unlikely to make a rapid move through that area
That is all he does. Now - you want specific entry and exit points - but that is the mechanical/non-distretionary/objective mindset which I think at some point you have to walk away from.
Let me ask you something:
If a superstar trader came to you and told you that trading isn't mechanical and that you know just as much as everyone else - how would you proceed?
If you were told that people make money with exactly the same information as you with NO knowledge that you don't have - what would you do? Would it change the way you approach it?
Thanks for the reply and openness.
I guess holy grail is kind of a loose and subjective term, but I suppose it would mean the ultimate form of trading with both the highest profits and consistency possible. Something which might exist, but most likely only in the minds of the beholder.
This was an insight for me ´Most retail traders are led to follow squiggly lines on a chart and not really consider the 'cause and effect' aspect of trading.´ thank you for that. I never looked at it this way, it made me realize I should be looking for causes and trading there effects, not looking at effects and trying to trade there causes
I never liked the thought of technical indicators much, or strict rule-sets for that matter, but one big problem in not using a strict rule-set is that you are at the mercy of your emotions, how do you fight/balance this?
As for your last two questions, I suppose my approach towards trading would change from looking for the next hot thing to just jumping into the markets and gain experience.
The questions you pose sound somewhat familiar to what John proposes, in that it isn´t about the technique or edge of trading, nor having more (secret) knowledge, just how one carries oneself in the market. In that respect you might have more in common then thought at first sight.
Though I assume you are mainly hinting at developing intuition for a market and gaining skill in how you trade, whereas John is proposing that there is no realistic edge to be had and the only thing that really matters is risk and money management.
On a relatively unimportant side-note, but just to provide some fuel for my dreams
, do you know how much % your friend made on average the last 10 year? Should I be thinking of a modest 10%, a decent to good 20%-30% or a rocketing 50% or more ?!
Shakone
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My view is that understanding price movement is a bit like translation.
If you attempt to translate one language into another, you can go through each word, and look for a direct translation and input that, and what you end up with is a jumble with words out of order etc. Occasionally it makes sense, more often it's just confusing, and sometimes the meaning is even the opposite of what was intended. Because words can mean different things, depending on the context. There are meanings, grammar rules, and context to consider. And even beyond knowing the literal translation, there are idioms that have no real translation from one language to another. Now it's not that there is some secretive intuition that will make a good translation, each part is quite logical, but you only have to look online at some of the translation programs to realise that this is a hard thing to code, and you'll typically get a much better translation from someone who speaks both languages fluently.
Or to bring it back to trading, you need to understand what is happening, and the context of what's going on right now within what has been occurring previously. An indicator isn't going to help you, you need to understand price. You need rules, without at least some rules, you won't be able to learn properly. And even once you get these parts, there are things that are specific to the instrument you're trading that may not apply to other instruments. Again, it's not that there is a secret sauce (as I think DT pointed out), each part is logical, so in theory you should be able to do it mechanically, but in practice ... not really.
So I generally agree with DionysusToast's last post, but unlike him I don't think going down the mechanical route would be a waste of time. I think a lot of people jump in without any testing whatsoever. They carry on for possibly years, doing the same thing and not testing, and hoping that one day down the line they will get it. If you keep doing the same thing, you're likely to get the same results.
You have to have some structure while learning. You have to have a plan, and be able to make a number of trades that stick to that plan, to be able to analyse it and improve it. You have to be able to measure what you're doing and what you're observing. You can't measure intuition. So in terms of initial learning, it has no place. Same goes for subjectivity. Maybe once you've already learned a great deal, you'll see a lot of the mechanical stuff is not as important as you thought it was, but I wouldn't suggest you avoid going down this 'mechanical' road as there is a great deal to be learned there.
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DionysusToast
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I disagree that you cannot measure and track performance of a trading system with a subjective element.
You seem to be saying that if it is not objective, it cannot be measured and if it cannot be measured you cannot improve. The problem with that is, the only improvements you will allow are objective aka the addition of more mechanical rules.
Take a very simple system. A pullback to an MA. First question would be - is there cause to believe that people will buy after you when you buy a pullback to the MA. Is there reason to believe that there is 'cause'.
Well - you could argue that in a trending market, pullbacks are inevitable as the market gets imbalanced as it pushes up. When the market moves back up through the prior high, new shorts will get stopped out, so yes - IF you can get back through the high, there is cause that will effect higher prices.
Still -you have 2 components required to make this MA system work.
1 - The ability to know if a market is trending or not
2 - The ability to pass on trades where the market looks like it will blow through the MA.
3 - The ability to cut losers as early as possible
Now - you could look for the answer for 1,2 and 3 in a plethora of indicators in an effort to create mechanical rules OR you could give yourself more subjective rules to follow.
Is the market trending? Trending markets tend to move up, build a volume node, then move up again and not cross down thru these volume nodes. You could build rules around that tendency.
Will the market blow through? You will spot this more through experience but the pace as well as market internals/correlated markets would help.
Cutting losers? Again, pace, internals, correlated markets help immensely.
You'd be hard pushed to turn the last 3 into purely mechanical rules but you absolutely would be able to turn them into rules. They'd just not be mechanical.
You would know when you followed the rules and when you didn't.
You would know over time if a rule is working for you or not.
This is not "shoot from the hip" trading, this is rules based trading IMO. It's just that rules have a discretionary element.
You can't program "has a child been naughty" but you know when they have. It's the same sort of thing. "Don't allow naughtiness" may be a rule. It's not mechanical but you would know if you followed it or not.
DionysusToast
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Though I assume you are mainly hinting at developing intuition for a market and gaining skill in how you trade, whereas John is proposing that there is no realistic edge to be had and the only thing that really matters is risk and money management.
On a relatively unimportant side-note, but just to provide some fuel for my dreams
The markets are 4 way auctions and they are not random. They are just counter intuitive. Mind you - so is an art auction. An art auction may start off looking for a bidder for $1,000 but no-one wants the item, so they drop to $500 and someone bids. Ten minutes later the item is sold for $20,000. This makes no sense. No-one wanted it for $1,000 but it sold for $20,000. Higher prices generated more demand... Now - where have we seen that happen?
As for my friends profit %age - I haven't asked him to be honest. Seems like a rude question to ask when you meet someone face to face. I guess it's not.
Shakone
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DT I'm referring to the initial stage of writing a plan and learning.
You can measure results, but if you've changed something in your system, you need to be able to apply it consistently, to know if it is useful or not. If your only way to measure the usefulness of intuition is via your trading results, then you'll already have needed a previous set of trading results which didn't have intuition, ergo your initial trading plan will not have this feature.
I think Seykota made this point on whether it is intuition or into-wishing. If you know what it is that you're applying and when you've applied it, then fine. But more likely in the beginning, unskilled intuition and subjectivity will lead to poorer results (just my opinion and experience, your experience may be different) and you won't know whether you're just trading scared money or not.
You can measure results, but if you've changed something in your system, you need to be able to apply it consistently, to know if it is useful or not. If your only way to measure the usefulness of intuition is via your trading results, then you'll already have needed a previous set of trading results which didn't have intuition, ergo your initial trading plan will not have this feature.
I think Seykota made this point on whether it is intuition or into-wishing. If you know what it is that you're applying and when you've applied it, then fine. But more likely in the beginning, unskilled intuition and subjectivity will lead to poorer results (just my opinion and experience, your experience may be different) and you won't know whether you're just trading scared money or not.
DionysusToast
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The problem I have is that I have yet to meet a single trader that trades a mechanical system and makes money.
Every successful trader I know uses a huge chunk of discretion. So my view is that if you box yourself into a mechanical mindset, you won't get to the point where you actually see any returns for your efforts.
I could be wrong though - because of what I do, most of the traders I meet are short term heavily discretionary day traders, otherwise we'd probably not be in touch in the first place.
scholfield
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The unspoken secret: Something to do with options?
Shakone
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The fact that all the traders you meet are discretionary, is probably in large part due to the fact that it is better to be discretionary, and not because it is impossible to succeed mechanically.
I am discretionary. But I make mechanical and objective what I can within that, and as I said in my translation post, there's underlying and consistent logic to it all. Just not easily programmable.
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alot of people in this discussion seem very intelligent and i shall not pretend to be
but how come you or others can't build easy to follow mechanical systems
its not rocket science, and very likely some or most traders use the wrong indicators / wrong chart packages and don't fully understand the market cycles, and trading without charts sounds like financial suicide to me
with mechanical you don't have to look for trades - just scan the charts for signals both for entry and then close - there is no discretion - its either on or off - win / loss or draw
im fully sure most know all this, so am slightly bemused to why some think trading with no charts is easier
i know a few traders that trade without charts (although they are often fairly keen to see what my view is from a chart perspective)
what they do is buy value - where they ve seen price rise to and from many times, and use the market cycles, sometimes it works, sometimes it does nt, and they end up owning stocks for a very long time just to get breakeven
i tried price action once and it sucked - never again! , only in its most basic form is necessary
trading mechanically is much easier than some would think, but good systems don't just fall into place they sometimes take a yr or yrs to perfect, so you can fully understand the market cycles
not for everyone, but neither is trading without charts
personally i know far more successful traders that trade mechanically with charts, than without, and the ones who use charts and good well researched systems win far more than they loose
but i suppose it depends on which camp you re from and then which similar traders you associate with, but most all trade differently regardless of all trading mechanically
but how come you or others can't build easy to follow mechanical systems
its not rocket science, and very likely some or most traders use the wrong indicators / wrong chart packages and don't fully understand the market cycles, and trading without charts sounds like financial suicide to me
with mechanical you don't have to look for trades - just scan the charts for signals both for entry and then close - there is no discretion - its either on or off - win / loss or draw
im fully sure most know all this, so am slightly bemused to why some think trading with no charts is easier
i know a few traders that trade without charts (although they are often fairly keen to see what my view is from a chart perspective)
what they do is buy value - where they ve seen price rise to and from many times, and use the market cycles, sometimes it works, sometimes it does nt, and they end up owning stocks for a very long time just to get breakeven
i tried price action once and it sucked - never again! , only in its most basic form is necessary
trading mechanically is much easier than some would think, but good systems don't just fall into place they sometimes take a yr or yrs to perfect, so you can fully understand the market cycles
not for everyone, but neither is trading without charts
personally i know far more successful traders that trade mechanically with charts, than without, and the ones who use charts and good well researched systems win far more than they loose
but i suppose it depends on which camp you re from and then which similar traders you associate with, but most all trade differently regardless of all trading mechanically
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new_trader
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Discretionary traders use charts. Charts are nothing more than a graphical representation of numbers. When I use the term 'mechanical trader' I use it to mean someone who uses a pre-defined threshold to determine when they buy and sell. It doesn't matter whether the threshold is a line on a chart or a number on the tape. Mechanical systems are easy to program.
I must say however, that in my years of discretionary trading the distinction between mechanical and discretionary trading has become blurred. Experience has taught me to act almost automatically when the right conditions are met. You could argue that this is nothing more than a threshold. The argument against this is that there is no way I would ever be able to program those thresholds and I am fairly proficient at C#, VBA and Visual Basic!
numbertea
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I have been concisely tracking the way I trade with the indicators that I use and like you have said, determining the necessary thresholds. It's all programmed in now and trading by itself finally. I am adding more things in but on very general terms, I don't get specific because perfect is never a word to use when identifying patterns since it will lock you out of good trades. I take small loses and huge wins. Automation allows me to trade at my best all the time. I use C++ and per trade data giving me many ways to look at data including Level 2. I think automation does not have to be a handicap. It helps me by allowing me to truly backtest and stick to my trading system.
Cheers
rsh01
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some scalpers i have seen dont use charts...they may look at them on the open but the ladder does the rest.
it is a chart after all, just in diff format.
must get bit hard with wide ranging markets, but i assume some scalpers have photogenic memories so can remember the s & r levels without references.
scalping small range markets like the es or shatz prob doesnt require charts...
it is a chart after all, just in diff format.
must get bit hard with wide ranging markets, but i assume some scalpers have photogenic memories so can remember the s & r levels without references.
scalping small range markets like the es or shatz prob doesnt require charts...
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scholfield
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Yes, there are obviously a few ways that people trade without charts.
I think a chunk of this was taken up by people trying to guess what John1 was referring too in his posts after he discounted all of those methods though
I think a chunk of this was taken up by people trying to guess what John1 was referring too in his posts after he discounted all of those methods though
Forexmospherian
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Retail Forex trading to make money is just not simple or easy to achieve. If traders can trade without charts and can still be consistent and make proper retail trading results - ie over 20% + per month rather than the commercial norms of 4-10% then good for them.
Personally I think you need a lot of "tools" of the trade to assist you make profitable trades - but you also have to know what "tools" - such a fundamentals, COT and to some degree DOM are a waste of time ;-)
That is because the market makers and the liquidity suppliers etc - "deceive" ie they talk with forked tongues and do not inform you of the truth and the whole truth - but instead just try to paint a picture of false sentiment etc.
After all - for them to make money - they need your money and all the other traders monies who might be still in "perpetual" learning mode - ie anything from 1 to 10 yrs and so use every trick in the book to try and get you "off the scent" of a proper winning trade with low risk - ie small stop on ideally less than 2% stake of your capital.
They are brilliant at doing it - they are "gameplayers" extraordinaire and love it when they hear all this "keep it simple" stuff .
We hear the markets are a battle between millions of buyers and millions of sellers - but in reality - you could have say half a million retail traders selling the EU at say 2.00pm UK time and one large bank / players thinks - let's buy - and then change the direction etc.
Will that show in the COT report? - will it show on DOM ? - do you honestly think so ???
It will show in PA and price structure though ;-)
Surprise is the key in the game - there as to be an element of deception - otherwise all traders would be trading the correct way at the correct time ;-)
Only my own opinion - but it makes me laugh that suddenly all the regulators are now suspecting exactly what we already know and 15 Banks in the UK are presently under investigation for "rigging" currency rates ;-)
Regards
Forexmospherian
Personally I think you need a lot of "tools" of the trade to assist you make profitable trades - but you also have to know what "tools" - such a fundamentals, COT and to some degree DOM are a waste of time ;-)
That is because the market makers and the liquidity suppliers etc - "deceive" ie they talk with forked tongues and do not inform you of the truth and the whole truth - but instead just try to paint a picture of false sentiment etc.
After all - for them to make money - they need your money and all the other traders monies who might be still in "perpetual" learning mode - ie anything from 1 to 10 yrs and so use every trick in the book to try and get you "off the scent" of a proper winning trade with low risk - ie small stop on ideally less than 2% stake of your capital.
They are brilliant at doing it - they are "gameplayers" extraordinaire and love it when they hear all this "keep it simple" stuff .
We hear the markets are a battle between millions of buyers and millions of sellers - but in reality - you could have say half a million retail traders selling the EU at say 2.00pm UK time and one large bank / players thinks - let's buy - and then change the direction etc.
Will that show in the COT report? - will it show on DOM ? - do you honestly think so ???
It will show in PA and price structure though ;-)
Surprise is the key in the game - there as to be an element of deception - otherwise all traders would be trading the correct way at the correct time ;-)
Only my own opinion - but it makes me laugh that suddenly all the regulators are now suspecting exactly what we already know and 15 Banks in the UK are presently under investigation for "rigging" currency rates ;-)
Regards
Forexmospherian
new_trader
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I trade without using a chart and I don't use DOM and I trade with tight stops. I can scalp or swing trade or whatever I choose when the time is right, it is right.
scholfield
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What do you use?
