Leave your rigid trading systems behind........

kwickwool

Well-known member
291 30
Shakone,

Each trade is different in its own right to a certain degree and to try and lump each trade into some rigid system for exit and entry is almost impossible to maximise your profit or minimise your loss.

Also, your point in regards to successful automated systems out there, please name one and give some stats on its performance if you feel they are out there? How much is an automated system worth in the hands of seriously wealthy individuals that could ensure returns of say 20% pa, how much would you say that would be worth? It is always that logic that makes me think no they do not exist as their value is worth millions in reality? Maybe I am wrong here?
 

Shakone

Senior member
2,458 665
Shakone,

Each trade is different in its own right to a certain degree and to try and lump each trade into some rigid system for exit and entry is almost impossible to maximise your profit or minimise your loss.

Also, your point in regards to successful automated systems out there, please name one and give some stats on its performance if you feel they are out there? How much is an automated system worth in the hands of seriously wealthy individuals that could ensure returns of say 20% pa, how much would you say that would be worth? It is always that logic that makes me think no they do not exist as their value is worth millions in reality? Maybe I am wrong here?

HFT and Algorithmic trading are automated systems. These make up the majority of equity trading now, and are pretty prevalent in other markets too. Millions is spent on developing these, so are you suggesting none of these is regularly profitable, and all these hedge funds and banks throwing money at them is just them wasting all their money?

I don't really think it is up for debate that there are successful automated systems out there, is it? It is obviously true. There are billions made from automated systems.
 

Shakone

Senior member
2,458 665
Also a systematic approach to trading does not recognise anomalous scenarios which in themselves give a huge informational advantage over systematic participants.

This is true if the anomalous scenario is not visible from observing the price and/or volume. If there is a price volume anomaly, then it could be incorporated into the system.
 

kwickwool

Well-known member
291 30
HFT and Algorithmic trading are automated systems. These make up the majority of equity trading now, and are pretty prevalent in other markets too. Millions is spent on developing these, so are you suggesting none of these is regularly profitable, and all these hedge funds and banks throwing money at them is just them wasting all their money?

I don't really think it is up for debate that there are successful automated systems out there, is it? It is obviously true. There are billions made from automated systems.

Fair enough in that regard, and the same automated systems responsible for some of the big sell off's and market movements also when they are not operating correctly.

The big guns spending millions on this no doubt with a bunch of the brightest sparks around.........
 

D70

Established member
839 195
Re: Is a rigid specific trading system the right answer?

No disrespect here meant for your systems trader that use specific rules upon entry and exit but i just do not understand logically how you can ever nail down a system 100% with specific rules?

If this was the case you could then automate it and make a fortune? But logically there is no such thing as a really profitable automated system, is there?

So, the way i see it and always have is that trading with entry and exit points is always a dynamic risk assessment based on all the information that is being absorbed right at that moment from a multitude of places such as technical analysis, news, correlation to other market movement, S/R, recognised patterns, individual statistical analysis etc etc

From years of watching the markets, its movement, correlation etc then your brain can make those decisions that a system could never as would be far too restrictive?

What i am trying to say is that anyone can follow a specific system, specific rules, but the goal should be to be able to dynamically adjust your trading each time based around the behaviour of the markets at that given time and all the information available to you to make that split second decision?

That means a hell of a lot of screen time, the ability to absorb a lot of information and to think outside the box as in what it means at any given moment? I know i am being a bit vague here but that to me is real trading and the ultimate goal in this business? and there is no short cut to getting to that stage, just time and ability.

I am not sure but i have been coming round to the opposite conclusion.

Namely that an objective trading strategy. Like you suggest. Is always going to fail because humans are programmed to make the worst decision when under stress.

An 'automated system' can be dynamic if you go about it in the right way and does not suffer any objectivity. There are also many many automated systems that by all accounts never have losing days. aka. Algoz.

I think when people try to learn to trade if they cant make a particular approach work, you tell yourself it's rubbish. So that you dont feel bad. So that you dont feel stupid. That if you try another method, you WILL BE successful. Again. Another human emotion.
 

D70

Established member
839 195
Hoggums, becuase if it was as simple as a total definition of rules then why not automate it? I am saying that all the many parameters that come into effect when placing a trade cannot ever be summed up in a simple set of rules. If it was a s simple as just finding the right set of rules, you could ultimately get a monkey to trade becuase they would only be in reality following instructions.

I see it as continually and dynamically assessing each situation in its own merits, you say hunches and gut feeling I say experience and skill from years of screen time and the right aptitude to make that split second decision.

The market dynamics are so complicated with so many variables how does anyone think that it can all be summed up by a set of rules for trading?

I'm with Hoggums. You are probably only aware of 1% of the variables. So are on every occasion making a trading decision, an objective trading decision based on 99% unknowns.
 

kwickwool

Well-known member
291 30
I think the 1% is not quite right but understand what you are saying. I think I may have used the wrong word as in variables in the system, maybe it is not so much understanding all the variables but as many tools and ways that allow you to read the market flow?

For example, you use an indicator, maybe two, does not matter which ones, within your trading that at a specific point you use for entry/exit etc. What I am saying that you can do is put in the screen time and energy that allows you not just to enter at your indicator specific trigger points but you understand the indicator to such a level that it is not about just meeting some specific points but tells you so much continually about the way the market is behaving at any given moment? Even when the indicator is not hitting your specific trigger points you understand what the indicator is telling you about the market?

This is just an example of how when trading you can get into the zone and almost feel part of the market and feel like a conductor over an orchestra? and not just waiting for specific targets? and that sort of approach cannot be put into a specific trading system which is my point to the thread? I know it is a different approach to a lot of trading and no disrespect whatsoever to other approaches that no doubt are successful.
 

kwickwool

Well-known member
291 30
Re: Is a rigid specific trading system the right answer?

I am not sure but i have been coming round to the opposite conclusion.

Namely that an objective trading strategy. Like you suggest. Is always going to fail because humans are programmed to make the worst decision when under stress.

An 'automated system' can be dynamic if you go about it in the right way and does not suffer any objectivity. There are also many many automated systems that by all accounts never have losing days. aka. Algoz.

I think when people try to learn to trade if they cant make a particular approach work, you tell yourself it's rubbish. So that you dont feel bad. So that you dont feel stupid. That if you try another method, you WILL BE successful. Again. Another human emotion.

I am not a doctor or an expert on stress but surely the whole point of stress is to increase the human performance when pressure is put on? Increase of adrenalin, focus etc

No doubt the big boys spend millions using the top mathamaticians in the world to get some decent automated systems etc that do work, but I am coming from the sole trader on his own here and for him to ever get close to an automated system by himself see it as a pipe dream? Maybe wrong here and maybe some individually manufacturered systems out there but really how good?
 
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new_trader

Legendary member
6,664 1,489
Re: Is a rigid specific trading system the right answer?

Namely that an objective trading strategy. Like you suggest. Is always going to fail because humans are programmed to make the worst decision when under stress.

What?? This is your opinion only and cannot possibly have any scientific basis to it. Would you step on an aeroplane knowing that the pilot is programmed to make the worst decision when under stress?

An 'automated system' can be dynamic if you go about it in the right way and does not suffer any objectivity. There are also many many automated systems that by all accounts never have losing days. aka. Algoz.

Have you ever written a software program yourself? Do you have any idea of how many lines of code it can sometimes take just to test a very simple condition? If you did, you would realise what an enormous task it would be to program what humans take for granted.

I think when people try to learn to trade if they cant make a particular approach work, you tell yourself it's rubbish. So that you dont feel bad. So that you dont feel stupid. That if you try another method, you WILL BE successful. Again. Another human emotion.

This is the process of learning. There are emotions in automated strategies as well, such as when the system is facing a significant drawdown.
 

kwickwool

Well-known member
291 30
Re: Is a rigid specific trading system the right answer?

What?? This is your opinion only and cannot possibly have any scientific basis to it. Would you step on an aeroplane knowing that the pilot is programmed to make the worst decision when under stress?



Have you ever written a software program yourself? Do you have any idea of how many lines of code it can sometimes take just to test a very simple condition? If you did, you would realise what an enormous task it would be to program what humans take for granted.



This is the process of learning. There are emotions in automated strategies as well, such as when the system is facing a significant drawdown.

100% agree with new trader comments
 

new_trader

Legendary member
6,664 1,489
Re: Is a rigid specific trading system the right answer?

I am not a doctor or an expert on stress but surely the whole point of stress is to increase the human performance when pressure is put on? Increase of adrenalin, focus etc

I am not an expert on stress either, however I would say that most people suffer stress when they find themselves in an unfamiliar situation and don't know how to cope. New traders suffer stress because of this, they are experiencing their first loss, or sudden market volatility, or any number of market events for the first time. The more experience and familiar you become with the market, the less stressful it becomes.
 

D70

Established member
839 195
Re: Is a rigid specific trading system the right answer?

What?? This is your opinion only and cannot possibly have any scientific basis to it. Would you step on an aeroplane knowing that the pilot is programmed to make the worst decision when under stress?



Have you ever written a software program yourself? Do you have any idea of how many lines of code it can sometimes take just to test a very simple condition? If you did, you would realise what an enormous task it would be to program what humans take for granted.



This is the process of learning. There are emotions in automated strategies as well, such as when the system is facing a significant drawdown.

Hi New Trader,

There are many many papers written on why humans fail when put under stress. The most pure example i can think of is walking a plank. If it is on ground level you can walk it every time. If that very same plank is 100m up the result is very different.

Yes, I am fully aware of the coding complexities of what you think are very straightforward rules which are somehow very tricky when trying to put into trading logic.

I have no doubt that when your 'system' is undergoing a drawdown YOU suffer emotions but your trading however does not (until you intercept it).
 
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new_trader

Legendary member
6,664 1,489
Re: Is a rigid specific trading system the right answer?

Hi New Trader,

There are many many papers written on why humans fail when put under stress. The most pure example i can think of is walking a plank. If it is on ground level you can walk it every time. If that very same plank is 100m up the result is very different.

I agree that stress may have a negative affect on a person and as I said it is generally due to an inability to cope with a new and unfamiliar situation and most likely due to inexperience. But to conclude from this that we have an innate tendency to make the worst decision under stress is going a step too far.

Naturally a person who is afraid of heights would be more stressed (and perhaps always stressed) about the idea of walking the plank at 100m than someone else who is doing it for the first time. However, if that person manages to walk the plank I am certain they would not be anywhere near as stressed the second time they had to do it or the third time and each time would actually get easier.

Your suggestion implies that they will always fall off the plank because under stress they are incapable of coherent, rational thought and would make the worst decision possible. I think the most terrified and most stressed person would avoid walking on the plank altogether which would make it the best decision possible under stress!:)

There have been studies which show that people who are afraid of flying are at the peak of their anxiety just as they board an aeroplane but the longer they are kept in the situation (on the aeroplane and flying) the more their anxiety decreases. This study supports my assertion that a trader will become less stressed with each trade and as their knowledge and experience of the market grows.

Yes, I am fully aware of the coding complexities of what you think are very straightforward rules which are somehow very tricky when trying to put into trading logic.

I have no doubt that when your 'system' is undergoing a drawdown YOU suffer emotions but your trading however does not (until you intercept it).

Ok, but according to you, under the stress of the drawdown they will make the worst decision possible and intercept it, right? I know, I've been there and there is no way, no how, no why anyone can say that automated trading is stress free. That is fantasy.
 
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CalvinLe55

Member
51 0
Systems that are too base onpersonal inputs will not be able to understand what happens in the actual market. The market place is too dynamic for traders to ultize any personal system that is not logical. In the instance only a system that can incorporate physics and mathematics can really predict or forecast the market conditions. The way we invented our technology and machines in theory should be applied towards the market place. This is why W.D Gann is way ahead of his time, and maybe the best trader to ever lived. Nature provides the best answer to all soloutions, because it explains the causes and conditions of the market.
 
 
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