Obscure Strategies

[pkfryer]

I'm doing some searching and fiddling and have come across a trading approach that uses a combination of level II, Time and Sale, and a few TA indicators for day trading. Also, using leading and lagging stocks in a sector.

How useful have you found T+S for gauging buy/sell strength? Is level II useful for finding underlying buy/sell strength?

What do you think is better: a rigid set of rules combined into a trading system that we follow religiously or a more discretionary approach?

 

[TheBramble]

How useful have you found T+S for gauging buy/sell strength?

I'll leave that for the LII experts.

What do you think is better: a rigid set of rules combined into a trading system that we follow religiously or a more discretionary approach?

If you're a seasoned and experienced trader and consistently are making money using a discretionary system and methodology - why not.

But I have never known a less experienced trader make money using this approach.

Fully systemised, rule-based and as automatic as possible is the key.

 

[Mr Euro]

You have described the best way to trade IMHO, it's certainly the way I trade and it's perfect for my personality. Horses for courses.

To call this approach "obscure" is obscure in itself. Are you new to the markets or just been around system traders all your life??

Sorry Bramble:

Fully systemised, rule-based and as automatic as possible is the key.

I could not disagree more

 

[TheBramble]

Disagreeing is OK Mr. Euro.

But are you an experienced trader consistently making profits? That was my point. I don't think new traders would do as well with a discretionary approach as a systematic one.

As for LII, T+S - absolutely. An invaluable aid to trading for most and I understand some successfully use LII, T+S as their only trading tools.

 

[Mr Euro]

But are you an experienced trader consistently making profits?

No I'm a rookie Bramble can't you see

I have tried system trading many many times, looking at various strategies, markets, backtesting etc.. but it's too boring for me. The past is a guide for the future IMHO however I prefer to feel the pulse and the market rather than distance myself from the action.

My winning trade % runs at about 80%+ and I am in the market (on average) less than 5 minutes a day. I don't like risk and being exposed to the market - through system/swing trading- just isn't for me. Sure I will miss out some gains but I hopefully reduce my risk too.

 

[Trader333]

Personally I use a combination of both strict application of rules and discretion but for different aspects. For example once I am in a trade and if the market goes against me I never under any circumstances move my stop price further away from where I have originally set it and if it gets hit then I am out. In my view those who use a discretionary approach to this will lose in the long run.

In terms of when to enter a trade then I do use some discretion and that is because all setups have slight variations. I always use the Level II screen as the final part of the setup to determine my entry point but I am not so reliant on T&S. The key for me is to reduce as much as possible the risk at market entry and once I am in a trade then I embrace the risk that I have accepted and manage the trade from that point forward. Much of my decision making cannot be put into a mechanical rule based system and therefore no software vendor would be able to code it. This is partly because I use a combination of pattern recognition which to many is subjective. I noted on another thread that Skim often sees patterns that others dont so making rules for this just wouldnt work.


Paul

 

[pkfryer]

Mr Euro. I must admit that I am both a novice trader and been focusing on systems. I have seen some pretty good results with systems and I have discovered that a systems doesn't have to win that often to be profitable in the long run.

But I have to say I find systems boring to use. Following rigid rules and applying them like a machine. I'd rather do like Johny does and code one up and set it off on automatic making money in the background without me having to think about it. Whilst I concentrate on learning to be a better discretionary trader.

I have read a few day trading books, one particular is: the underground trader which talks about fascinating plays and moves based on Level II. And also a strategy that uses T&S. I must admit that I prefer this style of trading rather than pure systematic.

I have observed this on a number of times: I study the the Level II and suddenly the mist rises and you see clearly whats happened and can see the resistance building or the pressure increasing and you just know which way it will probably go. I'm currently reading: Reminiscences of a Stock Operator and a lot of what he says still seems to play a part in stock movement. Price takes the path of least resistance. But sometimes I have seen huge buy orders and skimpy sell orders.. but the pressure is so great that the price still goes down. So maybe Level II isn't enough in itself. But Im very interested in it!

I know that psychology plays a big part for beginner/novice traders, so I am still concentrating on systematic trading, but I am learning the skills now which I believe will eventually pay dividends.

 

[BBB]

I have a variety of methods for entry and management of my trades. I select which one is best in a discretionary fashion. I apply the chosen method in a very systematic and disciplined way.

Plan your trade or you plan to lose.

 

[growltiger]

I have observed this on a number of times: I study the the Level II and suddenly the mist rises and you see clearly whats happened and can see the resistance building or the pressure increasing and you just know which way it will probably go. I'm currently reading: Reminiscences of a Stock Operator and a lot of what he says still seems to play a part in stock movement. Price takes the path of least resistance. But sometimes I have seen huge buy orders and skimpy sell orders.. but the pressure is so great that the price still goes down. So maybe Level II isn't enough in itself.

Livermore is interesting and still relevant because there is nothing new under the Sun.

What appears to be new is the order book. But the occasions when it is really showing the path of least resistance for prices are few. Most trades that go through the market are market orders (and so never appear in the L II book) and many of the orders that sit in the book are put there precisely in order to create an impression that the pressure of demand is a certain way, not in the expectation or intention that they will be hit. And the ones that are put there to be hit are usually the limit orders that reflect the target exit point for trades that started with market orders. Finally, you will notice that large lines of stock often sit there and get eaten away by tiny nibbles of demand (or supply), after which the market goes the opposite way to that which would have been inferred by totting up the level of supply and demand to be seen in the book....