Probably Breaking Even???

[Pat494]

If the politicians put a 1/4% tax on every trade - then it's goodbye trading as we knew it.

 

[intradaybill]

If the politicians put a 1/4% tax on every trade - then it's goodbye trading as we knew it.

The world can do without politicians, we the people haven't realized this yet because their best friends the media keep on exaggerating their need.

 

[TheBramble]

Which politicians? It’s not a global initiative.

UK is very unlikely to adopt any such measures, for obvious reasons. Even if they did, you’d simply switch your dealing out of the UK. For any Eurozone country that does adopt it, traders there will simply switch their account out of country.

The whole nature of the current fads to soak the rich and punish the bankers is precisely the wrong thing to be doing. Which is exactly what the politicos always tend to do. Seems to me that a better method of raising fair (is any of it?) taxation is to reduce the differentials between income tax and capital gains (and similar).

Voltaire had it when he said the perfect form of government was democracy tempered by assassination.

 

[Mr. Charts]

Oh my God !
What a pleasure to read this thread !
There really are intelligent life forms on t2w !
Great posts by Toastie, Bramble, the hare et al.
Richard

 

[Jason101]

I like and agree with a lot of the answers on here such as over trading to large for the account and phycology, but I think they are off topic. I think DT wants to look at market behaviour rather than the behaviour of the loosing trader.

I think the markets act in a way to make you do the opposite that you should do. I think it does this buy almost constantly returning to, or very nearly returning to the same price.

So your entry is often revisited, so is your stop, so is your take profit. Like the waves on a beech. Returning to the same place, you could stand there for ages and not really be able to tell if the tide is coming in or going out.

I think this happens because to the market a stop loss and an entry is exactly the same thing, so price is drawn back and forth to nearly the same point. At this point the market makers fine tune the gap to make a market, receive their commission, cream a bit off (stop run) and the end result is getting stopped out to the pip.

 

[wackypete2]

I like and agree with a lot of the answers on here such as over trading to large for the account and phycology, but I think they are off topic. I think DT wants to look at market behaviour rather than the behaviour of the loosing trader.

What is market behavior? What makes prices move? People do. There's no market without people trading it. Trading is based largely on emotion and sentiment of those trading that market. Prices go up or down because large groups (or large money) believe there is value or no value at the current price.

You don't explain why volatility would quash a random system, which is what a newb would use without realizing it.

I think you misunderstood me or maybe I was somewhat unclear. Volatility should have no effect on the randomness. It has an effect on the trader who may behave in a manner inconsistent with his methods, in your case a random entry method.

You are asking why would a trader break from a method that gets 50% correct and all he can do is break even. How long can you expect anyone to consistently just break even? Eventually they try something else, either a different method or they trade emotionally thinking they can do better.

Peter

 

[wackypete2]

Oh my God !
What a pleasure to read this thread !
There really are intelligent life forms on t2w !
Great posts by Toastie, Bramble, the hare et al.
Richard

Agreed. Nice to have a discussion about something other than doubling my money or whatever other cr@p is going around here lately.

Peter

 

[Jason101]

What is market behavior? What makes prices move? People do. There's no market without people trading it. Trading is based largely on emotion and sentiment of those trading that market. Prices go up or down because large groups (or large money) believe there is value or no value at the current price.

Semantics, they cannot be separated, they are both true in their own right and co-exist esoterically without contradicting each other within the confines of this discussion.

 

[petedeluiz]

What is market behavior? What makes prices move? People do. There's no market without people trading it. Trading is based largely on emotion and sentiment of those trading that market. Prices go up or down because large groups (or large money) believe there is value or no value at the current price.

I think you forget about those emotionless robot which are nowadays play a big part in trading.

Psychology is a crucial role to survive because people are too smart, we are even trying to outsmart the market We think too much and fall into the trap of our own perception. That's why 99% fail imo.

I remember Paul Tudor Jones trained a group of people who have no prior knowledge about trading at all to trade. He teach them to follow the trend and MM, he don't care about here we have support, resistance, trendline, MAs crossing, RSI overbought, oversold.... just follow the trend and trail your Sls until it hit. The results was the group of trader made a fortune because they are not smart, they are not outhinks the market, they don't think that: the fundermental is shifting, overbought, oversold condition, time for a correction.... They are just follow the dominant trend. They do the MM without the effect of emotion, that is why they belong to 1% success

Be harmony with the market

My 2 cents.

 

[Dommo]

What is market behavior? What makes prices move? People do. There's no market without people trading it. Trading is based largely on emotion and sentiment of those trading that market. Prices go up or down because large groups (or large money) believe there is value or no value at the current price.

How about adding trading programs into the mix?

At a minimum I would suggest:

(i) most program trading is intended to operate without simulating emotion
(ii) some programs are susceptible to wholly unintended behaviour
(iii) some programs may be expressly designed to provoke volatility

 

[wackypete2]

You could probably lump the trading programs into the "large money" that I referenced in my statement. We can go into an interesting thread about trading programs but for here it's very probable that there is a human behind each one of them turning them on and off at whatever point some human or group of humans deem relevant. Large companies don't use trading programs in the same way retail punters use ea's.

Peter

 

[enragedcow]

No-one is saying the markets are random.

What I am implying is that the markets may have multiple negative edges because newbies should effectively display the effects of random 'coin toss' trading.

I have outlined one negative edge.

Peter thinks it's a psych issue but I am not convinced...

Capiche?

Better bloody not be :|

I agree with peter. People lose because they enter based on whatever information they possess (never truly random) for argument's sake lets say their information is "wrong" 60& of the time so they'll lose 60% of all trades.

For this to work i'll assume "lose" means account goes negative and the trader exits the game.

A perfectly rational economic agent would behave this way however a perfectly rational economic agent does not exist in isolation (of course groups of players/agents can be rational).

So what other factors must be increasing the percent of losing trades, has to be that the agents abandon rationality. Examples of such behaviour would be; chasing losses at all costs, cognitive bias of information, letting losses run, cutting winners short etc.

 

[TheBramble]

You could probably lump the trading programs into the "large money" that I referenced in my statement. We can go into an interesting thread about trading programs but for here it's very probable that there is a human behind each one of them turning them on and off at whatever point some human or group of humans deem relevant. Large companies don't use trading programs in the same way retail punters use ea's.

This is such a valid point with respect to automated trading.

When I were a wee lad in t’ coding trenches we ‘ad saying that every piece of code had all t’ fears, ego, apprehensions, angst, formative desires, personal strengths and human frailties of the programmer who wrote it. Basically, the code is a mirror of programmer who writes it.

Of course, as Peter says, this goes way up the chain. The decision on what to monitor and how to analyse it takes the slant of the quant or risk manager that requisitions the code. They have been driven by the views, angles and biases of those who give them the broad brushstrokes to work with and constraints to work within. All the way down through the analysts who specify it and the coders who code it. The final pieces of code operate according to all those often unexplicated presuppositions and inherent yet unconscious traits of those involved in the production and operation of that code.

That’s not to say it’s crap, far from it. There is some truly amazing stuff whirring away out there and doing a reasonable job of if not anticipating market behaviour at least responding inhumanly quickly to the changing nuances.

In relation to OP’s intent for this thread, do 95% of currently operational automated trading bots fail or even manage to just break even? No idea. But I do know (from personal experience) that splitting the two major roles of trading into separate compartments makes a great deal of (positive) difference.

Analysis. Execution (and management). If you can do both well, that’s unusually good luck. I’m guessing, only around 5% can do both well. LOL.

It’s not that hard to analyse what ‘works’ in trading. Even just outright directional trading. Most bods attracted to the game can do that reasonably well. It’s when all those bods look back on what they actually did at any given time compared with what their system said they should have done at that given time that they scratch their heads, look at their smacked bottom line and wonder why they did it. (BTDIGTTS).

Where the lack of intelligence comes in that I referred to yesterday is their continuing to do the same wrong things. They don’t learn – even when it’s right in front of their face. They know what they should be doing. They’ve worked that out. But they continue not to do it. That’s stupid. That’s 95%.

 

[scose-no-doubt]

So suddenly, you went from a 50/50 win/loss ratio to something else. You went from 2 tick stop and target to something else. A 1 tick down to stop you out and 3 ticks up to realistically get you filled on the upside.

I don't understand this. Why are you allowing an extra tick for a realistic fill on profit but not for the stop? I'm a longer term cfd guy so this is all new to me.

 

[DionysusToast]

I don't understand this. Why are you allowing an extra tick for a realistic fill on profit but not for the stop? I'm a longer term cfd guy so this is all new to me.

If you have 1000 people in front of you in the queue on a limit order & you are number 1001, then you have to both hit the level and chew through 1000 orders ahead of you before you get a fill.

A lot of times, first time my target is hit, it'll print a fair few and then bounce off. Then you get into "don't be a dick for a tick" territory. It's one of the tougher aspects of trade management in my opinion. On a scalp, I will put stop to break even when this happens.

With a stop order, it submits a market order as soon as somebody else puts a trade through at that price. So - when you reach your stop, as soon as 1 order goes through at that level, the system puts in a market order immediately.

 

[DionysusToast]

I like and agree with a lot of the answers on here such as over trading to large for the account and phycology, but I think they are off topic. I think DT wants to look at market behaviour rather than the behaviour of the loosing trader.

I think the markets act in a way to make you do the opposite that you should do. I think it does this buy almost constantly returning to, or very nearly returning to the same price.

So your entry is often revisited, so is your stop, so is your take profit. Like the waves on a beech. Returning to the same place, you could stand there for ages and not really be able to tell if the tide is coming in or going out.

I think this happens because to the market a stop loss and an entry is exactly the same thing, so price is drawn back and forth to nearly the same point. At this point the market makers fine tune the gap to make a market, receive their commission, cream a bit off (stop run) and the end result is getting stopped out to the pip.

Yup - you are on more on the same page as me in terms of what I think the issue is. That is not to say that we are right and all the psychs are wrong.

I've been struggling the past few days on the ES. Once again we are down to the low hundreds on each level on the DOM but we've still got good volume going through which obviously makes it much more volatile. Now my stops are usually in the region of 8-10 ticks and after getting burnt a few times, I decided to widen this to take into account the volatility. The result - slaughtered!

Now - in this situation, with additional volatility, what is the one thing you would expect to NOT work? For me, tightening up the stops & targets is something I would expect to not work in this environment. Still, this is exactly what I did. I focused on the trades coming through on the Tape/DOM and at the first sign of a pause, faded the move with a 4 tick target and 4 tick stop. The result? Worked like a dream.

The reason I put this out there is that the market for some reason is counter-intuitive in many respects. Even when you think you know what you are doing, it throws a curve ball at you like this and forces you to re-assess some of the 'givens' about the markets.

Giving more room vs tightening up was not a psych issue. I tried giving more room but whilst I was doing that, I was very focused on what was going on (as you do when you are losing $$$) and it was this focus that made me notice the way the market was behaving. I would probably have missed it if I'd been making money...

 

[debrox]

No-one is saying the markets are random.

What I am implying is that the markets may have multiple negative edges because newbies should effectively display the effects of random 'coin toss' trading.

I have outlined one negative edge.

Peter thinks it's a psych issue but I am not convinced...

Capiche?

Why would a newbie trading demonstrate the effects of a random coin toss while trading?

 

[DionysusToast]

Why would a newbie trading demonstrate the effects of a random coin toss while trading?

That's the million dollar question!

 

[Jason101]

Yup - you are on more on the same page as me in terms of what I think the issue is. That is not to say that we are right and all the psychs are wrong.

I've been struggling the past few days on the ES. Once again we are down to the low hundreds on each level on the DOM but we've still got good volume going through which obviously makes it much more volatile. Now my stops are usually in the region of 8-10 ticks and after getting burnt a few times, I decided to widen this to take into account the volatility. The result - slaughtered!

Now - in this situation, with additional volatility, what is the one thing you would expect to NOT work? For me, tightening up the stops & targets is something I would expect to not work in this environment. Still, this is exactly what I did. I focused on the trades coming through on the Tape/DOM and at the first sign of a pause, faded the move with a 4 tick target and 4 tick stop. The result? Worked like a dream.

The reason I put this out there is that the market for some reason is counter-intuitive in many respects. Even when you think you know what you are doing, it throws a curve ball at you like this and forces you to re-assess some of the 'givens' about the markets.

Giving more room vs tightening up was not a psych issue. I tried giving more room but whilst I was doing that, I was very focused on what was going on (as you do when you are losing $$$) and it was this focus that made me notice the way the market was behaving. I would probably have missed it if I'd been making money...

I have a mate who is a trend trader. Initially he was concentrating his set ups in the direction of the longer term trend. One day out of interest he back tested the counter trend, trend. Now this counter trend with exactly the same set up produced a much, much better positive expectancy.

I know his set up quite well and I was completely gobsmacked. It was just so counter intuitive.