Article The Evolution of a Trader

T2W Bot

Staff member
1,454 55
At some point, if they last long enough, all traders discover that successful trading is not the inevitable result of a good trading strategy or system. If all we needed was a good system or indicator we would all be successful traders. Yet clearly we are not, far from it, there are very few traders making their living consistently from the markets.
Technical analysis is a vast and well researched subject. Many minds have poured their heart and soul into searching for the holy grail of trading: the system, strategy or indicator that will yield to them unlimited wealth and glory. Yet with all this depth of knowledge readily available, trading profits remain as elusive as ever.
System Vendors and the Holy Grail
If we were to take a scientific approach to evaluating technical analysis we would have to conclude that it is of limited value. System vendors, though, will continue to exploit our desire to believe that there really is some secret knowledge that will enable us to...
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Beach Runner

Active member
128 2
I always find Malcolm Robinson's writing thoughful and interesting and this is no exception; I enjoyed reading it. There are, if one searches, quite a few articles around online authored by him.
 

trendie

Legendary member
6,233 1,007
The whole point of his article is to develop your own style, and not to rely on system vendors.
He makes a well-reasoned argument as to why not.
Fair enough.

But, if you log onto his website, "masteryoftrading", there are links to some system vendors !!
( vantage point, for example )

I find that quite amusing.

Nonetheless, his article is quite good.
Nothing new.
Nothing controversial.
Common sense.
Generic.

edit: good anologies between trading and golf / tennis, re:skills and tools.
 

s-a

Active member
111 0
I like this topic a lot. One statement that I have problems with is the phrase, "cut your losses short". What is short? I'm a FOREX trader and I used to put in 30-40 pip stops. What happened was each loss was nickel and diming me to death! Upon backtesting my trades I realized that I would have been far better off using a wider stop, somewhere in the 100-150 pip range. I trade of 240min bars and have found that using a ATR(20) * 3 to determine stops has drastically increased my profits. Just my 2 cents though. Is this still cutting your losses short? Maybe, because I stick to my exit, but when I used to hear that phrase I always imagined it to mean that one must use a very small (short) stop loss.

HG
 

trendie

Legendary member
6,233 1,007
s-a,

I am going through the same issues as you did, re: cutting losses.
I was using an arbitrary 30-pip SL.
I now understand, that I need to look at the bigger picture, ( bigger time-frame ), to get a sense of the ranging to determine a more appropriate SL.
Yes, ATR seems to be the logical approach.
 

Zenda

Well-known member
491 10
As a trading instructor and someone who sells a trading system (£39.50) not £5,000 - I agree with every word Malcolm writes in this article - Malcolm always writes in a clear and consise fashion - based on real experiences. Always a great read, and sensible to.
 

Beach Runner

Active member
128 2
s-a & trendie,

Me too! Realised I was using too narrow a stop (on Eurodollar spreads - which hardly ever move anyway). And I think one has to adjust the stop according to the market - and I know that's a pretty idiotic thing to write, but I'm probably not the only one who forgets the most basic stuff.

And I agree with Zenda's comments on Malcolm Robinson's writing.
 

tcksee

Junior member
40 0
Very good article should be read by everyone could save many people
much money
 

dbphoenix

Legendary member
6,952 1,244
s-a said:
I like this topic a lot. One statement that I have problems with is the phrase, "cut your losses short". What is short? I'm a FOREX trader and I used to put in 30-40 pip stops. What happened was each loss was nickel and diming me to death! Upon backtesting my trades I realized that I would have been far better off using a wider stop, somewhere in the 100-150 pip range. I trade of 240min bars and have found that using a ATR(20) * 3 to determine stops has drastically increased my profits. Just my 2 cents though. Is this still cutting your losses short? Maybe, because I stick to my exit, but when I used to hear that phrase I always imagined it to mean that one must use a very small (short) stop loss.

HG
Cutting your losses short has nothing to do with how "tight" they are since an inappropriate stop can virtually guarantee a loss. The width of the stop depends on the setup used. To use exactly the same stop in every case is unlikely to achieve the desired result. A more productive exercise is to determine in advance just exactly what it is that the market has to do to prove you right and exactly what it is that the market has to do to prove you wrong. It is this exercise to which "cut your losses short" refers, plus, of course, the act of actually following through on the cutting.
 

halldorpb

Junior member
17 0
All my trading systems backtesting indicates that the most effective stop for the long term is at a mighty 30-100% drop from a high; 100% (buy and hold) really works out great, unless you buy Enron of course. In my opinion, those who use very close stops are simply playing themselves more risk averse than those that use very wide or no stops, and this is reflected in their generally smoother and stabler equity curves, but less profit potential.

The key to real performance seems to be market selection, market selection, market selection - and a simple risk management method that flexibly accommodates the market.
 

SOCRATES

Veteren member
4,966 134
This article is well written in a way that has something in it for everyone. May I point out that it is very fashionable to muddle what is a System and a Method.

A System is the way that something works, whereas a Method is a means of using a system in order to achieve an objective, and a Strategy is a planned method of achieving an objective.

It follows that a Superior Strategy is a better way of achieving an objective, whereas a Supreme Stragegy is the very best strategy that can be utilised in order to achieve a selected objective.

SOCRATES.
 
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Windlesham1

Well-known member
429 25
I'm happy to mentor any novices,after 2 years full time options and futures trading. What burns my a**e is that I let my broker trade some funds for me,incurring a 17% loss.For my own account in the last 12 months I'm up 30%,double my first year's profits.
 

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