Predictor

MightyMouse, I'm not sure what you mean "by looking backwards". That equity curve was generated by REAL TIME signals I provided. I imported the REAL TIME signals into Tradestation to analyze them. As for the present, my net real money percent returns are already better then my best year that I provided signals, and I'm only slightly off my all time highs. I see you made some assumptions about how I was doing based on just a couple posts in the ES thread where I had good trades but were stopped out. I was waiting for someone to make those wrong assumptions. I think it is human nature. And the ironic reality is that countless traders have been believed to be winning but either weren't even placing real trades or turned out to be losing. I want to clarify something else too. I have never claimed to teach someone "how to trade". I do provide instruction on specific skills but I don't even believe it is possible to "teach how to trade" -- just like its not possible to learn "how to program". Trading like programming is very broad with many levels of skills and difficulty. Of course, one can learn to make a given program and after they make many types of programs they may feel they learned to program but surely there will be some programs they can't make. I view trading as a process and not a result. A process that I enjoy. Sure, I'm struggling with stop placement. But, that's normal for me.. that's part of the process.

The idea of self-improvement has always fascinated me. In fact, I’ve been really fascinated by two ideas. The first idea is the idea of synthesis. The idea of combining my strong discretionary market read with technology to enhance my performance. This idea of synthesis is the idea that we can use technology to achieve self-improvement. The second idea I’ve been enamored with is the idea that if instead of trading in a single way that if I could trade in 10 ways that I might learn 10 times as much and 10 times as fast. We shift the paradigm from being forced to make decisions to a new paradigm in which we can try everything that we desire. Instead of being forced to trade in one style or another, we can trade in both. We simply try everything that we think could make sense and then later we evaluate which of those methods actually worked the best. For example, instead of debating on whether to use a smaller stop or a larger stop then we simply trade additional accounts with the two stop sizes. And, instead of wondering if we should take a profit quickly or let it ride then we simply do both. Of course, I see this as a learning exercise probably best conducted in simulated accounts but certainly for the stronger convictions they could be taken in live accounts. And, I do think this exercise has a great value as a learning tool. Yet, taking trades in more than a couple of accounts quickly becomes distracting and difficult. Meet the Clone I had built trading systems, and I had optimized them. The real breakthrough came when I realized that the optimization of a trading system and my clone concept were very similar and that optimizing my discretionary trades would be the ultimate clone. The idea was that if I could read my discretionary trades into a trading platform like Tradestation then I could bring to bear a great deal of analysis that had been reserved for system developers. This would represent a concrete application of my synthesis paradigm. Requirements and Limitations The first requirement is that you must have timestamps for your trades. I had planned to import my recent live trades into the analysis. However, when I checked my statements for the timestamps I couldn’t find them, and so instead I will analyze the signals I provided at C2 under my discretionary futures system. There are a few limitations, as well. The first is that Tradestation only has minute granularity and this introduces a certain amount of noise into the results and will likely result in slightly worse hypotheticals. The second limitation is that, obviously, it is only possible to analyze a single symbol at a time. The script can use the chart symbol as a proxy for multiple symbols. The trades should be in sequence and if multiple symbols were held overlapping then some trades will be skipped. Even with the limitations, a professional trading platform like Tradestation brings an unparalleled amount of analytical power for the discretionary trader. Basic Analysis and Example The second best month that I had offering signals in 2011 was in October. The approximate equity curve for that month is shown below. Note that this equity curve isn’t completely accurate because I’m using the ES for a proxy for all instruments traded, and I traded the ES, CRUDE, and the NQ. Likewise, the large loss came from a crude oil trade. The current script can’t handle multiple entries open in the same direction. Even with these limitations, I compared the hypothetical equity curve to the generated curve and they were about the same: The trade statistics can also provide useful information which can be used for future performance reviews and enhancement: One of the first things I note is that my average trade played out within about 52 minutes whereas I held onto my losers for up to about 4 hours. The analysis suggests that it might make sense for me to cut my losers more quickly. Fortunately, we don’t have to guess, as I can code this as a rule into the analysis if desired. Other Types of Questions The fact that multiple contracts were traded in the above example makes it more difficult to understand the size of the trades in point terms. This can be easily resolved by analyzing the profits on a per contract basis. It is possible to set the max contracts in the strategy properties or by overriding the contracts variable in the code. After limiting the contracts to only 1, we can see more easily see that my edge was worth about 1 point, average win about 3 points, and average loss about 5 points: Beyond The Basics The statistics above represent the approximate times that I opened and closed my trades. However, I can just take the entries and add new exit rules for stop and targets which I can then optimize. This can result in some trades being skipped but should prove useful nonetheless. Under the format options, it is possible to declare the “LossLimitDollar” and “ProfitTargetDollar” inputs as optimizations which allow Tradestation to do the work for us. A word of caution, the Excel spreadsheet must be read each optimization, and this can take a very long time. It is advised to start with broad general optimizations requiring limited runs. I let the optimizer work away for several minutes. I didn’t do a comprehensive optimization. Yet, the optimizer has already produced meaningful improvements. I notice the average bars in the losing trades dropped considerably: Of course, this is only a small sample of what is possible. The creative trader could analyze based on time of day filters, time based exits, and even add specialized entry rules. Technical Unfortunately, I can’t provide support for this script. This was programmed rapidly and was only intended for my use.. You must have Excel installed and the Excel file path and the sheet name must match exactly with what is in the file. The script will throw an exception if it doesn’t and the script must be turned back on. I’ve included a proper sample Excel file as an example. I've commented out the stop loss and take profit, sections and they must be uncommented to be used. I’ve left in some code that is not used but could be useful for expanding and adding additional trading rules. The code and sample Excel: (Copy and Page Into A New Strategy) http://themarketpredictor.com/external/tradestation_clone.txt'>http://themarketpredictor.com/external/tradestation_clone.txt http://themarketpredictor.com/external/Clone_Sample_Data.xls Inputs: WorkbookName: The file path and name. It must be exactly correct. SheetName: The name of the Excel sheet where the trades are located. This must be exactly correct. FirstRow: The first row to start reading trades from, typically row 2. LastRow: The last row to read to. This must exist. Other Platforms The minute resolution is one major limitation in the Tradestation platform. It would be very useful to have a similar script that could be run under Multicharts and Ninjatrader. If you program such a script then please send it to me, and I will update the article with your contributions. --- http://themarketpredictor.com

Speaking of the late day reversal pattern, sometimes traders will anticipate this and try to front run such a pattern which creates actually a new sort of pattern. basically as soon as enough traders anticipate something happening then something else happens.. surely a reason that many successful traders don't share their edges.

Neg.... the LQ providers can "clear" short inventory for days on end... they are very good at this game... IMO.. the later we go into the day the higher the odds of reversal.. I can share this edge because I haven't been able to profit from it and I think it is known. But during the intraday session the day trader builds inventor and must close it before end of day. When the trade is too imbalanced then we will often get a reversal late day.. Mark Fisher talks about these patterns. It is very hard to get these to work though unless you're willing to hold overnight because the other factor is that many funds will run orders late day. It may be they have in mind that they can run orders after the day trader inventory is mostly cleared and get fairer prices.. imo they are just fooling themselves. The other risk is that many funds get privileged information throughout the day and then run the orders as soon as they complete their analysis and the end of day is the last chance.

There is my 2nd target. It was only a small loss. I'm not sure if I would have held or not but I had to leave. I didn't want to leave it on and possibly be stuck over weekend if I didn't get back in time if my stop or target weren't hit. That's why I really closed the trade. I really don't like to lose... But on other hand, I gave the trade a lot of time and did see some evidence it wasn't working. I closely track the order flow, intermarket relationships, the way the tape moves, and I'm going to start tracking various measures of open inventory. I think that one of the difficulties in reading the tape is that the HFT bots are always front running the institutions.. so they get a bit ahead but then they clear immediately. The frequent "clearing" makes it more difficult to read how the actual positions are building. This clearing action also allows the LQ providers to hold the market up for very long time... as they run stops and so forth. Part of this dynamic is just how the market is built... when too many traders take to market on one side then the limit pressure becomes heavy.. providing a floor and/or making it difficult to clear. In my case.. when I closed trade due to an external event.. I became one of the noise traders but in all honesty I had lowered the probability of that trade working.

My read tells me LQ providers are getting overloaded with sells... but equities are still strong... strong oil might be bad for market. One of difficulties on shorting on a day like today is that we get can some strong rallies on any pull back... This makes it difficult to get full value for the short trades that to do work. Knight really soared today... I was actually surprised that anyone cared to fund them with retail trading drying up. --- Institutions looks to have exhausted the equities bot.. looking for a drop here.. --- Pulled out.. have other appointments today.

pag... Interesting... my read tells me that institutions are selling but there is still a strong bid. I need for this bid to drop to clear. So far trade hasn't shown any FA but I still see indications the trade can work.

Offering at 88.50.... looking for 85 to possibly come into play and lower. Not going to push this one as against the trend. .... We rarely don't get strong reversals when market is this strong at least for a few days. I'm testing the waters to speak. I've went to market..

My read tells me longs are high risk here. However, I don't like shorting when trend is this strong either... I believe the odds favor we are topping here though. Not sure where market is right now as don't have my software up but in general this is setting up excellent short.. for 1-2 days

Some comments were posted I wanted to address. Most of this article applies to my discretionary trading but it also applies to my systems. I have my discretionary trades which is where I am applying highly discretionary trading, and I have systems with strong edges. Unlike some other system traders, I do not trade my systems mechanically nor do I believe I have to take every trade. Why would I want to throw out my years of experience and superior market read just because I've program something that was profitable? I make both adjustments to the trades and make a decision on whether I will take every trade and how I will manage the trade. I, also, don't always follow the system rules once in the trade. I give myself a degree of discretion to adapt the system based on my read of the current market conditions. For my system trading, I view my discretion as critical. It is like a "guiding hand" principle or "captain of the ship". I trade my systems. My systems don't trade me. Now some times, the system will think something will happen and I will think something else will happen. The results can be interesting as I've found often we're both right. Sometimes I view my systems as traders, I can put up to "bat" when I'm tired of trading. For most my systems, I have "groups of systems" which are variations of a concept that have similar return histories and similar programmed logic. I monitor the performance across the variations and make decisions on which variations to run. I've found that in some cases, a variation will break down as the market becomes more efficient but with adaptation it can remain profitable. I know some mechanical traders who beat themselves up when they don't take every trade and then they try to take every trade and end up losing even though they felt like they shouldn't. I don't trade that way. I don't operate that way. I am not operating from a "critical mindset". I am not operating from just a "looking back" perspective but from a "looking forward" perspective. For me, my adjustments are part of a process.. part of a flow. Overall, I believe my adjustments boost my performance but in some cases I find that my adjustments aren't effective. I focus on what I'm best at. I don't beat myself up when the adjustments weren't useful because for me the operation of the system is an active process. I will over time cut out those adjustments that aren't effective and focus on the adjustments where I feel I add value. I don't regret the hypothetical.

Okay, I see your points. This is kinda what I was getting at a rule would be explicitly defined "quit after 3 losses" which is rather arbitrary. But, my principle is to cut back when I'm not trading well (as well as to trade at my best). Yes its all about psychology.. if I feel I am strong and reading the market well then I have the option to get back in. What develops from this style of thinking is that I'm always able to focus on my internal state and my relationship to the market and my read...whereas when I used rules, I was focused on the rules and it was very distracting and hurt my performance. While the trades may not be truly serially correlated, some styles work better for certain market conditions...

Goodoboy, I'm sure you will get a lot of opinions as everyone has on take on things. Db has his but I rarely/never measure by risk/reward or only basically. I am more concerned with the probability I will make money. I typically will use a large stop because I don't have time to think about where I should put my stop and I don't want to be distracted. I'll exit using my tape read when I feel that I'm more likely wrong then right. I am also concerned with whether or not I can clear my positions. Even though I detected a seller at 52.50, I would not have taken that trade because I wasn't convinced I could clear lower.

goodoboy.. I told you there was a buyer at 50. Why would you put a stop above what we believe might be the natural buyer? Did you put your stop directly below what you thought was a pivot? I've found that in many markets, we will go out, touch just below the pivot and then reverse. We seen that with the sell off earlier today.. where we touch just above a prior high. I believe in this case.. the equities buy programs kicked in just above the natural buyer. Of course, these patterns don't always setup in this way...

What we have now is something interesting.. equities bots are starting to sell and we have a possible natural buyer in futures at 50ish.... get ready for dump back to 50, imo. I can be wrong though.

How do you plan to see if 55 holds and get long at 53.50? If 55 holds wouldn't that mean 53.50 won't fill... 53.50 is no mans land... first buy opportunity is 52.50.. the better one is 50. or you could buy as you suggested with a run over 55... I'm not sure the wisdom of buying new highs in a down trending market though unless you are sure you've got the reversal.

Locals are just short term traders who tend to trade same market all the time. They can trade large size but they can't hold so they can't move the market far/much. These are really the LQ providers today.. few/no real locals. Traditionally locals got payed for volume.. so they can try to make activity.. make it look like they are doing something when market goes nowhere. The new locals are day traders trading from home... imo -- FX, I might say there is a natural buyer at 1350.. this just means a buyer who will actually hold inventory for a while vs a bot who will immediately clear... like the seller at 52.50-53 cleared very quickly..

Buyer at 1350.... possibly. --------- Seller at 52.50

Only locals buying... based on my tape read.... more lows in store.

I'm not trading today. I recognized the market was higher risk and made a decision not to trade. One reason was I couldn't find a definite timeline for the events. I believe this move was perhaps better a setup for options then futures, especially before the market became volatile. I'm curious if somehow the premium was still on those options because the events.. as I don't trade options. However, I've been surprised at just how predictably even if volatile the market is trading. I was concerned it would be more erratic. Predictably of a certain sense. There are always games to be played and a certain type of game being played now is doing well. Overall, market has held up way better then I would have expected. That means either #1 we're only 1/2 way through the decline today or #2 everyone knew Draghi wouldn't do anything or #3 the market did not rally because of his remarks but because of something else.

bakrob, originally I mentioned the code was available on my blog for a fee (as an after thought after developing it). However, because of your interest, I will write an article up and share it here for free. It may take a few weeks for me to complete this though as I've some other projects going on and need to clean the code up and may expand it. I appreciate your patience and look forward to sharing this. Josh, well it can be difficult to communicate well over the internet and easy to misread communication. I only meant to suggest that it sounded like our styles might be similar and therefore collaboration could be a possibility. However, I don't know enough to know. Like you, I don't have any idea how this collaboration would take place. When I said "you have potential", I really meant "I think we might potential to work together". As for being busy, that much is true, and I am busy for the next few months. I usually have at least a few things I'm working on at any one time.

Principles Over Rules: A Topic From The Logic This is the first in what will be a series of lessons that I'm going to be sharing from The Logic. The Logic is a collection of ideas, concepts, psychology, philosophy, and basic mental solutions I've came up with to deal with the roadblocks I've faced as a trader. I disagree with most of the ideas and concepts that are published on trading psychology and many of the efforts undertaken by so called experts and trading coaches are in my opinion misguided. It took me a great deal of effort and many years of work to understand exactly how the common ideas were wrong because they weren't obviously wrong. I owe a great deal to Dr. Steenbarger's work in helping to guide my thoughts on these matters and to help orient me to find my own answers. The approach I will take is a compare and contrast methodology. First, I will take a generally accepted idea, hold it to the light of logic, and then I'll contrast this idea with the new insights that lead to breakthroughs for me. This article will focus on rules and how the rules I created to help me trade actually created a trap and the concepts that eventually led me out of that trap. You see new traders are fascinated by rules. The market is unstructured, chaotic, and very risky. There is an inherent need in people to try to protect themselves and we need to have a sense of security in order to be able to take action. People need structure. And, the common solution to this problem is to focus on rules. And most new traders approach this with a list: I'll only trade after the first 30 minutes. I won't trade overnight. I'll use tight stop losses. I'll quit after 3 losers in a row. And, the list can go on and on. There, at least, 4 essential problems with this line of thinking and they are: #1 The rules we like may not make us money. An exaggerated example is that I'd really like to be able to risk only 1 tick per trade. And most people know that trying such a thing would be foolish and would be just throwing money away. And, that's obvious but its no more arbitrary then the trader who says I'll risk 8 ticks per trade because that's all I'm comfortable with risking. Another example in this category is basically traders who are trading a system or a plan that doesn't have any basis in reality. It is not uncommon for the beginner to start trading a "system" that they don't have experience with because they didn't want to trade on the simulator and that they haven't backtested because they didn't do the work. That's a real recipe for disaster in my opinion. So, this first problem is the problem that basically some rules are going to be bad rules, and the rules that we like the most may well be the worst of the bunch. #2 Rules Are Primarily Focused On Avoiding Bad Things Versus Maximizing Opportunity Most traders who do focus on rules are going to focus on rules that are primarily aimed at avoiding loss. Examples are too numerous to list but examples could be trading time restrictions, stop losses, number of losses before quitting, making up new rules to avoid each new loss, and so forth. Starting with such a risk averse approach is already making a mistake because great traders understand that losses are impossible to avoid and that what great traders are really good at is maximizing opportunity. Imagine showing a business plan to a group of investors where everything was about avoiding loss versus making a profit. Of course, investors care about risks but first they want to know that the business can generate profit. #3 Rules Can Be Deceiving One of the biggest problem with rules is that they can be deceiving, and that's kind of the point I made in point #1. But, the trader who creates a rule obviously creates the rule for a purpose. The problem is that the rule may or may not fully serve that purpose. Let's imagine a trader wants to limit his risk and he's decides he'll risk X dollars per trade but he may not have thought further. So, he's trading with a rule that he believes will protect him. Yet, if he has 10 losses in a row then his total losses will be 10x as large has what he may be thinking. Maybe, he's decided to use a stop loss to limit his risk but he's trading an instrument that gaps. He made rules up that he thought would protect him but there is no guarantee that they'll actually be effective. #4 Rules Are Rigid Rules don't allow for taking advantage of exceptional opportunities. In my case, I had a rule early on that that I wouldn't take any overnight trades because, at the time, I was doing much better in my planned trades. Well, one evening I had planned a trade for the next day that actually setup overnight and was ready to be taken. I seen the opportunity and I took the trade. And, then I thought to myself, I've broken my rules and it started to bother me, and so I closed the trade for a small loss, and the trade ripped higher and would have been one of the best trades of the year. And, that's really the trade that made me aware that there was a big problem with my whole psychology. I lost a great opportunity simply because I had a faulty belief system. And this was really when I started to question everything. And from this experience, I came up with my concept: Principles Over Rules. Principles over rules means I operate from first principles and not as much from rules. Principles are more useful then rules because first they don't have the "holes" that rules often have. For example, if I had to create rules to protect my capital then surely I'd need many, many rules and it is likely I'd miss one whereas it is easy to state the principle of "seeking opportunity while managing risk" and operate by it on a daily basis. Principles allow for constant re-evaluation and keeping an open mind while holding central important concepts. Principles help me to avoid the arbitrariness that rules can easily assume. Principles allow me to stay fluid and to adapt and to take advantage of exceptional circumstances without the baggage that would come from a list of rules. Positive concepts such as focusing on strengths, finding opportunity, and maximizing the best opportunities are more easily stated as principles. Of course, I do have several rules or really procedures I try to follow. But, most of my rules aren't strict rules, and I'm ready to adapt them as needed. My rules are to serve me and not for me to serve the rules. They are always guided by my principles first policy. The only really strict rule that I have is that I do have a maximum amount per day that I can lose. I can risk that on one trade or several. But, I know that if I'm at that limit then its time to shut down. Yet, even when dealing with negatives, I've found that often my principles have been more useful. For example, my principle is to trade when I'm at my best and to shut down when I'm not trading well. It is not uncommon for me to have some losses, take a break/re-evaluate, and come back later to make a profit. I operate from a strong and positive state of self-monitoring and evaluation versus the overly critical and distracting state that trying to follow rules typically produces. Rules are about protecting us from ourselves and once we are ready take responsibility then we don't need the rules. We may need some procedures but we don't need a rule for everything. Ask yourself, why are so many people afraid of heights? I believe one reason is because many are afraid that they will jump. Once we understand that we're not going to jump then heights become a little less scary. --- http://themarketpredictor.com

I use the Bloomberg calendar http://www.bloomberg.com/markets/economic-calendar/ to track events. Is there an ECB/European calendar like this where I can see potential market moving events and the times they are for release? The TOS platform lists 11:00 PM tonight as an ECB event but doesn't contain a lot of information.

Josh, I think you are taking things the wrong way. I only meant to convey that we trade the same instrument and may have similar ways of trading. I don't know know for sure though because I don't really know what you do. However, some of your posts have been some of the of the highest value (on the 5 point or 4 point scale I talked about). Anyway, as I said I'm busy for next few months... now, of course, everyone can continue on not liking me and trying to align themselves on the competitive axis. Best of luck,

I had a position on in my C2 account and watched as it happened. I was completely shocked how fast the market moved and how quickly my losses mounted. I was long just for a small scalp. These weren't real losses but it was on my track record (which I've hidden to keep firms/traders from trying to copy me). It really took me by surprise. But, let me back up... I had actually predicted that this would happen the night before. Yes, I predicted the flash crash but I didn't expect it to happen as quickly as it did. I was looking for that move within about 3-5 days to take place. I actually made a large profit from this trade on the long side because I added a bit which I rarely/almost never do when I'm down. But, I recognized it was an exceptional opportunity.This event was I believe the largest DD I experienced over my track record. Yes, it did change my beliefs. C2 didn't allow me to enter a stop with my entry (efficiently) but it made me swear to ALWAYS enter a stop at the time of entry and not after entry. I realized that when these things happen there isn't time to react! I always use bracket orders. This came in handy recently when my internet went down and I was in a large trade. My phone is an internet phone, as well so I had no way to call the trade desk. But it also made me really question the value of stops for longer term traders...As a day trader it reinforced that notion but for swing traders.. I think it shows how risky using stop losses can be because a lot of people lost a lot of money who had stop losses. Events like these are unfortunately hard to come up with an answer for. Also, I learned that its risky to get involved during these periods in equities where trades can be busted and losses can mount. Fortunately, futures don't have that rule. I read that a lot of traders lost money in equities due to busted trades. I think that made it worse as traders were afraid to try to take advantage of the situation. I think for sure though this was a bad event for all traders and investors, and something I never want to see happen again.. though surely it may. --- Blog - The Market Predictor

One thing to note is what stop losses actually: first, they do not "protect" you from losses like insurance. They merely transfer open drawdown loss into closed loss, whether or not this is a benefit depends on what the market does next. From my research, stop losses 1. Limit the MAE (good), 2. Often increase the Average Losing Trade (bad), and 3. Almost always increase the drawdown (very bad). Most traders understandably want to keep their losing days about the same size or smaller then their best winning days. Yes, I don't want to take a big losing trade but what I really care about is how much I can lose in a day whether it comes from many small losses or 1 big loss, I really want to limit my MAX % LOSS per day. So, I've a max dollar loss based on a % that I'm comfortable with that I can lose per day. I want to explain why I have this. I'm very strong at trading even if I didn't have the loss limit then on most days I could recuperate from early losses. But, that's not the point of the my max loss limit. There are a few days, maybe as few as 1-2 out of the year, where I might just completely be reading the market wrong and dig myself into a big hole. That's psychologically damaging. Again, I come into the market from a position of strength and self belief -- not from one of a scarcity mindset. If I have a bad day, I don't have to get that back in the same day. In other words, my max risk limit per day doesn't have anything to do with optimizing my profits but about managing risk. As I noted, my research has shown that the larger stops do tend to result in straighter line equity curves but they have the cost of reducing the average win to the average loss size. I like for those to be closer to equal even though its not always optimal which is why (based on my read) I will make adjustments. My point is, most traders just do things without really thinking about what they are doing or understanding how these things work. I encourage traders to THINK and research these areas for themselves. My 2 cents... admins feel free to move this to another thread if desired. Steve, you're on ignore and no idea what you just wrote but based on your history, I'm sure that I'm not missing anything.