SIUYA

good point - it raises another issue. Humans are naturally good at seeing patterns and recognising, however when it comes to data and such, often those patterns have no real significance. (others may say this better) When it comes to trading thats why often the visual is the road map and you have too see what happens when you get to certain points on the map.

oh there is still a good amount of skill in operating an order - being able to read the ebb and flow of the market. They have the advantage of only having to go one way, not worry about stops, and to follow instructions - they have the disadvantage of usually having to follow the instructions, put up with the sales guys, or PM, beat vwap (or other measure) ensuring they get filled, and usually managing other orders - eg; what happens when you have a large order to sell on a screaming rally day as well as large orders to buy - do you favour one or the other? It is a different skill set. The difference for them is that the next day they wander in and sit down and get a new set of orders - like analysts - the risk is transferred to another person who actually does the trade.

I agree with wrb trader - there can be value here, but this is one of those often quoted statisitics that miss the other side of the coin. All the falls in the markets have probably occurred in only 30 days as well. Another great one people use is 80% of options expire out of the money - hence you should short them......:doh: - they forget about the ones that get rolled, and the 20% of the time that wipes out your account. However that is not to say that there might not be value in it. I would say the real value is only trading when there is a reason to. (another simple one to use a quant friend showed me is to wait until the markets crap out and then look to buy good stable high dividend paying cash flow stocks - problem is these opportunities are rare)

A friend of mine had this problem - turns out he had an insulin problem that did not get picked up - he has now fixed this and looks and feels much healthier with daily insulin injections.....not a recommendation to do anything more than ask at a checkup.

(the below is speculation based on what i know, and of people i know still in big firms - but hey these days it could all be complete crap - what with all the banking scandals) yes - there are very few speculative traders. Most at big firms either fit a mandate, hedge, operate orders or follow a systemised model. Most 'traders' at the bigger firms are doing just that - operating orders....and that can be a completely different skill set. As to your question where is the main skill that leads to profit - I would think the risk manager has little to do with - the parameters are preset, the mandates need to be adhered to. Their job is to make sure they are managed and not broken - independently. For the analysis - well - how often are we bearish, and eventually right, but loose plenty in the meantime as we went too early......if you are an operator, thats not your problem at the end of the day - you are entering or exiting based on directions, if you are an analyst - you just claim you were right and forget the times you did not give a call to stop out. Point is - the pros (a poor choice of words) at the larger firms dont do what we do, as they usually have analysts who come up with ideas, operators to help put them on, and they might manage the overall portfolio structure and bias.....and yet you only need to read any of the market wizards books to understand even with all this, most still refer to a chart and price levels. (They rarely worry about perfect setups, indicators etc - just price levels) Quant analysts - different again - I would think they are either mean reverting, using leverage and looking to spread, spread spread, or trend following and its a portfolio systemised approach looking for the outliers that kill the mean reverters. For me the real skill for those pros who might be like us is recognizing when they are wrong - few analysts ever need to worry about this - and running things when they are right.....this is what few retail traders do.

no - the hard part is doing the work continually, developing a philosophy for how the market works, developing, testing and following the plan etc etc the charts are just a visual tool that is part of it. yes - I do think people think that following a chart is easy and that they think that is all the work they need to do - that is the problem. (Vendors prey on that - here's my system that only requires a few minutes a day crap) Once you have all the other stuff out of the way then yes maybe thats all it takes and that is probably why its often said you never meet a rich chartist - there is more to it than that.

suby - no wonder we all get so confused. its simple - if you have a maths back ground and an affinity to it, and really want to learn it - go for it. You will be competing against very smart people and teams of them who have been doing this for a long time. if not stick to the simple things, and most importantly things that work for you. Drawing a box, or using statistical probability distributions pretty much do the same things IMHO - you find places of support, or resistance and you trade accordingly. You manage the trade - and your emotions (either by shutting them out or tricking them or playing to your strengths combined with your strategy) Period - every one pretty much does the same things to make money. and while its not that easy it is that simple at a base level. the rest becomes semantics of how to define support, resistance, a trend, where you place stops etc. and most people who are arguing with each other generally do the same thing but in different ways. any way --- have a good weekend - I am off to a buck's day pub crawl where statistically its a high probability i will get trollied (100% certainty), hitch a ride home in a taxi and not end up in a box with the cold hard cement as support - and will not find resistance from my partner because I did not deal with her or my emotions well as a result of my historical educational walk between pubs.

So you want to develop a mathematical edge around HFT and other algos that have been developed and are run by mathematical geniuses with more phds than ass holes......good luck. Seriously - learn to follow the flow of the markets, understand what makes them tick, and move first, develop a feel for them - then plan and test. Personally I think a lot of the 'edge' talk is BS - it comes from have a statistical or price related edge usually related to arbitrage opportunities. Our edge as traders is that we are small, nimble, dont need to trade and be patient and just need to follow what the market does. We should consider our selves as sheep and just follow the market. (others may differ but I have not seen someone argue with the market and make money over the long run as Mr market is bigger badder, more irrational and more ruthless - even big players who try and corner markets often get toweled up)

"who here applies quantitative methods to their trading specifically in regards to technical analysis....?" Any one who has done a backtest on a computer..... anyone who has done a foward test.... anyone who records their trades and analyses the results..... Plus uses technical analysis fits this criteria. That's why you do it. Unfortunately you will find most things are at best right 50% of the time, hence why you might apply discretion. Or you might find that they occur 90% of the time, but that last 10% wipes you out if that 1-100 year 9 standard deviation move happens......of you dont have a stop, and 90% is unlikely. etc; etc; What exactly are you after?

picked this up from else where - relates to trading but also face book recent IPO as the example. Facebook Handled their IPO Exactly Right « blog maverick particulalry this point - "I bought and sold FB shares as a TRADE, not an investment. I lost money. When the stock didn’t bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn’t the fault of the FB CFO that I lost money. It was my fault. I know that no one sells me shares of stock because they expect the price of the stock to go up. So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don’t see one, it’s you. In this case it was me."

http://thepatternsite.com/setups.html what you were looking for

Trading certainly has complex aspects to it and thinking it is simple is definitely a mistake, maybe the idea might be better stated - .....ensure any review has a focus on not making it unnecessarily complex if it does not need to be......or to KISS for those aspects where adding complexity adds nothing..... for those areas where complexity is required - until it becomes second nature, then maybe rather than common sense, careful and deep thought is recommended. There is certainly nothing common in trading - for every buyer and reason to sell there is the opposite, and they all may be valid in their own rights. as for other truisms - not! - i will think of some more I am sure..... The only thing I can think that always make sense, is the only truth and while it is often forgotten in many other aspects of life - the only way to make money is to buy something at a lower price than you sell it at, otherwise.... There is nothing true in the markets - most things are strategy specific (thanks zdo) and even hindsight often deceives. (its late and I think common sense is telling me I have complicated this )

none taken..... I also guess many other here must be not using charts given few are responding Initially yes - then you would watch the levels and see what happened at what you might deem turning points, support, resistance - whatever. Partially why these days with better computers, access etc I cant really find a way to automate (fully 24 hours a day) a lot of what i try and do without some form of discretionary input.....it turns out funnily enough its similar to what many people do in some form or another.....and more is then based around trade management once in a trade. Re educators - a different matter, but yes - basing an entire strategy around a chart without some form of context is what makes things hard from a computer point of view. eg; working out that its a low probability to buy something as you approach resistance in a long term down trend and the recent activity has shown signs of being congested - but all moving averages are showing as up on the current chart..... But more than anything a lot of the automation i find difficult is around the trade management for running things, and then the re entry if you need to..... so for me context is still important....from there one entry is probably only slightly better than another IMHO. The patience of waiting, holding back the impulse to trade to not chase, to then hold winners and cut losers - computers do this, but they dont have patience, they are impulsive as they take every trade, they will cut winners quickly if the rules say to and might not re enter....they might not understand bias and the fact that the ECB is meeting today....i have also not seen a computer recognize support and resistance the way i might. Now basing things purely on statistics is another matter IMHO Re options - there are other issues here - cost, cost of commissions, spreads, etc......and I dont think they are they great for day trading - likely to be better for longer term protection, occasional extra leverage or kickers, or as a passive portfolio type approach. and yes - if you run a portfolio of options it helps, but is not the cause of any success. Whereas I have seen some very good option trades put on based on charts - they happen rarely. (One guy turned $100,000 into $1.7mil over about 4-5 months based on buying OTM options when he determined a bull market was going to start and the 3rd wave (for elliots) was likely to occur - he was up about $2.5m at one stage) The chart ultimately to me is just a road map of past historical prices and should be a guide to what is possible - ultimately you want to be following the road, and not fighting it - but there are certain hairpins that you have to slow down on..... and times when you have to dodge on coming traffic.

I had read the Price action Blog previously and it is definitely highly recommended. One of his conclusions sums it up nicely for the Q of this thread..... "As a conclusion we can state that the issue is not whether a system is optimized, because all systems are in one way or another, but to what degree optimization impacts the probability that the system will fail in the future due to its nature."

in brief, why use the charts - they were the best tools available at the time. long story..... As a junior I read market wizards and the thing that i got out of it was that you buy things that are going up, (ie; dont try and pick bottoms - just go with the trend) There was the old style green reuters screen - top of the line in those days, and I used to paper trade the numbers, and started charting them. When I was allowed to trade live - I figured fundamentals had nothing to do with what was happening immediately in front of me. (We were equity options market making) In order to get the most out of making markets and rather than just hedging everything I started trading more delta (directional positions) in order to try and make the most out of the book. As we focused on price and not fundamentals - and looked for more putting skews on prices based on what the trend was, AND what other people were trading, it was important to be aware of price levels, and likely directions. Plus on busy days you might have done 100-200 trades, the important thing was to have a bias to what you thought, and what was happening in the market. It also became important to understand price levels and how they might interact with option strikes, and when to lean on your positions, or hedge them up. It was a long and sometimes tedious process, always printing charts, drawing lines, rechecking them.......but that's all that was available.

LOL, renovations - always overbudget, over time and a pain....especially if not dont properly. From my own renovation experiences ---Best labour saving device for those who don't want to do it.....pay someone else to do it for you.....otherwise, you are 100% correct prepare properly which is hard, and largely unseen and hidden work for a great job. If you are just patching up and flogging it off to the next punter then ....buyer beware.

Aha - the critical thing - Db beat me to it. its not about the platform, its about the desire/motivation/drive to actually put in the work, and so even if people were presented with simple things, a simple platform, etc; then they would still complicate it because they would rather have something that is complicated if it can avoid them doing the hard work. In other words could it be suggested we want to make things more complicated because we dont want to actually do hard work.....makes sense some what for all manner of 'labour saving' devices.....but I dont think that really applies here. The hard work is about thinking, time, analysis.....review, more thought... I do agree that it would be interesting if brokers gave out more tools to help people with this.....eg; a series of practice trade journals, spreadsheets with trade statistics etc; etc....problem is most people would find out they are over trading - and dont the brokers love that

Neg - problem with this idea is that if you go to the platform boards you will constantly see 'users' requesting more stuff - so what would happen is that a simple platform would then evolve into something more complicated. A simple platform exists already - all of them have the ability to draw lines and watch a chart - yet people want more things. We are all free to throw off the shackles any time we want.....So while interesting - my guess is a reversion to the mean of wanting more complicated tools to simplify things would result. Also based on the idea....."It's because a new trader sees something and thinks it works and gets stuck in a mindset", then surely if you showed all new traders a simple idea, that works reasonably well then everyone could be shown this and then they would be profitable and happy. If only imprinting was that easy........

Blue---- holiday time in the US - plus my guess is most people find it easier to just rely on single contract sizes....as for a few random thoughts. Re your two charts, everytime I have seen this sort of thing it tells me that when a system is working well you want to ramp it up, and when it does not you want to scale it down. Looking at trade 228 ? shows the problem with the fractional MM. Have you looked at why that trade occurred - was there anything different about it. Plus your idea of ramping it up from the start then reducing size would go against the best use of this - ie; you have a system that is winning and then you want to reduce its size.....what do you do when a system is loosing? Mind you people do a variation on this by tracking their equity (though the trade at 228 would not help this) For me - I try an change the amounts based on what I think is happening - too hard to program. A lot of this boils down to an exercise in what is the ideal thing to do v what is most comfortable and that works.....of course if fully systemised then it makes sense to apply the best strategy of MM for the strategy...... I wonder if there is a major difference between applying different strategies to mean reverting v trend following? '''''''''''''''''''''''' As an exercise for anyone who has a long list of trades, randomly - every 20 trades, throw in a series of outliers whereby you loose 2-3x what you would normally. Then do the same whereby you gain 2-3x what you would normally rather than taking profits. This will tell you more about the importance of making sure you dont have big losses, v trying to get a few bigger wins.....(not exactly MM (position sizing) as it does not tell you how much to buy/sell), but when you apply an aggressive MM section to this, the winners can get bigger once you learn to let things ride a little.

indicator: something that might help in summarizing an activity in the hope of being able to anticipate some future possible future outcomes. leading indicator: the one i promise will predict the future and I can charge more money for predictive indicator: the super duper one that I can charge more money for, but is much the same as the first one. Footprint: How big a heel you will feel for believing the future can be predicted purely from an indicator, or; How much of you trading equity will be stamped out by buying such an indicator. for my mind the best every used is "overbought" and "oversold" - but i try not to think too hard about them.

A lot of the maths might be handy after the technical analysis - to determine its validity, modify money management behaviour or check out the actual entries and efficiencies of a system......otherwise, you dont really need a lot of maths to apply simple TA. (my preference) Thats not to say that you cant also approach it from a purely maths point of view and do it without a chart, and use maths to optimise parts of a strategy......I suggest it will all depend on your love of maths. (check out people like ralph vince, kelly formula, optimal f, Ed Thorp, Larry Williams - there is plenty of info and debates out there - otherwise start as others suggest - at the beginning - remember there is the off said "lies, lies, and damn statistics" a lot has to do with how its presented, what it represents and then if you can follow it.)

In KISS --- Why.....why not? ........................... First I would like to quote from a book I just read, and a point I wholly agree with - Attacking currency trends - Greg Michalowski (not a bad read - keeps it simple, has some good points) KISS stands for "Keep is Simple to be Successful" ---- a simple but good recommendation IMHO ''''''''''''''' as to why people complicate things? I have seen people answer with responses such as - we over think things, we dont understand the basics, we think complicated works better etc; my personal theory (I this can be applied to many aspects of live and is just a personal idea I have) is that we have primal urge to control - or at least feel the need that we are in control. When it comes to trading this manifests itself in many ways and comes out in expressions such as 'masters of the markets', the "truth" in how markets work/move etc, 'tame the markets', 'control your emotions', 'discipline', 'rules based', even when we hope and pray - we think we might have some influence on the outcome etc; etc; So when we cant accept that most things are out of our control, or we often cant even control ourselves (impulse trading, anger, adrenaline etc) we believe that by adding more complications it is a way to improve the control we think we have.

yes....but then you kind of get into the Efficient markets debate - totally unrelated to HFT and speculation......personally I am happy to be wrong in my opinion of the fundamentals but right in how i trade other opinions. - another thread topic. always has been - technology has changed, the participants have changed the underlying drivers remain the same! It has always amazed me that people in the markets often think that other participants are there as a charity - While many may end up giving that is certainly not their intention.

interesting - good find. I did find it interesting that their idea of price discovery was meant to be fundamentally based and that those applying technicals or other ideas might not be welcome (a general summary) When you think most markets need speculators to take the opposite positions to people it does make you wonder..... next time you look at the charts - have a fundamental reason why as well just to be sure! I think the person nailed it - while HFT has many forms, HFT in some predatory disruptive forms will likely be banned, moderated, regulated. Trader IDs might make them more accountable and hence might be all that is needed. Maybe they had best look at the culprits that allow this - the exchanges.

Blue - have you ever tried testing something like this as an idea.... Take a MA, and for each MA level eg; 5, 10,15,20..... buy or sell a small amount. combine them as if they were multiple different systems. what are the results then? You are then not really relying on a parameter - simply a series of them each with an equal weighting...... (just an idea, not sure how to apply it in EasyLanguage)