Why So Many Indicators but Little Strategies in TL?

[waveslider 10]

Ok I am ready to release my ultimate system. It's very simple.

Get a lot of traders together in one room. When they hit buy, you sell. 90% of traders go broke in the first year, so you just get rid of the 10% and you have a cash cow. Volunteers?

 

 

:ciao:

[Sledge 13]

Ok I am ready to release my ultimate system. It's very simple.

Get a lot of traders together in one room. When they hit buy, you sell. 90% of traders go broke in the first year, so you just get rid of the 10% and you have a cash cow. Volunteers?

:ciao:

 

I'll get in that room with you I won't need to watch their clicks though!

[Sledge 13]

In my opinion one should only program to automate parts (if not all) of an already successful discretionary system. It is very dangerous for an individual to try and program a new system by plugging indicators together which creates a curve fitting nightmare. My guess is that this is what Sledge was referring to.

 

Actually I'm not trying to piss on the parade- but automation and the chase for the Holy Grail is a time consuming and fruitless adventure. Thousands of people have tried it, thousands have failed.

 

If you can understand what the bars tell you- what do they say- what knowledge they speak to you- you are light years ahead of the average trader. If you can look at a chart and say "Ok, I see buying on this bar" or "I see extreme weakeness- time to cash out and bank $" instead of "one line crossing another" to make your trades- you will be highly successful.

 

Trading simplified is this:

Find the major trend and go with it

Use smaller timeframes to pinpoint your entry.

If long- look for weakeness appear and decide: Cash out or see if it is a reload

If Short- do the same

Buy Support and sell Resistance

 

I know it sounds simple- but in reality- it is. Took me a long time of dicking around with every mix of indicator under the sun to finally learn this (with some help from a cool cat named Tom Williams) to realize- IF YOU CAN READ A CHART- LIKE A PIECE OF SHEET MUSIC, THE MONEY FLOWS, THE TRADES TAKE CARE OF THEMSELVES.

Edited June 10, 2008 by Sledge

[Hlm 10]

Actually I'm not trying to piss on the parade

Haha...yes, I did not take your comment as pissing on the parade . I just wanted to make clear to others that there are two different paths to automation and they are extremely different.

 

but automation and the chase for the Holy Grail is a time consuming and fruitless adventure. Thousands of people have tried it, thousands have failed.

The correct path of automation does not necessarily equal the "chase for the Holy Grail" any more than learning how to "READ A CHART- LIKE A PIECE OF SHEET MUSIC" does. The correct way to use automation, or at least the way I think is correct, is to simplify aspects of your methodology so as to be able to process more information faster and more efficiently. One does not need a fully hands off automated system to take advantage of its use. For example, a simple system can be used to watch several instruments (e.g. the minis) and give you a general idea as to which one is currently the strongest to trade based off of your specifications. The actual reading of that instruments chart for specific entries and exits could still be completely discretionary.

 

If you can understand what the bars tell you- what do they say- what knowledge they speak to you- you are light years ahead of the average trader. If you can look at a chart and say "Ok, I see buying on this bar" or "I see extreme weakeness- time to cash out and bank $" instead of "one line crossing another" to make your trades- you will be highly successful.

I absolutely agree. This level should be obtained before any attempt at automating aspects of your strategy.

 

Took me a long time of dicking around with every mix of indicator under the sun

Sounds like you took the first route (the most popular) of automation instead of the second. I went through a long and painful indicator plug-n-play period as well. It seems like no matter how much you warn a new trader of the dangers, they end up having to find out the hard way for themselves. The most one can hope for is to get through that stage quickly and with as little financial loss as possible.

[Sledge 13]

Sounds like you took the first route (the most popular) of automation instead of the second. I went through a long and painful indicator plug-n-play period as well. It seems like no matter how much you warn a new trader of the dangers, they end up having to find out the hard way for themselves. The most one can hope for is to get through that stage quickly and with as little financial loss as possible.

 

Its funny isn't it- that you DL an Mt4 platform or virtually any other platform and they have a list of 100+ indicators on them- you think "Sweet! the answers to my trading fortune are right here- they are actually giving me a cheat sheet- I'll be RICH" until you figure out that the vast majority of them are LAGGING indicators. They are more like "Hey this JUST happened" Wow- thanks for that.

 

I'm not saying that indicators are worthless. If you are new to the game and you want to see if a market is overbought or oversold- you could use a Stoch or RSI to get a FEEL of where your instrument stands. It could warn you that you are getting into dangerous territiory to try and go Long on a GBP/USD when the Stoch is at 89 or RSI is at 77. But the bars (or candles) will tell you when the top is in place.

[Guest Tresor]

Actually I'm not trying to piss on the parade- but automation and the chase for the Holy Grail is a time consuming and fruitless adventure. Thousands of people have tried it, thousands have failed.

 

If you can understand what the bars tell you- what do they say- what knowledge they speak to you- you are light years ahead of the average trader. If you can look at a chart and say "Ok, I see buying on this bar" or "I see extreme weakeness- time to cash out and bank $" instead of "one line crossing another" to make your trades- you will be highly successful.

 

Hi Sledge,

 

I am an unexperianced trader but a successful one. I started a few months ago. Trading has become my hobby horse. The more I trade the more fun I have earning money and discovering intricaties of trading. I experience such passionate hobby addiction every 4 - 5 years (women, motorcycles, etc). After 2 - 3 years the fun fades (except for women). My aim is to go automated / semi automated before I get bored with my present hobby. The more I will learn about automating the better I will understand the markets in case I fail with automation and will have to trade non-automatically.

 

The more people piss on this parade the more I want to pursue my scheme

 

Regards

[brownsfan019 17]

Hi Sledge,

 

I am an unexperianced trader but a successful one. I started a few months ago. Trading has become my hobby horse. The more I trade the more fun I have earning money and discovering intricaties of trading. I experience such passionate hobby addiction every 4 - 5 years (women, motorcycles, etc). After 2 - 3 years the fun fades (except for women). My aim is to go automated / semi automated before I get bored with my present hobby. The more I will learn about automating the better I will understand the markets in case I fail with automation and will have to trade non-automatically.

 

The more people piss on this parade the more I want to pursue my scheme

 

Regards

 

This is priceless - an unexperienced, successful hobbyist.

 

Sooner or later this 'hobby' will prove that it requires full dedication or none at all. Time will show you this.

 

Here folks is part of the 90%+ number we hear about those that fail. Clearly this person has no desire to treat this as a serious business, they simply want an ATM machine at home while they are doing other things.

 

And to that I say - THANK YOU VERY MUCH FOR YOUR PARTICIPATION IN THE MARKETS. May your glass always be half full and may you constantly replenish that glass.

 

 

This is the beauty of the markets - anyone (and I mean anyone) can try to play in this game. And as soon as they leave, a new one will jump right in. As evidenced here, many simply want a little part-time 'hobby' and figure, how hard can this be!?

 

And sadly (depending on how you look at it) the markets NEED these people. The serious traders NEED hobbyists that are willing to chase that pipe dream of having an ATM machine at home while on the beach getting drinks from girls in bikinis while your Maserati is getting polished.

 

Don't let me stop you from chasing that dream though. Please give this hobby of yours a serious go and see what you can make of it!

[Guest Tresor]

 

Sooner or later this 'hobby' will prove that it requires full dedication or none at all. Time will show you this.

 

 

This hobby takes me 14 - 16 hours a day for the last few months. If I treated this as a normal job I would spend 8 hours.

 

Regards

[Soultrader 12]

This hobby takes me 14 - 16 hours a day for the last few months. If I treated this as a normal job I would spend 8 hours.

 

Regards

 

A hobby costs money. Treat speculation like a game or hobby, you will lose. The only way to beat speculation is to treat it like a business.

[Guest Tresor]

A hobby costs money. Treat speculation like a game or hobby, you will lose. The only way to beat speculation is to treat it like a business.

 

Hi Soultrader,

 

It does cost money. I spend money on trading seminars, books, travels, professional charting software. I will soon start paying for a shared ownership in 8 processor (quad core CPUs) machine - a very powerfull one that I will use for data mining. My hobby's aim is to become a proffesional trader. The more money I make the more I like this hobby. I learn money management techniques, I learn trader's psycholgy, I am - not forced by anybody - picking up the knowledge of math that I lost after I graduated and. I hated math while at school. In a year from now I will do my first coding. Would you devote yourself to anything like this if it was just another job in your career?

 

Try to remember when you got your first job. Were you excited? I was excited like hell. With every next job the excitement was fadeing. Now I have been excited with my trading for several month. This excitement of mine rises every new day I trade. That's why I call it a hobby not a job. That's why I recently quit my regular post and decided to live from my hobby. Isn't that great that you can make a living from something you like? From a hobby.

 

It is 3.24 am my local time and I am making a blueprint of a module of my future trading strategy for a programmer. Would you sit in the nights and write it if it were not your hobby but just a job?

 

Regards

[MC 10]

That's why I recently quit my regular post and decided to live from my hobby. Isn't that great that you can make a living from something you like? From a hobby.

 

You're telling me you've jumped into trading for a living after about 10 months of experience? :\

 

I hope you have deep pockets, or you have next to no living expenses.

Otherwise without sufficient resources you'll probably find yourself pressuring "just one more trade" and maybe throwing money management to the wind so you can afford your bills that month.

 

If you've been profitable from October and all the way down I'd say that's a nice accomplishment for a new trader so hats off to you.

If you have the ability to jump all in like this that's cool. I wish you luck and hope it works out for you.

[bootstrap 47]

well i have read all the posts int his thread and there were hints to the answer, but i didn't see it. maybe my eyes are just tired. but the simple answer to why so many indicators and little strategies is........

 

indicators are basically just math trying to emulate the market.

strategies are personal and based on your observations after putting in the screen time.

[MC 10]

well i have read all the posts int his thread and there were hints to the answer, but i didn't see it. maybe my eyes are just tired. but the simple answer to why so many indicators and little strategies is........

 

indicators are basically just math trying to emulate the market.

strategies are personal and based on your observations after putting in the screen time.

 

Good post.

 

Plus a math based strategy that worked yesterday or even at 9:30AM today won't always hold up tomorrow, todays close etc... Every tick in the market is a unique event in a quirky kind of way.

 

I'm learning more and more every day which is awesome. End of October will be 2 years for me so I'm a baby to the game still. I am getting to the point where I realize some indicators/internals are needed to help tilt the odds. But the core and trigger needs to be price action or what you see on the chart directly. It's hard to put into words what momentum "looks" like because when you've paid your screen time dues things start to "feel" more than "look".

[Hlm 10]

Original question: Why So Many Indicators but Little Strategies in TL?

 

In my opinion the question should be Why So Many Strategies but Little Indicators in TL? If you flip through TL the big discussions are about strategies.

 

My response would be...

 

Here at TL we like to keep the horse in front of the cart by focusing on how to actually read and understand the market instead of playing the curve fitting game via indicators. This helps to keep the new trader on track to success.

 

Maybe the original poster meant system instead of strategy.

[Soultrader 12]

I'm learning more and more every day which is awesome. End of October will be 2 years for me so I'm a baby to the game still. I am getting to the point where I realize some indicators/internals are needed to help tilt the odds. But the core and trigger needs to be price action or what you see on the chart directly. It's hard to put into words what momentum "looks" like because when you've paid your screen time dues things start to "feel" more than "look".

 

Absolutely true. Screen time for the markets you trade enables one to become familiar with the price movements and characteristics of the instrument. Given enough experience and screen time, one will be able to recognize patterns hinting weakness/strength, breakout patterns, reversal patterns, etc... Reading volume for the market you trade is critical in my opinion... which does take some time to learn. The only indication I ever use in my trading is whether is it being accumulated or distributed. The indicator I use for this? Volume and the relationship between high/low/close/open per bar. Heres an example of the indicator I use on the ES from yesterday.

 

[MC 10]

Great stuff James. I noted both those points in my chat today as I was tracking SPY and practicing on a 5 minute chart oddly enough. I faded both times for a scalper and an attempted trend freebie. First one no trend trade, 2nd one did well.

 

I still am interested in MP but can't afford a solid setup with data at this stage.

 

I owe alot of what I know to TL. I combine VSA with other things I've picked up here and elsewhere. It's nice to finally be feeling the action instead of seeing it.

[Guest Tresor]

You're telling me you've jumped into trading for a living after about 10 months of experience? :\

 

 

Yes, I have.

[Guest Tresor]

Original question:

Maybe the original poster meant system instead of strategy.

 

I call buy and sell signals a strategy. This is meant a strategy in a language of traders in my country.

[Guest Tresor]

Reading volume for the market you trade is critical in my opinion... which does take some time to learn. The only indication I ever use in my trading is whether is it being accumulated or distributed. The indicator I use for this? Volume and the relationship between high/low/close/open per bar. Heres an example of the indicator I use on the ES from yesterday.

 

 

I agree 100%. In my future strategy / system I will additionally filter volume by actual open interest. I volume bar of 1,000 contracts when OI is 50,000 is something different than a volume bar of 1,000 contracts when OI is 150,000.

[bootstrap 47]

I call buy and sell signals a strategy. This is meant a strategy in a language of traders in my country.

 

 

i might as well give you a little heads up then. Buy and Sell signals make up about 10% of a trading strategy. why are you buying or selling? how do you determine position size, do you average up, average down or go all in, do you scale out of trade or exit all at one time. what is the goal? how much time can you devote? what do you do if your pc or connection goes down in the middle of a trade? how often do you take money out of the account?

 

these are just some of the things you have to know each and every time you push that little button that initiates a trade.

[tradergirl 10]

Hi, trading strategies differ for every trader. Therefore using someone elses strategy is probably the worst thing you can do because it may not match your personality, goals, risk profile etc etc. You may want to visit xxxxxx to see how you can build a strategy that will give you your own, unique edge.

 

Moderator------

NO SPAM is allowed here. URL removed and consider that a warning. Any more of that business and it's a permaban.

 

Thanks for following the rules going forward.

Edited June 13, 2008 by MC

[darthtrader2.0 10]

No set of indicators or basic system could ever give you that. IMO Discretionary with MP and VSA and any other mix of things to tune you into market sentiment and then systematic execution on your interpretation is the way to be timeless and profit from the market forever.

 

There is a great quote from John von Neumann that applies to this. "Precisely describe to me what it is a machine can not do and I will make it do exactly that".

To me the issue with retail auto trading is people are taking what discretionary traders are using(fibs, MP, patterns, candles, whatever), automate the simple patterns, curve fit the data, run it live and pray you get lucky that these simple patterns match up with the present market conditions. All the time not thinking about that what makes a successfull discretionary trader is the catalog of patterns in their brain for making decissions under uncertainty while the simple indicators are just a way of filter out some of the noise. Sure you don't need many conditionals/lines of code for the simple indicators but there is no way to emulate human decission making without getting extremely complex.

[darthtrader2.0 10]

Foregive me my being so inquisitive. Just need to asses whether it will take 5 years of my life to devise and code such a system or 15 years.

 

Regards

 

I think you need to take the stance that if you want to automate things, then commit fully to it and it will take as long as it takes. Just like if your going to trade discretionary, you need to put in the massive hours of screen time, commit to it 100% and there is no way around that.

To me what you need to focus on is what the brain is not good at. Your not going to beat a brain watching one market for 5 years trading simple patterns. There is no algorithm that can match the brain as far as pattern recognition in that sense. However, the brain can't watch a 100 markets at once and scan each market for a 100 statistically valid patterns then excute on those patterns like a machine can.

I've just started down this path also and if it takes 25 years of research and a phd in stochasic modelling then that is what it takes.

[tradingsystemreviews 10]

Hi all,

 

Firstly newbie on here as I've only just discovered this forum...I know I took my time!

 

Anyway first post and I'm going to start with a disagreement....

 

pray you get lucky that these simple patterns match up with the present market conditions. All the time not thinking about that what makes a successfull discretionary trader is the catalog of patterns in their brain for making decissions under uncertainty while the simple indicators are just a way of filter out some of the noise. Sure you don't need many conditionals/lines of code for the simple indicators but there is no way to emulate human decission making without getting extremely complex.

In response I'd like to paraphrase Alexander Elder in his book Entries and Exits, where he points out that although he is a discretionary trader, he believes there are more successful systematic traders that discretionary traders, although he believes that the very best performers are discretionary.

 

Now I have to say I don't think there are too many people out there who have the discipline and talent to be able to trade their A game week in week out. We are all human; we get tired, we get emotional (remember it has been shown we suffer psycologically more from loses than we gain from corresponding gains) and sometimes we just get it wrong. If you are one of these A game people, then I doth my hat to you as I am certainly not!!

 

As we all know trading is actually pretty dull, you find what works and keep doing it, regardless of whether you are discretionary or systematic. So it seems that if you can find your edge, mechanise it and then you can either let the computer trade it for you or at least take most of the legwork out of it and let you concentrate on the most likely candidates?

 

If you can come up with a model that works, why not let a computer trade it for you? Your John von Neumann quote even says this - "Precisely describe to me what it is a machine can not do and I will make it do exactly that" - which is exactly what systematic traders are looking to do.

[tradingsystemreviews 10]

Going back to Tresors question about how long it takes to build a system - I have a friend of mine from university who is an incredibly clever research biologist. He has a team who are investigating a gene believed to be related to asthma. He and his team are testing several approaches to finding a way to use this to improve asthma treatments. He also knows there are at least another dozen teams trying differing approaches to the very same gene. None of them know if their approach is the one that will be successful, if indeed any of them will be successful. If they knew, they would only work on the ones that would work, but without this, they have to put their effort into every single potentially fruitful approach, if they don't they may miss the one avenue that would have been successful. It is exactly the same to come up with a trading system.

 

You come up with a strategy, try to work out all the entries, exits, risk management, postion sizing etc for all market conditions and then back test it, forward test it and probably end up throwing it away and having to try another one.

 

Sometimes it fails because the drawdowns are too bad an the risk of wiping you out is too high, sometimes you can't trade it because it simply does not suit you and your personality, sometimes because in real life you cannot get the fills you could in back testing, the reasons are endless. The one that works for you may be the very first one, it may be the 489th, you just don't know until you find it.

 

It sounds like you have found a style that works for you, so my advice would be to find ways to take the grind out of it - can you automate some of it with filters, screens etc so you don't have to scan the entire market to find candidates to trade? Can you write a spreadsheet that hooks into your data provider to calculate your position sizes, stop loss points etc quickly and easily? All these things make it more efficient to trade, so you can spend less time and effort doing it.....then you can start working on your second system!!!