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Anyone Have Success Trading Patterns?
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Anyone Have Success Trading Patterns?

  #11 (permalink)
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Tymbeline View Post
This question reminds me a little of a trading experiment reported in Van Tharp's Trade Your Way to Financial Freedom (of which I can't remember the precise details, and haven't now got the book here to check them) in which two traders simultaneously entered positions (one always long, the other always short) at multiple, randomly determined times, with set trade management parameters which - as I remember - were rather more complicated than just R:R and a stop-loss: both were profitable, just about. It was one of the things that prompted me to realise that good trade management is more important than exact entry-timing.

Although I wouldn't want to try that myself (), it reminds me of a similar story involving Linda Raschke, who, supposedly challenged members of her trading room to do something similar, take a random long or short at a particular time and manage the trade; as I understand it, the majority made money. (It would be cool if someone else knows more about the story and can post a better account of it.)

I wouldn't have what it takes to do that (skill or balls ), but it stuck with me. Maybe it's even true, which would have interesting implications for trading, when everyone is looking for the Right Method, but perhaps is barking up the wrong tree.

Bob.

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  #12 (permalink)
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I would be interested to know what their trade management was too. Obviously stop loss and take profit are going to be part of it but as tymbeline said there is some other parameters involved that would be inetresting to here. If the majority of people can take random trades and be successful and profitable with it that leads me to believe trade management is more important than a system. Imagine if you have a system with an edge paired along with trade management skills like that that would be a very successful trader i think. You could also view it another way and say trade management is part of the system.


bobwest View Post
Although I wouldn't want to try that myself (), it reminds me of a similar story involving Linda Raschke, who, supposedly challenged members of her trading room to do something similar, take a random long or short at a particular time and manage the trade; as I understand it, the majority made money. (It would be cool if someone else knows more about the story and can post a better account of it.)

I wouldn't have what it takes to do that (skill or balls ), but it stuck with me. Maybe it's even true, which would have interesting implications for trading, when everyone is looking for the Right Method, but perhaps is barking up the wrong tree.

Bob.


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  #13 (permalink)
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dgaubatz313 View Post
If the majority of people can take random trades and be successful and profitable with it that leads me to believe trade management is more important than a system.

If this is in fact possible, I doubt that "the majority of people" can do it.

I would say that it points to trade management being more important than we sometimes realize. I assume we would be talking about such things as scaling in with multiple contracts to shift your cost basis more in your favor and closely managing your exits. But I don't actually know, because I haven't seen it in action (also never read the Van Tharp book, so I don't know what he had in mind.) Also, I think that trade management is more a matter of something that works over time to affect your average, more than in an individual trade.

Generally, I think that the search for The Best System is a search in the wrong direction. The general experience of people on this forum alone suggests that many ways to trade can work, and many will not, and it seems to depend much more on the trader than on the system. (I would say that this applies to pattern recognition too, by the way, which was the original question....)

That's not to say that there is no "better" or "worse" (or even "unworkable") method, just that it is probably more about the trader than the method. Not that having a good method is a bad idea, either....

Bob.

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  #14 (permalink)
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Patterns is the secret sauce that all the professional traders use.

Back when prop trading was the shiz at banks, you use to go in and once you've gone through the various hazing rituals and you were one of the bros, one of the high wizards will formally initiate you into the fold and ask you to pick a secret sauce pattern to unlimited riches.

The secret sauce was simple, pick a pattern that you feel most at home with and then overlay it on your chart - any chart.

This was my one

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  #15 (permalink)
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cts001 View Post

I think a more interesting question may be 'Anyone have success NOT trading patterns?'


What if you convert price to returns and plot them though?
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The pattern is always buy low sell high or short high cover low. Everyone is always doing a valuation if they realize it or not. The valuation part just gets muddled with magical thinking when people see price series visualized for some reason.

You can easily swindle people and tell them the double golden unicorn formed on NQ in that chart in 2012, look what happens after the double golden unicorn. Even works on YM and ES too so it must be very powerful.

I think all this is because price patterns are a form of "narrative bias":
"Narrative bias refers to our tendency to make sense of the world through stories. To process the great amount of information coming our way, our brain creates a narrative to link the different inputs together, and drops the other facts that do not fit in the story. The process cooks up a causal relationship of all the facts that may not exist, but it helps us retain and make use of information more efficiently. Furthermore, the narratives only work in your existing frame of thoughts; therefore they usually only reinforce your original beliefs and understanding of the world."

That is why there are so many animals and goofy names in trading.
That last line of the above quote makes me think of some guy yelling "IT'S ALL PRICE ACTION!"

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justrandom View Post
That last line of the above quote makes me think of some guy yelling "IT'S ALL PRICE ACTION!"

In my case, if I were to yell, it would be something like "It's all order flow!". I think I'm smart enough to know that it's not "all" any one thing. As someone has said (I think someone in sports, but I'm not sure) "It's 100% of everything".

I have this suspicion in the back of my mind that says all these patterns we look at and calculations we do, etc are all just to give us enough confidence to pull the trigger on a trade. The rest is, as has been mentioned in other posts in this thread, just trade management.

I haven't run the experiment to determine if that thought has any merit, but it seems that others have. I'll have to look for those stories. I think having the confidence to pull the trigger on the trade is a very important skill to have to be successful trading, so really anything (or maybe just some things?) that gets us there is a good start.

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