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Trust me when I say this, even if banks and hedge funds spend millions in R&D they may not find very good trading systems. For instance, Winton Futures has a lot of PhDs on their payroll, but they aim for returns of 8% p.a. Smaller shops could aim for higher returns, but generally you would struggle to find a fund with a reasonable track record with annual returns over 20% p.a.
Where most banks made good money was on their market making operations. If a bank has an options trading desk, they can make pretty good money selling options and just hedging whenever needed. However, I am not sure what the annual returns would be for such a desk. I would wager that the annual returns are not that high either once you take into account the total capital commitment needed. However, if this adds another business line / source of income for a bank, then adding a trading desk makes sense from a business perspective.
I'd say try tinkering with different time frames, instruments, scaling methods, and types of trading (watch some webinars for ideas). See what loses money the fastest. If you can analyze what loses money the most you'll have some clue as to what makes money. Over time just try to weed through and inevitably you'll have something that is half decent.
R.I.P. Joseph Bach (Itchymoku), 1987-2018.
Please visit this thread for more information.
I'd second this. Mainly because this is how I learned. I easily went through 20,000+ hours of market replay and by trial and error got really good at scalping. And I can tell you this, the entry does not matter - the exit is by far the most important thing to figure out. You can seriously take random trades and be profitable if you just learn how to manage a trade by moving your stop and target around depending on what the market does next. So experiment. Try big targets, small targets, big stops, small stops, and think about the trade-offs that are inherently tied to both styles of management. Learn to think of everything in terms of odds. During a trade I'll observe how the odds change for or against me so I can do the appropriate thing.
I also learned how to blow out an account in replay. Then by doing this multiple times, eventually I learned that taking small losers is always preferable to taking a huge loser (which of course always came from moving my stop). If you think about it, it's statistically inevitable that we're all going to buy a top or sell the bottom. So when (not if) you do this, learn to never make the mistake of letting that one trade do any damage to your account, there's just no need for it. Period. But don't take my word for it. Go try it for yourself. I think that's the only way to learn this stuff. You've got to try it out for yourself. Make your own observations, come to your own conclusions. Because whatever you do - it needs to make sense to you, and it needs to fit you.
Anyways if you can learn how to make random trades profitable, you're now a profitable trader. But why stop there? Why not go a step further and figure out for yourself why the market does what it does (order flow, volume profile, tpo, delta). Then you won't need to take random trades and you won't need to rely on anyone else to make money but yourself. And eventually you'll get to a place where you'll actually understand what market is doing or probably trying to do. You'll get a feel for how good or bad the odds are if you try long or short at any moment in time. Then you can just frame trades around that understanding and manage them with some of your taking trades at random skills.
P.S.
Don't chase automation in the beginning like I did. Unless you don't personally mind baby sitting and being physically present for all your open positions. Because if you automate and don't do this, you're just exposing yourself to unnecessary risk imo. I do plan to automate in the future, but I highly doubt it could ever do as well as I can by myself.
Keep things complex. But not more complex then they need to be.
Trading: The one I'm creating in the present....Index Futures mini/micro, ZF
Posts: 2,311 since Nov 2011
Thanks Given: 7,341
Thanks Received: 4,518
What's the common denominator? You. I think you are looking in the wrong place my friend. Don't look outward, look inward. You don't need someone else's "system". You need to understand yourself, get some mentors (from books, works very well I find, you can email them questions, they love it) understand what's on the screen in front of you. Mentors might be Mark Douglas (you can still email Paula), Van Tharp, Brett Steenbarger etc etc.....there are many right here at FIO. I see you have 30 posts here at FIO in about 5 years. I say dive in and become involved in a big way! Don't be afraid, do you want to make it or not! Number one most important thing to do is start a (trade) journal here, Elite or not. Elite will keep it from Google if that's a concern for you. Post in it a lot. Pour out everything it does not matter what it is. Gee, take a look at my journal here......lol
There is much to say but I'm short time.
Ron
...My calamity is My providence, outwardly it is fire and vengeance, but inwardly it is light and mercy...
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
Trading: The one I'm creating in the present....Index Futures mini/micro, ZF
Posts: 2,311 since Nov 2011
Thanks Given: 7,341
Thanks Received: 4,518
I can tell you don't much like what I had to say. Totally fine with me, absolutely. We have to be ready. Made this short clip for you as a last effort. I only want the best for you. I should be in bed right now feel like crap.....
Ron
...My calamity is My providence, outwardly it is fire and vengeance, but inwardly it is light and mercy...
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
That is Completely True and I accept it 100% which most of this is me, BUT we have to have a good tools to follow. I mean an strategy and then inside that strategy look for making our self better. Do you agree? That is what I cannot find, Everyone claiming they have a wining strategy but most of them hiding the down part and when you find that down part it is too late, you have paid for their system and there is no return. That is why I am asking here, because I know there are some people here very experienced and want to hear their opinion about a system that they think is working well.
