I know what you mean, but I'm thinking "Objective" meaning that even if it is not something that can be programmed, it can be OBJECTIVE.
As an example, even if it were evaluating movement of a squiggly line, in a way that would be extremely difficult to program, but that movement can clearly be seen by the eye.
I guess what I was meaning, was that I was looking for something that could clearly be defined, so that if one were to evaluate the same chart 10 days later, he would come to the same conclusion he did the first time he saw it.
I'm sure I muddled that explanation, but does that make sense?
Still looking for a bit of a more objective way to define a trade.
I've been messing with both the Perry thread, and the CJBooth thread. Both have their merits.
I would say the Perry thread, I am missing quite a bit of context. Everything other than the context is perfectly defined and objective. What I mean about missing the context, is that there are literally dozens of trade opportunities.... but which ones do you trade? It seems without applying some discretion to it, the trades one would take are mostly a crap shoot as to whether you would end up profitable on the day.
The CJbooth thread has context, in that you have a 'general' structure as to trade locations. But the entries, or whether or not a trade is good seems to require quite a bit of discretion in that area.
I am pretty confident that there is a completely objective/mechanical way to structure a trade. Whether or not it is something that one could code into an ATS via a bunch of squiggly line indies. That isn't very important to me at the moment. But the subjectivity/doubt on whether or not a trade is a good selection or not is the problem.
I have looked extensively at perryg's method and cjbooth's method. Although the rules of perryg's method are very well defined, I believe he trades it with extreme discretion. If you closely examine all of perryg's posts throughout his thread, you will discover many more additional discretionary factors he uses to trade that method, and he claims a 90-100% win rate like that. I have yet to find anyone else trading that method with that kind of win rate. I think most people who discover that method quickly realize they cannot trade it with that kind of win rate. I think the rules of cjbooth's method are also well defined, but it seems he uses fewer discretionary criteria to filter trades, so I would classify it as more objective.
Overall, If you want to trade a truly objective method, you have to be ready to take every signal, whether you think or feel a trade may not be successful based on some outside criteria. Otherwise, your method again becomes subjective. That does not sit well with most traders, and is naturally counter intuitive. In order to trade a system in this fashion, you have to calculate and rely on the system's expectancy.
I trade a strict and objective mechanical system. As you mentioned previously, I've been unable to code it, because it is based on recognizing squiggly lines. But I take every signal even if I think the signal will fail. Sometimes those signals do fail, sometimes they don't, but if I start cherry picking them based on any criteria outside the rule set, then I can no longer rely on the statistics that I derived from the historical data of method.
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Everything you said.... pretty much jives with what I think about being able to trade mechanically and totally objective. So you're thoughts about needing to take every signal based on your expectancy is pretty much what I had thought.
I actually don't like the idea of picking trades based on my personal opinion. I never have, I was an engineer by trade, so I kind of like the idea of being able to completely define my trading approach, which I have yet to be able to do the way I want.
For me, wether or not I can code it is unimportant, but I hate the feeling of not being able to completely and objectively define a setup. I'm sure in the future, I would be more comfortable with more discretionary means.
I don't necessarily need the OBJECTIVITY to be a line crossing another, but I would like to be able to stare at my screen, and without any hesitation or doubt, know if a setup exists or not.
Last edited by forrestang; June 28th, 2011 at 08:09 PM.
You can train yourself to recognize your setups if they are objective enough. You can then look at a chart for 3 seconds, and identify 5 setups without thinking, analyzing, drawing trend lines, or using fib tools, S/R levels, or higher time frames, etc. etc., with an objective method. I basically trade pictures of squiggly lines. I know what the picture looks like, I have trained my brain to recognize it by looking for that picture in hundreds of pages of charts, for hundreds of hours, maybe thousands.
You first define all the rules that make up the setup, and train to recognize it visually. I trade a restricted picture of divergence. The great thing about divergence is you can see it forming multiple bars in advance, and depending on your chart type and how you enter trades, you can know to the tick exactly where your entry is going to be and where your stop is going to be, and if you use fixed targets, you can know where you exit is going to be, all before the setup even triggers. I think that is pretty objective.
I'm sure one can make what appears to be very subjective to most, appear completely objective in one's own mind after seeing it enough.
I'm still working to find something with a positive expectancy that I can at least start with. So far though, mostly everything I've dabbled with either winds up with a negative expectancy, or something I can't put into objective terms so that I can recognize it.
Something else I was thinking of as a way to describe the dilemma.
I think after evaluating a trade decision, or placing a trade, if one can start a sentence with, "I probably........"
That means one still hasn't figured out how to objectively define the setup.
For example, if one can say, "I probably shouldn't have taken that trade because........" What that means is that there was doubt as to wether the trade fit one's rules.
On the contrary, if one can say, "I probably should have taken that trade because........" Again, one still has vague trade definition.
If the trade is clearly defined, those two sentences would never be part of one's vocabulary, despite the outcome of that trade. A ma crossover system, if that was the ONLY rule to the system...... either the ma crosses or it doesn't, simple.
Yup, you are repeating what I've said before in many other posts on this forum. If you regularly say "I should have..." regarding any trade, you will not last long in this business. I have taken hundreds of trades in the past 2 years, and I've never said that phrase, because if the trade doesn't meet even 1 of my rules... pass, if I didn't see it coming 3 or 4 bars in advance... pass, if it looks weird, or smells funny... next, if I have to squint to see it... pass