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Short vs Long Psychological Characteristics played out in real world stats
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Short vs Long Psychological Characteristics played out in real world stats

  #1 (permalink)
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Short vs Long Psychological Characteristics played out in real world stats

There are some psychological elements that play into short trades vs long trades that I find interesting. Nothing new but interesting none the less.

I have been really examining my stats for the past few years on CL crude.

A few things I have noticed is my short trades tend to drop like a rock and hit targets much faster. Longs can hit target fast but they tend to grind up longer and don't get to target nearly as fast as shorts on average.

My winning percentage is also much higher on shorts with lower draw downs.

I am sure not only reason but from my stats market tends to accelerate when going down much faster than going up reflecting fear as a powerful market force. We know the role of fear in the markets but I find it interesting that it plays out in my real world stats.

I am currently looking at how to leverage this better in my AT. I currently use targets and stops that are same for both long and shorts. But I am reexamining my approach. My current setup longs and shorts are both profitable. However, If longs grind up and shorts accelerate to target faster I may can take advantage of the overall psychology of market by making some adjustments.

Just a few thoughts to open a discussion.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."

Last edited by liquidcci; October 8th, 2011 at 04:32 PM.
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Yes, I heard someone comment the opposite on this forum and it kind of surprised me.

Longs typically 'grind up' just like you said.

Something I found myself doing is that because the economy is shite, then I don't like going long. haha...

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Sounds very sensible. I have the same experience (over a shorter timespan though and only sim so far....). Many short trades hit my target quicker than you can say "I hope it'll go south now". I actually prefer shorting a lot and probably am a bit quicker on the trigger there.

Talking about targets....I have to check on that, probably have to tweak my journal a bit...

vvhg

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bluemele View Post
Yes, I heard someone comment the opposite on this forum and it kind of surprised me.

Longs typically 'grind up' just like you said.

Something I found myself doing is that because the economy is shite, then I don't like going long. haha...

That is surprising. I guess it depends on the strategy being used. What is also interesting is running my stats when oil went from around $80 to over $100 now back to $80 this year. My strategy still did better taking shorts even as oil rose from $80 to $100. The longs did fine but not near as well as shorts.

I tend to mentally be a bear most of the time. Guess years of being in market will whip the optimism out of you after a while. That is my bias but I don't let it enter into my trading. I just go with the stats.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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another possibility is

Another possibility is that counter trend moves tend to be more violent than with trend moves (rather than up vs. down moves). Over the last 3 years we have spent more time trending up on the daily charts of most instruments (except the us dollar) and so the conclusion about down moves being more violent than up moves is consistent with the alternate view.

There is general trading wisdom out there that agrees with this - i.e., counter trend moves tending to be short and violent vs. with trend moves being slower and grinding. I'm not sure if there's a straightforward way to test this possibility but it seems like something to reflect on when considering this topic.

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I have now split out my shorts and longs and let my AT trade on separate charts with separate settings. I make changes very slow with my AT but the difference in draw down and profit was significant enough to warrant a change. There is some definite psychology being played out in overall market that drills down into my little world.

Honestly I would rather be short the market any day as a black swan won't hurt you. There are times you get a melt up on a market but usually much more orderly than a melt down. Being long adds certain risks especially in HFT environment that causes some crazy stuff. I have actually considered going to a short only style.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."

Last edited by liquidcci; October 11th, 2011 at 01:00 PM.
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I have noticed this in my results too - generally my shorts perform better even in a market slowly trending up. I attribute this partly to my time-based exits (at breakeven or small profit) when the trade is going nowhere - longs seem to stall like this more often than shorts. As a discretionary trader, I'm trying to train myself to give the trade more time when conditions warrant.

Confirms the old adage about going up on the escalator and down in an elevator.

permeant

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