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What do you do to stop overtrading / manage trades?
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What do you do to stop overtrading / manage trades?

  #41 (permalink)
Bakersfield, CA USA
 
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There are many excellent points in this thread. One of my favorites about stop placement was from JMoniker. There is some value in that statement.

Let me add, however , consider the amount of "randomnous " in your timeframe.

How much can price swing up or down with price flat (not considering a trend)?
Consider 2-3 standard deviations of the last X bars. I use plus 2 sigma of the highs to 2 sigma of the lows of the last 20 bars to get an idea of how much price swing to expect without a trend change. If your stop is within that band you have lost your edge. On a trade moving in my favor I may move my stop to over what I consider to be the random swing.

The same principle could apply to JMoniker's comment regarding buying and selling "the range." Whenever I miss an entry and chase price it always results in buying near the top of the range or selling near the bottom of the range. The shorter your time frame of interest the greater the impact on profits. Learn to wait for your price entry. There will always be another trade.

I intend to examine the random swing range to see if it results in better entries.

Thanks for your question.




JMoniker View Post

Stop Placement: ...Am I willing to go short there at my stop if it gets triggered? If my answer is yes, then my stop is valid because if I am willing to go short there, that means my long bias gets invalidated there. To me, that is a good stop. But if my answer is no, then I am trading my P&L ...

String of Losers: ...... You'll find an infinite amount of ranges within ranges as you go down the time frames. What looks to be an uptrend is only retracing a prior leg up towards the top of yet another range. Knowing this, I tell myself very simply: buy low and sell high. Know the current range. Do not trade the MIDDLE of it. You may buy the bottom of it and sell the top of it.


The problem with trading is one needs to be right twice!
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  #42 (permalink)
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wldman View Post
has only happened once. My first off floor big deal was trying to automate a multi-strategy gray box. Truly my siren song, and the reason I first joined this forum.

My other forced reconciliation was the two weeks following 9/11...which could vaguely be argued as "not my fault".

Ive walked away for perseverance sake, but I've only gone to zero in the trading account twice.

Dan

I've gone to 0 once and too low to trade without too much psychological risk 3 times. deposited more funds and kept going

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  #43 (permalink)
Miami, USA
 
 
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What a great thread


Hey everyone,

I'm a quant, trading currency markets. I've been lurking around on this forum for quite a while, but haven't been posting much.

I saw this thread and I wanted to share some thoughts:

I think "overtrading" and being trigger happy, itchy fingers, etc., is typically something that would come into effect when someone is focusing on the wrong things.

For me, trading was always about research. When I didn't have any profitable strategies, research was about finding mentors and people who could help me learn how to think about the markets.

Once I understood how to think about trading, and what profitable strategies looked like - trading was about backtesting, and doing all the research that way.

I'm personally trying to avoid "looking at charts", at least in terms of live charts. When I have a positive expectancy system, I put it live, and I leave it alone. I let it trade and look at the stats at the end of the week, when trading stops. Looking at it during the week is just to prevent emergencies. That's "trading" for me. There's no space for me to be trigger happy at all. It's all about finding new systems and rules.

Apart from a few geniuses of discretionary trading, I think "looking at the chart waiting for opportunities" is a mistake. You can invest your time into learning, researching, developing, etc., instead of watching how the markets move and trying to analyze them manually.

Just my 2 cents,

-Ben

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  #44 (permalink)
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This is the obvious argument for algorithmic trading. No emotion, just stats. I fully agree with the argument here, but I think to transfer the average discretionary trader's strategy into algorithmic form would require an extremely advanced programmer. I am not a regular in algorithmic circles so I don't claim to know how advanced the average strategy is, but from what I have seen it is usually not considering as many factors as a discretionary strategy. So the allure to discretionary is the human brain's innate ability to handle a whole lot of inputs and output a logical instruction to the user. I think that in the time it would take for an individual of average intelligence to learn how to program to the degree required to automate an average discretionary trader's strategy they would already have mastered a profitable discretionary strategy.

How easy would it be to automate this:

Develop a directional bias on an instrument based on the news

Determine if that correlates with the story told by the structure the candles are forming.

How has this circumstance played out historically?

Does the T&S support the trade direction?

Where are we relative to volume by price?

Plus about 10 more things


I could describe the logic to link all of these things together into a trading system, but to actually implement that would be so daunting I don't know if the system would even work by the time I got it programmed.

I don't know everything, these are just my thoughts at the moment.

Please educate me

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  #45 (permalink)
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LittleFinger View Post
This is the obvious argument for algorithmic trading. No emotion, just stats. I fully agree with the argument here, but I think to transfer the average discretionary trader's strategy into algorithmic form would require an extremely advanced programmer.


This is my take on it as well, and I am a programmer (we'll leave off the question of "advanced," out of both modesty and realism. )

I think there's a parallel to automated, self-driving cars. You can teach a teenager, for God's sake, how to drive in a fairly short time, but world-class software firms with an enormous financial incentive have labored, tested and experimented for several years now trying to get a car that is as smart (in driving terms) as a very average high-school adolescent, and they are still working on it. (The problems are actually pretty complex, but so is trading.)

Of course, maybe I just don't know what I am talking about. I would love to know more.

Bob.

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  #46 (permalink)
Miami, USA
 
 
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Hi LittleFinger,

For sure as a quant you end up thinking about totally different types of strategies. A lot of the discretionary stuff I've seen and automated were actually price action related. That's doable, but not necessarily worth it unless you understand data mining and other stuff and can algorithmize automated discovery of strategies instead of trying to model the exact same thing the trader in question is trading.

All of this is to say - there are many, many ways to skin this particular cat. When you're a quant, you end up thinking about different ways - and in a way usually actually much more efficient ways - to do it. And when you invest your time into learning about all that stuff, you are all of a sudden not obsessing about whether the situation you're looking at should be treated as a signal for 15 different discretionary reasons or not. Make sense?

-Ben



LittleFinger View Post
This is the obvious argument for algorithmic trading. No emotion, just stats. I fully agree with the argument here, but I think to transfer the average discretionary trader's strategy into algorithmic form would require an extremely advanced programmer. I am not a regular in algorithmic circles so I don't claim to know how advanced the average strategy is, but from what I have seen it is usually not considering as many factors as a discretionary strategy. So the allure to discretionary is the human brain's innate ability to handle a whole lot of inputs and output a logical instruction to the user. I think that in the time it would take for an individual of average intelligence to learn how to program to the degree required to automate an average discretionary trader's strategy they would already have mastered a profitable discretionary strategy.

How easy would it be to automate this:

Develop a directional bias on an instrument based on the news

Determine if that correlates with the story told by the structure the candles are forming.

How has this circumstance played out historically?

Does the T&S support the trade direction?

Where are we relative to volume by price?

Plus about 10 more things


I could describe the logic to link all of these things together into a trading system, but to actually implement that would be so daunting I don't know if the system would even work by the time I got it programmed.

I don't know everything, these are just my thoughts at the moment.

Please educate me


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  #47 (permalink)
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There is no such thing as overtrading. There is only bad trading.

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  #48 (permalink)
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Many good things being said in this post. And I recognize many things as I have been and am still dealing with the same issue. My coach however always tells me that there is no such thing as overtrading if the trades meet your entry conditions and entry criteria. The issue is therefore that I do not stick to my plan and display a lack of discipline. And that is, as other have also mentioned, a mental issue that needs to be dealed with. Limiting your risk to 2 losses a day etc is good. But if you do not have the discipline to stick to this it will not work. Hard work ahead indeed on the mental side I would say. Easier said than done but very rewarding if you pull if off. Not just in trading.

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  #49 (permalink)
Market Wizard
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Tap In View Post
There is no such thing as overtrading. There is only bad trading.

Hey man...I'm in Bend too! Let's golf sometime.

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  #50 (permalink)
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Tap In View Post
There is no such thing as overtrading. There is only bad trading.



I love your response. Just keep in mind that “bad trading” could include compulsive trading. Which is what I think most people are talking about when they referred to “over trading”.

I understand what they’re talking about because I have switched back-and-forth from compulsive trading to complete avoidance many times. It’s actually easier on the mind to over trade then it is to get into avoiding mode and sit there and do nothing. It feels more productive when you are over trading, even trading compulsively.

I would consider over trading (compulsive trading) the opposite of FLIGHT which is fight. Both negative behaviors and yes “bad trading” from a mental perspective.

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