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No more BS- what works and what doesnt.
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No more BS- what works and what doesnt.

  #11 (permalink)
Elite Member
charlotte nc
 
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Broker/Data: NinjaTrader
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Here's an analogy...

So we have two basketball teams playing. One team in white Jerseys and one in Blue Jerseys. This is about all the information we have. Make your bet... This is an example of what "doesn't work". Now if we do some further digging we find that one team is ranked #5 and the other is ranked #15. The team ranked number 5 has a record of 10-1 and the number 15 ranked team has a record of 7-4. Now with this new information make your bet. This would be the better path obviously.

This is really the best analogy I can give you of what works vs. what doesn't work. There are thousands of ways to peel the proverbial onion and define entry points and exit points that have historical odds of x,y,z. But most traders don't take the time to ever quantify any of it.

The single biggest problem most traders have is not having this type of information (betting odds) going into a trade. And in order to get this type of information one must undertake trading research from a different angle. The challenge involved is not one concerning difficult math, data processing, statistics or any other obvious skill.... But the challenge is in coming up with a decent classification system so you can even start to quantify things. So the relevant skill set needed is a strong taxonomy skill set, paired with a solid data skill set to source the data and then at least a basic math skill set to quantify every thing.

The worse the data set is (Unstructured, unclassified, raw, rough, limited data elements, etc.), the more the user would need to rely on more fanciful things like ML, AI, complex statistics. But the better the data structure is: (Good taxonomies, segmented into quantifiable buckets, multiple data elements to build a complex structure) the easier this becomes to measure with fairly simple statistics / math.

There are tons of ways to find real edges if you just look at the data. But this is where most people fail, they only look at charts, and never can differentiate anything because visualizing linear price movement isn't robust enough by itself.

I'll give you one example to kick this off.... Take any famous candle stick pattern. (A hangman for example) or any famous chart pattern (Head and shoulders for example). Now this alpha alone is likely not enough to give you a real betting edge, but if you layer in transacted volume or resting volume or some additional information to give this pattern context, you might be able to find a legit edge. Like this:

Every time you see alpha signal X with the presence of volume Y and additional information Z, then once you define these hard characteristics, you go back and source the data for 2 months, 2 years whatever.... and figure out when all of these things were present at the same time what happened? Did the move go your way 60% of the time, 70% of the time, etc. You will likely never get any thing over 60% or 70% but this should be about what you are aiming for. Then you have the discipline to place the same bet the same way every time with no deviation from it. And if you have done your homework, and found your edge, then you will enjoy a 60% to 70% win rate.

But don't try to use 5 - 10 different entry setups that you have never kicked the tires on! This is the biggest mistake you can make. Start with one real edge that you have really kicked the tires on and stick with it until you have found another, then another, etc. But unless you have really done the work and validated the edge don't use it. Have discipline and stick with this process.

Best of luck.

Ian

In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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  #12 (permalink)
Elite Member
sweden
 
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Mabi's Avatar
 
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iantg View Post
Every time you see alpha signal X with the presence of volume Y and additional information Z, then once you define these hard characteristics, you go back and source the data for 2 months, 2 years whatever.... and figure out when all of these things were present at the same time what happened? Did the move go your way 60% of the time, 70% of the time, etc. You will likely never get any thing over 60% or 70% but this should be about what you are aiming for. Then you have the discipline to place the same bet the same way every time with no deviation from it. And if you have done your homework, and found your edge, then you will enjoy a 60% to 70% win rate.

But don't try to use 5 - 10 different entry setups that you have never kicked the tires on! This is the biggest mistake you can make. Start with one real edge that you have really kicked the tires on and stick with it until you have found another, then another, etc. But unless you have really done the work and validated the edge don't use it. Have discipline and stick with this process.

Best of luck.

Ian

I try to find as many entry setups as possible to create diversification to avoid long draw down periods. I do not create them my self my computers does this. I do not care much about the code since i can see the result on the EQ curve nor do i look at charts anymore just the median (SPP) results overtime. It is not hard to find strategies this way that works. Same entry can usually be used with different exits to create a totally different performance which will work in periods were other exits do not. For example.

1. High Win% 75-90% works very well in sideways markets because they have large stops and small targets.
2. Medium Win% 45-60% work well in trending markets , breakouts and mean reversion usually end up here.
3. Low win% 15-30% works also if You can diversify enough. Very small stops but with huge targets.

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  #13 (permalink)
Elite Member
Point Roberts, WA, USA
 
Trading Experience: Advanced
Platform: IB and free NT
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Blash View Post
You want to hear what works with zero BS.... here goes.....

A boat load of cash.

Guys with tiny accounts use tiny stops and get stopped on wiggles rarely able to stay in for the trade to develop.

How many stop outs before you are out of business? Cleverest edge still has random sequence of trades that work and donít.

Well said Ron!

Happy New Year!!

(Gosh this whole thing would be so much easier if I had that boatload of cash!! :-)

Keep your mind in the future, in the now.
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  #14 (permalink)
Trading Apprentice
Groningen Netherlands
 
Trading Experience: Intermediate
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MiniP View Post
the thing with people selling items online is that a lot of them are actually right what happens is they promise people to make 10k a day and once people get that in there head, the second it doesn't work they scream fraud/scam etc.... but yes there are a lot of shit bags selling stuff.



Now what works for me might not work for you, there a million ways of telling if things are going up or down and everybody thinks that if they copy what joe millionaire is doing they will become joe millionaire jr. Hell you could trade cross overs on a daily chart and still make money if you find your edge. Some guys/gals on here trade order flow and ice bergs and all this off the DOM , if i try to trade a DOM only its like a bull in a china shop so I don't trade it. It's taken me a very long time to figure out what works for me and what doesn't. The reason why some "pros" say that is because they get tired of saying the same stuff to everybody who comes here thinking next year they will own the CME.



Want to be a great trader:

Obsession with trading

Patience

block out anything that is negative in your trading life ( friends.family etc )

figure out what works for YOU maybe you spend 20k on classes but if that one class works for you then the earning potential is unlimited

if you're lucky enough to get a "pro" mentor, pick up everything he/she does



you are trying to do one of the hardest thing in the world, 95% of people don't make it of that 5% about 1% actually make it BIG.



people are going to be harsh as many of us have worked years and years and gave up many things to get where we are so if someone tells you to quit before you start don't take it personally.





-P



Pure undiluted truth right there!!!


Sent from my iPad using futures.io

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  #15 (permalink)
Elite Member
Calgary, Alberta
 
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iantg View Post
So we have two basketball teams playing. One team in white Jerseys and one in Blue Jerseys. This is about all the information we have. Make your bet... This is an example of what "doesn't work". Now if we do some further digging we find that one team is ranked #5 and the other is ranked #15. The team ranked number 5 has a record of 10-1 and the number 15 ranked team has a record of 7-4. Now with this new information make your bet. This would be the better path obviously.

This is really the best analogy I can give you of what works vs. what doesn't work. There are thousands of ways to peel the proverbial onion and define entry points and exit points that have historical odds of x,y,z. But most traders don't take the time to ever quantify any of it.

The single biggest problem most traders have is not having this type of information (betting odds) going into a trade. And in order to get this type of information one must undertake trading research from a different angle. The challenge involved is not one concerning difficult math, data processing, statistics or any other obvious skill.... But the challenge is in coming up with a decent classification system so you can even start to quantify things. So the relevant skill set needed is a strong taxonomy skill set, paired with a solid data skill set to source the data and then at least a basic math skill set to quantify every thing.

The worse the data set is (Unstructured, unclassified, raw, rough, limited data elements, etc.), the more the user would need to rely on more fanciful things like ML, AI, complex statistics. But the better the data structure is: (Good taxonomies, segmented into quantifiable buckets, multiple data elements to build a complex structure) the easier this becomes to measure with fairly simple statistics / math.

There are tons of ways to find real edges if you just look at the data. But this is where most people fail, they only look at charts, and never can differentiate anything because visualizing linear price movement isn't robust enough by itself.

I'll give you one example to kick this off.... Take any famous candle stick pattern. (A hangman for example) or any famous chart pattern (Head and shoulders for example). Now this alpha alone is likely not enough to give you a real betting edge, but if you layer in transacted volume or resting volume or some additional information to give this pattern context, you might be able to find a legit edge. Like this:

Every time you see alpha signal X with the presence of volume Y and additional information Z, then once you define these hard characteristics, you go back and source the data for 2 months, 2 years whatever.... and figure out when all of these things were present at the same time what happened? Did the move go your way 60% of the time, 70% of the time, etc. You will likely never get any thing over 60% or 70% but this should be about what you are aiming for. Then you have the discipline to place the same bet the same way every time with no deviation from it. And if you have done your homework, and found your edge, then you will enjoy a 60% to 70% win rate.

But don't try to use 5 - 10 different entry setups that you have never kicked the tires on! This is the biggest mistake you can make. Start with one real edge that you have really kicked the tires on and stick with it until you have found another, then another, etc. But unless you have really done the work and validated the edge don't use it. Have discipline and stick with this process.

Best of luck.

Ian

@iantg has captured exactly what every new trader should be doing from the beginning. Unfortunately, it all goes wrong for new traders because you start sprinting at the beginning of marathon. Every new trader is guilty of this to some extent because at the time you don't know how long the race is.

It is only as you continue trading you realise you have to slow down and perhaps stop for a while before you can continue. This could be due to blowing up an account(s) or just the plain realisation that what you are doing isn't working. You need to catch your breath when things are going wrong, not double down!

It took me years to discover that I needed to use the market data to find an edge. The edge only has to be small and "just enough", but if you do find something the hard work can really pay off.

The paradox here being that if I didn't blow up an account and didn't get whacked around by the market hundreds perhaps thousands of times, would I have all of the tools and lessons learned to parse the data in a meaningful way? I guess that part is up for debate.

I am not an Excel whiz by any means but once I began extracting the market data, opportunities started to present themselves. For example, I used the data to calculate the number of contracts (in the ES) required to turn the market in the opposite direction by a minimum number of ticks.

I met another trader via FIO and we talk all of the time over email, swapping ideas and discussing everything trading related. He is a very smart guy. It turns out, he was doing the same thing as me, but calculated the number of contracts using different data points, but our numbers were uncannily close. This wasn't coincidence.

The data then started to unfold itself in other ways. Could I calculate when a pullback is only a pullback and not the beginning of a trend in the other direction. You betcha. Is it 100% accurate? Of course not, but it is better than having no information at all.

@iantg is a much smarter guy than I am when it comes to using data points. He has posted many informative posts which I know some traders will gloss over because it appears too hard. Fact is, trading is simple but not easy. Ian knows A LOT about parsing market data and has provided this forum with really good information.

--------------------------------------------------------
- Trade what you see. Invest in what you believe -
--------------------------------------------------------
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  #16 (permalink)
Market Wizard
Chicago, IL
 
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tpredictor View Post
Everything works and nothing works. I created a list of questions (for myself) that I think will make me more successful and shared it at my blog. If you can answer yes to each of these questions I think you can become more successful.



I love youíre first sentence here @tpredictor.

One manís junk is another manís treasure.

Basically there are many ways to run a trading business. Just like any business. Some burger joints cook from frozen, some from fresh, some 100% beef, some use a weird processed corn filler. Everybody is making money.

Some business manufacture over sea some donít. Some folks grill out with propane some with hard wood.

Trading is no different.

This is what makes the world go round. Basically the initial post here is asking a question from a, shall we say, somewhat naÔve station.*

There is no one way or even small group of super secret trading methods that ďworkĒ.

You have to go with what you find fits you, your personality, something you can get excited about, something that rings true to you alone.

Ron







* Iím being gentle here. Itís extremely naÔve.


Sent from my iPhone using futures.io

It is an axiomatic fact that while you meditate you are speaking with your own spirit. In that state of mind you put certain questions to your spirit and the spirit answers: the light breaks forth and the reality is revealed.
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)
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  #17 (permalink)
Life's short, risk it all
Portland, OR
 
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jumping on what @tpredictor said you absolutely have to feel good about yourself, your life, everything...your vision needs to be extremely strong and rarely waivers. Doubt creeps in and out at times and sometimes you hate this profession but overall the vision remains constant.

What's worked the best for me:
Patience
S/R
Volume
Risk/trade management

Lots of base hits with some big winners sprinkled in.
avg 60% win rate and avg 2:1 r:r

I've had months of 70%+ win but lower r:r and <60% but 3:1+ r:r

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  #18 (permalink)
Market Wizard
Columbus OHIO
 
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trading is similar to dieting,

if you want your diet to work and see life changing results then you need to change your life to encompass your goal,
trading is the same.. you want to become a trader then make sure your life is encompassing and supporting of your goal..

-P

"Truth is not what you want it to be; it is what it is, and you must bend to its power or live a lie"-Miyamoto Musashi
Interested in what my setup looks like, take a look below and be sure to press thanks!!!
https://futures.io/traders-hideout/21330-battlestations-show-us-your-trading-desks-83.html#post702046
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  #19 (permalink)
Market Wizard
Birmingham UK
 
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Nobody will tell you that once you have built the system that draws beautiful pictures, and tells you exactly what the market is doing, and even why it is doing it, that you will still do the opposite of what your system is telling you to do. For a very long time.

Travel Well
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  #20 (permalink)
Elite Member
San Diego, Miami & On the lake (Summer)
 
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Massive l View Post
jumping on what @tpredictor said you absolutely have to feel good about yourself, your life, everything...your vision needs to be extremely strong and rarely waivers. Doubt creeps in and out at times and sometimes you hate this profession but overall the vision remains constant.

What's worked the best for me:
Patience
S/R
Volume
Risk/trade management

Lots of base hits with some big winners sprinkled in.
avg 60% win rate and avg 2:1 r:r

I've had months of 70%+ win but lower r:r and <60% but 3:1+ r:r

Wait wait wait a minute! I have a finance background (undergrad) and statistics/math background (grad school) from 25-30 years ago which are just pieces of paper and I think I burned them in effigy in my mid 20's...

However, 60% hit rate @2:1 r:r Even if you are only trading 10-15 trades per week and net net you are 1.8 r:r @60% winners; then you my friend are the top 0.1% of all traders.

Have you done the math on this over time? It is insane. You should be banging out 50-100 lots in your instrument of choice and clearing 7 figures+ per year unless your absolute net per trade is like $15.00 per trade and your doing 2-3 lots per trade or something in that area.

Congrats though. Numbers you quoted are as impressive as I have ever seen in trading.

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