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Koyaanisqatsi Hototo--wldman out of balance
Started:May 14th, 2012 (07:40 PM) by wldman Views / Replies:49,886 / 695
Last Reply:November 1st, 2016 (03:53 PM) Attachments:53

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Koyaanisqatsi Hototo--wldman out of balance

Old January 23rd, 2014, 12:07 PM   #331 (permalink)
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iqgod View Post
@addchild I have to politely disagree about 6E. I know it is going seemingly chop chop everywhere but the setups are a joy to take.

As an example, here is an easy one I took just now for a 10-tick target (this 70-tick spot marked up, trade was on 6E):


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1. This was from 6(ish) months ago.
2. 10 ticks does not volatility make.

I still agree with my original sentiment, I think it will continue being a poor trading product until volatility comes home. Its great if people are making money in it, but IMO its wasted risk.

"If I agreed with you, we'd both be wrong."
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Old January 23rd, 2014, 02:40 PM   #332 (permalink)
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@Adamus

The book, I would not say that it debunks technical analysis, rather I'd say that the book accurately states that a subjective method is non-testable. Further claiming that an objective rule based method converted to an algorithm can be back tested and duplicated. Both of those statements are true in my estimation. That said, I've been trading what I know to be a largely discretionary method with pretty good success for years. My personal view of back testing is that it is a waste of time...a fool's game really. But here is the trick. It was posed to me about 4 years ago that my "system" as a method was in fact something that was capable of being "programmed" if I was diligent enough to document all of the objective and subjective items that went into the decision metric. At the time, I also believed that was a fool's game. Plus, as someone suggested a couple posts up, much of the heuristic is sub-conscious at this point.

Here is why I am interested now. Most of my post market trade evaluation is spent on the bottom 20% of trades. For the last 12-18 months the bottom 20% are all losing trades. Almost everyone would say that is typical. But the year prior to that I'd have days where the bottom 20% of trades included winning trades. That is not normal. Important to say here that win rate is somewhat subjective in and of itself, but most claims of better that 60% win rate are highly qualified or highly suspect. Very prolific and successful guys will say that their win rate is more like 40%

So it is possible but unlikely that someone "me" could throw together a string of "good luck". So I am investigating in an attempt to isolate what I am really looking at in a trade decision metric because I believe that I can be better with out falling into the back testing hall of fame or a worse distinction all world sim trader. I'd be interested in creating the algo for gray box purposes and to simplify the decision metric down to the simplest series or confluence possible. I can not code at all so I'll try to do the project in public to both avoid expense and gain from perspective other than my own.

Okay back to "the book". It is having an impact on my trading in that it is making me question every element in the process...that sucks this week but will go ex-dividend soon, I am sure. Those interested in information on the book can PM me their e-mail. I will try to post observation from the book relative to how my metric has been called to question. I can post some trades in close to real time but that is not paramount. Necessary will be the losers and the trades I missed as well if the "documentation" of discretion is to be accurate and valuable. I do promise no bull shit and that I will try not to be distracted by it in the thread. Best that we all be honest, direct and open.

Dan


Last edited by wldman; January 23rd, 2014 at 02:57 PM.
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Old January 23rd, 2014, 02:53 PM   #333 (permalink)
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Hello..


@iqgod and thanks for posting.

I am not sure what you mean in response to @addchild and I do not want you guys to fight it out here if fighting is your game.

I appreciate your chart and price action approach. Ten tick winners will add up to more than a sandwich if you can contain and kill losers little. But I do notice that your risk was also set at ten ticks. That requires a very very high win percentage to maintain viability....as if the in and out each cost a tick your wins might be 8 and losers could be 11 or 12. How do you "handle" that?

The chart looks like a high frequency tick chart (while addchild's was a daily chart) so I'm not sure the two time frames are subject to the same trade or price dynamic. I bring that up mostly to say that I will try to remember when I post charts to label everything so guys know what they are looking at. All the time I get questions about a chart where every identifiable characteristic, sometimes even the product, are left off or obscured from view. I also take everything off my screens as to maintain the cleanest view possible but I will try to keep that in mind so that the pictures have appropriate meaning.

I'll try to get to the meat of the meal a little bit this afternoon but posting will come when I can get to it without letting the project encroach on other important priorities. Be well everyone and trade well.

Dan

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Old January 23rd, 2014, 03:12 PM   #334 (permalink)
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wldman View Post
My personal view of back testing is that it is a waste of time...a fool's game really....

So I am investigating in an attempt to isolate what I am really looking at in a trade decision metric because I believe that I can be better with out falling into the back testing hall of fame

I'm looking forward to following this.

Once you have isolated and coded your decision metric as far as you can, what are the next steps? I'm trying to understand how you'll proceed - I couldn't think of a way without back testing to refine and improve entries/exits.

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Old January 23rd, 2014, 03:17 PM   #335 (permalink)
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@addchild

"wasted risk", that is an interesting statement. What would you identify as a typical hold time for trades in 6E? If you are viewing price charts to help with the entry metric, what is the primary time frame on your "decision" chart? Last, I am wondering what you broader view on risk/reward is on that primary time frame.

My risk approach is very rare from what most people post about. I begin with assessment of risk whereas I feel most guys consider that after they have a position. Many are arbitrary or have no consideration at all for risk. For me every trade is specific and quantified before the position is on.

From a macro sense, as soon as you are long you become a seller, as soon as you are short you become a buyer. Yes if you are good you press winners so you could technically buy six times before you sell...but generally a long is looking to sell and a sell is looking to buy because we can not get paid till a closing transaction is executed. So the longer the price run goes the more pressure that builds the other way.... that means the possibility of competition at price.

So what risk is worth it, how do you, or do you quantify that? Is risk and reward while in the trade mean money or is risk a price area at which exhaustion or reversal may occur? For me risk is an "area" relative to current price based on recent and expected conditions. Reward is where I screw things up. Reward in my mind should be tiered with an outcome versus risk as the primary. BUT when I have the bear by the balls why the hell would I end my profitable run until I'm either sick of winning or I see the contra side indication set up?

Dan

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Old January 23rd, 2014, 03:37 PM   #336 (permalink)
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@sixtyseven

Well the results of back testing are really the only empirical measure other than trading results. When totally objective a system can be evaluated on a standard that is the same for everyone and thus be duplicated. For me the trick will be in finding and noting all of the pieces of information in a decision metric as to include them all as declarative statements in an algorithm.

So I will have to back test...lol

I suspect that some of the tenants on which my trading method is built are redundant. I'm sure some are not referenced visually on my screen,but rather based on how I feel about something or how I feel. If I posted charts with trades and an explanation, which I have done in the past. Correctly someone will ask...why this one and not this one? My answer is sometimes "I do not know". I'd like to know. I'd also like to eliminate down to the most simplified decision metric referencing the fewest items. When that is done I think I'd grey box the idea so that I get a prompt to trade. If that worked well I'd try to expand to more products and certainly extend my trading hours, probably by hiring someone. But the main impetus is just to get a better understanding of what I am actually doing when considering trades. Then I'd like to focus on the bottom 20%...sort of a sharpen the saw, cut more wood type deal. One problem for me is that I'm not really sure why I take some trades and lay off others, so I'm trying to figure out with better specifics what the hell I'm doing. For example...I can tell you what I'm doing but left on your own you would get a different result even applying exactly what I suggested. I want to identify and maybe quantify the discretionary items that seem to be sub conscious.

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Old January 23rd, 2014, 05:27 PM   #337 (permalink)
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wldman View Post
@sixtyseven

Well the results of back testing are really the only empirical measure other than trading results. When totally objective a system can be evaluated on a standard that is the same for everyone and thus be duplicated. For me the trick will be in finding and noting all of the pieces of information in a decision metric as to include them all as declarative statements in an algorithm.

So I will have to back test...lol

I suspect that some of the tenants on which my trading method is built are redundant. I'm sure some are not referenced visually on my screen,but rather based on how I feel about something or how I feel. If I posted charts with trades and an explanation, which I have done in the past. Correctly someone will ask...why this one and not this one? My answer is sometimes "I do not know". I'd like to know. I'd also like to eliminate down to the most simplified decision metric referencing the fewest items. When that is done I think I'd grey box the idea so that I get a prompt to trade. If that worked well I'd try to expand to more products and certainly extend my trading hours, probably by hiring someone. But the main impetus is just to get a better understanding of what I am actually doing when considering trades. Then I'd like to focus on the bottom 20%...sort of a sharpen the saw, cut more wood type deal. One problem for me is that I'm not really sure why I take some trades and lay off others, so I'm trying to figure out with better specifics what the hell I'm doing. For example...I can tell you what I'm doing but left on your own you would get a different result even applying exactly what I suggested. I want to identify and maybe quantify the discretionary items that seem to be sub conscious.

And this is the reason experts make it seem easy while having an incredible difficult time explaining to newbies "how" they do it....They don't really know. A huge part of it is intuition which contrary to popular belief, is not to be taken lightly.

As discretionary traders, we would do well to listen to our intuition a bit more....

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Old January 23rd, 2014, 05:31 PM   #338 (permalink)
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wldman,

I've very interested in where this goes.

I do a lot of manual back-testing myself. Here are some procedures I use:

a) Define my entry. The simpler the better.
b) Identify lots and lots of examples (over 1000)
c) Take screen shots of the hard right edge as each setup appears.
d) Sort those into winners and losers.
e) Try to determine: what is a "good" pattern?

I also like to move throughout time in different ways. So, for example, I might look at charts from January 2009, then February 2010, then March 2011, then April 2012, etc.

Aside from identifying "good" instances of my patterns, I will also look at the time of day the setup is appearing.

I've never - literally never - been able to successfully filter patterns with indicators. The "shape" or "rightness" of the pattern is a much better filter. I try to hone what that "rightness" looks like objectively, but as anyone who codes knows, translating an observation into an abstract representation can be challenging. I prefer sloppy but absolutely repeatable patterns to any subjective assessment, so I'm always looking to tighten up my definitions.

Then I took a page from Kevin Davey's book and let the "best" version of a system sit for months, and go back over the charts later to see how the patterns held up.

The only thing I've ever optimized is targets and stops. Never entries. I optimize like a technophobe: I keep a spreadsheet with every entry and exit and manually toggle my stops and targets.

Oh, that means I manually record MAE and MFE for each setup, as well as the MFE before a return to my entry point on all winning trades so I can track the results of using a breakeven stop.

It's tedious as hell, but I think looking at all the charts is also good for my market sense.

Good luck,
RK

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Old January 23rd, 2014, 05:52 PM   #339 (permalink)
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Thank you...

@rk142 and @PandaWarrior

RK,

I love your 5 steps.

c,d,and e are new ideas to me and something that I will start doing as additional steps in the daily review. I'm about used up for today so I'll try to get some charts up tomorrow describing what I do trade wise.

Thanks everyone for chiming in.

Dan

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Old January 24th, 2014, 12:22 AM   #340 (permalink)
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wldman View Post
@iqgod and thanks for posting.

I am not sure what you mean in response to @addchild and I do not want you guys to fight it out here if fighting is your game.

I appreciate your chart and price action approach. Ten tick winners will add up to more than a sandwich if you can contain and kill losers little. But I do notice that your risk was also set at ten ticks. That requires a very very high win percentage to maintain viability....as if the in and out each cost a tick your wins might be 8 and losers could be 11 or 12. How do you "handle" that?

The chart looks like a high frequency tick chart (while addchild's was a daily chart) so I'm not sure the two time frames are subject to the same trade or price dynamic. I bring that up mostly to say that I will try to remember when I post charts to label everything so guys know what they are looking at. All the time I get questions about a chart where every identifiable characteristic, sometimes even the product, are left off or obscured from view. I also take everything off my screens as to maintain the cleanest view possible but I will try to keep that in mind so that the pictures have appropriate meaning.

I'll try to get to the meat of the meal a little bit this afternoon but posting will come when I can get to it without letting the project encroach on other important priorities. Be well everyone and trade well.

Dan

Hi Dan,

Good points, each one.

Stops - The 10-tick stop is placed to simply contain the risk. The intention is not to allow it to get hit while watching. The real risk here was one tick beyond the breakout so the R:R was pretty.

Hence the win rate need not be high. That also should explain that there would not be 10 or 11 or 12 tick losers (and there will not be 8-tick winners, 10-ticks or more.)

I just wanted to say that it is possible to trade well on 6E right through all of last year and it is not a waste of time attempting to take 10-tick winners and scalp.

Also, timeframes do not matter - all of them can be traded equally after "forgetting" what the x-axis represents.

Be well everyone.

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