Jeff, as I read your after the fact analysis (post mortems), I come away with the same feeling that led me to abandon discretionary trading for ATS. It's the old shoulda, woulda and coulda--trading's version of the three stooges.
IMHO, left to their own devices, discretionary traders will underperform an ATS that uses the exact same parameters because of their MINDS & EMOTION. In other words, if the ATS is profitable or unprofitable, the discretionary trader following the same exact system rules will UNDERPERFORM the ATS. Discretionary traders think they are smarter than MATH & SCIENCE. The sad truth is they're not, but such is the ugly monster called ego. This explains, to a great degree, why casino gamblers lose a whole lot more of their bankroll than the house egde says they should. Second guessing the math is not a profitable method. If it were, casinos would allow pit bosses make discretionary decisions instead of following the rules of the game.
Find a method that gives you a mathematical edge (and it may this this one BTW), work that edge to death and leave your thoughts, emotions and psychological baggage at the door. The only way I know how to do that is with an ATS. Don't fear drawdowns if you know the edge is in your favor!
The various results among different traders using the same system that are posted here for Friday should be a yellow, if not red light.
Last edited by Zoethecus; July 10th, 2010 at 10:16 PM.
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And.....last but not least......final trade of the day.....outside bar......nice winner.....this launched an 80 tick rally at the close........I get +16+16.......perhaps a better money management strategy could have captured more of this 84 tick rally.
So.......had it not been for my unfortunate decision to close my first trade before it hit my stop........this would have been a profitable day.......as it was I lost -26..........so not a profitable day for me but.....better money mangement could have made this day a big winner........the moves were there......the three set ups spotted them.
Last edited by Jeff Castille; July 11th, 2010 at 12:09 PM.
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This is NOT would da could da should da......this is what I DID.......see Fridays post where I recap the day. This is in response to Shodsons' day of carnage post. Yes, there are areas where I might have made a better choice....but all traders need to recognize these........including ATS traders......and make improvements where necessary.
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I'm not directing this to you, Jeff, but to all the followers who are employing this method. Clearly, as the "founder," you have the best grasp of the method and how to trade it. If the followers of this came forward and posted their respective results, we would see a lack of conformity. Other than differences in datafeeds, how would you explain that? (I can't help but think of weenie's remarks on how her ATS outperforms her intuitive knowledge trading these setups.)
This is a very simple trading strat that is easily codeable to those who are expert at this sort of thing. Shodson is taking a shot of doing that, but I don't know if he has succeeded in quantifying the rule set. Until someone does that process, we won't know whether this is indeed a profitable ATS.
Maybe off-topic, maybe not. As I continue to learn about trading in general, one thing is puzzling to me. I keep hearing traders say to follow your rules. But, how can a discretionary trader succeed over time without breaking his rules? Put another way, if I establish a set of rules that is profitable for me, shouldn't I be able to hire a programmer to automate them? It seems that a profitable ATS is hard to come by, thus, I am led to believe that profitable discretionary traders are always breaking their rules.
I am also interested in seeing whether Shodson's strat, when fully developed, becomes profitable. I think that the most important part of this Three Setups approach is to make sure to only take trades in the morning U.S. time and avoid the news (as Jeff says "Know when to trade"). If that part is successfully automated, then I wouldn't be surprised if that strat could be applied to a plain old zero-line cross on an Eco, SMI, CCI, or a MA crossover to achieve similar results that Jeff experienced.
Last edited by Dragon; July 11th, 2010 at 01:17 AM.
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