The learning cycle for a newbie trader - PART 2

[Trader02]

[quote=Soul-Trader2004]



you also said "I have personally met a couple of professional traders who make serious money. They don't trade from mechanical systems and they shake their heads and roll their eyes if you ask them about backtesting."

Im not talking about computer backtesting here im talking about hand testing - proving or disproving a hypothesis that your method has a greater chance of success than failure.




"But I have to tell you, I've never heard a professional claim they can kick back on the beach and let a mechanical system make money for them. In fact, people like Linda Bradford Raschke and other well-known successful traders go to some trouble to disabuse newbies of the notion.
"

quote]


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Agreed! Handtesting a hypothesis is a key ingredient. Hundreds of hours of work spent doing this across instruments and markets. Increases confidence immensely. Foolish to place money at risk without testing methodology.

Professionals kicking back on the beach while their systems are running on auto & making money constantly?

Michael Covel's book, Trend following lists names of some huge hitters who just have a simple office with one secretary -- plus a computer room with their system running non-stop on autopilot. These guys manage some real big money for clients. Didn't say nothing about "beaches" but I presume any of these fellows could buy his own beach in a heartbeat.

[Soul-Trader2004]

Mick, you feeling a bit bitter to me tonight?

just cos it had a 48% drawdown in the month does not mean it ended the month that way.

mate, i would explain and will in time - i made a gross error of judgement and took decisions- all will be revealed soon.

But i must admit - I do not believe that discretionary traders can survive without spades of luck.

I discretionary traded for about 2 years on forex and i made money. but i truly believe now that the vast majority of my gains were because of luck and my unwillingness never to close a winning trade till the trend was dead.

As for the drawdowns - the biggest performing funds in the uk manage about 30% pa and have drawdowns of up to 40%. I know one bunch of investors in australia who make around 45%pa but have horrific drawdowns of up to 70% - i couldnt stomach that at all.

I may be wrong and all i can quote on is my experience of life at the moment - I don't yet know what i don't know.

All i know is that in my world MOST ta is total bollocks and cannot be relied upon for a more than 50% probability - this observation is held up by the latest research.

Why are you so angry at me mick? I have nothing to gain from this, I dont sell anything, I'm not attracting investors, im just shooting the breeze with you lot - whassup??

oh, and i changed his signature as he is not allowed to have links in it - it's a moneytec rule - applies to all except moderators. I didnt make the rules, i just enforce em with some humour.

[4xis2ez]

Guess I'll voluntier to be a moderator.

[4xis2ez]

Originally Posted by Soul-Trader2004

oh, and i changed his signature as he is not allowed to have links in it - it's a moneytec rule - applies to all except moderators. I didnt make the rules, i just enforce em with some humour.

Moneytec must be run by Nazis. Forget about voluntering. Good riddance Moneytec.
Hey, I made it to 1000 posts!, but no more.

[craig66]

http://www.youtube.com/watch?v=ELzjQ8F_2gE

[Trader02]

Originally Posted by 4xis2ez

Moneytec must be run by Nazis. Forget about voluntering. Good riddance Moneytec.
Hey, I made it to 1000 posts!, but no more.

Your country is run by one who makes Hitler look like a saint.

How many newbies have you nailed with that bogus name thus far, Russell?

Manage other people's money, my ass!

Bah!

[MickMason]

Originally Posted by Soul-Trader2004

All i know is that in my world MOST ta is total bollocks and cannot be relied upon for a more than 50% probability - this observation is held up by the latest research.

Can't say I've seen any detailed or authoritative research on the subject but even if there was, 50% is perfectly adequate provided it's consistent.

If TA and/or discretionary trading didn't work for you for whatever reason then fine, different strokes, but it doesn't mean either is bollox. If you were a seasoned vet in the markets then perhaps your opinion would hold more weight, as it is you base your opinion on limited experience and readers should bear that in mind.

Ok, let's put this to a practical test.....

Taking fundamentals, technical analysis, and discretion into consideration my trade for this week is buy dips on yen crosses ie Gbp/Jpy leading up to, and after, the BOJ decision. What does your system say?

As for investors, Australian or otherwise, most astute investors and large funds screen fund managers using various metrics, the Sharpe Ratio as mentioned in another thread is one, a 40% drawdown 30% return wouldn't even get you through the door, 70%/40% would end up in the bin!

I'm not bitter to you or anyone else but in a business where vast amounts of people's cash are on the line any advice needs to be balanced and accurate and when I see this kind of misinformation I have an insatiable urge to correct it, I'm kinda quirky that way

Of course there will always be the idiots who fall for any old line.......

[Soul-Trader2004]

well, if you are happy with 50% then i presume a good old coin toss is your strongest weapon - and it's very consistent. what a ridiculous statement for someone who says he's an experienced trader.

suggest you read the last currency trader where that article on indicator probability proved they were no better than a coin toss.

a seasoned vet? - well, i dont know how long that takes - ive been a trader for 5 years - which is 4 1/2 years more than most manage - three of them in forex and the last three of them profitable (the last two VERY profitable) - exactly what does it take to be a 'vet'?

You're right, different strokes for different folks, all i can do is as i say tell what stinks for me -) and a wiggly line based on a multiplier of what price did since the last full moon just doesnt cut it for me.

I don't trade GBPJPY so I can't comment - even the pairs that i do trade i cannot comment till my system says go this way or that way. One thing is for sure, my system gets it right 56% of the time and it doesnt matter what side of the bed the fed chairman gets out of nor wether the coffee bean harvest will be late this year in guatemala.

I did work out my sharpe ratio last year but can't remember the exact figure - i'll have to do it again. - as for drawdowns vs returns - last year my system returned over 600% ROI with a max drawdown of 48% - the 48% was an anomaly and was the biggest in 3 years - the norm was around 33% - not bad odds i dont think.

the most important thing about my way of trading is that I can repeat it, month in month out - wehter i feel crap, end up in hospital or some terrorist decides to take a swipe at someone - it makes no difference at all.

I don't know about you, but i'm in this game to make money - that's the only reason I do it and what I do makes money for me and others. More than most on here will ever see.