Getting Out Of A Trading Catastrophe

[Sunny Days]

1 hour ago, HMB said:

Thank you, Sunny Days!  Maybe I should teach then...  seriously, glad to read you found a way to steady profitability.  I think you're a number of steps ahead of me, and it's good to hear it's possible to learn, change, and come back.

All the best for you too

I could feel your pain. i looked at my losses as IG were kindly holding on to my money for me. It was safer to leave it with them and not the banks lol.

I have been fascinated with the markets since school when we went on trip to the trading floor. Life didn't allow me to peruse my passion until now. My initial losses were heartbreaking. I kept at it, not to chase my losses but to for fill my dream of being good at something I am passionate about

I sit in front of my screen during every open trade I place, every trade Is a potential loss and not a gain., Forget about retiring to Barbados, concentrate on keeping the bailiffs from your door.

[HMB]

7 minutes ago, Sunny Days said:

I sit in front of my screen during every open trade I place, every trade Is a potential loss and not a gain., Forget about retiring to Barbados, concentrate on keeping the bailiffs from your door.

Exactly what I think I should be focusing on - at least at the current stage of my "development".   

[dmedin]

42 minutes ago, jlz said:

people that don't know how to write code

So many kids are coming out of school 'writing code' nowadays that being a coder will be the new burger-flipper in 10 - 20 years anyway. 

I am sure the technology already exists to fully automate the creation of code.  Just look at all the 'meetings' these people go to: they spend all their time talking, reviewing change requests, and fannying about with project management and agile scrums and other such total sh!te.

We're all f*ked and there's no way out. 

 

[HMB]

48 minutes ago, dmedin said:

You can define your risk management however you want, but if you don't win enough trades you will eventually run out of money.  

yes, I think that's right.  it's necessary but not sufficient.

[Sunny Days]

Hence I watch every trade, I trust my instincts and knowledge rather than trusting a computer code. 

[dmedin]

27 minutes ago, Sunny Days said:

Hence I watch every trade, I trust my instincts and knowledge rather than trusting a computer code. 

 

And on days like this one, you sit in front of the screen all day and  - nothing happens.

And this takes an enormous psychological toll.

And if markets are choppy for days or weeks on end ... full blown depression, if you haven't already given up all the profits you made

[dmedin]

What you can lose in a few days, will take you months or years of constant discipline and patience to make back again.

Here is the curse of trading, and why most people get out and sell training courses instead 😜 

[HMB]

1 hour ago, dmedin said:

I don't think this guy realizes what you mean.  You don't look at charts.  You have some kind of algorithm doing it for you. 

No, I got that, I think - useful clarification, though, thanks.  My problem would be first to be able to formulate my strategies.  In other words, I think it is literally true that I didn't know what I was doing (even at the start, i.e. even before the vicious cycle, as described well by Sunny Days, set in and I was completely in a fantasy world until the brutal awakening).

I believe the initial problem was the lack of the ability to narrow the focus and simplify.  Whenever I tried working on a strategy, I quickly realized that it will become too complex.  I didn't want to ignore anything - valuations, macroeconomic conditions, mega trends, concepts like Soros's reflexivity theory, Malkiel's critique of both technical and fundamental analysis, behavioral finance, capital market theory with its focus on information efficiency, market micro structure, or more recently the idea of "flash mobs" (from, Sears' The Indomitable Investor) etc.

(I tried it with back-testing from time to time over the years, but never found anything really useful.  Closest I came was selling options based on rate-of-change mean reversion, which would if the right history and parameters were chosen create an alpha of 0.4% or so in the backtest....)

But I am starting to work towards some kind of "system" again - after all the valuable insights gained in this forum:  I think I continue using charts to identify pullbacks and rebounds - but use also all of the other stuff mentioned above to identify if the trend is up or down, or if the market is oscillating, or if there is maybe a shorter term trend only currently dominating a longer term trend.  Once that is clarified, the trading rules can be simple - as you said in another post, e.g. buy on pullbacks when the trend is up.  This combined approach seems to me to solve some of the paradoxa I'm struggling with.  It still doesn't look easy to me to formulate this in a way that it could be automated and back-tested, though.  

Wise would maybe be to run a simple benchmark strategy in parallel, e.g. as long as there's no death cross, the trend is up, etc...

(and again, disciplined risk management is prerequisite, for which in my case strategies to be able to handle emotions are crucial)

 

But in the past, unable to bring order into the chaos... I went for trust in intuition, likely also motivated by humanistic idealism... (still don't think the robots will take over).

Obviously I was totally naive and unable to learn.  Guess this is rather unique in its stubbornness...  which likely persists to some extent, given I still do believe my initial intuition was probably right more often than not - but at least I'm by now finally convinced that my execution (or better:  loss of control) was disgracefully underwhelming...

 

sorry I think was digressing a bit - however as I'm on it already... we never visited a trading floor in school, but one of my first (more virtual) "encounters" with markets sounded like this..., with all the algo dominance nowadays maybe refreshing to read some late 19th century stuff...:

 

‘Mr. Hall Pycroft, I believe?’” said he.

“‘Yes, sir,’ I answered, pushing a chair towards him.

“‘Lately engaged at Coxon & Woodhouse’s?’

“‘Yes, sir.’

“‘And now on the staff of Mawson’s.’

“‘Quite so.’

“‘Well,’ said he, ‘the fact is that I have heard some really extraordinary stories about your financial ability. You remember Parker, who used to be Coxon’s manager? He can never say enough about it.’

“Of course I was pleased to hear this. I had always been pretty sharp in the office, but I had never dreamed that I was talked about in the City in this fashion.

“‘You have a good memory?’ said he.

“‘Pretty fair,’ I answered, modestly.

“‘Have you kept in touch with the market while you have been out of work?’ he asked.

“‘Yes. I read the stock exchange list every morning.’

“‘Now that shows real application!’ he cried. ‘That is the way to prosper! You won’t mind my testing you, will you? Let me see. How are Ayrshires?’

“‘A hundred and six and a quarter to a hundred and five and seven-eighths.’

“‘And New Zealand consolidated?’

“‘A hundred and four.

“‘And British Broken Hills?’

“‘Seven to seven-and-six.’

“‘Wonderful!’ he cried, with his hands up. ‘This quite fits in with all that I had heard. My boy, my boy, you are very much too good to be a clerk at Mawson’s!’

(from "The Adventure of the Stockbroker's Clerk", a Sherlock Holmes story by Arthur Conan Doyle)

 

[HMB]

1 hour ago, jlz said:

I offered myself in the forum a couple of times to people that don't know how to write code. I have worked in the past with traders that wanted to automate their system with good results. I say it again, if you want something automated we can work on it. You get the benefit of executing your system by a bot and I get to see what you are doing and the way you think.

An algorithm is no more than a group of sentences that matches every single possibility into a system.

As I'm not an expert in algos, I'd be most interested in how you think they will influence markets.  My impression is that technical analysis has become (even) more reliable recent years - because more and more algos are trading accordingly, strengthening the self-fulfillment of the "prophecies".  however at some point I would expect declining profitability, e.g. scalping ranges will become tighter and tighter.

(How) would you counter that?  am I missing it (again) completely..?

 

[THT]

1 hour ago, HMB said:

Read your posts on the new moon strategy - very interesting!  I get your point about risk and money management, and how powerful a simple strategy can be with discipline in both.  As you pointed out, the strategy also exploits the upward bias of equities (Buffet attributes this bias to retained earnings, others would likely add ever easier monetary policy and rising government debt).

Thanks - I don't trade it - the point is a semi random method with half decent money management works, people who aren't achieving near it's returns needs to be asking questions about how good their method really is because there's a lot of methods touted out there that just do not work in the real world of trading.

 

 

 

[dmedin]

Have you ever wondered why there are trading systems 'for sale'?

Have you ever wondered why IG employs 'analysts' who do cr@ppy charts and never trade their own money?  (Here is a hint, they spend most of their time pitching to high net worth potential clients)

Have you ever wondered why so few people actually just make their money from honest-to-god trading, dude?

Why is that?  🤷‍♂️

[dmedin]

Just now, THT said:

I don't trade it

Yep, you're the same as all the rest.

[dmedin]

Why not learn from an 'elite achiever', this f*king fat p!g who won't f*k off and stop appearing on my Youtube

https://www.moneyberg.com/

[THT]

4 minutes ago, dmedin said:

Yep, you're the same as all the rest.

The point is to prove that you don't need a method or system to win in the markets, you don't need to be smart, clever, intelligent or have a great method - I published it as an educational tool that a few people will "get"

The markets offer many more times the possible % returns that the new moon method could return so why would you trade it! Even if it won every month/trade it would not make sense trading it compared to what is on offer by the markets - which is also why I was quite happy to publish it

[HMB]

14 minutes ago, dmedin said:

Why not learn from an 'elite achiever', this f*king fat p!g who won't f*k off and stop appearing on my Youtube

https://www.moneyberg.com/

Dammit - impulsively I clicked on the link without thinking (like if it was a ticket...) - hope this honorable gentleman won't now also persist on my youtube...

[jlz]

18 minutes ago, HMB said:

As I'm not an expert in algos, I'd be most interested in how you think they will influence markets.  My impression is that technical analysis has become (even) more reliable recent years - because more and more algos are trading accordingly, strengthening the self-fulfillment of the "prophecies".  however at some point I would expect declining profitability, e.g. scalping ranges will become tighter and tighter.

(How) would you counter that?  am I missing it (again) completely..?

 

I personally don't use any technical analysis but I listened the other day to a professional trader that uses Fibonacci patterns and she claims that indicators are getting more important these days exactly because there are developers trying to code algorithms. Since coding needs an exact value to enter and exit a trade, an indicator gives them the exact values they are looking for.

https://www.youtube.com/watch?v=J-9HtEg4lcY

We can classify algorithms depending on the frequency they use to trade. The ones that I think are affecting the market are High Frequency Algorithms that execute trades under a second (100 to 200 ms). They get an edge simply because they are getting the price before anyone else and can act faster. Because of it exchanges are implementing something that I found really interesting, they are extending cables to slow down connections so those algorithms get to a level that is "fair" to everyone. The video below shows how they do it.

https://www.youtube.com/watch?v=d8BcCLLX4N4&feature=emb_logo

Those algorithms are quite advanced and need a level of computing power that is not accessible to retail traders so they are completely out of our reach and I think they should be ignored. I consider them like another player like whales or dark pools that I don't have access to and don't get any information of what they do.

Then we enter in Medium or Low Frequency algorithms. Depending on who you talk to they are classified in a frequency between 1 minute and 1 day per trade. These are the ranges I use. Pretty easy to develop and schedule in a cloud server for a small amount per month. There are many tools available for free and even brokers like IG give you code samples to execute your system. Tools like Pro Real Time or Metra Trader have this kind of ability to execute automated trades.

I don't think these algorithms are changing the market per se, they improve the way retail traders act just because they are executing orders without thinking about it, so emotions are completely removed from the equation but I don't think they are fast enough or have the right volume to change a market. You could say that developers have a small edge against purely manual traders but that would be true if the system that a developer is executing is properly designed and as well as being profitable doesn't fail and execute all trades perfectly. 

In the professional world I would agree that coding is making a big difference, you just have to see how trading floors are not that busy anymore but in the retail world I think we are just all on the same boat. 

For me personally what has done is to remove myself from the ability to trade. I am the reason why my trading failed so coding a system made the difference because I was able to get rid of myself to trade. 

 

[HMB]

12 minutes ago, jlz said:

I personally don't use any technical analysis

Many thanks for your detailed response!  I must admit I'm surprised by the excerpt quoted above - for me "technical" was everything that analyses prices and volume only (including all indicators based on prices and volumes).  Maybe that's too broad - are you in a position to give an example what a typical algo actually looks at?  I always thought it's only technical (except those guys with the fake orders to test market depth..).  Or is it like order book/price ladder mostly?  (feel free to replace "not an expert" above with "completely ignorant layman"...  )  No problem if you don't want to reveal any more, of course.

Edited September 7, 2020 by HMB

[jlz]

29 minutes ago, HMB said:

Many thanks for your detailed response!  I must admit I'm surprised by the excerpt quoted above - for me "technical" was everything that analyses prices and volume only (including all indicators based on prices and volumes).  Maybe that's too broad - are you in a position to give an example what a typical algo actually looks at?  I always thought it's only technical (except those guys with the fake orders to test market depth..).  Or is it like order book/price ladder mostly?  (feel free to replace "not an expert" above with "completely ignorant layman"...  )  No problem if you don't want to reveal any more, of course.

No problem, I enjoy these conversations.

An algorithm is by definition a routine that can be executed multiple times, that takes an input and produces an output. They are also called problem-solving routines.

They can be as easy as a simple sum, i.e. taking two numbers and producing the sum as a result. And complicated enough to solve a very complex mathematical riddle.

Normally they are defined in pseudo-code in the design phase so then they can be translated into any programming language.

If we look at trading we need to classify what could be considered as inputs, actions and outputs.

Inputs are normally values provided by your data feed: Price, volume, indicators, level 2 data, orders, news. Whatever is provided externally to you and cannot be changed. You use them as they are, they are immutable at a specific time. 

Actions are the ones you can produce as a trader: Buy, sell, send order, send limit order, take profit and so on. Normally they can relate to what you could do with your mouse as a person.

Outputs are the reports of your actions: Green if positive, Red if negative, reports, summaries, profit charts.

A simple one as an example can be:

1. Subscribe to price changes on USD/GBP

2. When price reaches level 12345 BUY : Size = 1

3. Wait in a loop for price to change : check every minute

      3a. If price reaches 12380 - SELL : Size = 1 (Limit and Take Profit)

      3b If price reaches 12300 - SELL : Size = 1 (Stop and Take Loss)

You can see that is pretty straight forward to define. It can be as complex as you like but essentially the computer is waiting for a path to follow. The complexity level will come from how many steps would you want your system to perform. Then that pseudo-code can be written into a programming language by a developer.
A useful tool to define these algos is the flow chart. It can give you a quick snapshot of what your system might want to achieve.

https://en.wikipedia.org/wiki/Flowchart

 

 

 

Edited September 7, 2020 by jlz

[THT]

34 minutes ago, jlz said:

I personally don't use any technical analysis but I listened the other day to a professional trader that uses Fibonacci patterns and she claims that indicators are getting more important these days exactly because there are developers trying to code algorithms. Since coding needs an exact value to enter and exit a trade, an indicator gives them the exact values they are looking for.

Every trade i make there is a exact entry level, an exact stop, a Target 1 exact level which when hit moves the stop, then I have a trailing stop for live trades and a Target 2 price level - This could be automated, but I am just so adapt and used to setting these levels along with the alarms that accompanying them that I think I'd miss them if my method was automated - that being said I could then be away from the screen and still get in the position!

Every method out there works to some degree

Using an Indicator allows you to pin point turns to within 1-2 bars or the high/low so for precision traders Indicators are very useful

I have absolutely zero knowledge of coding or even using PRT's idiot proof system of automation

I might give you a scenario to code/test of which you're free to use yourself 

[jlz]

1 minute ago, THT said:

Every trade i make there is a exact entry level, an exact stop, a Target 1 exact level which when hit moves the stop, then I have a trailing stop for live trades and a Target 2 price level - This could be automated, but I am just so adapt and used to setting these levels along with the alarms that accompanying them that I think I'd miss them if my method was automated - that being said I could then be away from the screen and still get in the position!

Every method out there works to some degree

Using an Indicator allows you to pin point turns to within 1-2 bars or the high/low so for precision traders Indicators are very useful

I have absolutely zero knowledge of coding or even using PRT's idiot proof system of automation

I might give you a scenario to code/test of which you're free to use yourself 

No problem, let's try something out. Think about that we have a demo platform where you can execute anything I will code, so there won't be any harm to try it out.

[THT]

1 minute ago, jlz said:

No problem, let's try something out. Think about that we have a demo platform where you can execute anything I will code, so there won't be any harm to try it out.

OK thanks - It might be a week or so - I'll message you

 

[HMB]

1 hour ago, jlz said:

No problem, I enjoy these conversations.

An algorithm is by definition a routine that can be executed multiple times, that takes an input and produces an output. They are also called problem-solving routines.

They can be as easy as a simple sum, i.e. taking two numbers and producing the sum as a result. And complicated enough to solve a very complex mathematical riddle.

Normally they are defined in pseudo-code in the design phase so then they can be translated into any programming language.

If we look at trading we need to classify what could be considered as inputs, actions and outputs.

Inputs are normally values provided by your data feed: Price, volume, indicators, level 2 data, orders, news. Whatever is provided externally to you and cannot be changed. You use them as they are, they are immutable at a specific time. 

Actions are the ones you can produce as a trader: Buy, sell, send order, send limit order, take profit and so on. Normally they can relate to what you could do with your mouse as a person.

Outputs are the reports of your actions: Green if positive, Red if negative, reports, summaries, profit charts.

A simple one as an example can be:

1. Subscribe to price changes on USD/GBP

2. When price reaches level 12345 BUY : Size = 1

3. Wait in a loop for price to change : check every minute

      3a. If price reaches 12380 - SELL : Size = 1 (Limit and Take Profit)

      3b If price reaches 12300 - SELL : Size = 1 (Stop and Take Loss)

You can see that is pretty straight forward to define. It can be as complex as you like but essentially the computer is waiting for a path to follow. The complexity level will come from how many steps would you want your system to perform. Then that pseudo-code can be written into a programming language by a developer.
A useful tool to define these algos is the flow chart. It can give you a quick snapshot of what your system might want to achieve.

https://en.wikipedia.org/wiki/Flowchart

 

 

 

Very clear explanation!  Thank you very much, indeed  

[RANZ]

3 hours ago, dmedin said:

Why not learn from an 'elite achiever', this f*king fat p!g who won't f*k off and stop appearing on my Youtube

https://www.moneyberg.com/

Why don't you buy Youtube Premium, it's one of the best things I did, no brainwashing! 😁

[RANZ]

5 hours ago, dmedin said:

So many kids are coming out of school 'writing code' nowadays that being a coder will be the new burger-flipper in 10 - 20 years anyway. 

I am sure the technology already exists to fully automate the creation of code.  Just look at all the 'meetings' these people go to: they spend all their time talking, reviewing change requests, and fannying about with project management and agile scrums and other such total sh!te.

We're all f*ked and there's no way out. 

 

Everyone can write code, but not everyone has a brilliant or even a profitable strategy to convert it into an algo and this is where the difference is.

Doesn't matter if you could automate it not, a rubbish strategy while automated would still produce rubbish results and vice versa.  

[dmedin]

9 hours ago, HMB said:

Dammit - impulsively I clicked on the link without thinking (like if it was a ticket...) - hope this honorable gentleman won't now also persist on my youtube...

Sorry

 

[dmedin]

7 hours ago, RANZ said:

Everyone can write code, but not everyone has a brilliant or even a profitable strategy to convert it into an algo and this is where the difference is.

Doesn't matter if you could automate it not, a rubbish strategy while automated would still produce rubbish results and vice versa.  

 

I fully agree with automating the strategy.  Sitting looking at charts all day is just frustrating and makes it impossible not to overtrade during the sideways and non-trending times, which happen to be MOST of the times.

Charting is futile ...

[HMB]

Loss limit for the week hit on Tuesday.  Why?  Because Monday was a US holiday...

Still in the "pre-automation stage".  Still skeptical about being able to fully automate and also still have doubts that that's ideal.  Ready to admit, though, that it might well be "second-best", in the sense of optimal in reality because the ideal cannot be achieved.

However there's also working on character flaws...  logical first step seems to me:  learn to always be able to not to trade at all.

Target for today:  don't log into the trading platform before 2pm EDT...

[enza131]

Thanks for this HMB , it's really helpful