Monday, February 23, 2009

Your Regular Scheduled Programming will NOT be Shown...

I got smattered today. My triggers are effin' lame. Too quick, too jumpy. My targets don't get hit without a direct act of god. My pars are too aggressive. My entries are too elaborate. Too ineffective. The method is vulnerable. My account is vulnerable. And in the disaster I had a revelation. The concept is simple. The setups are even more simple. Logical. The targets are dynamic and more accessible. The entries are more consistent, more momentum based.

All of this builds on an idea I had one day not so long ago when I was making a free "how to trade video". I remarked at the time that it looked good enough to trade (even though it was an idea that I had pulled out of my ass in about 30 seconds). It wasn't complete at the time. I spent 4 hours today reading a thread on the notorious Elite Trader forums. The idea in the thread wasn't to my liking - but in the process it gave me ideas, ideas that evolved into whats sitting in front of me as I speak. And it looks good. Damn good. It makes my "holy grail" that killed me today, all last week, and would've tortured me for the rest of eternity look like chicken shit.

I'm going to sim it this week. I know what the backtests suggests... Check back tomorrow and we'll see how the results come in. I make this promise to you all right here and now. If this shit works... like really works... it will be the most annoying truth in trading i've ever faced.


Michael said...


Correct me if I'm misunderstanding your post... but it sounds like your giving up on your system and gearing up to test a new approach. If this is right, are you sure after all the previous backtesting that the current system is faulty, could it be just an execution issue, or it's the market environment we're in right now.

I say this because I too have been looking at alternative entry methods the last couple of day's, and it's stressing me out because I don't see any other way. This environment we're in right now is just not conducive to my system, so I have to wait.

Either way I hope your testing gives you what your looking for, I know it's stressful as hell when what you thought would work, doesn't give you the results you hoped.

Good luck!

Matt said...

Yea Micheal, its a completely different approach (kinda). I'm still trying to take pullbacks into a trend but i'm using stupidly simple indicators and some volatility bands for targets and i scrapped my trigger for entry. Its so simple and works so well i don't know what to say. I looked at it over that one time period i backtest everything on and while the exits are a bit more discretionary so I can't quote direct figures its not just a little bit more profitable, its night and day more profitable.

And all while hitting higher win rates, more profit, better entries, better setups.

I hate to chuck it all out the window but its like if its not working and something else is, and can prove to me then i'm willing to humbly admit a mistake and move forward.

Up +4 es on it thus far today ;) (A far cry from my old method!!!)

Michael said...

Just be careful not to fall into the same trap I did a while back, which is constantly chasing what works now. What ultimately happens is, it works great now then suddenly it stops.

Any method you try is going to have a specific market condition under which it will do well. When the market changes it will either leave you on the sidelines or have a higher failure rate. The only method I've ever seen that produces consistent results is scalping (like Don Miller does)which is also the hardest form of trading there is to learn.

I highly recommend looking back over the past 4 months and try to spot a pattern or setup that jumps out at you and repeats itself with some degree of frequency. Then start building a system around that. Another important thing to do is look at how the market fluctuates when these setups tend to work. Recognizing the conditions under which these setups work best is very important. Some methods work best in trending environments, others in a range bound markets, choppy markets, or smoother more orderly conditions.

There's a big misconception people have about trading, they think a full time trader should always be trading, this is bullshit. Every successful trader I've meet, and read about, all have their own niche, they've developed a method that works for them and they stick to it. Certain times they're busy, other times they sit and wait.

Constantly changing systems and chasing what works now is a losers game (absolutely no offense to you, I'm not calling you a loser), it will not work.

Some where out there is a method with your name on it, find it, learn it and stick to it. Don't move on to any other system until your consistently profitable with it, then and only then see if there's anything else you can add to your tool box.

Take it from me, I may on be an expert yet on how to make big money trading, but I have earned the title of expert on how not to trade.

Trading's a bitch, it's hard to master!

Matt said...

Good advice Michael! I know it sounds like i'm constantly changing and chasing the "what works now". Believe me - i've been down that rabbit hole and I don't want to repeat it.

But the same ideas i've been using are the same ideas I continue to use. I just simplified everything about 110x's over and was left with fewer trades, better trades, and a much cleaner system overall. What you've been saying about a pattern that repeats over the past four months, etc... thats EXACTLY what this is all based off of.