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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: TraderAlan who wrote (2625)	8/10/1999 9:16:00 PM
From: Eric P	Read Replies (1) \| Respond to of 18137

Alan: Wow! I think we'll have to agree to disagree agreeably. Let me try to reply to each of your comments. System trading forces you to visualize a two dimensional view of the markets and to focus on a finite number of specific quirks/movements within the markets to make your money. This takes you out of the market when it doesn't meet the conditions that you set. This implies that a systems trader is restricted to trading a single system. Successful systems traders are also able to develop a variety of systems to match each kind of market. This is no different that a 'discretionary' trader would do. I'm not sure I understand what you mean by a 'two dimensional view', but I certainly know that my main trading systems incorporate many more 'dimensions' than I am mentally capable of handling manually. To give you an example, before I enter a trade my system analyzes the trade through several thousand lines of programming. It looks at the potential trade through every conceivable angle that I would want to analyze prior to making the trade decision, and does so instantly. Assuming I can manually trade in 'three dimensions', then I would have to assume that this systems approach is able to trade in one hundred dimensions, not two. By looking only in the rear view mirror, you deny yourself analysis of the current conditions which may negate the trades that you're considering or force you to the sidelines on perfectly good opportunities that don't fit within the two dimensional scheme. Sounds like the beginning of a new system. If I ever see new opportunities that don't quite fit my existing trade criteria, I'm left with three choices: Modify one of my systems to allow a wider variety of trades, create a new system to focus on this new potential field of opportunity (preferred), or disregard these additional potential trades. It is not necessar to change a successful system that has worked extremely reliably for 11 months simply because it doesn't enter every perceived 'opportunity'. I do agree, however, with your general point that a single system will not fit all markets all the time. Multiple systems are required for this, and their individual performances can and should be monitored separately from one another. If you're a momentum trader, for example, weak markets force you to stand aside when a simple swing strategy will produce a high percentage of profitable trades. See above. Sounds like the start of a swing trading system, but don't 'screw up' your momentum system in the process. The nature of the market dictates that whatever edge you try to program from your backtesting and optimization will disappear immediately as the insiders adjust and eliminate the inefficiency that created the signal that you're acting on. I have not found this to be a problem. Perhaps others have. The most successful traders anticipate the future rather than evaluate the past. Controlled discretion allows you to throw out everything that worked yesterday and execute what's working today. I'm afraid the moment I begin trading with 'what's working today', then it would stop working. My point is, no matter how we choose to trade, no one can ever be certain what will work in the future. I guess as you would say, we all must trade at the 'hard right edge' of the chart. I know that there are extremely successful systems traders, just as there are extremely successful 'discretionary' traders, technical-based traders and fundamental-based traders. All successful traders have found their own niche that works for them. However, I would never presume to suggest that there was any best ways to daytrade. We must all work to find the method that makes each of us the most successful trader possible. I merely point out that systems trading is among the options to consider. In fact, quite a few of the traders interviewed in "Market Wizards" were systems-based, and... quite a few were not. To each his own. Good luck, -Eric P.S. We should have plenty to 'argue' about at the Expo! <ggg>

To: TraderAlan who wrote (2625)	8/10/1999 9:38:00 PM
From: Richard Estes	Read Replies (2) \| Respond to of 18137

System trading forces you to visualize a two dimensional view of the markets and to focus on a finite number of specific quirks/movements within the markets to make your money. This takes you out of the market when it doesn't meet the conditions that you set. ================================= Why do you feel that someone that doesn't fly by the seat of their pants has only one way of following Price movement? ================================= By looking only in the rear view mirror, you deny yourself analysis of the current conditions which may negate the trades that you're considering or force you to the sidelines on perfectly good opportunities that don't fit within the two dimensional scheme. If you're a momentum trader, for example, weak markets force you to stand aside when a simple swing strategy will produce a high percentage of profitable trades. =========================== Anyone that spends time and effort to master TA can move into proper mode. But they will be using a controlled measure not saying what will I do on this bar. ============================ The nature of the market dictates that whatever edge you try to program from your backtesting and optimization will disappear immediately as the insiders adjust and eliminate the inefficiency that created the signal that you're acting on. ============================== Tell me, who are the insiders, do they care what your 1000 avg shares do? Of course not. This isn't a war, there is no one out to get you or me. The market doesn't know if you exist. It doesn't know what you are trading or what system you are using. That type of view MIGHT apply to the futures markets where there are only 30 or so liquid markets. Stocks provide 1000s of markets. It is not one on one combat, it is fighting the tendacy in yourself to think that your desires will move market. ================================ The most successful traders anticipate the future rather than evaluate the past. Controlled discretion allows you to throw out everything that worked yesterday and execute what's working today. =============================== Who are the most successful traders? Those you see in a market wizards? The people making money off of other people's money? I bet you are a better trader than any you will read about in a self serving interview or book. Good system don't stop working, they work under all conditions. The amount of returns might vary, but a profitable system does not die in stocks. The one thing I disagree with Eric on is testing of systems, I have seen not seen any testing being performed on daytrading systems, except the individual on a limited basis. Look at ads, books, chart examples, you don't have anyone showing the effect of a system on a 5 min chart. Until Qcharts came into being, you couldn't think about it, the public didn't have data on all ticks in all stocks. The big boys may have had it, but I can't picture them having the ability or desire to do it. Those that don't study the past will repeat it. But the study of the past is not the focus of a system, it is the focus of testing - to get enough data points to mean something. It is all right to have your style but TA system trading is not what you pictured, and my "trading by the seat of your pants" is not accurate for "Controlled discretion ".