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

To: hypostomus who wrote (14192)	9/22/2001 11:55:16 AM
From: fut_trade	Read Replies (2) \| Respond to of 18137

"As an engineer myself, permit me to point out a fallacy that technical people understandably fall into when they start to trade. We treat the market as if it were a physical phenomenon and apply time series analysis, Fourier analysis, optimal estimation theory, conditional statistics, Kalman filtering, etc. ad nauseam." I know a few EE's who would tend to analyze the market that way. That's advanced stuff. But I think the garden variety investor plays the market with simple patterns, MAs, MACDs, etc. But the result is the same. But few investors run simulations of thousands of trades on different markets at different times to see how well their strategy performs. I have found a little success in trading index futures. Risk is limited compared to stock trading. But one must use a strategy that is simple enough to be programmed. What I find most of the time when I test a new strategy is that win/loss is 50/50 so there is a net loss per trade due to commissions and slippage. But it is possible to make a little bit of money with limited drawdown with some systems. It is really low pay for hard work. I know there are some traders that make a killing some of the time (far end of a statistical distribution) and there are some traders who get killed some of the time. Computer testing of trading systems is one way that I can trade with more comport, although the profits will not be huge.

To: hypostomus who wrote (14192)	9/22/2001 12:42:12 PM
From: TraderAlan	Read Replies (3) \| Respond to of 18137

hypostomus, I actually agree with just about everything that you've said. Plummer especially is essential in describing the situation we find ourselves in these days. TA and trading are two separate skills. Proficiency in one does not necessarily determine proficiency in the other. The problem for many empirical types is that they approach TA books with the assumption they represent some sort of linear trading cookbook, ie see #1, act #2 and get outcome #3. Markets have never operated in this manner. Well-defined patterns don't come with strategies attached. That is the arena where the trader must come in and do his or her job. A whole universe of entry/exit, risk parameters etc is available to apply to any given setup. That is why it's fruitless to backtest the pattern itself. Many of us make our money doing exactly the opposite of the cookbook paradigm for a given pattern. But that shows the power of TA rather than uncover its weakness. We wouldn't have seen the market inefficiency and related opportunity if the charts didn't draw the pretty picture in the first place. <engineer> I see this being worn as a badge the same way that tech geeks were using it during the tech bull. It assumes some sort of advantage over those of us that don't look at the physical world with the same black and white precision. But I believe it represents more of an obstacle to profit production than an advantage. Many elements of crowd behavior require a very well-developed sense of intuition, gut-feel, whatever to correctly interpret market direction and timing. I noticed that Ira came in with his important comments about that aspect but felt the need to be almost apologetic. I feel no such inhibition after being in the markets for many years. The "voodoo" side of market analysis is broad and profound. Perhaps that's because the marketplace taps many of the identical emotions and belief systems as the world's religions and mystical principles. Our understanding of market movement would be greatly undermined if we replaced Gann, Elliott and Leonardo de Pisa with crunchy numbers and supercomputers. Alan