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Safety In The Market

Discussion in 'Trading/Investing Resources' started by Buy low. sell high, Feb 16, 2007.

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  1. Vicki

    Vicki

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    Re: Safety In The Market.

    Hi Luke,
    I'm currently looking & trying to learn about different ways of trading.

    Could you expand on the statement: A system may suit one person and be profitable for them. Then for someone else be unprofitable.

    As I was under the the impression, that was what a system is for?

    Forgive my ignorance, it's just that I've heard that "mono" of "you should have an effective system, to follow with discipline, so that even your mother could do it" etc.

    So the proven system is working for you?

    Could you also specify where people may be going wrong, or missing something?

    Interested, because this may assist me in assessing other products or methods.

    Regards,
    Vicki:)
     
  2. professor_frink

    professor_frink Moderator

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    For starters we are all different - different people will have different thought processes, certain areas we will have more skills than others, and vice versa. To the novice, who has no understanding of the market at all, the different ways of extracting a profit from the market will all seem to be pretty similar, but the reality is that a lot of them are so different that they wouldn't even be classed as the same sport.

    The person who spends all day taking trades off the book and holding the position for a few minutes is playing a completely different sport to the accountant who bases investment decisions off of a company balance sheet and holds for years.

    Someone who thrives off shorter term trading based on order flow and technicals and is successful at it, will most likely find that they won't get as much out of trying invest in a company based on an accounting valuation. If they try to do something that they have no interest in, then the drive to succeed at it will be lacking, leading to poor performance.

    The basic jist of it all from a psychological perspective is that the early stages of getting into this game should be one of self discovery - finding the area that really interests you should be one of the primary goals.

    In regards to buying a canned system from a vendor, this whole process of self discovery is missing. They are basically telling everyone who is looking for direction that they have the answers and all you have to do is spend lots of money buying their courses and competency will follow. Even if the course they are selling can turn a profit, you may find that it doesn't suit you in the slightest, and that you either lose interest, or worse, start fiddling to try and change bits and pieces of it to suit the way you want to be involved in the markets.


    The other reason that people buying a canned system from a vendor may fail is that you need to "know" that a system works, and the way it operates in great detail for you to be able to follow it properly. If you go to a seminar for a course, do you think that the vendors of the system are going to give you a breakdown of every single signal that the system has taken over the past 20 years, and tell you how long you may spend in a large drawdown before you get to the point where you recover all your capital and start making money regularly again? Using safety in the market as an example, a lot of the stuff they are peddling is based on Gann, which is hugely alluring for the novice investor, despite the fact that you would have a hard time finding a trader working for any recognisable firm that subscribes to his "theories".

    One of the main features of anyone that peddles Gann is that they will claim that with enough training(and money spent on courses), you'll be able to predict what is going to happen in the market in advance with monotonous regularity. This kind of thinking really appeals to people who don't really know much about the markets, as they think that in order to be successful, you need to be able to predict what will happen more times than you don't. Add in the fact that most people succumb to the illusion of control, and have the need to be right in almost anything they do and you have a recipe for disaster!

    The reality is that for the most part, the outcome of any given trade is essentially random, and over time you'll have just as many winners as losers. If you are learning based on the implication that you will be able to predict turning points with regularity, then dealing with the consecutive runs of losers that will inevitably happen when you are trying to profit off this random outcome is going to do untold damage to your faith in the methods that are taught. Unfortunately though, if this reality was the first thing that is taught to you, you are obviously going to have a fairly hard time justifying the 5 figure sum required to do all of the courses these guys are trying to get you to do, which means you aren't very likely to hear this from any educator that is charging this sort of money.

    Hope that helps a bit:)
     
  3. TeleSonic

    TeleSonic

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    Front page ASIC website....

    "ASIC commences proceedings against 'safety in the market'....
     
  4. DocK

    DocK

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    Posts like this make me wish for a "like" button (or a tick, gold star, thumbs up etc...) Excellent response Prof Frink, & well made :)
     
  5. captain black

    captain black

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    Re: Safety In The Market.

    Hi Vicki, just to add a little bit to Prof. Frink's excellent post above I'd recommend having a read through his thread linked below. It's a good example of the "groundwork" many traders put into developing a system and knowing intimately how it works/why it works and when it doesn't work. :2twocents

    https://www.aussiestockforums.com/forums/showthread.php?t=20000
     
  6. Vicki

    Vicki

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    Re: Safety In The Market.

    Thanks cap.
    I've been reading through that thread for the past couple of hours!

    I can see the prof. must really hold a 'doctrate' on the subject.
    [great reading].

    I'm going to dust-off some of my old books, & re-read some material to try & keep up with the thread.lol.

    Thanks again guys.

    Vicki:)
     
  7. tech/a

    tech/a No Ordinary Duck

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    True

    BUT all are attempting to skew their results to a profit.
    Those who know how to do this can do it with any trading strategy they employ.---ANY---provided it isn't a flawed strategy.For those wishing to trade in a discretionary manner then this is imperative!

    There is even with "some" educators a confusion of what a system is.
    Many believe a system is simply a set of rules---and in reality often thats the case. To me at least thats not a system---its a set of ideas---at best a hypothesis.
    The spin doctors can make any Hypothesis look un beatable using hind site.

    Knowing HOW to evaluate design and trade a proven system---for those who wish to trade a system is imperative.
     
  8. luke256

    luke256

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    Re: Safety In The Market.

    Hi Vicki,

    The SITM ABC system i was taught is a trend following system that uses stop orders to enter and exit trades. So its not going to work well on stocks/contracts that are moving sideways for extended periods of time (no strong trend) or stocks that gap a lot (stops are not as effective).

    So someone trading IAG would not do very well but someone else trading the EURO with the same mechanical rules may make excellant profits. I trade it on the forex markets and do well out of it. So if a person only wants to trade stocks that do not trend much they may lose money trading a trend following system like SITM ABC.

    The system is very basic (which i like) and easy to learn, but i think it is the back testing over a long period of time that people fail to do. I test the signals on about 20 years of historical daily data to ensure it has worked consistantly before i trade with it on a particular market. That way i know what to expect i.e how many losses in a row, largest losses, win/loss ratio etc.

    I don't use the ABC trading on stocks as i find it works better on futures and forex. Over time i have adjusted the rules a little to suit each contract.
     
  9. tech/a

    tech/a No Ordinary Duck

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    Re: Safety In The Market.

    Im interested in how you were able to code the ABC formula ---getting around Zig Zag and % correction.
    Ive not yet seen a formula that can possibly test an ABC type setup.
    If you have one and dont wish to make it public I would appreciate a copy by private message.

    Id also be interested in your "Numbers".
     
  10. luke256

    luke256

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    I dont have any trading software other than the platfrom provided by my broker. I bought the courses back around 1999/2000 before the profit source software was part of the deal. I have heard profit source can help back test ABC signals but i don't have it so i can't say for sure.

    I hand draw all my charts and manually test the signals off them. I set up the sitm trading plan sheet in excel to save time calculating % retracements and exit targets. But i still have to enter basic data into excel from the chart such as price of previous swing low and swing top etc.

    I have no idea how it would be coded into trading software and have never seen anyone do it.
     
  11. tech/a

    tech/a No Ordinary Duck

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    So what are your numbers.
    % win
    Drawdown Peak to valley and initial
    String of losses.
    Number of trades Tested against.
    Etc

    If you manually place pivots (swing highs/lows) in excel you'd be still going!!
     
  12. luke256

    luke256

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    I'd say it takes about 10 hours to test a years worth of back data manually. Thats drawing daily and weekly bar charts and respective swing charts. Apply the signals and do calcs.

    I dont enter all the swings into excel.
    Rough summary of my testing:
    1. Draw charts
    2. Look for the ABC pattern
    3. Then enter the price of Point A., Point B. and the potential point C. So it only requires entering 3 figures. Then excel formula calculates the retracement between A and B. And can project a profit target from the point C. Only requires very basic formulas.
    4. Review results. Largest loss, profits, check if there is any benfit of compounding i.e buy more contracts as account increase etc.

    I dont have exact figures on hand but for the spi i'd say about 6 out of 10 win, the other 4 are combination of break even or loss. The profits on average are about twice the average loss. 3-4 losses in a row can occur.
    The average amount of win/loss can vary quite a bit between years as can the average profit so there just rough figures. Its been a while since i did the calc on the spi using pure ABC (i adjust the rules a bit to suit my trading style) but i think there was a 15% drawdown on one trade that gapped up massively over one of the public holidays in 1984/85 (although i think the volume was 2-3K back then so not that liquid). 15% is based on a 30k account, trading one contract.
     
  13. KIRSTY88

    KIRSTY88

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    Has anybody done SITM course recently? I went to their introduction seminar a few years ago but did not sign up, but I went to another one just two nights ago and i signed up for $995 to do a 2 day course, but now I am kind of not sure to go ahead or have my money back? Has anyone ever used this system/software?
     
  14. joea

    joea

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    Hi.
    If a two day course cost that much then you require a document of what you are going to learn.
    Once you get that document get back to us and we will tell you what two books to buy to achieve the equivalent knowledge.
    Send PM if you like.
    joea
     
  15. Garpal Gumnut

    Garpal Gumnut

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    I'd agree with joea, K88.

    There are cheaper ways than SITM and you maintain control.

    gg
     
  16. joea

    joea

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    ProfitSource does ABC and 12345 waves. However if you purchase the software you probably require to complete a course called "TRADING kEY".
    The graphs are 20 minutes delayed, but not intraday. Daily is the shortest time period.
    Better software elsewhere I think. Read the forum.
    Can send graphs of both wave if you like.
    PS software has Fibonacci built into the (12345 waves) , so time and price are displayed.
    joea
     
  17. sails

    sails

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    Joea, unless things have changed, I understand that you HAVE to buy the data for profit source from SITM (or whoever the main company is) otherwise the software won't work. That means big subs each year - at least that's how it used to be.

    The other thing about SITM is that the two day is probably only the beginning of their courses. There will likely be "secrets" only available in the "next" course and only costing another few thousand grand for each course. I called it quits up after the video series on Time. When I started the full number of courses added up to around $25,000 and inflation has probably taken that higher.

    Optionetics and SITM used to be run by the same company and both courses same sort of deal with the initial courses just being the sucker ones.
     
  18. joea

    joea

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    Correct. $685/year for ProfitSource charting with scanner and backtesting etc.
    PS allows you to walkback through the charts and watch wave formation etc.
    I use it for Elliott wave, and because I have satellite broadband I can conserve useage.
    You do not have to apply the Fibonnaci analysis on 12345 patterns. But manual analysis
    helps with confirmation if necessary.
    All futures etc. are available.
    PS suits me for now, but may not suit other people.
    Incredible charts is supposed to be up grading to intraday charts shortly, but scanning is not brilliant, but would be a step better for people starting out. $220/year.
    joea
     
  19. Stumpy1

    Stumpy1

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    Hi doing training with them and called the top on N225 there stuff works if you take the time to learn it
     
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