I'm not saying buy on a pullback, I'm just saying that buying a high price isn't necessarily a high price. If we buy into what we think is a higher point in the wave because we think it's going to break out or something, then it's not really a high point in the wave (at least by our judgement). If we buy into a higher point of the wave looking for momentum to carry it a little higher, we're probably making a trade that better relates to a faster chart, and on that faster chart we would have been buying into or after the retracement (we may miss these on the slower chart, so the trade isn't really efficient on the slower chart).
Well you've lost me completely I have no idea what your on about.
Your definition of buying low has become a clouded tangle of timeframes.
Cant you post a few charts explaining what your saying or are you just as confused as I am?
Id be really interested in seeing whatever this is traded in realtime.
Not every second but simply Ive entered here because (Chart/s).
Now I'm exiting here because (Chart/s)
All your doing is finding a pattern in a timeframe which suits your mindset/criteria. Thats fine but just trade the timeframe in which the patterns/criteria belong.
I don't jump around different timeframes, and the ones I use I do trade differently, so the chart on which the trade is made is the one that controls it. A few months I looked at letting the trends of a faster chart control the trade, but it was significantly less profitable. My fast trades do what the fast chart tells me, the medium what the medium tells me etc.
That said (Written above) You have no idea wether you have entered a trade at a low or a high for that matter until it can be seen in hindsite
Timing cannot be claimed until after the fact.
Okay take the picture below. On the left is a chart of a slower timeframe, and on the right is a faster timeframe. My aim here is to show that a trade could look completely different depending on the timeframe we look at, and therefore a high price is not necessarily a high price, because it is all relative.
We take an entry at point 1, seeing momentum, and hoping to capture a small profit. We do that at point 2. The faster chart shows what may have happened if we had made the same trade on a faster chart, entering somewhere near 3 and exiting at 4. On the slower chart, it looks like we're buying near the top of a wave - a relatively high price. However, once the trade objective is considered (ride momentum to catch a small profit), I think a faster chart would have been more appropriate to make the trade, and we may have come up with something similar to the left.
Might still be unclear, so maybe I'll explain my perspective. I view a chart as a piece of a greater picture, and containing many pictures of its own. Every chart is part of a larger move not shown on the chart, and every chart contains many smaller moves than may only be apparent on a faster chart. The "one chart's retracement is another's trend" factor. Since I look at charts that way, I always consider what a trade might look like on another chart, and it often completely changes how the trade looks. What most may consider a high price could very well be a cheap price on another chart, so when someone looks to "buy high and sell higher", my argument is that they are probably buying low and selling high, whether they know it or not. If they're buying high on the faster charts, then it's not an optimal trade.
You suggested that I buy into or just after retracements, and that is true. It may not be true on the chart I'm using, but it would be true on a faster chart. I have charts of various timeframes open just for this reason, because regardless of the chart I'm trading, I will also use the information on faster charts to make an entry.
Hopefully someone understandings by ramblings.
In the way that we claimed we timed it correctly or incorrectly? That's arguable, because we can obviously only trade the information we have at the time. If we make a trade in situation that we know over the long run is +ev, then it can be argued that the trade was a good one, and that timing was correct, regardless out of the outcome.(Uhhh? thought you said the outcome was +)
It is how we trade the situation that matters, not whether the result proved us right, because the result can't prove us right. We're playing a game of probabilities, and all that matters is that the probabilities are in our favour.
From one perspective, if one has an edge, one can never be wrong (ignoring mistake trades) even if the trade loses.
1. Back test your trading system - preferably in blocks of 12 months. If any of the 12 months seem out of sort with any others, perhaps your system only works in particular markets and be aware the market can change quickly. A low volatility stock that almost never trips false alarms the last two years, can suddenly move 5% a day for three months during turbulent times, costing you brokerage and giving you losing trades. If there are some prerequisite that your system relies on (i.e. low/high volatility), then keep an eye out on those prerequisites.
2. Trade small to start off with. (That's when starting trading, not your initial position) Never put all your eggs in one basket, even for a "sure thing". Remember the two sayings "The bargain of the century comes once a week" and Mark Twain's quote that ranks as one of my favourites: "It's not what you don't know that gets you into trouble. It's what you know for sure that just ain't so." Small also helps with discipline. If you can't close out a losing stock when it's lost $1000, what hope do you have of terminating a $10,000 loss when you "know for sure" it's going to turn?
3. Have someone keep you accountable. Explain to them your rules, make sure they understand it. If a trade signal is triggered, you call them, you tell them that you are executing a trade. If you fail to call them, they have to call you. "I notice BHP dropped below its 20 day EMA yesterday. Did you close out your position? No? Why not?". Obviously this has to be a reciprocal favour, or else someone who loves you/owes you. Mine is my fiance, although sometimes she's a bit sloppy with the calling...
Flip this upside down and you get my thoughts
1. Timing is nothing. Trade management is everything.
2. Don't believe in yourself, if you are wrong then forget about it. Next Trade.
3. Cut losing trades off fast.
4. Never average down. Averaging up is OK.
5. I agree here, you won't always get the selection right.
Ah some sence.
Timing is nothing. Trade management is everything
For Clarity are you two stating,
That in the system results that tech has posted
Anyone could have gone short at each signal ( instead of long )
and made as much or even more return
and you have data that proves that ?
That where you start an entry has no effect on results ?
That every entry is as good a short as it is a long ?
Simply manage the trade ?
motorway
Question.
If timing is so important wether conventional "Go with the trend" OR "Contrarian-- pick tops and bottoms" would you expect to out perform.
Lets say the ASX 300
(1) Buying highs to out perform--
(2) Buying Bottoms.
Say buy the highest high for 1,2,3 or whatever years and sell after increase in price of 100,200,300 or whatever %
OR
Say buy the lowest low for X periods1,2,3 or whatever years and and sell after increase in price of 100,200,300 or whatever %
This is my entire problem with the method tech, it is purely mechanical, I wouldn't care which of those would outperform because I would never try to trade that way. Over 10 years, I don't see any edge in specific timing, but it's not my niche.
Here is my example of which I traded recently and just one of many of what I mean by my rules (then again, these aren't really rules, just tried to give a few basic ideas):
Risk appetite was on a high, sentiment was bullish when S&P was at 930-955s in that range at the top, currently percieved risk assets (all to do with corrlations) were for the most part, sitting on their recent highs. Whilst risk averse assets were on their lows (USTs, USD index). All required a technical pullback. Understand global macro environment. Geithner and the US were desperte to hold up the USD, as any serious break down in it, could cause a run of sorts on both USTs and the USD, effectively destroying their QEP attempts. Meeting with the Chinese to support USD and some spectacularly successful record bond auctions in the US were enough to turn the tide. S&P false broke 950 and this looked firm resistance. Considering oil was on it's highs and now being viewed as a potential to hinder any economic recovery (further push in stocks), whilst bonds were also on their lows, resultant in high yields, particularly a steep curve, passing into the mortgage market hindering rates (believe 30 year mortgage rates are effectively priced off the 10 years), and we had a perfect storm of global macro factors to push the S&P down. We knew the level on the S&P of 950 was near range top and a perfect area to get short in anticipation, considering the trend structure was also running out of momentum. That is timing to me.
We got down to 870s looked as though we would push below the range (probably to the 50% retracement on S&P at 810ish) and on a Monday, Asia positioned short for this event. Overnight, Europe and US put in a huge push higher. Coming into earnings season with the first being what we know as a company that ALWAYS beats the street in GS, we had some bullish appetite. The S&P came back up to 900s and you could clearly see Asia panic out on Tuesday in the order flow. Guys dumping at market and HUGE size coming online and showing their hand, they wanted to be clipped and wanted out. Nobody there to clip them? Why not? Everybody who was anybody or otherwise referred to as 'they' were now pricing for a rally. Tuesday, get long. Of course, this could have just ended up in chop, but I think it was clear by the action that there was a decent probability of a rally. Just prior to this, the S&P had false broke an important level just above the 870s, on no effort and tiny range bars, with a move back through 900s and the rest of the factors probably a good reason to time an entry. Not buying the exact low in this case, but still timing nonetheless.
Combination of knowing the overall environment, knowing where everything sits in the picture, knowing what the current psychology is behind the moves, knowing what it would take to shift that sentiment and understanding levels and how markets move to narrow it down and time specific entries.
Of course, intraday has less fundamentals and more simply flow, lower probability IMO, but more opportunities.
Wow - great stuff MRC, thank-you.
Anyone could have gone short at each signal ( instead of long )
and made as much or even more return
and you have data that proves that ?
That where you start an entry has no effect on results ?
That every entry is as good a short as it is a long ?
Simply manage the trade ?
motorway
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