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Daytrading beliefs

December 30, 2013 Leave a comment

Richard Feynman

Cover of Richard Feynman

Mark Twain

Cover of Mark Twain

Matt asked:
From: Matth<snip>
To: Ken Long <longke@yahoo.com>
Sent: Monday, December 30, 2013 8:11 PM
Subject: Beliefs
Hi Ken:
          Been working on on my mission statements and business trading plan. I would like to model you – day trading (if you have no objections)
What are your beliefs that I could/should find useful.
Thanks Matt
===========================
my preliminary answer
i am on a journey of eliminating beliefs, trying to show cause why ANY belief is necessary as opposed to accumulating beliefs
i believe therefore that a couple essential beliefs are helpful; maybe these are attitudes more than beliefs:
1. Ask: what’s the evidence for this belief? Why is it necessary to have a belief on this subject?
2. What is a proper degree of confidence to hold on the basis of the evidence available?
3. What are the limits of the belief?  or alternatively:  how robust is this belief?
or, from a constructivist perspective: what is the utility of this belief-structure? What are the characteristics of the scaffolding? What does it allow me to do?
or Practically:
if you look at my daily and weekend report, I would say that each indicator/report-chunk is there because I have some belief that they have information content
or Specifically:
each published system has statements of core beliefs, assumptions, models, rules that stand together as a whole
the RFA e-book has a ton of things that might reward the research
my video on “Edges” recorded at an IITM workshop is probably a useful collection of beliefs
i have a very strong belief in the sayings of  Mark Twain with respect to human nature and behavior and in the sayings found in the complete book of Murphy’s Law when it comes to mankind trying to exert mastery over Nature, like “Measure with a micrometer, mark with a crayon, cut with an axe”
a lot of beliefs could be found in the chatroom archives where i respond to questions.  I find that questions push me to articulate beliefs out of the messy stew of ideas in my head at any time
whatever my belief sets  contain has to be large enough to stretch from the sparse beliefs and rules of the Frog to the increasingly complex RLCO-SQC framework
i am more interested in “intentional” action than I am in trying to find some kind of grand theory of everything for  daytrading; that’s in line with Feynman‘s belief that he was not trying to find ultimate truth, but rather simply trying to find out more about how the world works. I think that’s a healthy belief
i have a belief in the trade frames i make when i am preparing to act.  i believe they represent reasonable reward: risk ratio opportunities.  I believe that the habit of framing consistently builds proficiency an effective action/mental muscle memory and that over time provides an effective way to internalize adaptive judgement
start with the frog and RLCO frameworks; watch the live trading tapes and listen to my commentary for a belief set, especially when i am marking up the charts to try to create sense, sense enough to act
probably not the specific answer you were looking for, but it’s a start
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Why trade?

September 24, 2011 Leave a comment

Hamburg-090613-0336-DSC 8433-Hanseatic-Trade-C...

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have to trade because of the intellectual and emotional challenge and the satisfaction I get from trading well.

love to trade because I find it interesting, and it challenges me every day to discover who I am and what I can do.

like to trade because it combines my passions for action, research, intellectual challenge and adaptation.

Trading directly supports my personal and financial goals and rewards me for the time and effort invested compared to other things I can do with my time.

Live trading workshop and research weekend summary

August 14, 2011 Leave a comment

An assortment of United States coins, includin...

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we had:
1. options trading and grain trading presentations from career traders in those lines of business which were outstanding.
2. Hunter’s discussions of Value Area based on volume stats and market profile were superb and very helpful during a volatile week
3. numerous analytics of various implementations of some of my systems and the systems of others
4. refinements of blended monthly rebalancing
5, live trading challenges and results
6. tradestation research reports and demos
7. status reports and trading and business plans with deep insights
8/ Wayne Mueller’s work on “when to know if your trading systems id broken” based on Monte carlo and stats  was outstanding and very thought provoking
9. opening range breakouts, use of frog SD etc
10. visual trading from the chart with BB and tick charts

Weekend report review, exec summary for Jul 09, 2011

July 10, 2011 Leave a comment

Stock market of Brussels

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  • Market in Bull Normal;  Market is Overbought on a short term basis
  • Equities maintained the gains this week, with volatility declining slightly inspite of weak employment numbers
  • Blended monthly rebalancing, current holdings:
    • 26 ETF portfolio:  FXF, IYR, IEV
    • 13 ETF portfolio:  IYR, DIA, EFA
    • next re-evaluation  on/about  1 Aug
  • ETF2 notes: no change, adjust stops
    • Theoretical exposure is recommended at 90%;
    • model portfolio will be at 100%

Tradestation system bundles ready to go

June 28, 2011 3 comments

The TradeStation Bundle2 is just about finished; I was proofing the code and appearance today and in the words of Bill Brower, Tradestation programming wizard: “This is very cool”

The “Alphastat” which uses linear regression lines  and statistics to define trends, can be applied to any number of symbols in order to find those symbols, from a  population with the reatest relative strength vs the market  and the rest of the population, and just as importantly, when it goes out of leadership and runs out of steam. It provides an excellent tool to judge when to harvest profits after a good run in a un a unique way.  There are a batch of other indicators too which support many different styles of trading, related to finding moments of relative advantage, and a “state change” in multiple time frames.

A state change occurs when the underlying conditions of the symbol/market make a nonlinear change or turning point. Being able to get alerts at the crucial times is very handy

the frog style trading is continuing to impress. Our supertrader continued his performance with a 6R trade today with less than optimal entries and exits.  Turning out to be a very robust and popular strategy

Example: MCD (see attached case study) was top 5 Frog candidate today (and also tomorrow), and yielded between 3-5R without any effort at adding positions or finetuning exits

I will be asking our Tradestation programmer to code that as a separate module. his estimate is that a system that performs like this goes typically for 5K in the tradestation world.  more to follow 🙂

Reminder:

Tradestation Bundle 1: a set of 6 swing trade mechanical systems, a continuation pattern module (makin it 12 swing systems) and a set of intraday trade management indicators that use rangestat and standard deviation to calibrate profit opportunities

Bundle 2: a set of 6  market and population classification systems that alert you to trends and state changes in all time frames and markets

Bill has seen packages with much less go for 5K each in Tradestation land.  IITM clients and seminar attendees get steep discounts;  contact me for more detailed specs and prices

May 27, 2011 Leave a comment

MACD 12,26,9

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Important insights from one of our workshop participants this week:  a ton of good learning inside these ideas

Our initial stop placement reflects the information available when our trade is initiated. Any price action after the trade provides additional information and can be used to update the stop placement. An example is the use of the MACD histogram to exit before taking a full 1R loss.

If your system is designed to catch singles, don’t wait for the home run before exiting. Take the single and move on (until you can recognize when the market is making it obvious that this time you should hold on for more).

Markets may have unique characteristics that should be taken into account when making framing and trading decisions. DBA, for example, can be framed with tights stops, seems to make orderly moves, and sees more action only after the opening of the grain futures markets.

Framing trades with tights stops right after the open feels like getting caught in a dolphin hunt (the underwater tornado). The lunch and afternoon sessions tend to provide a better environment for identifying trades using the WMB method.

The importance of understanding the type of move you’re trying to capture (F –> C; B –> A), and matching your entries/exits with that type of move.

After learning how to trade large index ETFs (IWM, SPY…), index futures provide a way of using the same skills to produce higher returns. 

Respect the R.

Opportunities are available any time the market is open. 

1st hour statistics for high of the day & low of the day

May 17, 2011 Leave a comment

The main trading room of the Tokyo Stock Excha...

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some analysis in our chatroom today examined hundreds of symbols (ETFs and large cap stocks) that make their high of the day or low of the day in the first hour of trading.  To our surprise there are a considerable number who’s probability of an early high or low of the day is greater than 95%.

That’s a staggering number, especially when we examine how much follow thru after the first hour there can be;  we’ll be working this up into a tarding staregy pretty quickly because we like the odds and the additional control it gives over our trading, once the morning shenanigans at the open are past