Decision-making error - page 4

 

George Merts:

So, if we can't program, if we are too lazy to check manually and don't want to hire programmers, we won't check our TS either?

Why? ))) Many people, I think, think that they check by making estimations practically "by eye", including, for example, seeing "good" parts of charts and not taking into account, "ah..., rubbish! we'll get through (will get through)!", the dangerous ones. And/or omitting from the calculations (manual and/or software) a lot of details or major details, or "small/significant", but essential, in the end.


P./S.: Totally agree with you that you need clear, well-founded TC rules.

To form them for oneself and then to adhere to them rigorously - yes... that is not an easy task.

 
George Merts:

I don't need "details of calculations". What I am saying is that all these figures he cited should not be taken from the ceiling, but should be obtained as a result of checking the clear rules of the TS on the history.

The simplest situation - you often hear the phrase - "here is the level, it means we put a limit on it (or something else, it doesn't matter). You may ask where it is concluded that the level is here. They say that there is a local maximum on ten bars. Ok, but why didn't we place the Limiter on the same maximum of 10 bars the last time? The time before that we did. And two times before that we didn't set it again? And before that - we did it even though the maximum was only among eight bars !

And so on.

My thought is simple - you cannot trade without having absolutely clear trading rules. But, as practice shows, very, very few have them. (Just those who regularly make a profit).

So, if we cannot program, if we are lazy to check it manually, and we do not want to hire programmers - then we will not check our TS either?

Well, then why are surprised that most people lose most of their money setting 0.1 lot on a $100 deposit at 80 pips SL?

Now we can talk, my trading day is over, I'm trading intraday.

I have already answered some of your questions, but you are asking them again, apparently you read across one line.

The answer is very simple, I wrote about it once:

The simplest situation - you often hear the phrase - "here, here is the level, so we put a limit on it (or something else, it doesn't matter). You ask "how do you know it's a level? They say that there is a local maximum on ten bars. Ok, but why didn't we place the Limiter on the same maximum of 10 bars the last time? The time before that we did. And two times before that we didn't set it again? Before that, the limit switch was set even though the maximum was only eight bars !

The situation may be very simple, but fundamental factors, market mood, previous movements, and very importantly, the point of price right now should be taken into account. The signals may be 10 pieces a day, but the market does not always allow to use them, and therefore the entries are often missed after a general analysis of the situation at this very moment.

I can confidently say what I do not believe in and never will:

1. indicators such as all sorts of stochastics, macd, rsi, etc.

2. In pure technical analysis most of the existing figures are only visible on the history and when you hear the phrase like "you closed too early, the figure hasn't worked", but does it always have to work out? If we want the chart to work, we have to call somewhere, for example, a market maker and tell it to lead the price there, but it is a fantasy. If 3 traders sit in one chart, all of them will see different market situation and different chart patterns, to me, when they try to show a head-shoulders pattern, it looks more like a pair of failed breakouts, and some consolidations with the consequent exit of the price from the range.

I look at the figures a bit, but I do not take them in trading, just for the sake of sport interest.

Waiting for some figure before Janet Yellen's speech or important US news publication is like winning the jackpot in the lottery.

3. I don't believe in forecasts given by a broker or a DC.

4. I don't believe in long term trading if you constantly use more than 5% of the deposit per trade.

What I believe in:

1. Price cannot go in one direction indefinitely without corrections.

2. It is always necessary to put a stop loss.

3. I believe in support and resistance zones, but not in all and not always. Again, it is important to consider the fundamentals. If there is a driver for price increase, and the price passed only "nothing", then there is no such resistance.

Further this situation can be described for a long time, but we should not forget that even in the moments when the price should go up or down, it will definitely do so now, because many people know that the price goes first to where there are the most stops and then to where it should go.

Here's where they checked my ticket, it turned out to be wrong by just a couple of pips, - 18pp

I will stop here a bit to explain the situation:

I opened a position seemingly correctly, went in the plus, when the shallow consolidation began, in fact I could have closed without waiting for take profit, the plus was about 25pp.

But since the stop was set at 18 points, the profit should be at least 18*2.5 = 45 points, at that time, no growth prerequisites, I have not seen, so I decided not to close, or the planned profit or stop loss.

As I wrote before, the stop loss to profit should not be lower than 1/2.5. This is the main rule of TC. The entrance can be any, but here the proportion stop to profit should always be observed, otherwise we will not see the profit even in 50 years.

Then the position was interrupted by stop and price reached almost exactly one pip to planned profit, but without me. The stop was taken morally quite easy, almost as easy as the profit, thanks a lot to the indicator, I knew what kind of loss I could get before I opened the position.

Here I'm already with the ticket, +117pp, stoploss was 20pp.

4. I trust him more than me, I will not describe it, I will show a picture

5. I believe in the second account. When I catch several craps in a row I switch to micro and pips on majors there.

===================

I am now going to answer the question about TS: any system will stop working sooner or later, you have to watch the trade results. This is especially bad when TS is designed for small profit and large stop, so when you catch a 50/50 loss to profit there will be a negative result.

There are a lot of TS, but all of them worked in the past and some will start working in the future, but there are also those that have been working for several years and will work, it takes hard work and deep analysis. I traded successfully in 2009 with breakdowns, now this TS does not pass any test, the loss is very fast, but then it was relevant, I had to change the TS fundamentally, and while doing that you want to change the occupation )

===================

And the last, I have to clean the position, which was dragging for half a day but did not reach the target - I closed it to avoid spending the night. The situation is unclear, support level was not broken through, there was a test, but there were no further promising, everything was going very slow and sad. Better to re-enter later but more confident.

I have set a stopper at 30pp, the pair is volatile, the major currency is AUD, EUR/AUD pair. Why emphasis on AUD, because it is strangled now (my personal opinion) is not quite right, it should rebound against the euro.

I entered a bit early, but the top was not hurt, stop 30pp, respectively, the profit 30*3=90pp. The rule is simple, if we risk something then profit should be at least *2.5, but most often *3. If I always risk more than the expected profit, it will come to an end badly, in my TS the only rule is either profit at least, or stop loss. But it was broken here - I wrote above why. I try to avoid such gestures, but the market has its own conditions and sometimes you have to adapt to them.

If you are interested, here is my chart in all its glory. The yellow dots are maximums/minimums of bars with volumes. I do not trade Gold, it's just an indicator of the market mood.

If I look at the red figures, they are showing losses since the beginning of the month. If I look at the green figures, I am showing profit since the 1st day of the month. The image is big, I ask the admins to forgive me!

If there are no red and green figures, it means that you haven't traded this month.

Like described all, wrote a message more than 2 hours, had time to play backgammon and billiards :)

I hope to say goodbye at this point and do not write in this thread again.

 

Bravo, Vitaly!

A worthy reply.

Well, since I don't trade hands at all, neither intraday nor mid-term, I can answer at any time.

Ситуация может и простейшая, но стоит учитывать фундаментальные факторы, настроение рынка, прошлые движения, и что очень важно, в какой точке находится именно сейчас цена. Сигналов может быть и 10 шт в день, но вот рынок не всегда позволит их отработать, поэтому и входы часто пропускаются после общего анализа ситуации именно в данный момент.

I am not against accounting. I'm against "fuzzy rules". For example, you say "the fundamental factors should be considered" - but how do you do it? This "general analysis of the situation"? ? I'm afraid there's too much non-obvious and flexible, when in one case we make a trade and in another such case we don't.

I can confidently say what I don't believe, and never will:

1. Don't "believe in" indicators ? You probably mean "in trading purely on one indicator". I would only agree with the last statement. How can you not believe in, say, the ATR indicator, when you should use it to place pending orders in the calmest market? How can you determine that the market is calm without this indicator? How can you determine a recent movement without looking at the slope of the indicator?

2. my main Expert Advisor is based on shape analysis. You are absolutely correct to say that "if you sit three different people, they will see different figures" - I strongly object to that. The criteria of figures should be clear and if I use mine, all three people will see the same figure on the same chart in the same place. Taking into account that the Expert Advisor has demonstrated good results during 15 years of history and has been running on autopilot for the last two years, the figures do work.

4. For one trade we need to use exactly the deposit indicated by TS. But, that said, my experience coincides with yours - neither in my "working" Expert Advisors, nor in those of my experienced ones, I have never managed to set such a big risk. The drawdown is too big.

What I believe in:

1. Last year the EUR was falling practically without a hitch. All the Expert Advisors based on the assertion that "it is impossible to move without losing points". And all of them, sooner or later, lose when they encounter exactly such a movement.

2. Stop Loss - I am surprised that there are people who do not use it and are profitable according to their statements. You can use locking instead of stoploss, but it is the same stoploss, only "with an allowance for the future", the Equity line is the same. All my attempts to make an EA without stoplosses were unsuccessful.

3. the only thing left to do is to define what a "price upside driver" is, when it is there and when it isn't. everything else - I agree.

 

Как Я уже писал, стоп к профиту не ниже 1/2.5. Это и есть главное правило ТС. Вход может быть любой, но вот пропорцию стопа к профиту нужно всегда соблюдать, иначе прибыли и через 50лет не увидим.

This is something I would like to discuss separately.

On the one hand, I totally agree. I am very reluctant to reduce TP/SL below 3. Low TP/SL is very unstable.

The question is - trailing. introduction of trailing, according to my experience - always considerably reduces this parameter, but the increase in the proportion of wins is stronger than a fall in TP/SL. There are several PAMMs working in profit for several years and their TP/SL is very low, estimated not more than 1/5. According to managers' descriptions - trailing is used. And judging by their experience, it is not quite correct to stick to TP/SL of 2.5 or higher.

At present time when optimizing TP with trailing stops I set TP/SL = 0.8 and the results are encouraging. But I don't have any experience so far.

What do you think about it ?

 
George Merts:

So far I've set the minimum TP/SL = 0.8 for myself while optimising my TS with trailing... I think the results are encouraging... But, I have no experience here yet.

What do you think about it ?

When trailing always closes position when I am not close, it looks like someone is looking into the camera when I leave the office.
 
Vitaly Muzichenko:

I can confidently say what I don't believe, and I never will:

...

What I believe:

...

It doesn't matter what we believe or don't believe. It matters what works in the market and what doesn't.

Vitaly Muzichenko:

I can confidently say what I do not believe in, and never will:

Indicators like stochastics, macd, rsi etc.

When you look at the price - it means you use one indicator.

But of course there is some truth in what you say. The past prices are not related to current prices, therefore most indicators show random values in relation to the current market situation.

George Merts:

1. Don't "believe in" indicators? Probably you mean "trade purely on one indicator" I would only agree with the last statement. How can you not believe in, say, the ATR indicator, when you should use it to place pending orders on the calmest market? How can you determine that the market is calm without this indicator? Even the simplest MA - how do you determine the recent moves without looking at the slope of this indicator?

another unsuccessful example. The ATR is the same as all other technical indicators, it shows the volatility of the past data.

George Merts:

2. As for the stoploss - I am surprised that there are people who do not place it, and they claim to be "in profit". You can use locking instead of stoploss, but it is the same stoploss, only "with a margin for the future", the Equity line is the same. All my attempts to make an EA without stoploss have been unsuccessful.

Any limiting factor for your TS reduces profit and increases risk. The limiting factors are Stop Loss and Trailing Stop levels in any of its modifications. Stop Loss does not actually reduce the risks of the TS, but usually increases them.

A good example of TS can be based on the intersection of two MA: fast above the slow MA - buy, on the contrary - sell. The main source of risk for this TS is the frequency of reversals, i.e. the price does not move anywhere, but the deposit is lost. Setting a Stop Loss for this strategy makes no sense, as its risk is the absence of movement, rather than a strong price movement.

The market price dynamics very closely resembles a random walk, which means that no matter what point we are at, the probability of continuation of the current trend is equal to the probability of its reversal. Hence the stop level is meaningless as such, as we have a 50% chance of a pullback, and hence fixing our position at a better price. As a consequence, simply sitting out and exiting on a pullback is as good as a stop.

George Merts:

On the one hand - totally agree. I reduce the TP/SL parameter below 3 with great reluctance. The TP with a low TP/SL is very unstable.

This is what they tell all the newbies at free brokerage classes: "take the take three times the stop and you will never lose" - of course it's also nonsense. The sl/tp ratio does not play any role. If your tp is bigger than sl - then the stop will trigger more often, and you will lose just as much, just a little bit at a time, not all at once.

 
Yuriy Khrustalov:
When I use trailing, it always closes the position when I'm not around, like someone is peeking into the camera when I leave the computer.
Ooh... All my trades only happen in my absence. That's the downside of trading with experts... You can only influence the situation by presetting.
 
Vasiliy Sokolov:

But of course there is some truth in what you say. Past prices are in no way related to current prices, hence most indicators show random values in relation to the current market situation.

I disagree. Past prices are very much related to current prices and that is what makes all TS work.

Also an unfortunate example. ATR is exactly the same as all other technical indicators, it shows the volatility on past data.

Well, precisely because prices in the present are very much related to prices in the past - we can use this volatility for prediction

Any limiting factor for your TS reduces profit and increases risk. Among limiting factors we can refer Stop Loss and Trailing Stop levels in any of its modifications. Stop Loss does not actually reduce the risks of the TS, but usually increases them.

Again I disagree. In reality SL is the only one that reduces risk by limiting drawdown.

A good example is the TS based on intersection of two MA: fast one is higher than the slow one - buy, on the contrary - sell. The main source of risk for this TS is the frequency of reversals, i.e. the price is not moving anywhere, but the deposit is being lost. Setting a Stop Loss for this strategy makes no sense, because its risk is the absence of movement, rather than a strong price movement.

Every market has its own TS! I remember I was shown the Pound daily charts of the mid seventies and they showed me how good TS worked on them on one MA. There the risk was mainly in the flat corridor. However, without SL this system lost on several strong movements (as I understood it, on those days there were some important economic or political events).

This is what they tell all newbies at free brokerage company courses - "take a take profit three times the stop and you will never lose" - of course this is also nonsense. The sl/tp ratio does not play any role. If your tp is bigger than sl - then the stop will trigger more often, and you will lose just as much, just a little bit at a time, not all at once.

No, you're wrong. The TP/SL ratio plays a big role in the stability of an EA. When this ratio is large, small changes in market behavior will not affect the results of trading with this TS. Once instead of 150 pips we will get 140 pips, but when the TP/SL ratio is low, the same exact change in market behavior will have a much stronger effect on the trade results - instead of ten wins of 15 pips, we will have ten wins of 5 pips.
 
George Merts:

I disagree. Past prices are very much related to current prices and that is what makes all TS work.

Well, it is precisely because prices in the present are very much related to prices in the past that we can use this volatility to make predictions

Again I disagree. In reality SL is the only thing that reduces risk by limiting drawdown.

Well, each market has its own TS! I remember I was shown the Pound daily logs of the mid seventies and they showed me how well the TS on one MA worked there. There the risk was mainly in the flat corridor. However, without SL this system lost on several strong movements (as I understood these days there were some important economic or political events).

No, you are wrong. The TP/SL ratio plays a big role on the stability of the TS. When this ratio is high, small changes in market behavior will not affect the results of trading with such TS. Once instead of 150 pips we will have 140 pips, but when the TP/SL ratio is low, the same exact change in market behavior will affect the trade results much more strongly - instead of ten wins of 15 pips, we will have ten wins of 5 pips.

1. Prices are almost uncorrelated. You can say whatever you want. Just provide evidence that there is a correlation.

2. It's all a fit. You set a short stop and optimize the parameters of the TS so that it bypasses it. The result is a real loss on this very stop and total confusion as to why it has happened. If you have the lowest SL/TP ratio of 1:1, then you lose 50% of the time and win 50% of the time and there is no fish here.

 
Vasiliy Sokolov:

1. The prices are almost unrelated. You can say anything you like. Just give proof that there is a correlation.

Sure. The Eurodollar has a range of 0.8 to 1.5. The price is now 1.09. Why don't you take a random number generator from 0.8 to 1.5 and I'll take a regular MA. And we'll predict the price every five minutes. Whichever prediction comes closest wins. In my opinion, sufficient proof that there is a correlation, and a very strong one at that.

2. All this is a fitting. You set a short stop and optimize the parameters of the TS so that it avoids it. The result is a real-time loss of this stop and total confusion as to why it happened. If you have the lowest SL/TP ratio of 1:1, then you lose 50% of the time and win 50% of the time and there is no fish here.

All the TS is a "fit". That's the art of the trader, to choose those techniques that are most closely matched to the current market situation. However, TCs with large TP/SL values are more resilient to changes in market conditions.