Also, I wanted to say this: “As in life, so in a game of hazard; skill will make something of the worst of throws” - I forgot who originally said this, but it reminds me what unskilled players we had been, how bad our throws, how little we had made of them!
Also, I might add that, if one doesn’t want to aquire the skill of trading/investing, then one is better off giving their money to somebody else who had aquired that skill, so that they can trade it for them.
But, please, before you do that, check out his risk profile and track record. I can suggest a great place to do that or you might have guessed it. yes, C2!
"Also, I might add that, if one doesn’t want to aquire the skill of trading/investing, then one is better off giving their money to somebody else who had aquired that skill, so that they can trade it for them."
That’s exactly what I said above! I have proven over many years that I can’t trade successfully with my own ideas, so I either put my money into good mutual funds, or follow someone elses system. Both are letting somebody else trade the money.
But I still maintain that trying to tweak someone elses system, when all you get (on C2) are specific trade entry and exit notices, makes no sense because the underlying methodology for picking those specific trades is not known by the subscriber, generally.
But I still maintain that trying to tweak someone elses system, when all you get (on C2) are specific trade entry and exit notices, makes no sense because the underlying methodology for picking those specific trades is not known by the subscriber, generally.
One does not have to know the underlying methodology for picking those specific trades. I’ll explain why below.
By examining the trade(s) the system vendor(s) is(are) recommending one can learn why the system vendor(s) is(are) recommending it and the strategy he(they) is(are) using.
You may acquire valuable insights into different strategies for trading and thereby incorporate it into you own trading.
Remember, I said the indicator is only one, probably the least important, aspect of the trade. We’ve got instrument, entry (indicator), money management, exit and psychology. One can use any signal indicator to signal a trade. All signal indicators are simple entry mechanisms. The other 3 (money management, exit and psychology) form the setup or interpretation of the system. Entry rules control risk. As long as one is correct about the direction, one can enter the market anytime by adjusting your position size. Entries don’t determine winners or losers! Exit rules determine profits or losses (winners or losers). Entry and exit rules together determine expectancy and opportunity. Position sizing determines your net profit or return, as well as maximum drawdown.
The setup is the key, not the indicator signal system per se. The best way to learn these aspects of trading is by trading along with a successful trader.
I repeat, one does not have to know the underlying methodology for picking those specific trades. You can use any indicator system to pick those trades. It is what one does after picking those trades is what really matters. What money management strategy (fixed fraction, fixed contract, kelly criterion, etc.) is used, what exit methodology is used (short, medium, long-term), Psychology, trading philosophy etc., Once you have mastered the setup, you can use any indicator system to trade successfully. This is one of the best kept secrets in trading.
You also have the opportunity to interact with the system vendors through their forum and also in this general forum and thereby expand your own knowledge and understanding of the market.
There are several pitfalls in trading. Even when traders know about these pitfalls, they still fall prey to them. You see, we are genetically programmed for success and human nature is simply much stronger than any acquired knowledge. There are two paths to learning the market discipline necessary to consistently follow sound trading practices. One, you spend several years making all the trading mistakes while you try to develop your own good trading habits. Two, you find a Coach. That’s what I did after I couldn’t do it alone. It is by far the easier and better path to follow and a lot less expensive.
The business of trading forces you to face the psychological baggage that you carry. It also makes you deal with new issues that develop from losses in the markets. Hard-earned money and dreams lost can leave deep psychological wounds. The prevention of such wounds, and the way you handle them when they do happen, will determine whether you will survive as a professional trader.
If you want to become a profitable entrepreneur, you must prepare yourself by getting some education and a business plan. This is a time-consuming and costly process. Look at doctors, lawyers, and storefront business owners. For each career, money is required to provide for years of education, and then additional capital is needed to maintain the business and a comfortable lifestyle through the start-up phase of the venture.
The same requirements apply to trading. To become a trader, it is important to realize and prepare for the fact that most traders are not profitable in their first year. Early planning for the equipment and trading capital is important for eventual success. Most traders enter the trading business undercapitalized, undereducated, and underprepared for contingencies. This lack of preparation creates an emotional war zone from the very beginning of the venture.
This is exactly where the systems at C2 can help. By giving one an opportunity to trade along with a successful trader, it prepares you to face any contigency.
On the other hand, if one wants to learn how to pick stocks rather than to learn to trade, then I would suggest you visit the following site:
http://www.aaii.com/
I use Relative Strength the filter the stocks. Even this web site acknowledges that Relative Strength is just about the only technical indicator that works for this purpose. I also tend to gravitate towards safe stocks and I find by experience that optionable stocks are safe stocks.
There is no other great magic about picking stocks, but it does help if you know which sector is poised to move which is where the futures trading can help. For example if the ND or NQ futures is poised for a move, I look for stocks in the NASDAQ exchange. If ES or SP is poised for move, I look for stocks in the S&P 500 etc.
But, I do agree with you, that giving your money to somebody else to trade it for you or following the system through the auto-trader are just about the same. I never really thought about it that way.
Here is some more info: On this web site (www.aaii.com) the following:
Question No. 8:
Are there any technical characteristics that you examine?
Most studies indicate that most technical approaches are not that successful, and few portfolio managers place very much emphasis on technical analysis. There is one type of technical analysis that has shown promise, though, and that is relative strength, in which the price performance of a stock is measured relative to the price performance of an index, indicating whether the stock’s price is trending up faster than other stocks.
An interesting use of this tool is described by a growth fund manager as follows:
"We use it not because we feel it’s some kind of magical technical tool that tells us if the stock is a good investment, but rather as a check on reality. If a particular company looks very good to us but is underpeforming the market, I want to step back and say ‘What am I missing?’ There must be something wrong that other investors know about that I, for whatever reason, haven’t been able to find or don’t understand. If the relative strength isn’t there, we may simply keep our eye on it rather than buy it."
8. Is technical analysis used?
Studies indicate that most technical analysis provides an unreliable indicator of long-term future price action, with the exception of measures of relative strength. Avoid funds that rely heavily on technical analysis to the exclusion of an examination of fundamental factors concerning potential stock investments.
Also Cash Flow analysis is very important from the fundamentals point of view. There are good articles on this web site about Cash Flow analysis.
Pal:
>Personally, I am KISS (keep it simple stupid) kind of guy.
I like you man, but you are anything but keeping simple. You responded twice to your own post, besides writting 10 pages long esseys.
But thanks for the laugh, it made my day!
I think you caught me there. I nominate you the Sheriff of C2.
Atleast my systems are simple enough to follow because they use position trading, not day-trading where you have to watch the market all the time or in auto-trading where missing fills on limit orders and unrealistic volume on stocks/options leading to unrealistic fills are enough to drive anyone to the wall.
This is what happens: in Position-trading I’m trading golf during day or do some other work, and only after the market closes, I do my research, with the result I get time to interact with other traders at C2 and elsewhere. In day-trading, i’m not sure you get time to relax even after the market closes.
You got it, Pal! My systems only trade once a week (signals post on Sunday, to be traded Monday morning). The rest of the week is free time. Can’t get much simpler than that.
Brian
Actually, there is one other system (Mutual Fund Trader) that seems to make occassional trades once a month, which might be even simpler.
I do trade only weekly/monthly for stocks instead of daily because, I can hedge my stock portfolio with options when the inevitable short-term counter-trend comes along.
But for forex, and futures, options are not yet available at C2, with the result, I’m forced to monitor the trades daily in order to minimize drawdowns.
That strictly wont be necessary if C2 shows only closed equity plot, but since C2 shows open equity plots which in reality is closed equity plot for day-trading systems (which is unfair for longer-term systems), I’m forced to trade daily for these instruments.
But in real-life, I trade only options on forex and futures, so can monitor it weekly or monthly.
There are two additional systems that only trade about twice per month: Rebound ETF and Rebound Select. After the first three months of trading, they are both generating excellent annualized rates of return in excess of 50%.
(Mutual Fund Trader) that seems to make occassional trades once a month, which might be even simpler.
I have wanted to point out a long time ago, that Mutual Fund Trader (no affiliation) is one of the best systems here, although most people probably won’t notice it. On my rating system it would rate an easy 10. Very easy to follow, realistic, trades are rare, thus a subscriber doesn’t have to worry about quick changes, etc.
The system has a very decent annualized return, with low risk, so if I had tons of money to invest, that would be my choice. Right now its style is too slow for me, but who can complain about a low risk 35% annual gain?
Peter,
Yes, that would have a very good place in a portfolio, but I wouldn’t put all my money into it. Why “settle” for 35%, when you can get much higher returns by increasing your risk exposure just a little bit.
Brian
Sure, I would spread out my portfolio among 3-4 systems. The point of my post was, that there are some excellent systems with low risk, but because of the nature of the list, they don’t show up among the first 40, thus average people won’t notice them…
by increasing your risk exposure just a little bit, do you mean by using options? I have previously argued about the optimal buy-and-hold portfolio that includes a few options, but Mutual Fund Trader does not trade options to hedge its portfolio. If it had, the returns would have much greater. But anyway, I would think, that put options would have reduced the risk exposure, not increase them. A portfolio without options to hedge it is more riskier.
One reason could be the numerous computational challenges associated with the optimization procedure that exist in the practical implementation of the optimal buy-and-hold strategy that involve options.
That why professional money managers are flocking to Hedge Funds where the returns are greater and consequently the compensation is better.
Approximately 75% of all market activity is institutional trading. Much of that institutional money is managed in hedge funds. Almost all hedge funds are very actively managed. Over the last five years, hedge funds on average have substantially outperformed mutual funds/ETFs.
