I thought in english it's pronounced kindergarden? Well, as I am from germany, I know that the original word is kindergarten.
Apologies.
Living the adventure in my head.
- Joined Aug 2007 | Status: Always trying... | 2,263 Posts
Apologies.
- Joined Dec 2006 | Status: Member | 3,852 Posts
Please ignore my stupidity. "Kinder" means "child" or "baby" doesn't it? And "garten" means "garden"? Of course you're correct then, and I've just made an arse out of myself.
Apologies.
This is really a silly argument. Using the term "random entry" with "good money management" doesnt make any sense. If the entry is random, but the exits are not, then the entire thing becomes NON-random. As someone pointed out, you could flip a coin, enter, and then just exit immediately, flip again, enter, and exit again. Keep doing that until you get the entry that you "want", and then hold onto that trade and exit when your edge tells you to, but then I guess even the entries arent really random anymore are they?
What this really boils down to is the importance of entries vs exits, the argument being(I think) that exits are much more important than entries. Knowing when to exit is certainly part of an edge (at least 50%), but so is knowing when to enter.
I would pose the question this way:
Is your edge good enough, to overcome using a really stupid method of entering the market(like flipping a coin), and the answer could very well be "Yes".
Although why someone with an actual edge would want to use coin flipping as a method of entry is beyond me
What this really boils down to is the importance of entries vs exits, the argument being(I think) that exits are much more important than entries. Knowing when to exit is certainly part of an edge (at least 50%), but so is knowing when to enter.
I would pose the question this way:
Is your edge good enough, to overcome using a really stupid method of entering the market(like flipping a coin), and the answer could very well be "Yes".
Although why someone with an actual edge would want to use coin flipping as a method of entry is beyond me
- Joined Nov 2007 | Status: Conscious Incompetence | 3,274 Posts
Don't wish it were easier, wish you were better. ~ Jim Rohn
This is really a silly argument. Using the term "random entry" with "good money management" doesnt make any sense. If the entry is random, but the exits are not, then the entire thing becomes NON-random.
What this really boils down to is the importance of entries vs exits, the argument being(I think) that exits are much more important than entries.
http://www.wyzant.com/Help/Images/segment_AB_image.gif
now what's the more important point in any segment? A or B?
Their importance is clearly equal.
I guess we tend to perceive exits as more 'important' or 'difficult' because at the time of exit, we are exposed to the market. So i guess the mother of all these statements is - psychology. Picking good entries is good for psychology as well (Q: which trade is better? the one going straight to the target or the other spending an hour in close proximity of the stop loss, then hitting the target? A: both trades are equal!). Good entries make risk management a much happier endeavor. But so do good exits.
In practical trading, the key to success lies in maintaining the sum of negative A-B segments (+transaction costs) below the sum of the positive ones (providing trade size remains constant). Both A and B determine any segment length with equal power.
In a dream world, MAE of an ideal entry would never exceed transaction costs and the ideal exit would be another ideal entry in opposite direction making more than the costs.
In the real world, any strategy should aim to come as close as possible to this ideal (anything less is hypocrisy). However, most of them will pick both A and B points no better than a coin toss, if applied mechanically with total disrespect to market structure and behavior. But exactly this is how most people want to trade them!
MarginTrader All Time Return:
-2.4%
- Joined Dec 2007 | Status: Informed | 1,640 Posts
Price data represents a beautiful paradox. It approximates a random walk, especially over the longer time horizons. In other words, price data almost* fits the definition of randomness. BUT, there are some extremely profitable traders. Why? Because price charts are just the scoreboard. If you're watching a football game, you're probably not going to be able to predict the outcome of the game by watching the score only--you need to watch the players, know about the players (research), keep track of who's been injured lately ect... New traders, don't read into my words here, I'm just using an analogy. What I am saying is that you need to start looking at things other than price data. Price should not be your main inputs.
Here is a quick example so you can think about the market maybe a little differently:
November 30th price spiked in EU due to multi government interventions to help the EU banks with liquidity issues. Think about that. Price spiked nearly 250 pips in a little over an hour. Prior to the intervention, was there information in price data alone that foresaw this action prior to the event happening? I submit to you all that it absolutely was not. Replace the action of government intervention in the example with Hedge Fund Alpha Omega placing a 200M buy order and causing price to spike momentary--maybe triggering stops and momentum traders to make it an exceptionally volatile move. Again, previous price data did not specifically predict this event-- not if the hedge fund was trading because a plane flew by.
Am I saying that price data is of no use? Au contraire mon ami! Price data is far from random......(insert paradox here)...... until further price data comes along and makes it look random.
You just need to inform yourself a LITTLE BIT and apply some common sense and you can begin filtering lots of clutter from your decision making.
One more thought...So we knew that the spike NOV 30th was the outcome of a government intervention. It's not often that we know with certainty who just moved the market...I sold the heck out the market the following couple of days. Why?
I'm going to shut up now and go make Christmas cookies with the family... I agree 100% with Mr Vegas Goose Man. He wrote the book and hopefully I drew a picture.
Here is a quick example so you can think about the market maybe a little differently:
November 30th price spiked in EU due to multi government interventions to help the EU banks with liquidity issues. Think about that. Price spiked nearly 250 pips in a little over an hour. Prior to the intervention, was there information in price data alone that foresaw this action prior to the event happening? I submit to you all that it absolutely was not. Replace the action of government intervention in the example with Hedge Fund Alpha Omega placing a 200M buy order and causing price to spike momentary--maybe triggering stops and momentum traders to make it an exceptionally volatile move. Again, previous price data did not specifically predict this event-- not if the hedge fund was trading because a plane flew by.
Am I saying that price data is of no use? Au contraire mon ami! Price data is far from random......(insert paradox here)...... until further price data comes along and makes it look random.
You just need to inform yourself a LITTLE BIT and apply some common sense and you can begin filtering lots of clutter from your decision making. One more thought...So we knew that the spike NOV 30th was the outcome of a government intervention. It's not often that we know with certainty who just moved the market...I sold the heck out the market the following couple of days. Why?
I'm going to shut up now and go make Christmas cookies with the family... I agree 100% with Mr Vegas Goose Man. He wrote the book and hopefully I drew a picture.
- Joined Jan 2011 | Status: Member | 2,680 Posts
What you just mentioned is perferct example of a Headless Chicken Strategy.
ps - The issue here is not a system producing 50% or more and less then 50% winning trades. The edge means "A method that is logically able to yield more profit than loss by consistently following certain basic rules". No money management technique alone can generate an edge. Challange me on that so that I have an excuse to give you a piece of my thirty-year research and names of two Vegas Casinos who threw me out three years apart for only temporarily taking chances...
I CHALLENGE YOU
i really am very interesting to see your research and ideas on the matter
AVT INVENIAM VIAM AVT FACIAM
- Joined Sep 2008 | Status: Married - 5 Wives | 14,713 Posts
i am with you on this one but...............
I CHALLENGE YOU
i really am very interesting to see your research and ideas on the matter
This rules says something like: "There is no limit to how much profit one would like to see but there is always a definite limit to how much loss one can afford." The challange is to prove this statement wrong without having a definite edge using any MM based method. I tried for several years but finally surrendered.
The Thief of Wall Street