Systematic Trend Trading

Ok, understood. But if edge increases with higher R:R and trails, why stop at 7R? Why not 14R or 20R for example?

TRUTHS ABOUT STOP-LOSSES THAT NOBODY WANTS TO BELIEVE

https://www.quant-investing.com/blog...nts-to-believe

Nice consistently achievable figure. I aim for exactly the same!

you don't need to stop but you have to understand the risk implications as you go higher and higher with RR. As with any edge the solution is risk control and diversification. Going forward nobody can predict the precise movement of a market so you need to insure you make profit and control risk in as broad a range of market conditions as possible (even conditions never experienced before.)

3R, 5R, 10R, 20R all exploit the same edge, none of them are right or wrong..

If you are looking for a trading edge then you should look for edges that show a technical and behavioural edge. You want to look for an edge that is popular amongst traders who are consistently profitable, and very unpopular amongst the much larger group of unprofitable traders.

Popular amongst retail traders:
high win rates
precision entries
low RR
Fixed targets
complex strategy / complex analysis
limited diversification (single strategy)
Consistently large, linear returns

this does not mean that none of these factors can be part of a profitable trading strategy, but the evidence suggests a different approach should be considered.

In my mind this is the one fact you need to take on board if you ever hope to trade profitably

"Simple algorithms like continuation of trend in the short term, or reversion to the mean in the long term, outperformed all the experts, and delivered better than random forecasts."

"On average, experts delivered forecasts, and confidence in their forecasts, that were less well calibrated than one might expect from random guessing."

https://www.zeninvestor.org/in-the-world-of-stocks-and-bonds-there-are-experts-pundits-and-legendary-investors-but-when-it-comes-to-explaining-whats-happening-right-now-nobody-knows-nothing/

"In life, it's important to know when to stop arguing with people and simply let them be wrong."

Trade 219 -1R, 220 -1R, 221 -1R, 222 -1R, 223 -1R, 224 -1R, 225 b.e, 226 -1R

Results:
Week 1 +4R
Week 2 -14R
Week 3 -2R
Week 4 -3R
Week 5 +3R
Week 6 +4R
Week 7 -7R
Week 8 -10R
Week 9 -4R
Week 10 -13
Week 11 +21
Week 12 +6
Week 13 +14R
Week 14 -3R
Week 15 +15R
Week 16 +19R
Week 17 -6R
Week 18 +7R
Week 19 -5R
Week 20 -7R
Week 21 -0.5R
Week 22 +11R
Week 23 -7R

*credit to Rambo

Lessons from Amarillo Slim:

As they say, the stock market is the greatest casino of all. Here from Amarillo Slim In a World Full of Fat People: The Memoirs of the Greatest Gambler Who Ever Lived.
We quote as follows:

• While [Minnesota] Fats and I looked like a ball and a bat standing next to each other, he was the first hustler I patterned myself after and he’s probably the reason I’m such a talker when I gamble. I learned from Fats that the more you can get someone to want to beat you, the more likely you are to make him emotional, so that his ego gets in the way of his brain.

• The point is that in gambling you need to put the odds in your favor. The result of one particular game doesn’t mean a thing, and that’s why one of my mantras has always been “Decisions, not results.” Do the right thing enough times and the results will take care of themselves in the long run.

• It just goes to show you that luck does have a place in poker. Johnny had set the perfect trap, and the other guy just drew out on him. In my lifetime I’ve lost approximately $30 million playing poker (you wouldn’t believe me if I told you how much I have won), and very little of it came from making a mistake. It’s not like chess, where the best players win all the time. In fact, at the 2002 World Series of Poker, of the 631 entries, there were 12 former world champions, including me and Doyle, and not one made it to the final 45 players. If that doesn’t tell you that there’s a short-term luck in poker (the tournament only lasts five days), then I don’t know what does.

• Play the players more than you play the cards. What they say is true: A man’s eyes mirror his soul. Why do you think I always wear a big old brimmed Stetson when I play? A man’s eyes show 90 percent of what he’s thinking. When I am wearing my hat, you can see my eyes only when I want you to. Besides what you can see from a person’s eyes, you also can pick up something about his hand from other physical giveaways, known among poker players as “tells.” One player may talk a lot if he’s got a strong hand, giving signs of being anxious to raise; while another player may become very quiet if he’s holding something. I can say this now because he’s no longer alive—Jack “Treetop” Strauss, a world-class player who won the World Series in 1982, whistled ever so quietly when he was bluffing. If you can pick up a tell like that on somebody, he might as well be playing with his hand faceup.

• For those of you looking for some sort of secret as to how to beat sports, I could save you a whole lot of time and say to just stay away from it altogether. The only way to beat it, of course, is to be taking bets, which even I had to give up in 1961. But since I know you just can’t wait to get your money into action, I will give you a few pointers.

• It’s also a known fact that in sports betting, the public is [going to] bet on the favorite…Rule number one is to bet on underdogs… if you were just to bet every underdog, at the end of the year you’d quit a winner…Rule number two is that if you’re going to make a bet, you need to know something that everybody else doesn’t…The third and final rule…Don’t bet with your heart. Emotion is the greatest killer to any gambler, and if you wear your heart on your sleeve when you wager, those bookmakers will knock it off like a dead limb.

• If there’s one thing I learned in life, it’s never to say yes to the first offer. If you agree to a deal too early, a person is always [going to] walk away thinking he could have gotten more out of you. But if he has to work for it and you cave in a little, he’ll think that he really got the best of you.

• Sigmund Freud did research on gamblers and found that a true gambler is a loser. People who enjoy speculating—deep down—want to lose…he had it right about certain people not feeling worthy of having any money. And that’s why most gamblers deserve the bad reputation that they get. But what most people don’t realize is that a professional gambler—or an even better word for it may be “competitor”—isn’t the same thing as an ordinary gambler.

• I had a knack for arithmetic as a kid—as most professional gamblers do. If you’re going to make your living putting the odds in your favor, you’d better know how to calculate them. The late, great Stuey Ungar, one of the best card players I ever saw, was a mathematical genius.

Your individual trade win rate is far more important to your ego then your profitability. My trade win rate is around 18%, if I group them together by weeks then the win rate goes up to 50%, if I group them together by years the win rate is over 90%

Mulvaney trade performance - low win rates, high returns

"the house largely bets on the consistency of the crowd to remain inconsistent in approach"

Thanks for this clever thread.

Green pips

thank's... love your quote

"Bottomless wonders spring from simple rules, which are repeated without end"

60

Watching you handle those -R weeks like a boss reminds me of Neo when he accepts he’s “the one” and is all Zen / at peace about everything to the extreme annoyance of Agent Smith and co

keep it up mate you’re a proper inspiration

had to google Agent smith

If you can't stick to your plan then you're lost I reckon Candle....and not only in trading

Oh ain’t that the truth!! In trading and in life it’s all about dialling down the noise!!

It’s funny, I’m currently rereading Michael Covels Trend Following book after many years. When I first read it years ago I thought it was a load of cobblers and quickly got resigned to the under stairs cupboard to die a slow death

Now, after many years it seems like a work of complete genius and truth.

Obviously the book hasn’t changed but the reader certainly has

60 v market

Trade 227 -1R, 228 -1R, 229 +6R, 230 -1R, 231 +5R

+8R this week.

My expected target for this strategy is 50-100R a year, week 24 of the forward test and sitting at 30.5R.

Two or three of these simple systems will make a very solid portfolio... it's not rocket science really.

Results:
Week 1 +4R
Week 2 -14R
Week 3 -2R
Week 4 -3R
Week 5 +3R
Week 6 +4R
Week 7 -7R
Week 8 -10R
Week 9 -4R
Week 10 -13
Week 11 +21
Week 12 +6
Week 13 +14R
Week 14 -3R
Week 15 +15R
Week 16 +19R
Week 17 -6R
Week 18 +7R
Week 19 -5R
Week 20 -7R
Week 21 -0.5R
Week 22 +11R
Week 23 -7R
Week 24 +8R

The NY Times carries a crisp interview of Howard Marks who talks about how investors are often their own worst enemy. When asked if investors have become smarter in the 50 years Marks has been investing himself, he replies –

They’ve gotten more information. They know more about more asset classes. There are fewer secrets in the world today. On the other hand, I think they are more shortsighted, more short term oriented than they used to be.
And while people now understand more about contrarianism and counterintuitiveness, I don’t think the human race has become less emotional.

On how to succeed in investing, Marks suggests –

Superior investing is taking advantage of the errors of others. In order to get an above-average return in the long run, you have to buy things for less than they’re worth, which is to say that the other people out there have to be selling that thing for less than its worth.
They’re making a mistake and you need to act in a contrarian way to take advantage of that.