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  • #81
  • May 7, 2019 5:05pm May 7, 2019 5:05pm
If you all have time to listen this ..
there is answer to all your questions.
Oh yeah , he is not an engineer, he used to be a chef and musician.
Also his free course contains 30 hrs of videos particularly last 2 chapters will cleanse your heads !! only if you are ready to listen and drop your egos!!

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on a postive roll...
  • #82
  • May 7, 2019 5:20pm May 7, 2019 5:20pm
Quoting Nik-Nyc
An edge is the probability of X-tick price movement in one direction over Y-ticks price movement in the opposite direction after an objective signal. If an edge does indeed exist, then consistent execution is all that is required. Grinding, day in and day out. This definition of an edge coupled with consistent execution puts the law of large number on your side, not against you. Note, if the objective signal is actually subjective, then the trading becomes completely discretionary and the results are based on the traders "ability/skill" (good luck...
what a tremendous post kudos NIK
  • #83
  • May 7, 2019 5:33pm May 7, 2019 5:33pm
Quoting Rmg
If you all have time to listen this .. there is answer to all your questions. Oh yeah , he is not an engineer, he used to be a chef and musician. Also his free course contains 30 hrs of videos particularly last 2 chapters will cleanse your heads !! only if you are ready to listen and drop your egos!! https://www.youtube.com/watch?v=dfRPZfkrDKk .

I think the edge is purely discipline. this is his curve chart. Red area marks around 7 months of stagnation. Most people would intervene/optimize after 1 month max i believe. And again, this can happen at ANY time and frequency .

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I think ultimate trading edge is not even related to trading; it's your ability to withstand variance.

There are really 3 parts to this

1. define a base for your trading (pattern)
2. define the risk parameters as nik said so that you can quantify it
3. execute flawlessly and allow the law of large numbers to play out your edge

Then pray to almighty God that you have the mental capacity to withstand the variance along the way....
  • #84
  • May 7, 2019 7:14pm May 7, 2019 7:14pm
is a reduction in transaction cost an edge?

it has nothing to do with risk parameters!

yet it is an edge.

combining various edges to your strategy, to increase pnl, is the ultimate goal.

running a mechanical system from a VPS closer to the broker is an edge as well.
  • #85
  • May 7, 2019 7:17pm May 7, 2019 7:17pm
is automating trading an edge?

yes it is. it combines all aspects of trading in one, and more specifically: risk, discipline, execution, low transaction cost, probability of system behaving as thought is higher than gut feel.

a trader who can backtest and trade a strategy mechanically has an edge over discretionary trader.
  • #86
  • May 7, 2019 7:18pm May 7, 2019 7:18pm
Quoting hilmy83
I think the edge is purely discipline.
Incorrect. The most discipline human being on earth will simply be flawlessly executing an edgeless system that will not produce profits. They may get lucky in the short-term, but this isn't Vegas.

Quoting hilmy83
this is his curve chart. Red area marks around 7 months of stagnation. Most people would intervene/optimize after 1 month max i believe. And again, this can happen at ANY time and frequency .
Yes and no. While the red area does represents 7 months, it only represents 140 trades because this is a daily breakout system. Being breakeven during a 140 trade sequence is not the end of the world, indeed, it should be something that is planned for in advance. Lots could be written about this subject, but lets just leave it at "frequency is and important consideration". Also, we cannot exclusively look at the red period while ignoring the other very profitable periods. Most importantly, looking at this equity curve you can conclude that regardless of the system traded, it has proper risk management and risk controls in place (a very important requisite).


Quoting hilmy83
1. define a base for your trading (pattern)
Yes, you need a signal, the more quantifiable and objective the better.

Quoting hilmy83
2. define the risk parameters as nik said so that you can quantify it
Yes, you need to make sure the signal has an edge, the more testing the better, HOWEVER, without a proper edge go back to #1

Quoting hilmy83
3. execute flawlessly and allow the law of large numbers to play out your edge
Only if #2 confirms that an edge exists . . . if an edge does exist then using the proper money management & risk management should be "easy". Also, this is the stage where trade management(be, scale in, scale out, move sl/tp etc etc) should be explored and quantified.


Quoting hilmy83
I think ultimate trading edge is not even related to trading; it's your ability to withstand variance.
I disagree, but assuming what you say is true, your entire focus should be on defining what variance is because you will not be able to detect it if you do not have a clear definition of what the baseline should be. Massive statistical haul required, otherwise it's probably not variance but rather fear and greed.
  • #87
  • May 7, 2019 7:20pm May 7, 2019 7:20pm
is money management an edge?

yes it is. it helps increase pnl and reduce risk.

i.e. risk allocation based on diversification is an edge.
risk allocation based on strategy performance is an edge.
  • #88
  • May 7, 2019 7:23pm May 7, 2019 7:23pm
Is Forex Factory an edge?
Toxic Flow for FX Brokers.
  • #89
  • May 7, 2019 7:25pm May 7, 2019 7:25pm
Quoting alphadude
is automating trading an edge? yes it is. it combines all aspects of trading in one, and more specifically: risk, discipline, execution, low transaction cost, probability of system behaving as thought is higher than gut feel. a trader who can backtest and trade a strategy mechanically has an edge over discretionary trader.
everything can be an edge

is health an edge? yes
is a good computer an edge? yes
is a hot supporting wife an edge? yes
is postive reinforcement gift to yourself for profitable months an edge?yes
  • #90
  • May 7, 2019 7:25pm May 7, 2019 7:25pm
most important edge of all, is the signal itself.

i find many traders in public forums trying to improve a strategy by MM, execution, and manual intervention, etc. while forgetting that the signal itself does not have an edge.

you should always start with the signal. hence my practice, that you should test your edge using no transaction cost first, then proceed to the next step(s)
  • #91
  • May 7, 2019 7:28pm May 7, 2019 7:28pm
Quoting anti-flash
Is Forex Factory an edge?
yes. and many other trading forums.

i personally use the forums as trading idea generation.

you need a good source.
  • #92
  • May 7, 2019 8:30pm May 7, 2019 8:30pm
Quoting Nik-Nyc
An edge is the probability of X-tick price movement in one direction over Y-ticks price movement in the opposite direction after an objective signal. If an edge does indeed exist, then consistent execution is all that is required. Grinding, day in and day out. This definition of an edge coupled with consistent execution puts the law of large number on your side, not against you. Note, if the objective signal is actually subjective, then the trading becomes completely discretionary and the results are based on the traders "ability/skill" (good luck...
Desperately trying one more time to squeeze something tangible out of your experience and those contributing here.

What is the DNA or characteristic of an EDGE in a raw signal?

You wrote:
"An edge is the probability of X-tick price movement in one direction over Y-ticks price movement in the opposite direction after an objective signal."

Fine! I believe you but ...
probability.. is it 20%, 50%, 80% or how much and why? for how long in your initial test and why? At what frequency in the initial test and why? I am expecting specificity in our discussions from this thread as that is the only thing that matters in systemic/automated trading as that is the only thing systemic strategy relies on i.e. facts supported by data.

You guys are saying "edge exists in raw signal". focus on finding one edge in one signal and take it from there. I am saying Edge does not exists in a raw price vs time series or I would have found it by now (still finding since 2015). We might be both right or wrong based on HOW WE DEFINE OUR SUCCESS CRITERIA?

Here's how I define my success criteria (i.e, EXPECTATION from backtesting results)...
1) no more than 3 consecutive losing days in a week,
2) no more than 3 consecutive losing weeks in a month,
3) no more than 3 consecutive losing months in a year and
4) no loss or drawdown of initial capital after 6 months.
5) "only one trade open at a time"
I also EXPECT a strategy to stay profitable beyond 3 yrs and most definitely protect my initial capital after 6 months.

Is the above success criteria too stringing or limiting? what is your success criteria now or what was it back when you wrote your first algo in futures. Reflect upon your journey dude so I and others can LEARN and more importantly avoid the same mistakes.

I came here only to look for the SPECIFIC steps involved in determination of an "raw edge in a signal". I HAVE FAILED IN FINDING ONE. I am admitting it. Specificity is the only thing that matters to quants or anyone dipping their toes in fintech. I can find a ton of youtube shit but does that really help? I am looking for practical experience from those who are trading their algos LIVE. You and Adude are the only ones that are doing this outside of MT4 so help steer this into some meaningful, tangible, process/recipe/methodology driven discussion. Devil is always in the details (atleast to me).
Staying in my lane...
  • #93
  • May 7, 2019 8:31pm May 7, 2019 8:31pm
Quoting Nik-Nyc
{quote} Incorrect. The most discipline human being on earth will simply be flawlessly executing an edgeless system that will not produce profits. They may get lucky in the short-term, but this isn't Vegas. {quote} Yes and no. While the red area does represents 7 months, it only represents 140 trades because this is a daily breakout system. Being breakeven during a 140 trade sequence is not the end of the world, indeed, it should be something that is planned for in advance. Lots could be written about this subject, but lets just leave it at "frequency...
The edge has to be mostly mental imo. Otherwise, what do you attribute the massive failure rate in this business is due to what? inability to find an edge? i doubt it. I think most people with enough exposure to the markets can come up with decent signals with + EV.

The problem is during the times DD or stagnation, people react emotionally. People are also very closely connected to money. When they lose or experience long periods of DD, it's natural to optimize/intervene to escape the "pain". This is the only reason that can justify the high failure rate, the fact that our natural innate human behavior doesn't sync well with the probability game (makes it worse when assign self worth to money).

failure at trading is a sign you're a normal human being lol
  • #94
  • May 7, 2019 9:51pm May 7, 2019 9:51pm
V,

Will do my best to be as specific as possible.

Quoting VEEFX
probability.. is it 20%, 50%, 80% or how much and why? for how long in your initial test and why? At what frequency in the initial test and why?
- Usually i like to see raw edges of 40% or better as they will require less testing. Also, as a lower "time-frame" intraday trader i need my trades to play out within my session and that usually means lower RR parameter (eg less than 3:1).
- It's not so much a question of sample size, but rather sample range. You need to check what happens during different market conditions. For the markets that i trade i have very good date ranges with examples of extreme trends, extreme ranges, extreme volatility, extreme illiquidity. Obviously i begin with "normal" days, and under these conditions the first tests are minimum 200 examples. The better it looks, the more testing it needs.
- Not sure what you mean about frequency? I just mentioned it to hilmy because he pointed out 7 months of trading whereas what really matters is number of trades, in this case 140 which could be traded in 7 months or 2 days. 7 months of BE trading would suck, but 2 days is not a big deal.


Quoting VEEFX
You guys are saying "edge exists in raw signal". focus on finding one edge in one signal and take it from there. I am saying Edge does not exists in a raw price vs time series or I would have found it by now (still finding since 2015). We might be both right or wrong based on HOW WE DEFINE OUR SUCCESS CRITERIA?
Pretty sure we agree on this point. In all my testing and trading "time" is totally irrelevant to my signals and edges (besides defining a session). To the best of my knowledge, time has never caused price movement, besides very specific cases such as news releases or market closure. Time can measure price momentum (crudely), time can measure price "trend", but time is not the causation of either. Only one thing can move price, indeed its literally required, and that is orders. Can you trade profitably without orderflow analysis, sure, but why would you given the choice?


Quoting VEEFX
Here's how I define my success criteria (i.e, EXPECTATION from backtesting results)...
1) no more than 3 consecutive losing days in a week,
2) no more than 3 consecutive losing weeks in a month,
3) no more than 3 consecutive losing months in a year and
4) no loss or drawdown of initial capital after 6 months.
5) "only one trade open at a time"
I also EXPECT a strategy to stay profitable beyond 3 yrs and most definitely protect my initial capital after 6 months.
None of this has to do with edge discovery. Obviously this list is important to you, but these are all your own desires that have nothing to do with technical trading, but everything to do with systems design which is another can of worms. Everything on your list seems reasonable. However all of these points are best looked at from a systems point of view, not at this initial stage.

Quoting VEEFX
Reflect upon your journey dude so I and others can LEARN and more importantly avoid the same mistakes.
This would require more than a post, much much more. The best advice i can give is 1) be obsessed with risk, at all times, even when at Be+, 2) Start with a decent raw edge 3) any trade management parameter must be checked against old data to see its true effect.


Vee, we have PM'ed a bunch in the past and i have offered to voice chat with you regarding an array of topics, that offer still stands.
  • #95
  • May 7, 2019 10:30pm May 7, 2019 10:30pm
Quoting hilmy83
The edge has to be mostly mental imo. Otherwise, what do you attribute the massive failure rate in this business is due to what? inability to find an edge? i doubt it. I think most people with enough exposure to the markets can come up with decent signals with + EV.
I'm certainly not going to down play the importance of strong emotional intelligence and control when it comes to trading. It is extremely important, indeed required, but why? It is required because it keeps you grounded to your plan, and assuming your trade plan has positive expectancy, you will come out the other side. That said, the strong pschology doesnt actually earn you a single dollar, your trade plan, with its edge/s and optimization earn those dollars. You see the difference?


Quoting hilmy83
The problem is during the times DD or stagnation, people react emotionally. People are also very closely connected to money. When they lose or experience long periods of DD, it's natural to optimize/intervene to escape the "pain". This is the only reason that can justify the high failure rate, the fact that our natural innate human behavior doesn't sync well with the probability game (makes it worse when assign self worth to money).
I agree willingly assuming risk is counter to human nature, but the optimizing/intervene-ing is clearly not the solution, indeed its usually the beginning of the end. On the fly optimization is edge-less trading and slowly bleeding out is the best possible outcome.

Quoting hilmy83
what do you attribute the massive failure rate in this business is due to what? inability to find an edge? i doubt it. I think most people with enough exposure to the markets can come up with decent signals with + EV.
Have you roamed around FF? Would you say most system threads have edges? I think not. The vast majority fail because they don't have edges. For those with an edge, execution and emotional discipline are the two constant dangers, indeed in the professional sector those are the first two things instituations remove from individual traders with Risk Managers (emotional discipline) and Execution Algos (executions).
  • #96
  • May 8, 2019 12:06am May 8, 2019 12:06am
Quoting Nik-Nyc
V, Will do my best to be as specific as possible. {quote} - Usually i like to see raw edges of 40% or better as they will require less testing. Also, as a lower "time-frame" intraday trader i need my trades to play out within my session and that usually means lower RR parameter (eg less than 3:1). - It's not so much a question of sample size, but rather sample range. You need to check what happens during different market conditions. For the markets that i trade i have very good date ranges with examples of extreme trends, extreme ranges, extreme...
Thanks Nik.

"examples of extreme trends, extreme ranges, extreme volatility, extreme illiquidity." - Agree, I am also knowingly testing whatever promising presumably raw edge I run across against these conditions.

"None of this has to do with edge discovery. Obviously this list is important to you, but these are all your own desires that have nothing to do with technical trading, but everything to do with systems design which is another can of worms. Everything on your list seems reasonable. However all of these points are best looked at from a systems point of view, not at this initial stage." - to comment on this, I need to dig deeper and share my steps involved(and maintaining specificity along the way)
1) investigate the visual setup or something I was not able to try in MT4)
2) implement the setup via indicator or whatever it takes to create the algo (very simple and easy in Sierra as you know
3) Always start with M1 (as my baseline chart). I will explain later why time chart is important to me. if a session or daily/weekly test look promising, then I swap charts to ensure the neutrality exists. To me, neutrality is key to long term sustainibility. Price or time or whatever abnormality cannot last for a longer period imo. so flipping timeframes, chart types etc casually as results will never be the same
4) then comes the rigor of testing across the date ranges that represent a good spectrum of market conditions as you describe. If, during this phase, one of my success criteria is not met, I give up and dump this setup in the trash bin. Is that the right thing to do? I am not sure but to me, transition from visual setup > quantification of setup > raw edge discovery > validation of setup > backtesting (which in geek lingo equates to sandbox testing > acceptance testing > stress testing > penetration testing > capacity testing > performance testing > redundency > load balanced/failover > e2e parallel testing > go live) > go live
Your suggestion to 'segregate' edge discovery to technical trading and then into strategy development i.e. "phased approach" is time consuming to me if the overall success criteria is not met in the raw edge(initial phase) itself. Perhaps this is the reason why I am still stuck in strategy development phase since January because I am repeating a lot of steps for each setup (believe me, I am running approx 100+ market replays per "raw edge" before ruling them out and move on to the next!). The good thing about this approach is... as I proceed thru each step, I am building confirmation on top of previous validation steps.
Now, I have tried your approach of focus only on signal strength and RR equation towards +EV but they have ALL failed or expectance decayed the further I move into strategy development and into backtesting. As you know, tiny variation in risk or money or time duration or any such parameters can alter the course of any robust "edge". atleast that is most certainly been in my case (being a retail price action shitty trader in spot fx)
Regarding timeframes. I am seeing the value of using range bars towards finding a minimum of 3R. Time has always been important to me as it allows me to manage and balance work life (which literally resulted in trading only news events in spot). I also agree time is not the causation of price movement but I do consider "time of day" as having an important element as an aid in strategy development to develop certain functions with ease (end of day or weeky equity stops as an example)

"This would require more than a post..." - it is worth the effort in my opinion. No one on this darn forum is willing to share their struggles. They all make it appear so easy. This stuff is equally hard as making consistent income from the market! I would say the same to Harold and Magnum. How you got here is equally important than how you are making it every day in the market to keep things in perspective for those desiring to follow your trading styles. Just my 2 cents.

I haven't forgotten about your offer. I just underestimated the level of effort and time involved. Back in January I was quite confident to have found something by March and here I am still looking and searching but the path and goals have not altered... not until I am convinced they are aligned with my overall objective of going the algo route in the first place.

Some more questions:
1) do you have any algo that does NOT include orderflow? if yes, how long in live and how often do they require tweaks? if they won't survive beyond 3 months, this journey will come to a stand still very quickly for me. I better drop all this shit and get into understanding volume and footprint stuff which is all completely greek to me. if not, do you believe basic PA and indicator stuff really has any long term merit in algo trading (for NQ)?

2) You will need to get me over the hurdle of how scaling up position size will have no effect on "orderflow mechanics" that the edge relies on (in your case). I am of the view that bigger position size will always result in different outcome than a smaller contract size (I am talking 1-3 contract versus 10-30 contract sizes). Perhaps this is a mental barrier for me but I need more supporting facts to get over this hump. I ask because I am focusing on more ticks to not so much rely on liquidity needs at any given time (and also to make my backtest results more closer towards live results but I am not convinced yet if this is the right approach.)
Staying in my lane...
  • #97
  • May 8, 2019 12:12am May 8, 2019 12:12am
Quoting Nik-Nyc
{quote} I'm certainly not going to down play the importance of strong emotional intelligence and control when it comes to trading. It is extremely important, indeed required, but why? It is required because it keeps you grounded to your plan, and assuming your trade plan has positive expectancy, you will come out the other side. That said, the strong pschology doesnt actually earn you a single dollar, your trade plan, with its edge/s and optimization earn those dollars. You see the difference? {quote} I agree willingly assuming risk is counter to...
In my case, risk manage(r/ment) has to be part of algo or I will blow my account on day one lol I hope this interaction gets me some concrete answers on 1) is it normal to see an edge "decay" as we progress thru strategy development 2) precise techniques to avoid the decay of raw edge. Without these two, I don't think I will ever reach the finish line. I cant be the only one experiencing this hurdle :-(

EDIT: my alternative to tackle this issue has been to always consider outcome of any trade to be 50:50 and then apply multiple strategies across multiple timeframes to trap price into winning more and losing less via strict initial and max DD controls and even rigorous and manipulative equity explosion episodes using volatility but all these techniques are very hard to do on a single futures instrument.
Staying in my lane...
  • #98
  • May 8, 2019 2:30am May 8, 2019 2:30am
Quoting Nik-Nyc
{quote} I'm certainly not going to down play the importance of strong emotional intelligence and control when it comes to trading. It is extremely important, indeed required, but why? It is required because it keeps you grounded to your plan, and assuming your trade plan has positive expectancy, you will come out the other side. That said, the strong pschology doesnt actually earn you a single dollar, your trade plan, with its edge/s and optimization earn those dollars. You see the difference? {quote} I agree willingly assuming risk is counter to...
All your insightful posts are very refreshing, and confirms what i have learnt from outside this forum.
Thanks NIK.
on a postive roll...
  • #99
  • May 8, 2019 2:44am May 8, 2019 2:44am
..sample range...

Indeed, I like to see systems that trades at least 30% of the trading days..

Quoting Nik-Nyc
V, Will do my best to be as specific as possible. {quote} - Usually i like to see raw edges of 40% or better as they will require less testing. Also, as a lower "time-frame" intraday trader i need my trades to play out within my session and that usually means lower RR parameter (eg less than 3:1). - It's not so much a question of sample size, but rather sample range. You need to check what happens during different market conditions. For the markets that i trade i have very good date ranges with examples of extreme trends, extreme ranges, extreme...
  • #100
  • Edited 7:21am May 8, 2019 6:34am | Edited 7:21am
Quoting VEEFX
Let's rock and roll with innovative IDEAS. It have tried many and they all have flaws in my eyes stopping me from going live so what I am really hoping to kick this thread off is to define a set of success criteria for any algorithmic strategy. what are the key essential ingredients required for any hands-free strategy to work long term?
___ whut abt KISS = Keep It Super Simple lol ------- good huh

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