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The Lunatic Fringe - Trading talk.

Goldhedge

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One thing that all chartists need to understand is how it sows the seeds of it's own destruction.
What I think about and I'm no expert... is Sinclair learned charting back when probabilities were driven by human emotions. Today's computer algos kind of put a damper on charting the old school way.

Today it's "the wave seems to be going this way so hop on and hope for the best". At least that's my interpretation.
 

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Sinclair is the one who originally turned me on to Armstrong many years ago...he said that Armstrong is the go to guy for timing...
Yet they seemed to part ways over gold...
 

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As soon as we find a key to the markets, some SOB changes the lock!
Yes... think of them as your wife but possibly, in some cases, more dangerous.

Most people must lose for markets to work... something your investment adviser will never tell you.
 

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The ASX Gold Tribe spent all day marginally red, closed flat. Not so bad really given US numbers.
 

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I am wondering if all these BTC holding millennial's that just got slammed by the virus will be selling assets to make ends meet. Given the holding demographic it may be an issue.

On the flip side the market may end up forcing the Chinese into a currency devaluation. I know that the Chinese have restrained BTC holding but if the rank and file wake up to this possibility in the Yuan the easy play might be BTC. The 20K+ BTC spike was made in China so watch that space.

++ for gold, now easier to buy than BTC for Chinese.
 

dpong

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Feel free to expand that one if you want.
Positive expectancy is more than being an optimist. It is understanding that a repeatable set of actions have a demonstrable probability of winning more than losing over time. When casinos let you play roulette they are always willing to take the other side. To bet against you. Are they gambling? Hardly.

According to this source, (forgive me I know nothing about roulette), in American roulette the house "edge" is 5.26%. This means with a perfectly "fair" (not rigged) roulette table, over time the house will win 5.26% more than they lose. Their goal is to get you to play roulette more and faster so that they can exploit their mathematical edge.

https://www.rouletteonline.net/odds/

In Weekend Trend Trader, Nick Radge says a few words about expectancy:

"People close to you will often suggest that you are gambling. Trading using a well-managed plan is NOT gambling. Gambling is a random act with a binary outcome. Trading to a plan is a discipline that has a proven mathematical edge or expectancy."

Speaking of a "proven mathematical edge".... Since Nick's (and my) strategy is programmable it is possible to backtest using historical data to see what would have been the outcome in the past. Once a positive outcome is identified in the historical data, then if one assumes that in the long run the future will look more or less like the past then a positive expectancy can be exploited.
 

dpong

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I ran my programmed strategy against every symbol in the S&P 400 one at a time by hand. I let the strategy work with all data from all symbols as far back as the TradingView platform had data. While there are some limitations in how I tested, including survivorship bias, and inability to test as a portfolio, the results should still mostly be valid. In any case, Nick did test and eliminated the problems I mentioned and shared the results in the Weekend Trend Trader book.

I tabulated the results from my strategy against the S&P400. The Actual results were that the strategy won (I won) 57% of the trades. I lost 42% of the trades. My average win was $2851. My average loss was -$752.21. My win/loss ration was 3.79. That means that for every dollar I lost, I won $3.79. Not bad. Be the casino.

However, some of the wins were so unusually large that I assume they will not come along every day. So I pulled out all wins that were in excess of $10,000 and looked at the results without these HUGE wins.

The results w/o the huge wins were: I won 56% of the trades. I lost 44% of the trades. My average win was $1818. My average loss remained at -$752. My win/loss ratio was 2.42. This means for every dollar I lost, I won $2.42.

If I agree to play flip the coin with you, and every time I win you give me $1. But every time you win I give you $2. How long will you play with me?

SnP400-2.jpg
 
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dpong

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The histogram that I keep showing is a picture of the results of this exercise. The height of the bars on the graph (bins) represent the number of trades that fell into each bin. (I made this chart by hand from the results of my testing.)

The 3 bins (bars) on the left are the losing trades. All bins to the right of those 3 represent winning trades.

This is how a bell curve is built. This is a histogram of the outcomes of all the trades made.

But there is something funny about this bell curve. It is extremely biased to the right-hand side. That is called a fat tail.

To be clear, there is nothing magic about the buy signal that my strategy uses. It's an OK buy signal. But the magic happens because the strategy always sells the losers and lets the winners ride as long as possible. Winners are only sold when price moves against us. That is the secret sauce. That is what creates the positive expectancy.

SnP400_Histogram.png
 
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Strawboss

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I ran my programmed strategy against every symbol in the S&P 400 one at a time by hand. I let the strategy work with all data from all symbols as far back as the TradingView platform had data. While there are some limitations in how I tested, including survivorship bias, and inability to test as a portfolio, the results should still mostly be valid. In any case, Nick did test and eliminated the problems I mentioned and shared the results in the Weekend Trend Trader book.

I tabulated the results from my strategy against the S&P400. The Actual results were that the strategy won (I won) 57% of the trades. I lost 42% of the trades. My average win was $2851. My average loss was -$752.21. My win/loss ration was 3.79. That means that for every dollar I lost, I won $3.79. Not bad. Be the casino.

However, some of the wins were so unusually large that I assume they will not come along every day. So I pulled out all wins that were in excess of $10,000 and looked at the results without these HUGE wins.

The results w/o the huge wins were: I won 56% of the trades. I lost 44% of the trades. My average win was $1818. My average loss remained at -$752. My win/loss ration was 2.42. This means for every dollar I lost, I won $2.42.

If I agree to play flip the coin with you, and every time I win you give me $1. But every time you win I give you $2. How long will you play with me?

View attachment 164889
An interesting question (which may not be knowable due to data restraints) is whether that system could be scaled down into smaller timeframes with similar results...

If so - could be used for intraday setups as well...
 

dpong

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An interesting question (which may not be knowable due to data restraints) is whether that system could be scaled down into smaller timeframes with similar results...

If so - could be used for intraday setups as well...
Hi Strawboss,

Nick does run some day trading strategies. I will share this link with the understanding that I am not connected to Nick in any way and I have no stake in Nick's business financial or otherwise. You could also search YouTube for Nick Radge as there are many good interviews where he explains what he is doing.

https://linktr.ee/thechartist
 

dpong

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Some people do run similar strategies on the daily timeframe. For example instead of buying a 20 week breakout, they buy a 100 day ( equals 20 trading weeks) breakout.
 

dpong

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Did you try to run this on the e mini SP futures contract?
No. After running it manually against 400 stocks my eyes were bleeding. I will say that the strategy is built to be "robust" meaning that it should have a good chance of working against any universe of equities. But the e mini is a single instrument only. That would be a serious limitation. It is built to be run against a universe of equities.
 

dpong

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Those initial BIG moves can take some digesting, it's not unusual to see the market step back to make sure it is real before proceeding.
Agreed. When I show a chart of a stock my system bought, I am not touting that stock. I'm just sharing and having fun. It is not necessarily a good idea to buy any stock that I show. It is the system that works, not the stock. ;)
 

dpong

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Also I'm not necessarily trying to tout the Weekend Trend Trader, although I do like it for myself. I guess more generally I am trying to share information about systematic trading and although it is not for everyone, it is a viable option. The weekly system works well for me because of time limitations. I was running a daily system and although I enjoy doing the work, it was a bit too much for me to do every single day.
 

dpong

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I am making some discretionary trades in the miners, apart from this systematic trading strategy. However I am using some principles that I have learned from systematic trading that should make my trading more successful.

[Like position sizing, risk management, stop losses.]
 

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Actually they could buy everything with just a couple ETFs.
 

Zed

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Zed

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Well they can't buy everything or can they?
Well, I wouldn't double dare them... Fed: Hold my beer!

Who knows?

Rules? What rules?
 

GOLDBRIX

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Zed,
I would like to have a pet kangaroo. Do you know if it’s legal to ship those out of the country? This is actually a serious question.
Check with the zoos in your nation. If the supply is plentiful they'd probably sell you one. Plush there would be no requirement for quarantine. Just my WAG.
 

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Deliveries May 2020 @ Monday 11/05/2020 Final.

Gold 7758 Contracts with 1968 Still Open. --> Impressive for an off delivery month almost matching the Feb delivery month total!
Silver 8701 Contracts with 513 Still Open. --> Over double last December THE king delivery month.

Physical demand is still off the charts, even @ the Comex.