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Wednesday, September 30, 2020

My favorite indicators update [part 2]

My favorite indicators update [part 2]

An update on my use of indicators. Going to throw my thoughts out my thought process if you're interested.

In my last "My favorite indicators" idea I placed the moving averages in the ones I do not use, they were top of the list thought the first ones that come to mind and make most sense. They are no substitute for a complete analysis but you need a starting point and when you are scanning 40 different charts you want to make it simple.
I've been turning the trend indicators on and off (and probably will continue doing that).

Right now using EMAS again. Not too many I don't want the chart to get all nasty, no full GMMA that hide the price. Just 2 fast moving EMAS.
Fast moving but not dumb either. What I get out of those is I see the daily trend because they are daily ones, I don't need to have D1 & H4 side by side.

"My eyes are trained to see the trend" BS I keep doing random stupid things buying too early...
I've not really been trend following for long, I used to with crypto during the bubble because it was too easy but otherwise I had an edge doing something else, I must be 1 in a million doing this xd Most retail fight the trend and lose, professionals follow it I fight vertical moves and idk worked out so far.

Helps filter baddies, helps spot what is going on faster (I have a watchlist of 40 charts I can't every day full analyse them all I need to filter first), they look great I love the blue and red. Goes faster to have the daily trend on the 4 hour chart, don't have to look at 2 charts side by side and zoom in and out and always have to reajust the screen etc.

But honestly the main point is probably I like how they look. The red & blue. Makes a good looking chart I think.
Makes it look all technical and professional and I just love the colors. Isn't that the most important part? Having fun and wanting to look at the charts.

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I kept losing this month. A good 17 losses in a row even with 1 potential winner I missed out on.... All those losses really ate up my other strategies profit. Pissed. Had +5 and +7 on a strat /3 and +5 -17 on my trend following strat for a grand total of 0, and then a few breakeven and +1 -1 zzzz Tried to make it with EURUSD had a wide trailing stop but it really bounced and all I got was 1R... Of course. And I have 4 positions now of course it's all slow 2/4 are more long term and this usually doesn't even move far from the entry where I can count it as a winner for a good month. And the other 2... We will see. Not counting the positions > 3 month horizon.

I doubt 90% would survive these situations, well I did have winners that absorbed my losses so it's not that bad actually.
And I choose to machine gun every setup with my new strategy (started as revenge trading at the start of the year and since I kept winning I looked into in again took a few good setups in the summer while backtesting and working on the strategy and then september I apply my rules and go for it for real and keep losing 🙃)
Normally I take, with the other 2 strategies, like 18 setups a year each. So 3/month total. And with this trend following I should probably take another 3/month not over 20...

Constant re-evaluation etc. So... I spent all of July to September backtesting improving and thinking this simple pullback trend following strategy.
I starting using it in the first 3 months of 2020, and had alot of knowledge from the start I did not start from zero.
I did not spend my whole days on it I looked at plenty of other things.
I would vaguely estimate I spent 8 hours a day on it for 3 months that's a total of 720 hours. And it's a rather simple strategy.
Just trying to get a decent strategy with a few setups here and there, that works for me.
Meanwhile complete noobs that aren't especially smart expect getting consistently profitable in 3 months with 1 hour a day on the side.

I tried looking at the oscillators again, see if they filter things I do not want.

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This joke:
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Versus:
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On top of this, using arbitrary numbers, in a month there is 30*16 = 480 hours, and 16 hours a day, say on the average day I:
- Spend 4 hours going out to not go crazy (wups failed my objective here) as well as eating and sometimes playing
- Spend 4 hours reading articles watching videos that I count as grinding my skillz & knowledge and posting on tradingview
- Spend 4 hours backtesting improving estimating probas and doing boring things like taxes
- Spend 4 hours doing research on potential setups AND managing trades (2 hours for the 30/month + 2 hours for the 3-4 I actually end up taking)
That's it. There are no more hours on the day as you see. They get eaten up fast.

If I get overwhelmed with these trash RSI signals... how many hours will that take? Should I spend less time doing my DD on other setups and miss out the good ones or take bad ones? Should I eat up hours in the backtesting (even if I'm happy with my strategies I want to adapt to changing conditions). Then I can spend less time doing loose research (articles & videos) or the "leisure" and burn out and also potentially miss some important info, some piece of news...

Not going to post the whole RSI analysis (I can't even if I wanted it's all over the place I have stats & screenshots spread everywhere it's really disgusting).
But I am 100% on this. It is not for me. Or anyone else. Sucks beyond belief. I don't know maybe there is a microscopic edge in using it oh cool.
How well will that hold up after 20 loss in a row? Continue using it? Consider it doesn't work anymore? Flip it?

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So that was an equity curve of some "many setups" strategy, maybe something with the RSI or macd lines firing mediocre signals over and over.
They really look like this. Well they would if anyone sticked to it.
Now an equity curve with less setups but being more picky with alot of research time spent on studying the currencies or other instrument (enough to avoid really bad setups and to be more precise and to manage it better at least).

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And then of course when you reach the scholarly peak and go for diversified strategies (it isn't possible in my experience to have that much diversification but a little is possible. Basically if you tried diversifying too much you'd end up repeating the same strategies but with different conditions or taking positions too large by trying to diversify via assets because assets are correlated you can't have 10 different strategies but you can have a couple by having different timeframes different markets and some reversal if that's possible careful most fail and some trend following if quant then also arbitrage and so on holding fixed income too can be added but not only the markets aren't offering infinite uncorrelated possibilities but also each strat that you add is hundreds or thousands of hours to design and then alot of time and attention to manage and execute)

But with 2-3 strat that equity curve would look something like this...

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Can strategies be completely uncorrelated thought? They're likely to all use some support and resistance analysis. It's sort of the same for forex stocks etc. Liquidity area. There aren't 30 ways to do this. What if S&R changes, what if they don't matter for whatever reason? Then it all falls down.
Just trying to use a simple example to show it can't all be uncorrelated. Even if you held bonds as an additional profit stream, their yield will change and it will impact the trends etc...


Oh and let's be real, the market does not provide an endless number of setups. I never heard of anyone that made money in choppy markets (if they do they are on a higher TF where it is not choppy). Even my reversal strategy is for trending markets. Some people say they trade inside ranges well even if they do and aren't just lucky lying or delusional there are very few clean ranges so here.

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I do not remember ever hearing Goldman Sachs or Bank Of America or JP Morgan Chase going "ok we think the kiwie is going to stay in a range so we will buy it at the lows because it is oversold".
It's either "Based on the research presented, the trend, the fundamentals, the market conditions/past data, here are our 3/6/12 months targets" or "we think the euro will continue going lower" or "we think the usd rally is not over so we are still long" or "we see a ranging market we have no position".

You really got to bring the retail swing traders to come up with this kind of stupid crap 😂

Here is a quote from an investment banker active on social networks:
"Its 80% fundamental, 20% Technical. Professional Traders don't day trade often so day trading is a small part of a much larger overall approach. There's no such thing as swing trading in professional trading circles. That was something made up by brokers for the retail market. To be honest I had never heard of it until I started teaching retail traders and someone told me what it was. I laughed out loud when they told me! No Joke."

I don't know all the kinds of weird messed up strategies the various funds have but as far as I know bankers look for momentum.
How many opportunities there are day trading if there are some is irrelevant just look at the daily chart and how many are there matter for this thought process, because if day trading did better than real trading I think we'd f**ing know by now and every hedge & mutual fund would be looking for day traders. So ye, not that many opportunities realistically per strategy (day trading can be an additional strategy but there are only 16 hours in a day at some point I really don't think more than a couple is possible and 2-3 max probably with day trading), even over a good dozen instruments (like a dozen fx pairs).


Even Jérôme Kerviel that lost 5 billion looks for big movers, big volatility :D

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Last thought: Howie Hubler made a successful short bet against the trend (or bubble rather) in subprime mortgages in the U.S (the big short) except he got the money from selling insurance on AAA morgages (the rating companies are basiclaly trolls) and he lost 9 billion 1 shot aaaaand it's gone. Rekt.

I've heard of plenty of trend followers (systematic or discretionary) Bitcoin bagholders from 2012 George Soros on the yen/Nikkei early buy/sell Warren Buffett..., I've heard of plenty of countertrend success (Enron shorts, 2007 CDS , Soros against the pound and SEA countries and so on), never heard of the "great flat market range trader". Well with the exception of the great signal providers and educators of course. Even Livermore didn't make money in ranging market but Livermore has alot to learn from 20 years old Ricky & Forex Lambo lifestyle & some random dudes in comments with 6 month old accounts and that have been offline for 2 years since then and whoever promotes this.

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