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     holycow
Member
Username: holycow
Post Number: 965
Registered: 08-2004Rating: N/A
Votes: 0
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| | Thursday, March 17, 2005 - 04:23 pm: |  
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kinda being busy body here - which one is your money making move - money management or your "correct" stock entry level?
Which one comes first? The chicken or the egg? Or rather which should come first?
I have this very simplistic view - if you don't have a good entry point to any stock you buy - no matter how good your MM, it's not going to do you any good.
Because all you can do with your MM is to exit - with a loss. Right?
So would it help if I say to make money trading in the long run (no matter how you qualify it), the first and most important thing is to get your entry right and then hopefully you get the chance to utilise your MM skill to either increase/improve/maximise your profit, or reduce/minimise your loss. (I can't think of a better way of putting it.)
If there's no problem with the above statement, then the next question is how to you get a correct entry?
Well, what's the argument here? To TA or not to TA?
Or what?
Here is a simple a illustration where chart/TA will help with your trade - if you consistently pick losers like VLL and because you believe you can make a winner out of it, what is the chance of you winning in the long run - as compare to picking uptrending winners?
A simple test will prove chart helps or TA works by picking 10 stocks of downtrending stocks against 10 stocks of uptrending ones and then either leave them or utilise your MM to maximise/minimise profit/loss and see what's the outcome be. (have to qualify myself by saying going long in a bullish market like now)
The point is simple - absolute statement will only make unsound argument.
If the argument here is TA is not relevant or valid, or chart is not helpful, then really I have no idea where to start other than to become a long term investor and look at stock fundamentals.
But that's not trading. And you don't utilise MM that closely. Do you?
HC
"... if you've got a chart, I have an opinion!"
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holycow
Member
Username: holycow
Post Number: 974
Registered: 08-2004Rating: N/A
Votes: 0
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| | Saturday, March 19, 2005 - 01:16 pm: |
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Thanks to the gentleman who PM me on Van Tharp. I have read his book a few times and am in the process of acquiring one for my library. But it's still good to be reminded of what he has said.
If I may, let me quote his "conclusions"...
To be a money master, you must first be a self-master... JP Morgan
If you understand the psychological foundation for system design, then I’ve accomplished a major objective in writing this book.(Obj #1) The source of the Holy Grail is inside you. You must assume total responsibility for what you do and for what happens to you. You must determine what you want from a system and detail a plan with the appropriate objectives. You must have a way to “cut your losses short and let your profits run, ” which is all about exits. Exits are a major part of developing a high positive expectancy system. If you understand the six key elements of making money in the market and their relative importance, then I’ve met a second objective in writing this book.
Those six key elements(Obj #2) include (1) system reliability, (2) reward-to-risk ratio, (3) cost of trading, (4) your trading opportunity level, (5) the size of your equity, and (6) your position-sizing algorithm. You should understand the relative importance of each of these factors and why successful trading isn’t about “being right” or “being in control” of the market.
Lastly, if you have a good plan in mind about how to develop a trading system that will meet your objectives(Obj #3), then I’ve met my third key objective in writing this book. You should understand the parts of a trading system and the role that each part plays. If not, then review Chapter 4. You should know how setups, timing, protective stops, and profitable exits combine to create a high expectancy system. You should understand the key role that opportunity plays and how it relates to trading cost. And most importantly, you should understand how important the size of your trading equity is and how it relates to various anti-martingale position-sizing algorithms.
If you have met those three key objectives, then you have a wonderful start. However, there is still much to learn in your trading journey that is beyond the scope of this book. As a result, I want to provide a brief overview of some of those areas in this final chapter. Since there is so much material to cover, I’ve elected to cover it in a question-and-answer format, which allows me to be extremely focused and to the point... there are more but would just stop here.
*** My point is quite simple - your trading system starts with a good setup and timing - without which, you can't really make use of good MM. I was referring to the contention that charts, TA, indicators, etc are nothing more than a waste of time, which make me wonder how does one start with a good trading system?
Okay, assuming one can just pick his stock base on flipping a telephone directory, and then utilise his MM to "cut his losses short and let his profits run" to come out on top; base on my experience doing thing this way is making his task unnecessarily hard and increases his opportunity cost quite substantially - which brings back to the point - without some kind of TA setup, chart pattern (which I use quite a lot), or indicator crossing, or MA crossing, or Weinstein stage setup or Alan Hull's trend trading approach, etc...
I simply cannot understand (or rather refuse to accept as credible) the argument that TA/chart/indicator/"whatever graph one use" is irrelevant to stock trading. If I have missed out some new laws of physics, I like to know. And learn.
Incidentally, I also have issue with this, but I am not joining the rather "personal" discussion elsewhere...
prediction
noun
1: the act of predicting (as by reasoning about the future) [syn: anticipation, prevision]
2: a statement made about the future [syn: foretelling, forecasting]
Source: WordNet (r) 1.7
So, I agree that TA is more on reading what's transpired and act/exploit appropriately with regard to one's trade - but the moment some one goes into "setups, timing, protective stops, and profitable exits combine to create a high expectancy system"... that person is consciously or unconsciously "expecting sometimes into the future that his system will net him some profit" - is this "hope with logic" or just plain old "Predicting with expectation"?
Btw, the definition of EXPECTANCY...
Expectance \Ex*pect"ance, Expectancy \Ex*pect"an*cy, n.
1. The act of expecting; expectation. --Milton. [1913 Webster]
2. That which is expected, or looked or waited for with interest; the object of expectation or hope. [1913 Webster]
Ok, prediction is too much "previsioning", just not scientific enough - to those who question the relevancy of TA and charts in stock trading etc, let's talk probability. Here is what it means:
Probability \Prob`a*bil"i*ty, n.; pl. Probabilities. [L. probabilitas: cf. F. probabilit['e].]
[1913 Webster]
1. The quality or state of being probable; appearance of reality or truth; reasonable ground of presumption; likelihood. [1913 Webster]
Probability is the appearance of the agreement or disagreement of two ideas, by the intervention of proofs whose connection is not constant, but appears for the most part to be so. --Locke. [1913 Webster]
2. That which is or appears probable; anything that has the appearance of reality or truth. [1913 Webster]
The whole life of man is a perpetual comparison of evidence and balancing of probabilities. --Buckminster. [1913 Webster]
We do not call for evidence till antecedent probabilities fail. --J. H. Newman. [1913 Webster]
3. (Math.) Likelihood of the occurrence of any event in the doctrine of chances, or the ratio of the number of favorable chances to the whole number of chances, favorable and unfavorable. See 1st Chance, n., 5. [1913 Webster]
Syn: Likeliness; credibleness; likelihood; chance. [1913 Webster]
Source: The Collaborative International Dictionary of English v.0.44
You can decide for yourself whether probability and prediction are "blood brothers" both in the business in looking into the future (event or outcome) or they are staunch enemies to each other.
... I will spare everyone by not bringing in GOD to provide the answer. But I am sure you can seek that out too. By yourself.
HC
"... if you've got a chart, I have an opinion!"
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dogalog
Member
Username: dogalog
Post Number: 988
Registered: 03-2004Rating: N/A
Votes: 0
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| | Sunday, March 20, 2005 - 01:55 pm: |
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i'm starting a lobby group of share traders so we here in Oz can keep chimps,hc.
so far it's been scientifically proved they can write shakespeare and i read on the net they[chimps] might write Michael Jackson's songs for him[Beat It?could be!] and now you have found that chimps make the best traders or some such,well i think we should all be able to have a chimp.
Will you,hc,write the form letter for the petition?or get ya chimp to chump it out?
cheers,
jr  [if you squint,this could be a chimpanze.No?squint harder]
edit-hc seen longshanks in General.Is there an anti-IC as well as charting plot on?of course i also wish to add i'm not havin' a go,personally with that tongue sticking out face,check what it's called ok?
more going by the horses name stock pick method for me.i wanna be a monkey man,too!
(Message edited by dogalog on March 20, 2005)
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