Wednesday, August 27, 2008

Your Brain's the Grail. How to Make It Holy


Ok. Let's do something really crazy. I've something big to confess. I've been hiding it for months because I don't want the headlines, I don't want our servers to crash, I don't even want the private island and the jet to take me there. But now, I can't hold it in any longer, so here goes:

We have the holy grail -
it's a strategy that, when used, is a guaranteed huge money pile maker. It's one strategy and it's never changed. It tames every: market situation, scenario, big news event/disruption, slow day, or fast day into a consistent winner. And it requires no spark of creativity or original thought from you. Pull it out, unleash it, and collect the money.

It is, indeed, a one size fits all strategy.

How much more in detail do I need to go to test the limits of credibility? Gullibility?

For you, dear reader, not another millimeter. And yet there are would-be traders out there in search of this kind of silver bullet - throwing money away at something that will not reward them. Example:

A Whopper of a Letter

I must share this surprising email I received the other day (name changed to protect identity):

From: JOHN C.
Sent: Friday, August 22, 2008 8:38 PM
To: david@trade-ideas.com
Subject: Nrrd help on TI

David,

I am a subscriber of TI. Username is xXxX.

My question is what is the best strategy for day trading?

Also, How do you setup to dedect ADX>40? as this question was asked by bkk.

I interested to hear your answer to bkk.

Thanks, John.


Here is my reply. One that would allow me to sleep at night:



-- On Fri, 8/22/08, David M. Aferiat wrote:
From: David M. Aferiat david@trade-ideas.com
Subject: RE: Nrrd help on TI
To: JOHN C.
Date: Friday, August 22, 2008, 11:06 PM

Dear John,

Your question on what’s the best day trading strategy is such an open ended question that it’s impossible to honestly answer. Suppose I said, sure John – it’s this strategy: XYZ.

How could I know it was the right strategy for you and your style?

Maybe it does or doesn’t make money the way you feel comfortable doing it (i.e., too much risk, etc.) Besides if it were the best strategy, wouldn’t everyone else be using it? Why would you assume that only one strategy is the best one and not the existence of several best suited to profit from several market situations.

I’m kind of surprised to get such a question.

Trade-Ideas and our event-based backtesting tool, The OddsMaker, help you discover your best strategy that’s personal to you – that represents your trading plan and all the hard-knocks and education that went into it. The best aspect of our tools is that they allow you to ask the best QUESTIONS and receive the answers that will help you confirm or disprove any advantage you see in the markets.

Take fencing or chess or water polo or college basketball and ask yourself, what’s the best strategy in this tournament to win it all? Maybe there are several strategies to win against various opponents that have to be applied at the right time or not at all.

The better approach to winning is getting the best coach and the best training so no situation that presents itself isn’t faced without the best reaction.

Substitute coach and training for real-time scanning and event-based backtesting. Trade-Ideas’ tools will not only answer the question, What should I be trading today but the equally important one, How should I be trading it?

I apologize for the long-winded response but you touched a deep well of reasoning and passion about trading and how to help others trade. It’s not by just giving the person the fish, but teaching them how to ask better questions about fish and ultimately provide the means of letting them answer their own questions about
fishing.

Visit our blog to start on your path of finding your own strategy that, when backtested, provides you with edge. Read our posts under the category of ‘Strategy Sessions’ and read the people we put on our blogroll. There’s a wealth of information there.

Currently we do not have a ADX indicator in our inventory – but it’s on our
list.

Best regards,

David


Is There a Pill I Can Take to Start Trading Better?

Some people wander the desert looking for external fixes (a lamp, an oasis, a pill, an order from somebody) to change their situation. It doesn't exist or rather it doesn't come that easy.

Good news however: The path to riches is inside you - no need to look too far. Getting at those riches means alot of work and training - more than just rubbing yourself for the genie. The genie comes out when you've learned how to read market signals, maintain an evolving trading plan, control your reactions and emotional responses, and applied cutting edge technology to leverage your size and capabilities into profitable trades. Want a sherpa to take along with you? I'd start with the insightful works of the 3 wise men: John Forman, TraderMike, and Dr. Brett Steenbarger.

Note: Don't go rubbing them either.

Good luck!

Friday, August 22, 2008

Trade-Ideas 'Fundamentally' Changed: Why It'll Never Be the Same

Change is good. Especially the incremental improvement change work we do to Trade-Ideas on a constant basis. For those of you who are new and see the large inventory of alerts and filters - sorry. The list is long but well organized and only meant to appeal to the wide variety of traders and trading styles that can be modeled using the tools - it doesn't mean pick everything.

So What's Changed? The Fundamentals

I told you about the recent and upcoming alerts and filters that were coming. They are here.

Leave it to good friend and surprisingly effective gumshoe journalist, Dave Mabe, at Stocktickr.com to get the jump on the release of our latest filters:

Click on the picture here to see the complete list of fundamental filters and their definitions. The colors may have changed to match the rest of the filters - this was an alternate color scheme for these filters. State your preference in a comment.

The Bottom Line: How This Impacts Your Trading

Some traders are not purely technical but feel they can find advantages (especially lowering risk without affecting return) by including some fundamental filters when defining their universe. That's now possible.

For example, you could design a strategy that trades new highs from stocks with earnings per share of at least X. Or with a market cap of at most Y. Imagine backtesting events that are also defined by fundamental conditions - I anticipate a lot of winning strategies with high odds thanks to these filters.

As StockTickr points out, this also adds new possibilities to automated trading and the partners through which we offer it.

If you don't see the fundamental criterion you're looking for on the list, here's an effective workaround:

Find the fundamental filter elsewhere and perform your scan. With the resulting stock list, copy or import it as a Trade-Ideas Symbol List in TI Pro. Then use this list in your strategy along with the filters we do have and voila! Problem solved.

Feel free to suggest what additional filters like these we should add (and the arguments for having them).

What Else Is New? What Have I Missed??

Visit this place often: http://www.trade-ideas.com/WhatsNew.html

Friday, August 08, 2008

Customers Talking, Trade-Ideas Listening: Upcoming Features

We are making continued additions and improvements to our service. In the spirit of the summer movies, below are the upcoming attractions to the Trade-Ideas PRO platform:

Coming Very Soon: Wide Range Bar

Wide range bar (WRB): The range of the bar is much greater than the average bar. This alert, recommended by one of the trainers, has been on our list for a while. It’s also a commonly discussed pattern in other places too. Consider it a contrasting alert to NR7.

Coming Soon:

Bullish trend alert: (The name has not been finalized - if you have a suggestion, please comment!) Rising stock above a rising 20 period SMA. The stock is rising if ((there are at least 3 consecutive green candles) or (there are at least three consecutive candles with higher highs and higher lows)).

Bearish – same thing flipped over.

New filters – how much were we up or down yesterday.

We will let you know as these become available.

Saturday, August 02, 2008

Weekend Reading: Follow the BRICs

Thanks to Dr. Brett for bringing attention to this article on the BRIC nations:

Global Investing, BRIC by BRIC

I am reminding readers of a post we made about the BRIC nations that features primary sources developed by Goldman Sachs.

You Don't Have to See the Future, to Know We'll Be Watching These Markets One Day

The link we mention in the article is a page I refer to every couple of quarters to see what additional information's been added.