Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
@tpredictor, I can't thank you enough for crafting this thoughtful answer---you sound like a great mentor. I think part of the problem for me is not having sensible stops and trying to time the whipsaws. My best trades seem to involve momentum plays and scalps. I PDT'd out of my TDA cash account, so went with Etrade. Etrade OptionsHouse is a great compact web platform, but severely limited. I will take a closer look at NinjaTrader and Tradestation and I'm going to read your reply a few times. I also have a fidelity account. Though they don't do futures, wealthlab looks interesting. Hopefully this thread will keep going and other traders can share what learning sources and techniques made things click for them. It sounds like this very forum is a part of that, and I hope to contribute back on my journey.
That is an excellent question. The difficult part is that you have to make the structure. There are several different ways that grayboxes can work and you don't need to use just one method. For example, it could filter your trades or it could funnel up trades for you to take. One way I suggest to start building a graybox is to take your existing setups and try to program them. In that case, you might not require historical profitability. The other method is to take an already profitable system or pattern or trade that has a strong backtested edge. The "problem" with most systems that work is they trigger infrequently. So, you don't get a lot of setups to gain experience with.
So, that's why I mentioned to "relax the rules". If you think about it, in order to add value, you have to take more risk. So, let's say you can build a method that is profitable taking say 30 trades per year. If you can relax the constraints to take 100 trades per year. Maybe, you can deploy the same system or edge on a shorter time frame, as well. The goal is to get the number of trades up so that you can trade it on a frequent basis because discretionary traders make use of implicit learning or pattern recognition. As an aside, a niche for systems is trying to exploit patterns that are infrequent. Those sorts of patterns that discretionary traders won't have any experience with.
Right but once you understand the variables that best determine the profit for a method then why would you want to take more risk by trading with discretion? It is a good question. As Dr. Steenbarger was mentioning, you can also build out. Let's say you have a method that generates average 30 trades per year with a high profit factor. You relax the rules and generate get it up to 50 trades. Next, you deploy the same or similar idea on a shorter time frame. So you can see how you could really multiply out a system.. If you can add in say one or two other setups using similar process then it wont be long before you would have several trades per day to manage and apply discretion too.
All that said, people think of trading as a "singular" activity but trading is like cognition. There are many styles of trading and the strengths that you can use with a given method are going to be different.
Remember, you don't have to trade one method. So, let's say you have some really creative ideas about the market. Well, you could still take those but you have your graybox or system setup to help you take out the consistent profits.
Right, the question is how do you know whether or not it works. There is no way to prove anything about the future but that is why you need to build out a process for testing things. Kevin Davey has a lot of good information on how to test strategies rigorously. But, you need to decide what level of testing is sufficient for you. I do not think walk-forward is absolutely required if you test over a long history and you incubate the strategy. The incubation is a must. Right as for your discretion you have the baseline of what the strategy will do.
For the discretionary testing part, you treat it the same way as a system. There is a set of data that you can see. You can study the setups and how they work. That's the data you train yourself on. You can cheat on this data. You want to cheat actually to get better and better. Next, you test yourself on unseen data. That's your real test. If it looks good then the final stage is incubation/live monitoring or sim trading. It is a lot of work but putting in the work is often what makes the difference.
I agree with you. Sim trading does not reveal the crippling subtleties of ones personality. Its all the little things that add up to define you as a trader. A few thoughts:
1. When you are live trading you will hesitate. You wont on sim.
2. You will naturally want to limit your losses by using tighter stops but on Sim you put them anywhere.
3. A string of losses on live trading will leave you irritated and questioning (dont pretend otherwise) but you will recover immediately when you are Sim trading and your mind is clear for the next opportunity.
The pain of losing is what allows you to see your weaknesses, it is impossible to know yourself otherwise.
i have a slight different opinion on this. When you have the mindset of a Winner. When Winning is everything. All you are doing with simming is ensuring day in and out, with rigourous discipline that thing which will make you Win against the Biggest, Mightiest, Skill fullest, Brightest, Best, etc etc etc.
When you approach your Trading with DD "Due Deligence"....with the mindset that you Win or yr $s is in the other mans pocket...Sim'ing or no-Sim'ing makes no difference. Sim'ing infact helps solidify. Lets put a Full Twist....if someone cannot have discipline, knowledge, etc etc in Sim'ing how can that person marvellously start performing in this High Performance field with excellence in live. that all my weird 2cs say.
Perhaps something we can all agree on is: validate a new approach in SIM, but when you have validated it, forget SIM and move to live.
There's the danger of going back to SIM as a 'safe' space IMO, and therein lies the rub, because once you are there you will tend to risk more - in other words, trade more aggressively than live as Grantx suggested.
I know in the past I did that - and after a while you realize you start sweating when you place your live trades but not caring when you place your SIM trade, and that's when the alarm bells should start ringing in your head as you are treating them differently.
Once you are confident your edge is there, you need to 'man up' and abandon SIM. Use SIM thenceforth to test new edges but never go back to it for established ones.
Hi @xplorer you have stated the problem. If you look deep it is not the SIm problem.
" you start sweating when you place your live trades but not caring when you place your SIM trade,"
this is not what i meant. you have to exactly do what you do in live on sim. what i used to do is...on a loosing day on sim...no treats so that i feel the pain.
Maybe up to the individual? I know what when I sim, I feel a lot of the emotions I did when I was live... tension, anxiety, elation. That said, I'm getting better at practicing mindfulness while trading, recognizing those situations and bringing myself back to "center".
I am a beginner trader myself. I'm using a system because honestly I wouldn't know where to start in developing my own trading strategy. However, I always figured if I want to truly succeed then I need to outgrow this system.
This thread has confirmed all of those things to me. I'm glad there are others trying to develop their own strategies here as well.