* Becoming Systematic With Discretion - I'm about halfway through developing two discretionary trading systems; one holds overnight, the other doesn't. Both feature hard price targets based upon the computed five-year probability of the market moving a certain distance--either up or down--in a certain period of time. Once that time period begins, one uses readings of buying and selling interest (NYSE TICK, Market Delta, sector behavior) to handicap the odds of hitting either the upper or lower price target and to time the entry into the trade. Interestingly, this way of trading (which starts with a price target, not with an entry setup) appears to be completely scalable: one can trade pretty much any time frame with the same logic. Basically you're saying, "We have 90% odds of hitting this price up here or that price down there, and I won't take a position until market sentiment tips its hand one way or the other." Eventually I'll set up a demonstration account with a broker, make the discretionary aspects of the system more rule-bound, and report on my progress.
* Still a Favorite Mechanical System - This remains one of my favorite TraderFeed posts re: markets; it makes an important point re: investing vs. trading. While I'm at it, this post is one of my favorites re: psychology.
* Mantras for Trading - Here are some wise guidelines from Ana Wang and Ray Barros.
* What Time Frames to Look At? - Some wise thoughts from GlobeTrader.
* What JPY is Telling Us - Proprietary trader takes a look at the JPY crosses and their current message.
* What the GSE Bailout is Telling Us - A thoughtful perspective from Jeff Miller.
* What Big Gaps Tell Us - Trading RM looks for the opportunity in the large opening moves.
* Bad News Isn't Always Bad - Nice point from Investor MD; markets trade off expectations, not current events.
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2 comments:
Brett
Before I proceed, a minute of silence for 9/11 victims and families.
Your on going development of two discretionary trading systems is unique. Hope you will build in a safeguard for a Black Swan event like 9/11.
Thank you for mentioning my post on trading mantras.
BTW 9/12 is auspicous for me!
Brett - I have been a long-time blog & book reader of yours and am working on similar concepts as your two discretionary systems. My initial thoughts on using this method would be to use the method to better exit a profitable position. The thought process would be something like 'Given conditions A, B & C and where this trade is at, there is a 10% chance of it continuing up vs. a 90% chance of it retracing'. I originally got the idea from reading 'The New Market Wizards' by Jack Schwager, in the section by Victor Sperandeo.
This concept seems very similar to actuarial science. Have you looked at that subject for guidance in your research?
Regards,
Eric
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