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  1. #1
    AlisaWatt Guest

    Default Trading System Ideas

    I hope you all had a nice Xmas.

    I was wondering whether anyone could assist with a bit of guidance on mechanical systems.

    I've been trading for about a year now with mixed success based on a longer term approach. About three months ago I decided that I wasn't at all happy with my own performance regarding discipline and execution of trades etc - usual stuff! I took a few months off to work solely on the psychological side of trading. I'm very happy with my progress and feel as though I've taken a few big steps forward and I'm now ready to get my hands dirty again.

    In order to instill what I've learned at a practical level I've decided to trade a shorter timeframe so that I take more trades and get quicker exposure to the pressures and situations that I've struggled with in the past. The idea being that any psychological weaknesses will come to the fore fairly quickly and I'll be able to address them accordingly. For me, the financial results in the short term are not that important. What I'm looking to do is get through a sample size of around 30 trades without making too many trading errors.

    My current problem is, having now got a handle on the �head stuff� (at least in theory), I�m having a little difficulty finding a simple system to trade. Considering the number of hits you get on Google with the words �trading systems� this sounds ridiculous � thing is it�s all a bit overfacing and I don�t know where to start.

    Does anyone know of any interesting system sites/sources?

    Has anyone had any experience trading �off the shelf� systems?

    I�m looking for a completely mechanical short-medium term system that generates entry signals based only on EOD data. I have no interest in trading on intraday data and screen watching. I�m not big on indicators � the system should be based around price & volume relationships and maybe a volatility indicator.
    As alluded to earlier the idea is to develop method, objectivity and execution skills so I�d like to be taking trades on a fairly regular basis perhaps getting through the sample size in two months or less.
    I�m unsure whether to limit my �index� to the top 50, 100 or 200 aussie stocks for this exercise � anyone have any thoughts on that?

    As from the end of January I�m taking six months off work in order to give my trading my undivided attention. I�m quite serious about this little educational exercise and my risk both individually and collectively (over the 30 trades) will be predetermined (excluding slippage of course). The dollar risk on each trade will be fairly small but enough to create a realistic atmosphere.

    Eventually I�d like to revert back to a longer term approach but in the meantime I feel I have to commit myself to a couple of shorter term exercises to quicker develop my trading skills. I fully appreciate the argument that a trader would be more comfortable trading a system developed by him/herself but I don�t think it�s essential for this particular purpose.

    Any pointers on system ideas etc would be greatly appreciated.


  2. #2
    AllenSak Guest

    Default

    Hi Zoso - Happiness and Prosperity to you for the coming year. It seems that you come up with a poser every year!

    Here are some Trading System Ideas for you.

    This link is a start :

    http://www.incrediblecharts.com/tech...the_market.htm

    In here, Colin states that

    Market Risk is 66%
    Sector Risk is 24%
    Stock Risk is 10%

    In other words, Trade with the TREND first, SECTOR secondly, and worry about the right STOCK last.

    The rest is entry, time in the market (timeframe), and exit.

    You will need quality stocks, so the ASX 200 would be a good place to start - the Fundamentals should already be pretty good. But do not trust them - check out the debt:equity ratios etc for yourself - remember ION and SGW? I don't care who says otherwise, you need to know that the stock will be there for at least the time you will be in the market!

    Volatility will be your own personal preference. For me, I prefer stocks that move up with a bit of speed, when they decide to move. I find the stocks in the price range 20c to $3 give me plenty to choose from.

    I prefer the time proven MACD with histogram, as one indicator to tell me when to enter the trade. I use both daily and weekly MACD, both set at 26-12-9 periods.

    I use RSI oscillator to assist with entry - (oversold). I do not use it for exit - I will explain later.

    I use Bollinger bands "sometimes". I set them at 10-day periods, with 1.8 standard deviation, which suits a short-term time-frame.

    Finally, you need patience. Currently Spider is using a nice little footnote, to the effect that all of our life experiences serve us badly as a preparation for trading.

    I read somewhere, that if a rock is thrown at your head, your first instinct is to duck (to get out of the way). That sort of reaction has no place on the trading floor, or the screen trader's desk!

    Instead, the trader mentality will be to stand and to stare down the rock, which invariably changes course, and misses the head easily. Be patient - 85% of all worry never happens, 10 % is never as bad as first thought, and 5% can easily be dealt with. (78% of statistics are made up on the spot too!)

    Enough - you already said you had done a lot of psych prep.

    To expand a bit on why I do not use RSI to exit - because RSI may remain in "overbought" territory for considerable periods. Instead, I use weekly/daily MACD for exit.

    The Bollinger Bands are used for confirmation only, never independently as a stand alone entry/exit signal. Some people do use them this way - it's just personal preference.

    In order to be able to call a system "mechanical" you must be able to trust it. In other words, stick to the plan. If the trade does not do what you expect it to do, get out fast. Why wait around just to see if you were right after all? You can not afford to play "What if ..." in trading.

    Hope this helps - just my humble opinion. Oh, one more thing ... anyone can set up an indicator - "click" and you have it. Nothing wrong with that, but if you wish to build confidence, and really get to depend on your indicators, get to know the strengths and weaknesses of them.

    I haven't met any other traders - but of the ones I've spoken to from this forum, I'd wager they are doing the research on all aspects of their trading. Honing skills, refining entry/exit, etc all the time. That's what it takes.

    I wish to earn my living through full-time trading by the end of this year - that's a huge ask, considering I placed my first trade in March 2004.

    But I tell you what, Paul, I'll make it. I give myself no option. And if I can help someone else improve along the way, so much the better.

  3. #3
    alkapadarm Guest

    Default

    Do I understand you correctly: You want to drive Formula 1 cars first to get used to the speed and excitement, and then revert back to go-carts once you gain experience from the F1's?

    My first lesson in trading was that I needed to crawl before I walked. I bought into one of those (now defunct!) trading programs which was designed to trade the options market. Oh boy, I learnt some good lessons really fast, and it cost me my trading capital!!!!! You need to learn how to trade normal shares first, ideally on a medium to long term basis (3-12months) before attempting to trade the weekly swings.

    I know how you feel, my current system (in development) is based on weekly data, and look like trades taking 12months to complete (albeit at 20-40% profit!). With my small trading capital and using correct money management and position sizing, I'll be lucky to have two or three positions open at any one time! Doesn't give me much to do on a daily basis does it, especially considering the $300pa data cost for software! But I've looked at trading shorter term, and the moves are just not there, especially when my brokerage equates to 6% of the trade.

    My approach will have to be the longer term one, so as to make decent returns compared to the individual trade risk. Over time, hopefully as my trading capital increases, my trading level will increase too. Then I will be able to consider upgrading from the go-kart to the F1's.

    Hope this gives you a little insight.



  4. #4
    AllenAmugh Guest

    Default

    How about Woodies CCI system on daily charts, trading only Zero Line Reject (ZLR) with the trend? Plenty of action there

  5. #5
    Altonbet Guest

    Default

    You stated "I fully appreciate the argument that a trader would be more comfortable trading a system developed by him/herself but I don�t think it�s essential for this particular purpose.". IMHO I think it is essential!

    I too had the same idea. That if I choose a shorter timeframe, then I get to prove that I have the discipline earlier (since I executed the trades at a faster rate).

    However, as part of getting the 'head stuff' correct, I believe, there is no better scenario than the real thing.

    Your success as a trader is dependent on whether you executed YOUR PLAN -- as planned.

    This includes your timeframes, your entries, your exits, and more importantly, your belief that the system is profitable (risk/reward comfort-level).

    Perhaps I should have stated "your level of belief" above. I think that any doubts or fears you may have is compounded when it is your system... [With no one else to blame <--tongue in cheek.]

    Consider (and excuse) the following analogy. I read in a book somewhere, and it helped me separate the two roles.

    1. When you are creating your system, you are a NASA engineer, analysing, calculating and optimizing the system.

    2. When you are executing your system, you are the space monkey, doing nothing else but following the system.

    Over the course of your trading life you will need to jump between the two roles, but it needs to be clear at any point in time whether you are the engineer, or the monkey.

    In saying all of that, I would like to contribute a very simple system. Choose two short-term moving averages, and blindly trade as they cross each other. Do not think about it, just do it!

    Next time the ducks line up, think to yourself "I am a blind space monkey", and ruthlessly execute the trade.

  6. Default

    Came across this one during research, but cannot recall whose it was for the credit. Sometimes I just jot things down without the reference.

    BUY : When the 5 day simple Moving Average is above the 15 day simple Moving Average, and the 15 day sMA is above the 30 day sMA.

    SELL : When the 5 day sMA crosses below the 15 day sMA.

    That's fairly mechanical.

 

 

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