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#1 danzman

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Posted 29 December 2006 - 06:34 AM

I suddenly got sick of listening to various non-informed opinions on the market. If you
continue to listen to this crap, you will never make good money. By good money, I mean
8 figures.





I've been doing this for a living since 1998...I've NEVER made money listening to anyone's
generic economic calls. I didn't make money until I came up with systematic approaches
to trading. There are plenty of ways to make money from the market, so don't listen to just
me...but I find 99% of the posters on this board and others are doomed to repeat the basic

mistakes that make most retreat from the market. Good luck. Usually luck is an application
of skill, but for most, luck is just luck in the stock market.



I don't think I learn anything from this board...seriously. Most posters just give you some kind
of an opinion. You will lose money if you think the market works this way! When was the last time
you saw a post that says "a buy signal will work x% of the time here, and the winners will be x

times the size of the losers"? You haven't.



When I fist started trading, I read about a few guys that were using computers to figure out
when to buy and sell. Years later, they are recognized as great traders, but few seem willing
to emulate how they became successful...even to this day. Ed Seykota, Bill Eckhardt, Rich

Dennis...those are my heroes because they actually decided to backtest their trading methods,
then trade using those results to make hundreds of millions. Most seem to think this is some
kind of BS...is there something better than mechanical trading? I don't think so at this point
in my carreer...and I do this everyday.



I remember a poll done a few years ago asking how many traded for a living on this board. The
number was very small. Better yet, the number of traders that used mechanical systems was
even smaller still. I highly suggest testing mechanical trading systems to find an edge in the
market. Once you've found that edge, try to find your optimal bet size. Everyone's idea of
potfolio volatility is different. I don't like to see more than a few months go by without making
a new equity high...and I don't want to see more than a 20% drop in my portfolio.



To do this, I use several trading systems. My short-term systems can be used in any market
condition. A good ST trading system should make money no matter what direction the market
in general is going. Even during 2000-2002, my long only systems made money.



If you're trading for more than a few sessions, it's a good idea to come up with a good IT
trading model for the market in general. A position that's open for a few sessions doesn't
really need to time the market, but if you trade a position for more than 20 days, it pays to
use an IT market direction filter.



Trading stocks is actually one of the least profitable methods for trading unless you have one
heck of an edge. There's some big money to be made trading futures if you're going for
absolute returns (only because trading stocks does not offer the same margins of futures
trading).



Trend following on stocks works OK, but the best method I've found is actually trading in and
out for consistent profits. Your drawdowns are very small, but the gains are fairly large. I've

been a recent convert to actually taking a profit after x days after my buy criteria is met.
This has led to constant new equity highs and very small drawdowns (less than 12% while
making 50%+ a year).



Here's an edge in trading: Buy before the breakout. I have a system that buys a 5-day
breakout, but the 5-day high is a bit less than the previous high...meaning that I get in
before that new 52-week high. Interestingly enough, the edge does NOT work for shorting
stocks.



Applying the same formula, but for weekly charts actually works even better. The win %
is close to 70%, and the winners are 1.5x the losers. The only problem is that there aren't
as many signals, so the growth rate is not as high.



Another edge: Look for "over-sold" stocks that are off their bottom, and retraced most of
those gains (more than 60%). Buy the dip for a quick trade. There's a lot more to it, but
this should get you in the right direction if you're willing to experiment.



I suppose that trading is very boring, which is why I keep wondering around the Internet.
I became fond of this board, sometimes posting to clarify my own thoughts. I'll continue
to lurk, and I'll post my COT signals for a bit longer...but I find it unrewarding to explain
how things work. Every time I tell people what the VIX is really about, or how the
SPX/VIX ratio is nothing fancy, or how a breakout on heavy volume is meaningless...no
one seems to care. I guess the Wall Street machine is doing its job to feed the majority
disinformation. Oh, and if you want to refute what I'm saying, back it up with hard numbers.
How often does that VIX/SPX ratio work? If a breakout occurs on heavy volume, how much
more likely is it to succeed? This is a numbers game, so use numbers!



My biggest IT edge is still the COT data. I only use small trader stats. Nothing else. I fade
those guys big time. Do I care about net? Nope. Do I care about large traders or commercials?

Not one bit. I just take the standard deviation of a few things....I then wait for an interesting
"where's Waldo" trigger to initiate the signal. It took me 4 years to see it, so don't expect to
get it over night. If you "get it" message me. Don't post it for those unwilling to discover it for
themselves. There are no free lunches in this game. I've put in more than a decade doing this,
so don't ask for formulas.



If you're looking for a more analytical approach to trading (and much more sophisticated
talks), you can find me here from time to time:



http://www.tradingblox.com/forum/







Dan...peace out
I don't make predictions, I just react.

#2 Tor

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Posted 29 December 2006 - 07:12 AM

Good post Danz and I always find your postings very interesting, so thanks for sharing. I still learn, and really wish I knew how to use your methodology or even where to start. Meanwhile, best to you for trading into the new year.
Observer

The future is 90% present and 10% vision.

#3 eminimee

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Posted 29 December 2006 - 07:26 AM

8 figures times 0 humility = 0

[IF]



If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don't deal in lies,
Or being hated, don't give way to hating,
And yet don't look too good, nor talk too wise:

If you can dream--and not make dreams your master,
If you can think--and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build 'em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!" If you can talk with crowds and keep your virtue,
Or walk with kings--nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds' worth of distance run,
Yours is the Earth and everything that's in it,
And--which is more--you'll be a Man, my son!



#4 Tor

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Posted 29 December 2006 - 09:13 AM

Danz, what is the raw COT data you use? Where is it obtained from? Best to you.

Edited by Tor, 29 December 2006 - 09:18 AM.

Observer

The future is 90% present and 10% vision.

#5 Vector

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Posted 29 December 2006 - 09:39 AM

"Once you've found that edge, try to find your optimal bet size." Key to keeping emotions out of the picture. Probably THE most important thing in all of trading. All I see is "I'm loading the boat!" :P Best of luck to you. Don't be a stranger.

#6 PorkLoin

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Posted 29 December 2006 - 10:50 AM

Great post, Danz, and you're right. Most people will do better with disciplined risk managing and mechanics behind them. I think there is also a place for the dirty word (fundamentals) in long-term considerations with stuff like energy, gold versus US Dollar, and liquidity making the stock market go up. To each their own on the time frame they pick. I'm more a "selective plunger" who likes to pyramid things when they keep going my way. It's a lot of fun. Best, Doug

#7 dcengr

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Posted 29 December 2006 - 11:16 AM

Danz, You are unfortunately right on target. I've been harping on the quality of the posts of this board for a while now, and there's only a few posters that I respect. There's a number of posters here that not only post NOTHING of merit, but go out of their way to TROLL. I've picked up a few things here, and grateful for that, but thats far from where this board could be.
Qui custodiet ipsos custodes?

#8 Vector

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Posted 29 December 2006 - 11:28 AM

"Once you've found that edge, try to find your optimal bet size."

Key to keeping emotions out of the picture. Probably THE most important thing in all of trading.

All I see is "I'm loading the boat!" :P

Best of luck to you. Don't be a stranger.


btw, it took me a long time to realize that the optimal $ position size for me is a lot lower than I originally thought.

The correct size is the $ize that you could still give a rat's butt if you lost 50% on the trade :lol:

in Real Estate they say its "location location location"

in the SM its "diversify diversify diversify"

the only thing that is preventing you from being successful in the market is you (your emotions and attitude or mind-set)

Edited by Vector, 29 December 2006 - 11:33 AM.


#9 Jnavin

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Posted 29 December 2006 - 11:35 AM

It's arrogant and narrow-minded to tell others what they should be doing. Some traders are successful with mechancial systems. Some traders are successful with their gut. The SPX/VIX ratio is relevant when it reaches extremes and when considered with other technical elements. It's not a matter of "giving a signal" or making trades based exclusively on the ratio. Only a fool would do that. But it's not totally worthless either. The most boring, tired cliche of trading boards is hearing someone blow out because he or she feels that the other posters are a bunch of chumps. Please.

#10 CLK

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Posted 29 December 2006 - 01:47 PM

Danzman, How about start teaching us how to trade by posting your trades in real time so we can learn. No offense but I can't remember the last time you did. To sit back and compliment yourself about how much you make and what a great system you have does not help the board. If your system is so good why do need to read a message board ? Just tell us when to buy and sell and save us the headache.