Guys can you enlightened me what do they mean when they say there are trading using a system ???

I'm now currently reading Jack Schwager book's Market Wizard and there is a lot of reference to using trading system...

BTW do you guys have any TA idol ???

Newbie here just getting my feed into TA :P

The flipping of the coin is used in place of the entry/exit methodology.

What is the probabability of you being correct? 50 pct on average.

If you win or loss $1 each time then out of 10 flips:
Win: 5 x $1 = $5
Lose: 5 x $1 = $5
Net P/L: $5 - $5 = $0

If win $2 each time and lose $1 each time then out of 10 flips:
Win: 5 x $2 = $10
Lose: 5 x $1 = $5
Net P/L: $10 - $5 = $5

If win $3 each time and lose $1 each time then out of 10 flips:
Win: 5 x $3 = $15
Lose: 5 x $1 = $5
Net P/L: $15 - $5 = $10

If win $5 each time and lose $1 each time then out of 10 flips:
Win: 5 x $5 = $25
Lose: 5 x $1 = $5
Net P/L: $25 - $5 = $20

and so on.

Now flip the coins 100 times, 200 times. What is the maximum number of times in a row you are wrong? Did you get a 10? a 15? Even if you did not get it this time, what do you think is the likelihood you will get it the next time?

If you have $10 as capital and you get a 10, you are wiped out.
If you have $15 as capital and you get a 15, you are wiped out too.
If you are not wiped out you get a big drawdown in equity.

Yes you can still be wiped out even if you have a probabaility to be right 50 pct of the time. The longer you flip the higher the chance you get a 10, 15, 20 wrong in a row. How do you prevent from being wiped out?

Of course flipping of coin is just an example used here. When you replace it with your own entry/exit methodology, the complete approach is the same.

This is a simple basic analogy of a trading system.

A little more on trading system.

If acct size is $10 and risk per trade is $1, this is too high. You are risking 10 pct on each trade. If ruin is set at 35 pct max acct loss, you hit ruin with 4 consecutive losses. Now this is easy to happen.

SO you reduce your risk per trade. The funds put this at 1 pct. Now you need a much bigger acct to do this. This is called properly capitalized. If ruin is 35 pct max acct loss, then you hit ruin with 35 consecutive losses. Can happen but not so easy. Your chance of survival has increased.

The next thing to do is to press your winners. When you are right, you may want to load more. Yes pyramid. But please pyramid properly. The base must always be bigger than the top, like the shape of the pyramid. SO when you are right you make much more now. You might increase your risk by doing this but you must have a way to keep that low relatively. The big profit is in the trends and you want to load up but to the preset limit. Never over-trade.

Now see why those trends that come your way 3 or 4 times a year, you press your winners, yet still abiding by your risk, these are the big money profit. These are what your trading system must patiently wait, catch and convert.

But you must have a strategy not to cut them!!! Don't cut your profit. You must let it run. You cut your profit you cut your big money profit. So don't believe those who tell you that you never go broke by taking small profit. Trust me that if you listen to them, you will. Trust them, you definitely will. Let your exit methodology take you out. Which means that your exit methodology must recognise that the trend is your friend.

Many people try to talk about Warren Buffet. Warren Buffet doesn't just buy stocks, he buy over control of companies! He therefore owns the companies so how can he cut loss. But do you have the money like him? Can you do like him? If you can't then you have to learn that cutting loss is a good thing. That losing 1 pct of acct per trade is a good thing. That this is a good habit to get into.

So next time you hear people say, "Price drop? but more. Average down." Next time you hear this you can be sure that person is just doing imaginary trades.

This may not sound like trading system. But it is. Trading system is not just about buy and sell signals. This is why in the thread on TA Books, I say mind and money management is the soil survey and foundation piling.

Hi Ironguru,

You do not need to know programming language in order to use trading systems. But it would be better if you know the language made available by the software you are using. Usually this type of language (probaby macro) are not as raw as real programming language.

Trading systems can be mechanical and can have show various levels of profitability. But not all trading systems will suit one's temperament. Someone who been profitable trading a particular system and when you trade that system you may find it not profitable for you. No one can really mechanically trade a mechanical system.

Ever hear anyone say sack the profitable trader and replace him with the mechnical trading system he is using and you will make money? No need to pay the trader's salary? No way. He won't be able to do it.

The chinese call this 8-characters clash.

It is better you know your risk appetite, the trading system risk performance, your trading temperament, the trading system temparament, the type of rules you can follow, the type of rules the trading system run on etc etc. It is all about 8-characters.

The Turtle system is a complete system but it is a system that can really be difficult to trade.

The first example is on EuroFX futures on the IMM.

In 2002, it came two times, the second stretching into Feb2003.
In 2003, it came two times, the second stretching into Jan2004.
In 2004, it came only once, very late in the year.
In 2005, it came only once, by early July it was over.

These are the outliers. The ones that make the difference to a trading system.
As you can see, they don't come often. It is very rare you see them.

So...

if you like a lot of activities,
if you like the excitement of the market place,
if you are impatient for results,
if you have a need to trade everyday or every other day,
if you can't walk away from the screen,
if you can't walk away from the market,
even when you have a positions,
then this is not for you.
Because it will never work for you.
Chinese saying is Eight Characters Clash.

If you like only profits,
if you are happy to take your profits early,
if you don't like losses,
if you let them run,
if you believe in the number games,
if you believe that good trading system
must show high percentage of winners
and low percentage of losers,
if you believe in the often advertised systems
of >90% accuracy,
of >95% accuracy,
if you are looking for
>100% profit in a few hours,
for >1000% profit in a few days,
then this system is not for you.
Because it will never work for you.
Chinese saying is Eight Characters Clash.

This is a trend following system. You see its beauty only very rarely, but see its
downside often. This is life anyway. This is human nature. Look around you. How
often do you see the upside of things? How often do you see the downside of
things? You have walk the path of life, you should know the answer by now. The
market is no different. It is created by humans and used by humans. Therein all
the human nature will be present. Trading system is no different.

The following $$$ is simulated results. A 58.53% return may not be convincing.
But before you let $$$ distract your mind, take note that the simulation is ran on
ONLY ONE SYMBOL with an account size of USD200,000. With this account size,
a lot more other symbols can be traded of course. Have you seen the chart of
Sugar#11?

But before you do, take a lot at the EuroFX futures chart. I try to show a realistic
picture of the realistic market. I believe in showing you the good, the bad, and
the ugly. Go on, pick them out. I don't believe in showing you fantasy.

Once in a while a very super good friend of yours come along, the true super
friend of yours. Like sugar#11 this time around. This type of friends are,
unfortunately very rare. But they do exist. This time around even with a 225.69%
over two years the accuracy is a lucky unusaully high 78.95%. But look how much
this may have contributed to the account.

Again I don't like the number game so commonly flashed on newspaper
advertisement nowadays. I show you when it can happen and therefore correctly
guide your expectation. I don't want to mislead you. Then add up all the possible
realistic numbers. Let there be reality. Let there be no illusion.

Hi
Do you guys know any trading system or software that will give signal/alert you
whenever a stock.... say hit 3 bid above the opening price. thanks

"Do you guys know any trading system or software that will give signal/alert you
whenever a stock.... say hit 3 bid above the opening price."

Well, I know this can easily be programmed in TradeStation.

Thanks CSK,