74 lines
3.1 KiB
Markdown
74 lines
3.1 KiB
Markdown
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# Chapter 10. Trading Idea
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Following topics to cover:
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* Entry rules
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* Exit rules
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* Market selection
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* Time frame/bar size
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* Programming
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* Data considerations
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## How will you Enter a Market?
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Entry Lovers = people ignore the drawdowns during the trade and say "Look what would happened if you had bought Microsoft way back when."
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Mis-conception:
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* The time before entry is really the only time you feel in complete control. You tell the market, “Mr. Market, you must do this, that, and the other before I place a trade to enter. If you do not follow my rules, Mr. Market, I will not enter a trade. I am in charge here.” That feels nice, as opposed to the time spent in a trade, where many times you hope and pray the market roller coaster will go your way!
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Entry & trading style:
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* Long-term swing trader (trades lasting weeks to months), an entry a few days early or a few days late won't affect
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* Scalping (抽头转卖) trader: entry becomes important. An entry off by a tick or two could turn a winning system into a piece of garbage.
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After getting ideas, first turn it into *pseudo code*: "If close this bar is the highest close of last X bars, then by next bar at market."
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* pseudo code can help to identify any important variables.
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Few tips:
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* *Keep it simple*
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* *Limit number of input parameters*. More parameters means more chance of over-fitting
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* *Try to think differently*. Moving average crossovers hav been over used.
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* *Use a single rule at first*. Slowly add new conditions if they significantly improve performance. Many entry conditions may turn out useless.
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## How will you Exit a Market?
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Most important, to get maximum profit or minimum loss. Need spend a lot of time
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Common ways of exiting a market;
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* **Stop and Reverse**: A new entry position means exit for existing one.
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* **Technical-based exits**: Support/resistance lines, moving averages, candlestick patterns, etc. Need coop with existing positions
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* **Breakeven (保本) stops**: Often seem to limit profit, since they typically exit on a retracement (回撤), with market then resuming its earlier trend
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* **Stop-losses**: when coupled with good entries, can help prevent catastrophe.
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* **Profit targets**
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* **Trailing stops**
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## What Markets Will You Trade?
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Two schools of trading system:
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* One for all: Applying one trading system over all market, tuning parameters for each market.
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* Pro: If it works on all markets, it is robust.
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* Con: Development is difficult. Need to relax their acceptance criteria
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* One for a particular market
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* Pro: Highly customization. Easier to create.
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* Con: Not robust.
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## What Type of System Do You Want?
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Author's preference, start a trading strategy as a day-trading. (i.e. in/out, multiple trades a day).
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## What Time Frame/Bar Size Will You Trade?
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Time Frame = length of time for each bar.
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* **Time frame contraction (收缩) and dilation (扩散)** used by many trader:
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* First, Test a strategy with a 10-min time frame
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* If succeed, testing on 9-min bar
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* Problem: add/minus 1 min will lead to change of indicator
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## How will you Program the Strategy?
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Program it by yourself.
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