March 23, 2010
Get Dropbox and Give More Space!
Good Morning! I've been using Dropbox as a way to share Rapidminer Experiments and Data with readers. It's vastly better at sharing large data files than my forums and I might completely abandon my forums (for now) in favor of consulting with Dropbox.
If you haven't used Dropbox before, I suggest you get it. Trader W0NK0 was the guy that clued me into it last year and since then we've been sharing market data, python files, and silly stuff. Make sure to signup using my referral link so I can get more free space with every signup.
March 24th, 2010 at 12:41 am
Tom,
Great video! I love the words of wisdom at the begining. Like I said before I've been playing around with statistical analysis specifically simple linear regression, and auto correlations trying to find relationships in the data.
I purchased 5 years of nasdaq data and loaded it into sql server and have been playing around with the data. I've been looking for a tool like this to find other way of forecasting data. I plan on using this as yet another indicator to aid my decisions for market orders.
I've been following The Market Guys and am reading their book "The 5 points to trading sucess" and they harp on the money management and risk management. I'm still learning but I want to be smart about it and protect my principal.
I've built a function in sql server that uses simple linear regression to help find correlations in the lagged data and put a model together based on that. I download the latest end of day data and import it into the database and then I train the model. After that I have my predictions from which I pick 5 and go paper trade them exactly as I would if I was doing it for real money (while I fund up my trading account). I've been 70% accurate so far with my predictions but I'm just not satisfied with basing all my decisions of that one forecast even with me following the 1% rule of risk management.
This is where I'm hoping to learn a great deal from your videos so that I will have many "indicators" to help me make better decisions on what to get in on and when.
I created a drop box account so you should get an increase in space from that. Thanks again for taking the time to do theses videos.
March 24th, 2010 at 12:47 am
oops, it seams I've posted this on the wrong section, sorry.
March 24th, 2010 at 5:04 am
@JohnS: You have to remember that indicators are almost completely derived from price and volume. You really need only those IMHO. 70% accuracy is very good and if you can get it consistently above 60% than you have a decent system. This only works with strict money/risk management principles though and you have to always ask yourself, am I risking $1 to make 50 cents? That's a bad deal, you should shoot for risking $1 to make $2.
April 7th, 2010 at 9:21 am
@JohnS, your 70% winning trade ratio does not necessarily constitute a good system. You can have a system with 30% winning ratio and make more money with it. The metric that is more important is Expectancy. You must start with a positive expectancy. If your winning trades win $100 and your losers lose $250, then you will wipe out your account over time. If your winners win $500 and your losers lose $100, then a 30% winning ratio should make money over time.
Also, 1% account at risk is a heuristic and is not based on anything quantifiable. I suggest Ralph Vince for more about optimal trade allotment.
April 7th, 2010 at 1:14 pm
@Milktrader That is correct, even thought it accurately predicts the next days trend movement it doesn’t predict expectancy. A stock that closes higher than the day before even if it is 1 cent would qualify as an accurate prediction. This by itself is meaningless and is why I don’t rely on it solely for my buying decision. I would use that prediction in conjunction with other predictions/indicators to give me a better feel for what I think the stock is going to do.
The 1% rule I’m talking about is the rule the Market Guys use in their book and videos. The idea is that you have evaluated the stocks your going to get into and then it will tell you how many stocks you can buy and stay within 1% risk of your account’s value for that trade.
It’s more for protecting you if you’re wrong then anything else. If I have identified 5 picks and I believe they will reach my target growth then I apply the 1% rule which tells me how many stocks I can buy of each stock and only risk 1% on each trade. I already know (think) how the stock is supposed to perform and what to expect.
If I see a stock that is trading at $10.00 and I suspect a it to go up by 5% and my risk per share is $0.50 and my account value is 10,000, the 1% rule tells me that I can buy 200 shares of that stock.
If I buy 200 shares at $10.00 and the stock rises to $10.50 then I’ve made $100 on the trade. If I’m wrong and the stock drops to my exit point I lose $100. That is $100 risked to make $100 and $100 is 1% on my account value.
I will read up on “Ralph Vince” and see what his appraoch is.
Thanks
John