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    systems

April 16, 2023

The best way to learn risk markets and trading

The best way to learn about markets and trading…

and how to prepare a trading plan is by learning through trading systems. Because trading systems encompass all the things that an experienced trader is looking at during the trading day, weeks, and months to organize his thoughts into a trading plan.

See the eight-minute video below on two swing trading systems

A system gives you the ability to do several things at once without several decades of learning and you do not need to be a program coder to do this.

All indicators in all systems no matter if they are oscillators, breakout bands, or moving averages are trying to do the same thing to predict the market for profit.

They are trying to predict the movement of the market to an extent that it generates profit net commissions and slippage. So, the trader and the system are the same things. The only difference is that while trading systems are good you will never find a computer-driven trading system that is great.

Here is an important fact, there are great traders.

As a mechanical systems trader what you are looking to do is take advantage of a positive mathematical expectation, the average trade stat. Like the one seen in this report.

The example here shows the Trend Walker on Crude with an average trade of $1,547.57. So, every time you take a trade on average you should make near that amount. In general, that is how the majority would love to trade at the top of the average bell curve. With discipline, a system provides and assumes you are taking every trade. The Crude oil Trend Walker has a good Average win to average loss ratio of 2.14 to 1 on all trades with an edge favoring the short side, as you can see.

Trading with discipline puts the trader where most investors want to be at the crest of the bell curve. It can be equated to the buy-and-hold trading plan promoted by the brokerage and funds industry.

So, the point is that trading for an average, be it from a system like Trend Walker or Buy and Hold S&P, which averages 12% per year, does not avoid the traditional periods that are not conducive to their methods. Hence, they are caught in bear markets or max drawdowns as we say in the systems development and trading sector.

So, to be a great trader, one needs to understand what it is to be an average one and what the risk of that kind of investing happens to be, and to turn that risk into their own opportunity.

I feel you can see how systems trading makes a good foundation for the learning experience. Along with these insights, by investigating training systems you will pick up more than the technical vocabulary, the terms used for the various tools. Some are common in all platform’s tool kits, and some are proprietary.

You will also gain an understanding of the difference between price-based entries and price-based exits as opposed to money-based entries and exits. You will realize what the interplay is between risk and reward, and what faster entries mean regarding your overall risk compared to slower entries.

You can visualize a system of any kind, even buy, and hold a diverse portfolio of shares with a variance developing around it. Such an envelope depicts the risk and reward fluctuations it will go through in time, which is a money wrapper. Just like profit targets and stop losses they have nothing to do with being right or wrong in holding the position.

Because the market doesn’t care about your money or your account size. If you contract or expand one side or the other or both how does that impact the overall performance of your system? But tell you nothing about being right or wrong about the investment. It’s about the investors’ money strategy and their temperament toward risk and account size.

So, these interplays are something that you learn through the understanding and the trading and the measurement of trading systems.

You must learn all the above before you can start any sizing exercises or portfolio allocation rules because you need to have the numbers first. You need to have the numbers from what your trade plan, your system, is going to generate for you in the future before you can do position sizing or asset allocation for the money.

So, these are all the things that trading systems can bring to the individuals who want to learn the markets instead of trying to learn what it takes many of us careers to learn in trading. To learn all the nuances of the elements of time, and the complicated issues of extra market events that can have an impact take hands-on experience. Learn what risk is and how to see it and when the time to take advantage of it.

To be a great one either you are born into it or it takes layers of time to learn. So, if your goal is to be great you still have to be good first and my suggestion is the use of training systems as opposed to being a gunslinger for all the above reasons.

So along with three swing trading systems, you have one on one access to the master once a month plus DM on LinkedIn with questions and answers when they arise.

Since the 1990s my systems have retailed for $5k locked code, and prices go up from there if open code is needed. TEM can be used visually, even if the hard code is programmed in the systems. Your choice of one of three swing traders for the lease period. Workspaces include TEM volatility model.

$595/Quarter or
$1,595/year
At the end of the training period, you can own the system net what was spent on training.
Locked code $4,995.00 no expiration date

 

Contrary Thinker insuring your future in the global equity markets.

 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2023

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its client’s trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice at any time. Digital products are not returnable or refundable

–Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

Great and Many Thanks

Jack F Cahn. CMT

January 1, 2021

Trend Following is More Than Long-Term

On the shoulders of Richard Davoud Donchian

Most investors and traders reference Richard Dennis as the father of the Turtle school. While he certainly made it a household name, he was standing on the shoulders of Richard Davoud Donchian, who coined trend following a decade earlier. Today I have had the luxury of building on their working and advancing their rules to a modern-day knowledge base.

Please note from the get-go that the majority of market players attach the meaning of “trend following” to the long-term time frame for the multi-month time horizon investor. In reality, “trend following” is applied to any time frame. Put another way, trends exist for any size bar and for any time frame you want to trade. With that in mind, applying these guidelines is of a robust nature.

  1. It is not the percent win rate or the frequency of success that matters. The investor/trader needs to know the edge for every trade before he makes it. The point is the magnitude of success that is critical. The size of the potential opportunity is where the Contrary Thinker’s volatility model is used to predict the immediacy of the move and the size. That model is the Technical Event Matrix (TEM).

The old school suggests the calculation of the volatility of the instrument you are trading with the Average True Range. This technique is widely used and highly discounted.  Very few people have the code to TEM, and only members have access to the plugins and their signals.

  1. You need to understand the concept of shorting. It would be best if you were not biased one way or the other on the market but be willing to play both sides as conditions dictate. I find the majority are phobic about the short side, something that one needs to get over if they want to achieve more than average returns.
  2. Stop worrying about how you enter a trade and focus on the exits; and keep it based on price, not money. Plan before entry where the market tells you the position is wrong and get out of the position. See the strategy page on our member’s blog for strategy exit ideas.
  3. If you want to make Turtle-type returns that are better than average (Alpha), you need to get comfortable with leverage and pyramiding winners. This is where TEM comes into play because it tells the investor when to expect a period of a forceful trend for the time frame he is trading. See the member’s only blog for the Turtle leveraging strategy for both scalpings to long term positions.
  4. The old school teaches you to vary your initial position size based on the volatility of the instrument. In contrast, sound risk management is low or no risk. So no matter how high the probability the precondition you only add after the position starts to work in the investors/trader’s favor.
  5. From a money risk point of view, risk no more than 2% of your account on a given trade is the standard rule of thumb. However, what is critical here is opportunity management before getting into the trade. Assuming it is 5 to 1 or better, you can be clipped four times in a row and hit in the fifth and still make money.

A new page that covers the entry and exit strategies page, based on charts and indicators, will be linked to this page shortly, showing how we control risk and maxes out opportunity.

  1. Be 100% price based, stay away from the evils of money, the being pulled around by your P&L if you can use a software program to test your strategies and systems. This will give you a better feel for the performance of your methodology.
  2. There is no fixed portfolio of markets or set account balance that you need to trade. Things change, risk change, and opportunities vary. Plus, each trader is different and should develop their plan according to their temperament and capitalization.
  3. Instead of watching TV to shape your trading decisions, use the price. Price is the purest form of information that the markets give.
  4. Remember that all content that is streaming in the public sphere is just that publicly available. There are several problems with it. It is a boom area for sales and marketing and a place for entry-level types to provide entry-level type advisory. Just like the financial news media, understand what it is, and stand above it. For the network news, their down-side is to get the insider interview they are used by the insider to make a market, and 90% plus of social media is inexperienced—a space I curate for a contrary indicator.

Contrary Thinking Starts Here 

I put my name on my work and stand behind it

 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice, at any time.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

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