SCOTT WELSH TRADING BLOG

Is This Part of the Secret?

Is This Part of the Secret?

Jan. 22, 2020

There has to be a way.

Last week, we talked about finding a path to guaranteed success. It exists almost everywhere else. Where is it in trading?

For example, in losing weight, there’s a guaranteed path. If we:

  • Don’t eat after 6 pm.
  • Walk 15,000 steps a day.
  • Leave a 14-hour gap between dinner and breakfast.

 

We’re guaranteed to lose weight. We don’t know how much we’ll lose, of course, only that we will lose something. Some will take this path to another level of dedication. Some would only do that (or even a little less).

But there’s no real discussion. Success will come if you follow that path. Period.

Trading is different, however.

It’s maybe the only thing in the world where people get paid to give out bad information.

If someone tells us that the market is random and there’s no real edge, that’s good for him and bad for us. He gets to keep making gobs of money and we won’t even start.

If someone tells us half of an effective trading system, that’s good for him and bad for us. He gets to protect his secret/keep making money and we will need to keep paying him for more answers.

If someone tells us about a trading system that we can’t possibly follow, that’s, again, good for him and bad for us. He gets to keep his money-making system in tact (no competition) while we continue to pay him money because we’re teased by the success that we can’t possibly follow. (An example? A trader sends out entries and exits on trades that we couldn’t ever get in real time. The trade worked but it’s always out of reach for us.)

That seems to be why it’s hard to find the path in trading. No one is out there telling us wrong things on purpose to make money. No one is scared of losing weight himself by telling weight loss secret.

Other people losing weight never hinders the educator’s personal success. Trading, of course, is different.

But last week we found something simple that is actionable by normal people. Following it shouldn’t hurt anyone else’s chances of making money (unless we start trading thousands of contracts).

Remember, it was simply a 100-day breakout on a Daily chart. The research showed that we would inevitably be profitable if we followed it long-term.

And that’s what I’m looking for: a path we can take that is doable and won’t be gone tomorrow.

The problem with our first step was not whether we’d make money, it was the maximum drawdown. It appeared too high to handle easily.

We were able to mitigate that some by adding another instrument or two, but it got me thinking.

Is that what we’re supposed to do? Or do the people who already know the guaranteed path do something else?

Like, do they use systems that are opposite?

For example, our simple system last week was a breakout system. If price moved above the previous 100-bar high, then we enter and hope for a long trend upward.

What’s the opposite of that? It seems like the opposite would be to fade the 100-bar breakout, to go Short when it hits that number rather than Long.

Or we could also go Long when price hits the 100-bar low. That means we’re fading a Short breakout on one hand.

But it also means we’re taking trades on this system when our initial breakout system wouldn’t even be considering a trade.

Going Long on the 100-bar low is definitely something very different than waiting to go Long when price hits a 100-bar high.

So, this week we’re going to see if this makes a difference.

We’ll see if this gets us one step closer to a guaranteed path.

We’ll break down this countertrend system in detail in this week’s emails.

Talk to you soon.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.