Tuesday, March 06, 2018

Volatility issues

Below I have shown a chart of the Dow which highlights the split personality of the markets in recent times.

Up until the end of January, we can see the market clearly in a trending, stable (i.e. low volatility) state. From there, the chart is a mess, and the Volatility Factor and 2ATR measurements clearly show the explosion in volatility.

Saturday, February 24, 2018

Some thoughts on varying your position size

In my own trading, I use fixed fractional position sizing - that is, while the monetary value of risk per trade varies as my equity goes up or down, I risk the same amount in percentage terms.

A while back, a good trader friend of mine experimented with varying the percentage risk per trade based on a look back period of performance. 

Both methods have been used by successful traders and Market Wizards. Both have strengths and weaknesses.

Saturday, February 17, 2018

Some of my beliefs about backtesting

When it comes to trading, I like to think differently. I'm not afraid of being a bit of a heretic when it comes to thinking about the markets. While I adopt and use 'classical' trend following and breakout principles, I also like to think for myself, outside the box.

As an example, lots of traders swear by running backtests and tuning their trading models based on the results of their testing and analysis. Certainly, in some cases with getting to grips with a basic concept, backtesting can be of some use.

Saturday, February 10, 2018

A tale of two setups

Rather than talk about the recent market shenanigans, the chart of the Dow covering the last few months offer us a good chance to compare a low volatility setup against a higher volatility setup.