Saturday, January 19, 2013

Idiots:1 - Fools:0 - Week Two Trading Round Up

Ok so apologies for some slight jubilance at the ETF headquarters last evening, but as we had just busted out end-February's target in week 2 of January, maybe it can be forgiven. 

From: Update 14 Jan 2013 - AT_ETF Idiots Trade 2
A suitable target would be +10-20% of the account size from this call over the next few weeks..

In this post a couple of idiots wanted to run through this week's trading statistics as they always do at the end of every week, and maybe shed a little light into the world of the trading computer game as seen by us idiots, because it's important for non-traders to understand.  

Although this week yielded a decent enough return (+10.05%) the trading results were not actually all that good. Firstly last weeks trade stats.

Trades taken: 7  - each trade has three potential profit levels, or can be stopped out at breakeven or a loss

  • Trade + TP1:      4 
  • Trade + TP2:      1 
  • Trade + TP3:      0 
  • Stopped (even): 6  - every single one of these was in profit, & gave it back holding out for more
  • Stopped (loss):   1  
  • Max total risk at any one time 4%.  Usual risk 1-2% 
  • Account +/-  +10.05%
  • Total trades win rate: 4 / 7 or 57%
  • Total (tranche) win rate 5 / 21 possible tranche wins = 23.8%
  • Max Risk / Real win ratio:  10.05 / 4  =  2.51 : 1
What actually happened.
  • Trades 1 & 2 -14 Jan. -S&P TP1&2, 3rd tranche stopped @breakeven,  Dow stopped @ breakeven
  • Trades  3 & 4 - 15/16 Jan -S&P hit TP1, Dow hit TP1 then both stopped @ breakeven on remainder
  • Trade 5 - 16 Jan  - S&P stopped out - loss
  • Trades 6&7  - S&P hit TP1, then scratched remainder and entire Dow

So we had 4 of 7 trades hit TP1, one of them went on to hit TP2, one loss, and multiple part tranches come back and get stopped out at zero. Did the floor fall out from under our shorts this week? No. Did we methodically bank money anyway, whilst waiting for a/the big win?   

There are really two things the idiots would like fools and observers to notice here. 

Firstly, that it is entirely possible to make money trading the wrong way against the trend, because the markets have trended up this week (in line with Turner's bullish call) and we have been trading down against the trend (because we think it will inevitably reverse huge at some point) and to make a point. 

The point is, that idiots neither have to predict the future accurately to make money, nor even care which way the market is going, to extract up to 10% account size per week, straight out of the accounts of fools.

Please bear in mind, a 10% win is a 10% win, if this same sequence of trades had taken place on a $10 million account, these idiots just live traded their way to a +$1,005,000 win in one week. 

Every trade setup was posted as quickly as we could get it up after entry, and updated as they ran, you have seen it all happen, real-time. Now the idiots are definitely not saying they make 10% a week every week, by any means. ..But some weeks.. 

It's also notable that although all but one of these trades initially went in the right direction, almost all of them gave back more potential winnings that could have been cashed out at one point.  Some idiots prefer to just go in heavy only looking for TP1 and fully out again, to maximize wins, and had the idiots done that, this week, the results would have been closer to +16%. 

However, in other weeks, when several TP2 and TP3 targets are hit, banking ongoing tranches can make significantly more than jumping straight out, so waiting patiently for the 1 in 3 or 4 that do run on, and on, and just letting the risk management maths play out can ultimately yield more over the course of time. 

This is super important, because although this week we only had one negative trade, if idiots take more losses, and do not wait patiently for the bigger winners, the risk management maths breaks and idiots lose money. 

Idiots live in a world of confusing probabilities to navigate, and attempt to do it using simple mathematics and rules and never try to kid themselves or anybody else that they know the future.  

Fools actually think they understand it all and broadcast loudly:  "There will not be..

..whilst getting it wrong continually for so many years, and still have the cheek to diss the idiots. 

Its a funny old world, where financial commentators can still get listened to and paid, and even on TV after getting everything so wrong for so long, the idiots think they are basically all just a bunch of voodoo  newsletter-writing witchdoctors.  

All Trades can be found here AT_ETF  and a chronological list of individual update posts as below, which all reference back to the ETF page. 

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