Discussion of article "Interview with Dr. Alexander Elder: "I want to be a psychiatrist in the market"" - page 7
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For me personally, the most useful were the thoughts on the general approach to trading. I will call it regular trading: analysing the market at the beginning of the week, making decisions according to some rules, keeping a diary. This all turns into a weekly cycle of trader's actions with a beginning and an end.
If you have the right attitude to setting a stop, not just throwing it wherever you want, that is.
How should a stop be set? There can be many variants, but the main idea is that the stop should stand in the area of minimum probability of reaching it.
Hence, the lower the calculated stop, the more confident the trader is in the correctness of the chosen direction. And since it is so, more funds can be attracted to the position. And vice versa, the larger the stop, the higher the uncertainty and the smaller lot should be opened.
It is painful to hear such reasoning from a person with serious mathematical training. What is described in the second paragraph has nothing to do with stops. Here a stop is understood as one of the system parameters. In this case "stop" can work if the probability of occurrence of this event multiplied by the result of the event will be less than 50%, i.e. actually "stop" is a whole trading system with positive m.o., which can work by itself and without other rules.
The 3rd paragraph is even more disappointing. The decrease of a stop will necessarily (the word "necessarily" means always, and under any circumstances) be compensated by an increase in the probability of its execution, which in the simplest case of a Gaussian distribution will fully compensate the effect of "small losses" by the frequency of their occurrence. In reality, on actual market distributions, things are much worse for small stops and stops in general. In this case, the advice to load even more is given: "Hence the moral: the smaller the calculated stop, the more confident the trader is in the correctness of the chosen direction. And since this is the case, more funds can be attracted to the position." Not only that due to normal market volatility a small stop will be blown out more often than usual, but also its volume will be additionally overestimated.
Still, I warmly relate to old Elder - my trading education started with his book. His books are like an alphabet book for kids. But there always comes a time when kids grow out of their trousers, but they still have a good memory of their first colouring books.
It is painful to hear such reasoning from a person with serious training. What is described in the second paragraph has nothing to do with stops. Here, a stop is understood as one of the system parameters. In this case "stop" can work if the probability of occurrence of this event multiplied by the result of the event will be less than 50%, i.e. actually "stop" is a whole trading system with positive m.o., which can work by itself and without other rules.
The 3rd paragraph is even more disappointing. The decrease of a stop will necessarily (the word "necessarily" means always, and under any circumstances) be compensated by an increase in the probability of its execution, which in the simplest case of a Gaussian distribution will fully compensate the effect of "small losses" by the frequency of their occurrence. In reality, on actual market distributions, things are much worse for small stops and stops in general. In this case, the advice to load even more is given: "Hence the moral: the smaller the calculated stop, the more confident the trader is in the correctness of the chosen direction. And since this is the case, more funds can be attracted to the position." Not only that due to normal market volatility a small stop will be blown out more often than usual, but also its volume will be additionally overestimated.
Still, I warmly relate to old Elder - my trading education started with his book. His books are like an alphabet book for kids. But there always comes a time when kids grow out of their trousers, but the good memory of their first colouring books remains.
Yeah, yeah, yeah, I used to have that too. Put the stop farther away, because the closer the line the higher the probability of achievement. We get that at TP/SL as 200/200 we have probabilities 50/50. But such reasoning is valid only when a trader works on luck. And only when 200pp TP starts to be reached much more often than 50pp SL a trader starts to earn, as he relies on the trading system.
Hence the moral: you have a TS if and only if a smaller stop hits less often than a bigger profit.
Hence the moral: you have a TS if and only if the smaller stop is hit less often than the larger profit.
Hence the moral: you have a TS if and only if a smaller stop is hit less often than a larger profit.
Too strict criterion, rather related to the Grail. It is more correct to temper your appetite: "you have a TS if and only if the stop is hit less often than at least a similar profit".
Okay, I was wrong, if we apply the spectrum principle, where one extreme end of the spectrum is the "TC zygote" and at the other end is the Grail, then these states of TC readiness will correspond to:
"Zygote TC" TP/SL <= 1.
"Grail" TP/SL >= 10.
All this is assuming that TP is reached more often than SL.
Again a caveat, TP and SL does not have to be server based, can be virtual. If SL is not a part of the TS, but is used to save the deposit in emergency situations, then all the above considerations do not apply to it.
All right, forget it. After all, the topic isn't about how to set the stop correctly.
Elder's a good man. There's a lot to learn from him. What is surprising, however, is that he is an ardent opponent of MTS, but he gave an interview to MetaQuotes - one of the brightest and most active ideologists of MTS.
Elder's a good man after all. There is a lot to learn from him. However, it is surprising that he is an ardent opponent of MTS, but he gave an interview to MetaQuotes - one of the brightest and most active ideologists of MTS.
MT is a terminal not only for auto-trading.
The doctor presented himself on three photos and one even in a mirror image, presented his commercial site, presented a book with autograf, presented a set of indicators for MT5 even at a discount - he achieved his goal and stayed true to his point of view (he did not advertise MTS).
PSYCHIATRIST IS A Utopian.
in the financial market
with obvious signals.
i.e., routing signals.
))
Euro down
Bulgaria - Finland
Police - Judiciary
Voted AS
VELIKIY NOVGOROD...
(for Ossetians)