MDA - Market Direction Analysis

[gtober]

Well, I'm glad I checked back here tonight before I turned it off. I tried to follow up with a Larry Dudash post on trade management on Zeev's thread, but had no takers. Maybe this will prove to be more fruitful.

My post is below. One thing I have learned about trading in the past year or two is that its not the system that makes the difference. I have seen every type of system known to man. And somebody has made money with every one. So, IMO, the difference is not the system - even though some are clearly better than others - the difference is the execution. That is, the money management and position management.

Currently, through past experience and through backtesting I have found that I can expect to be whipsawed 2 times (on a simple average) for every good trade. OF course, the good trades are significantly more profitable than the whipsaws are unprofitable. However, it is my goal to change this ratio to at least 50/50 and perhaps pitch it in favor of the trade itself. (this is a position trading system using ema's)

I have read many good authors that state that most successful traders are right only half the time. Therefore, the position management makes the difference.

Any other opinions?

http://www.investorshub.com/boards/read_msg.asp?message_id=942499

I think this gets into a question of position management which is different from the trade itself. It is an area I still have trouble with.

Many will take a position and hold it until they have a profit. double up when they have to - etc. That is more like shorter-term investing to me.

My trade system is based on ema's. Currently, i have two ways to enter a trade. First, I drop down a level and look for an entry in a quicker timeframe. Then, I try to hold through the desired trigger and make it a successful trade. The negative to this strategy is you are holding at support or resistance rather than closing a position.

The second way is to simply let a bar print at an ema cross. Enter the position and use the bottom/top of the bar that prints the trigger as the stop. No other timeframes involved.

I try to keep this as simple as possible, but of course no system is perfect. The good thing about my system is that if i can come out of an ema on the right side, my success rate is very high. However, it can take 3, 4, 5 tries and whipsaws at times before I am on the right side. And gaps totally screw me up.

I am always open to new points of view here, so I, too, hope that some others chime in.

GT