Greetings, I wanted to ask a simple question about what you think the better ingredient for trading success is between a well researched edge (very hard to find) or the intuition of the guy or girl behind the screen.
We are assuming a traditional trader (non quant/algo). Would you say that the x factor for success is more a well researched edge in the market or the edge that intuition provides in situations that would otherwise have non; just being able to decipher a good trade when you see one.[poll type=regular public=true]
If you cannot write the equation of you strategy, then it’s intuition.
If you can trade without looking at the charts, using math only, then it’s statistics.
In the past there was a guy here @atrwilder who used to say “give me your strategy so I can gouge it for myself” and I was thinking, well I cannot give him my strategy because it’s still confusing for me how I trade. He was the first guy that made me think more about backtesting.
I assumed that the first option, "well researched edge" - defined as “statistics” in the poll - refers to a mechanical-style approach which is driven solely by a statistically-justified rationalisation based on the premise that historical price actions will usually repeat in a similar fashion in the present to a degree that is statistically quantifiable and identifiable.
I understood the second option “intuition” or " being able to decipher a good trade when you see one" to include the subjective ability to rationalise trade opportunities, whatever method they are based on, according to previous experience and/or other current external factors such as imminent data releases, public holidays, elections, and so on.
It was on this basis that I preferred the inclusion of subjective analysis, as in intuition, over purely mechanical trading based on statistical analysis of whatever has gone before.
That is how I decided the “statistical” option should be interpreted - and included the use of indicators such as MAs , Stochastics etc as “trade initiators” rather than just “background information” in a system as a pointer towards “statistical methods”
I suspect a good many of us operate in a world where we are aware of the past, but where our entries and exits are based on our own assessment of what is “going to happen” (intuition) rather than taking trades based on what “has happened” (statistics).
Anyhow - that’s why I decided my methods fit more into an “Intuitive” definition rather than the other.
Whatever"intuition" turns out to be be in this context, it cannot be a “well researched edge”.
So it must be a system that has no specific identifiable edge, but which works for reasons unknown - and unknowable. This must mean it can’t be objectively understood by its user, meaning it can’t be shared or taught to others and it can’t be consciously improved or developed.
So we’re talking about pure luck.
Or, we’re talking about a fluid, holistic approach, which isn’t really intuition, its just vague.
Are either of these the basis for a great business plan?
If you spend enough time listening to Warren Buffet, particularly for a finance major you quickly realise that he is not saying anything you don’t already know or have read in any standard textbook; his “moat” is just entry barriers in any basic 5 forces analysis. But he has a talent that is undeniable.
If you were a football enthusiast, you could read or youtube every technique deployed by the greats in the game yet that doesn’t mean that you will end up playing in the premier league
I spend no time at all listening to Warren Buffet as he’s not a trader. however, I doubt his success is down to having no plan or well defined investment rules to follow. No business plan has to be incomprehensibly complex in order to succeed.
As for the premier league footballer, his talents are innate, i.e. he’s born with them and remains unconscious of them until someone else develops the game and rules of football. But football ain’t trading: trading is a purely intellectual activity, whereas football is a combination involving physical attributes also, so the two are not comparable.
I think you miss the point. At the end of the day as with the football analogy it may come down to the individual. Warren Buffet is a wise and interesting man you should listen to him and perhaps expand your horizons.
Back to the message. Anybody can put together a business plan, anybody in theory can trade, anybody can work out the techniques behind a skill in football. But there is a difference between those who know and those who can do. I know how to play tennis. I will never compete at Wimbledon.
We are assuming that the guy/girl with “intuition” is the repeatable edge. That their instinct makes the difference between being profitable long term or not. There is so much literature on trading for anyone who cares to read, yet figures for successful traders hover around the 5% mark. I can’t believe that 95% of would be successful traders are just ignorant people.
rrram linked to a video interview by Andre Minassian, there is another where he call a stock market rise one the eve on Pres Trump inauguration, calls maybe up to 2 years before a correction.
He is big into intuition, but it comes with experience - google “Intuitive Trading”. - goes back to Livermore’s day.
I think that when you use “well researched edge” - as opposed to- “intuition of te guy or gal,”
You’re introducing a bias in the mnd of the reader.
Some might (in their own terms) compare - “a load of old backtesting” - with - “A lifetime’s hard earned observation, knowledge and experience” - when comparing the same two parts of the question
I think it’s the combination of both. You need both to get success. Sometimes it is just the intuition and sometimes it is the strategy. And intuition doesn’t work all the time. You need good practice to use your intuition. Sometimes you may make mistake by perceiving your perception as intuition.
In support of my vote I wanted to add this here.
I cannot trade manually, although I insisted since 2014. Old school, naked charts, etc. My brain sent the wrong command every time. So, I got some time last month, dusted off my old robot, wrote some code to do backtesting, and wrote a simple strategy, nothing secret, a renko ATR(14, 1H) thing. It runs in a headless linux machine in my living room. This thing made more pips then I did in all these years. I check my mobile from work and I’m like, what? again +50 pips?
A big part of trading successfully is the emotional element. particularly around closing winners early and losers late. In that case having a statistical edge could still lead to ultimately losing since the emotional side of your trading might put your R. R off balance.
