Style drift
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  1. #1
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    Style drift

    Hi there!

    Today I want to talk a bit about "style drift" – too often traders tend to drift between one style and another, thinking that they are «flexible». But it’s not flexibility, it’s "style drift". By the way, in hedge fund industry, style drift is considered as a reason to change your money manager. In fact, when you give your money to a manager, and he tells you that he is long-term position trader, you expect exactly position trading - even if in some market it can generate some loss.

    Professional investors know, that "style drift" can seriously screw probability of outcome.

    So, first of all, it’s necessary to know your timeframe. By «timeframe» I mean not your «m5» or «H4» chart, but time period you are working within.

    Basically, there are scalpers (lowest timeframe), intraday traders, short-term traders (1-3 days), swing traders (more than 1 week), position traders (several months). Daytraders bring profit weekly, or monthly, but their profit is relatively small.
    In professional trading industry, there are extremely risk-averse day traders, who tend to make 8-10 ticks a day on their favorite setups, but they are not capable to benefit from big movements. When volatility comes to markets, they simply let it go, and even avoid trading in such days.

    On the other hand, there are short-term risk-seeking traders that benefit from volatile moves. They search for volatile instruments and volatile market conditions. Inside of one of these days, they can make decent amount of money.
    But regardless of style (risk-averse daytrading or risk-seeking short-term trading), they are consistent with what they do.
    Because if they are not consistent….

    …they can fall victims of popular trading diseases called «Probably I can catch the trend» or «I can earn small profit here»

    It is style-drift caused by performance anxiety or demand pressure, and more often than not it ends up with screwed final results. Several years ago I also was passionate about capturing one «killing trade», thus not closing paper profit very often. I drifted between swing trading and short-term trading. And, in some moths, equity curve was moving back and forth like pendulum. With the years, I became much more risk averse and finally gravitated to short-term trading. When I've become stuck with my trading style, I made my equity curve going smoothly up.

    But friend of mine is a swing trader, and he shows nice results in his trading, yet his drawdowns can be longer than mine in some market conditions.

    Do you drift between styles in your trading? How much money have you left on the «table» doing so?

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    Last edited by Value trader; 10-04-2013 at 04:22 PM.

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    Well, i have seen many traders shifting from different to different strategies. You can take my example a year back example of mine. When i was new, i wanted to learn and do every strategy . If one strategy failed i never used that again because it created a bad impression for me. Experts says that we should always give time to our strategy and stick to just one strategy. At least back test the strategy for one month and if satisfied then forward test the strategy for one month. If you are in positive pips by the end of the month, its considered good.

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    Certainly the thread starter has made a very good point that it is better for traders to stick to using one trading style. However i do not think that it is possible for the new trader not to change style because a new trader can try swing style and fail which means they have to try another style. So a new trader needs to try different style and strategies before they eventually get the style that is suitable and most profitable for them.

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    Quote Originally Posted by jonking View Post
    Certainly the thread starter has made a very good point that it is better for traders to stick to using one trading style. However i do not think that it is possible for the new trader not to change style because a new trader can try swing style and fail which means they have to try another style. So a new trader needs to try different style and strategies before they eventually get the style that is suitable and most profitable for them.
    You are absolutely right.

    Beginner trader should test many trading styles to find one that suits him personally.
    I'm talking about experienced traders who can't make up their mind - are they swing traders or short-term traders or maybe scalpers?

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    If the trader can identified his/her trading style, then it will make him/her more easier to choose the time frame on which one is suit for the strategy. I think the key to trade comfortable is depend on the suitable trading style. Am i correct, mr value trader ?.

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    Quote Originally Posted by taharoyal52 View Post
    Well, i have seen many traders shifting from different to different strategies. You can take my example a year back example of mine. When i was new, i wanted to learn and do every strategy . If one strategy failed i never used that again because it created a bad impression for me. Experts says that we should always give time to our strategy and stick to just one strategy. At least back test the strategy for one month and if satisfied then forward test the strategy for one month. If you are in positive pips by the end of the month, its considered good.
    I share the same opinion as yours,during my years of trading I have developed lots of trading strategy and most of them are high yeailding strategy but my problem is following it up for a long period of time to build my confidence in the strategy,you know patience is also important,you can't become rich over knight but you can become a professional trader that earns a lot from the currency market only if you can be patience to build a strategy and determining its reliability by trading with such strategy,its better than back testing.

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    Quote Originally Posted by topman View Post
    If the trader can identified his/her trading style, then it will make him/her more easier to choose the time frame on which one is suit for the strategy. I think the key to trade comfortable is depend on the suitable trading style. Am i correct, mr value trader ?.
    trading style suitable for our use will usually we get after we continued to conduct transactions in forex, because the more often we deal with the market, the greater we will set up a trading method that fits the character for us, all it requires a process and patience to find a way of trading suitable for us

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    I have read an article that relates just the same way as this has said it, but the volume was only the difference. It is better that forex traders makes sure that they are very consistent in the market, as this is the only way we can have the right trading success that we want without much loss. If you think that yo can be drifting, you will leave the best and thinking that you are still helping yourself.

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    In my experience i seen a lot of trader who just drift from one strategy to another. They just at once change their strategy if it fails. I think we need to take some time and we need to stick with one strategy and at least taste it for one month and if we get positive result then we can go otherwise change it then. I also did that before. Just cant be able to settle in a strategy but later realize the fact. I try to make my system better instead of changing it totally. This is technique to build a stable strategy.

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    trade when using style drift, traders need to have a peaceful mind, fresh and edgy all strategies must be well prepared so that when doing the style drift or scalping would be better than a long-term style so traders with scalping for profit will be faster than the longterm and it all depends on each trader

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