I wanted to share what I see as working in my own trading when I use discretion and what is not working.
What tends to be working
What tends to not be working well
What this suggest for future graybox development:
The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.
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Great article.
I have come to many of the same conclusions myself. Particularly that position sizing should be systematic and not to trade too big even if the edge is a favourite one.
I also agree that it’s harder after the morning session. I often place trades using MOO as it takes a way a lot of uncertainty and I don’t have to worry about where I get in using limit orders.
Q. What do you mean by ‘bracketing’ entries?
Thanks
The idea behind bracketing is that your discretionary bias merely arms or activates the possibility of an actual trade. Next, you wait for a specific trigger for entry such as a test of a low or high (within some number of bars or time). For example, if you wanted to get long then you might wait for a test of a recent low. If there is no test then no entry. You basically give up some trades to get better pricing. Pricing can be more important in specific circumstances such as when the average profit per trade is small or the stop loss is small or when opportunities are more marginal.