{"id":34694,"date":"2014-01-07T13:56:52","date_gmt":"2014-01-07T18:56:52","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=34694"},"modified":"2014-02-18T13:52:31","modified_gmt":"2014-02-18T18:52:31","slug":"stop-predicting","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/stop-predicting","title":{"rendered":"Stop Predicting"},"content":{"rendered":"

New traders are trained by the financial media to believe that accurately predicting the market is the only way to gain an edge. Meanwhile professional traders and prop firms around the world successfully navigate the market without forward-looking analysis.<\/p>\n

Here are three over-simplified components to a portfolio strategy that do not require predictive trading:<\/p>\n

1)\u00a0\u00a0\u00a0\u00a0\u00a0 Buy (long) instruments that are rising and tend to have big moves
\n2)\u00a0\u00a0\u00a0\u00a0\u00a0 Sell (short) instruments that are declining and tend to have big moves
\n3)\u00a0\u00a0\u00a0\u00a0\u00a0 Hedge (contrarian) with broad-based instruments that tend to not<\/em>\u00a0have big moves<\/p>\n

The rise, decline, and tendencies of instruments can be quantified and objectively measured using some backtesting software and very simple algorithms.<\/p>\n

As my friend and mentor Rick Martin has said in the past,\u201cEither it works or it doesn\u2019t work.\u201d Monitoring what is working and sticking with it until it doesn\u2019t work is the best way that I\u2019ve found to navigate the market without a functioning crystal ball.<\/p>\n

Big movers can be found using a beta filter. Back testing a trend\/momentum strategy on these high beta instruments helps to narrow down effective strategies. If the instrument doesn\u2019t work on a trend strategy, then don\u2019t try to predict that it will start having big moves. If the instrument does have a good track record of performing on a trend strategy and the current signal is long, then stop trying to predict that it will decline.<\/p>\n

This may seem oversimplified, and it is. In reality there is hard work, discipline, and risk involved. The hard work is digging through the hundreds of tradable names and backtesting strategies until you find some that work. The discipline is sticking with the strategy when it works and cutting it when it stops working. The risk is the historic drawdown in strategies and event risk not demonstrated in backtesting.<\/p>\n

Rick and I will be filming a live course in February to introduce the tools that we use to find strategies that are working. If you would like to receive information on this course or other resources that are made available for systems trading, please send an email to afalde@smbcap.com<\/a> and I\u2019ll add you to the SMB Systems list.<\/p>\n

Andrew Falde<\/p>\n

No relevant positions<\/p>\n","protected":false},"excerpt":{"rendered":"

New traders are trained by the financial media to believe that accurately predicting the market is the only way to gain an edge. Meanwhile professional traders and prop firms around the world successfully navigate the market without forward-looking analysis. Here are three over-simplified components to a portfolio strategy that do not require predictive trading: 1)\u00a0\u00a0\u00a0\u00a0\u00a0 Buy (long) instruments that are … Read More<\/a><\/p>\n","protected":false},"author":1039,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,1937],"tags":[3642,637],"class_list":["post-34694","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-systems-trading","tag-predicting","tag-stop","no-post-thumbnail"],"yoast_head":"\nStop Predicting | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/stop-predicting\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Stop Predicting | SMB Training\" \/>\n<meta property=\"og:description\" content=\"New traders are trained by the financial media to believe that accurately predicting the market is the only way to gain an edge. 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