Selectivity vs turnover

[stueytrader]

Been pondering this specific trade-off (pardon the pun) in my own trading.

From analysing my performance I can see this is something of a double-edged choice. Of course, being much more selective will likely improve performance in each specific race/trade. However, a larger turnover of trading and races will potentially gain more (given the assumption of still doing ok on average with selections).

Just wondering what people think about this operational issue and choice?

Stu.

[FrogThimble]

My strong preference is for selectivity. I trade in-running Lay to Back and only enter and then exit each market once during the race. I resist the temptation to perform multiple trades in any market now because, for me, I find that's when things have gone wrong in the past and I've turned good positions bad and made bad positions worse. Since I stopped doing multiple trades I've being doing so much better... I wish I'd worked that out months ago.

I appreciate it's very different for pre-off traders but pre-off isn't anywhere close to being in my skill set and is unlikely ever to be.

[ruthlessimon]

I like to think of it as a football match, although there might be a better analogy :

Frequency : Possession
Scale : Pass accuracy
Profitability: Goals
etc

Basically, the most important statistic in football is goals. The most important statistic in trading is the P&L.

A team can have a lot of possession, but if they are behind on the scoreline - they'll lose the match.

Now here's where it gets tricky. Let's take Burnley's amazing season (or Iceland). They don't really have any standout players but they're extremely well organised & work bloody hard. Their reward is getting to play in Europe. Saints on the other hand (used to) try to play lovely flowing football; just survive by the skin of their teeth. But here's the kicker, would a player like Ozil fit at Burnley; hell no he wouldn't - could Ozil change his playing style & mentality, possibly but it'd be difficult. That's the psychology argument; but my counter is that Ozil already knows the game inside out. In a trading sense I don't think many people know what the top pros get up to day to day; & hwo they got there.

However, I personally think the top top traders have built an approach which is balanced - & it's the weaker traders who focus on psychology (protecting what they have, rather than expanding). The Burnley player's aren't good technically, so they make up for it by working bloody hard. Ozil's very talented technically, so can play for whatever top club he likes.

I'd define a top top trader as someone who has high scale & high frequency - that's why they're top top pros I'm pretty sure Peter & others have said they have around an 80% strike-rate, & they're 6fig+ traders (suggesting their scale is big).

So to finish, rather than be negative, & tailor the method to your personality (which is what most will advise) (i.e. if there's a lack of trades - focusing on becoming more patient etc), focus on solving the reasons why you're having to be patient (that's what I do day to day) Btw it's extremely difficult; & if everyone could do it - they'd be Peter's left right & centre

[ShaunWhite]

The simple answer is to try a couple of weeks of each. Your question has quite a lot of 'likely' and 'potentially'. When you step away from the theoretical to the practical you might find that a preference for one style is a factor too. Does being too busy affect your control or does being too uninvolved affect your focus.

[northbound]

The simple answer is to try a couple of weeks of each.

+1

A few weeks ago I came up with a strategy to trade pre-off competitive races, where fav is 4.00+.

Feeling adventurous, I tried it often even when the fav was 3.00+.

Logged every single race P/L in an Excel spreadsheet and, after two weeks, filtered P/L and realised that the strategy works much better in 4.00+ setups.

Needless to say I’ll go for selectivity in this situation. Then use other types of races to experiment with completely different strategies.

[stueytrader]

The simple answer is to try a couple of weeks of each. Your question has quite a lot of 'likely' and 'potentially'. When you step away from the theoretical to the practical you might find that a preference for one style is a factor too. Does being too busy affect your control or does being too uninvolved affect your focus.

Yes, that would be ideal given enough of a sample strictly sticking to either approach. Unfortunately, I don't have a large enough sample that only strictly stays with either being selective or high turnover, at least not yet. Essentially my experience to date has this idea only as a 'side-issue' rather than a specific approach. Sometimes I've traded heavily (the turnover approach) sometimes more with a very specific targeted idea in mind (the selective approach) but I've only recently decided this might in itself be a key issue.

In time I could do what you suggest and compare the two.

[stueytrader]

Though essentially my question was not only what I should use, but whether others here focus on turnover or specific selection that rules out many races altogether from their trading?

[ShaunWhite]

1.it's the weaker traders who focus on psychology (protecting what they have, rather than expanding).

2. rather than be negative, & tailor the method to your personality (i.e. if there's a lack of trades - focusing on becoming more patient etc),

3. focus on solving the reasons why you're having to be patient (that's what I do day to day)

I'm confused by your interpretation of psychology.

1 says it limits your growth when it's actually about releasing your natural fears.

2 is confusing but seems to advocate changing your personality.

3 seems to say find angles to trade at the times you'd otherwise need to be patient.

Psychology isn't about tailoring your trading it's about tailoring you. Like me you pour your heart into the statistical research and the strategies but they are only half the story (I won't argue about the use of 'half' it's just a turn of phrase.) The other half is the execution, and that's done by the weak link in the chain, the human. Do you think you are utterly flawless in your execution? Don't you think there is any room for improvement?

Are you advocating only trading styles that suit your current personality, or changing your personality so you can exploit every possible situation?

The other thing is that many of us won't ever become the perfect trading android and for those people I see nothing wrong with adapting their style to suit their personality. I try and improve 'me' mostly to eliminate the destructive stuff, but I'm never going to be perfect, some imperfections I quite like actually, so I'm going to work with the tools I've been given.

Hang on a minute! You come across as being Mr anti psychology, but who's the person who keeps mentioning all different types of bias and posting up wall charts? What are they if not 100% psychological insights? Utterly pointless apparently?

Sorry to blur your thread stuey but I believe who you are has as a lot to do with your results. Eg Is being selective more profitable, or is it more profitable because you execute it better?

[ShaunWhite]

Though essentially my question was not only what I should use, but whether others here focus on turnover or specific selection that rules out many races altogether from their trading?

I just trade what I see stuey so long as it's profitable. I'll take high volume bits and bobs and occasional more focused select situations without predudice.

I've no idea if dropping one would improve the other enough to make up what I've dropped, I doubt it.

[FrogThimble]

Though essentially my question was not only what I should use, but whether others here focus on turnover or specific selection that rules out many races altogether from their trading?

I use race length to make my selections. If the race is of 9 furlongs or longer I'll trade it if there's a horse within the price range that I'm comfortable opening a trade at (95% of the time there is). If the race is of under 9 furlongs then I'll not even look at it.

My other main rule is UK races only as I find trading the Irish races too difficult - I can't explain why though but the fact that I struggle with them is reason enough for me to not trade them.

Yesterday (Sunday 17th) I only had 5 races to trade all day. The day before (Saturday 16th) there were 26 races for me to trade. Today (Monday 18th) I have 10 races to trade - though I might ignore the Ayr 2:30pm because it's a solitary outlier in terms of time as my other 9 races are all between 4:45pm and 9:00pm.

[ruthlessimon]

*cracks knuckles*

( btw I hope this’ll be an interesting insight Stu )

2 is confusing but seems to advocate changing your personality.
3 seems to say find angles to trade at the times you'd otherwise need to be patient.

2 & 3 are linked “rather than be negative, & tailor the method to your personality (i.e. if there's a lack of trades - focusing on becoming more patient etc), focus on solving the reasons why you're having to be patient (that's what I do day to day)”

That’s absolutely what I’m saying. Imagine taking a course, but the strategy being taught lacks frequency – which many of the students cannot handle. Why not understand why the strategy occurs infrequently, & take steps to rectify this? Is this variable completely necessary etc etc? What are the consequences of changing this variable? Etc. Now that type of analysis is incredibly difficult, because the person who solves those questions arguably outdoes the educator. Those IMO are proactive steps, rather than being negative, & changing your personality to fit the strategy.

Psychology isn't about tailoring your trading it's about tailoring you. Like me you pour your heart into the statistical research and the strategies but they are only half the story (I won't argue about the use of 'half' it's just a turn of phrase.) The other half is the execution, and that's done by the weak link in the chain, the human. Do you think you are utterly flawless in your execution? Don't you think there is any room for improvement?

Why have you assumed the statistical research side has no psychological/logical errors involved?

I personally believe most people struggle (myself included) because “what they think is edge, isn’t edge”. I reckon if a poll was done of the value of Fibonacci, most would say “it provides predictive value”. Whereas it's actually been proven that it’s no better than random. Yet people will still use it, & wonder why they still aren’t profitable after reading Trading in the Zone.

I’d love to see an entire series from BA on analysis biases & how to solve them in a trading context. For example, how does one solve the bias of “Pareidolia”? I’m currently looking at a technique called “Target Shuffling”. Again the words “target shuffling”, I don’t think have ever been mentioned on the forum. That’s an actionable technique that can be used to negate pareidolia – improve market knowledge - & increase overall profitability. Potentially with no negative consequences (i.e. drop in frequency/scale)

My argument is if I understood that bias – suddenly that solves execution problems, before they even occur.

Are you advocating only trading styles that suit your current personality, or changing your personality so you can exploit every possible situation?

I don’t understand how the latter changes your personality. If I’m a “greedy/competitive trader” rather than suppress the greed, use it to find more angles in the market. Use it to aggressively increase your trader networking etc. Surely that’s more natural, than trying to castrate the greed through psychological coaching?

The other thing is that many of us won't ever become the perfect trading android and for those people I see nothing wrong with adapting their style to suit their personality. I try and improve 'me' mostly to eliminate the destructive stuff, but I'm never going to be perfect, some imperfections I quite like actually, so I'm going to work with the tools I've been given.

But I think people do it because that info is easily accessible – saturated knowledge. There’s a physical limit to the quality of the execution (android status) – but there’s no limit to the potential of the original strategy. I personally think there’s far more to gain from increasing knowledge of the market, over improving execution. But it’s bloody difficult, no question – that’s why Peter’s are so rare. Hence why the “execution psychology” (assuming you have an edge) is extremely saturated.

Hang on a minute! You come across as being Mr anti psychology, but who's the person who keeps mentioning all different types of bias and posting up wall charts? What are they if not 100% psychological insights? Utterly pointless apparently?

Two types imo

1. Execution psychology (saturated)
2. Analysis psychology (bone dry – because the answers are hard!)

Let’s take survivorship bias, that’s not useful to a trader during the execution of a strategy – but it certainly can be applied when analysing data.

Don’t get me wrong; I’d love to see an entire series from BA on analysis biases & how to solve them in a trading context. The moment a video comes out on the effectiveness of target shuffling; I’ll be screaming with excitement.

Sorry to blur your thread stuey but I believe who you are has as a lot to do with your results. Eg Is being selective more profitable, or is it more profitable because you execute it better?

Yah sorry Stu mate, but I really hope that was “different” insight I do like a debate, & hopefully a synergy of “true knowledge” emerges. It’d be borin if we all agreed with each other!

[stueytrader]

Wow, must say some pretty monster answers on here from all who have posted - I had thought my question was a lot simpler, but seems to indicate some big ideas underlying the issue also here, about selection vs turnover.

I certainly hadn't posted originally about psychology (as I would usually focus on in many of my posts, lol) but I do get the link for sure, especially those very detailed suggestions above.

Food for thought, indeed in this area of operation, and maybe more deep than I'd originally considered, that choice of modus operandi links very closely to our original intentions in trading.

[stueytrader]

Though essentially my question was not only what I should use, but whether others here focus on turnover or specific selection that rules out many races altogether from their trading?

I use race length to make my selections. If the race is of 9 furlongs or longer I'll trade it if there's a horse within the price range that I'm comfortable opening a trade at (95% of the time there is). If the race is of under 9 furlongs then I'll not even look at it.

My other main rule is UK races only as I find trading the Irish races too difficult - I can't explain why though but the fact that I struggle with them is reason enough for me to not trade them.

Yesterday (Sunday 17th) I only had 5 races to trade all day. The day before (Saturday 16th) there were 26 races for me to trade. Today (Monday 18th) I have 10 races to trade - though I might ignore the Ayr 2:30pm because it's a solitary outlier in terms of time as my other 9 races are all between 4:45pm and 9:00pm.

Have to say, that was kind of the example I was originally considering. A fairly straightfoward filter based on some criteria that rules out many races. I find it interesting you suggest against the shorter races - I also have a similar filter and prefer longer races. I find Irish races double-edged, sometimes perfect, sometimes the worst - I'm working on filtering there for sure!

[FrogThimble]

Have to say, that was kind of the example I was originally considering. A fairly straightfoward filter based on some criteria that rules out many races. I find it interesting you suggest against the shorter races - I also have a similar filter and prefer longer races. I find Irish races double-edged, sometimes perfect, sometimes the worst - I'm working on filtering there for sure!

I only trade in-running so that's why I dislike the short races. The prices move too quickly so it can be almost impossible to trade out for a positive. Too often the market moves in the wrong direction and never turns back around. They're fabulous if the price moves quickly in the direction you want it too but there is just too much risk of it going the wrong way and never returning. With the longer races I find that the price of whichever horse I am trying to trade will be (almost!) certain to move price in both directions during the race and even if it looks like it will not I have enough time to get out for a small loss without any big risk to my bank.

I used to have the rule of just ruling out the 5 to 6 furlong races. So I would try to trade on races at 7 furlongs and over. Then, digging deeper into my results, I saw that I wasn't doing myself any favours trading the 7 and 8 furlong races either as I was only really breaking even on them. So that's when I decided on 9 furlongs as the lower limit. The longer the race is though the happier I am.

[spreadbetting]

I've always thought far too many traders get hooked up on chasing profitable trades rather than profits. Having a high strike rate might be good for the ego but being overcautious for the sake of that high win rate usually throttles your profit in the long run.