Anticipatory v/s Reactionary Trading

This follows from the discussion here:
http://www.traderji.com/technical-an...tml#post168460


1. Anticipatory Trading: You bet on future price movements.
2. Reactionary Trading: You simply ride the NOW wave.

The Elliott wave variety is the best eg. of the first type, while daytraders who trade on price discrepancies are eg. of the latter type.

Some people hold that all type of trading is anticipatory, others that it is reactionary, and still others who say that it all depends on the way it is defined.

Also, a loose difference between anticipation and prediction may be noted. In predictive models, the probabilities are exact; eg. casinos and Russian roulette . In anticipation they are not.

From my acquaintance with other traders, I have an idea that programs which are built on extensive backtesting fail at anticipatory trading horribly eg. statistical arbitrage and order book based strategies. Many daytraders claim their style to be reactionary. Also, some people consider counterintuitive trading as anticipatory.

An article (Not Mine - !!!!! - Just Sharing)

Minyanville : Reactionary Vs Anticipatory Trading - By Quint Tatro

An area of trading I have been focused on of late is the difference between anticipatory and reactionary. I feel strongly that before you can become a successful trader you need to have a good understanding of just which type of trader you are.

In Theory

A reactionary trader is someone who identifies a stock, letting price confirm his thesis and playing the move after it has taken place, hoping for follow through. An anticipatory trader is someone who looks to identify potential moves ahead of time and take a position before the price confirms this move.

Neither style is better than the other. Each is different and comes with different guidelines. Furthermore, neither is absolute. A specific trade may be quantified as anticipatory while others are reactionary but it takes a unique person to become consistently successful with both styles.

There are many variables that I believe go into deciding what style of trader you are. These include:

The current environment
Your temperament
The time you can devote to trading
Your account size

While many traders like to "feel" they are part of the fast moving action, the truth is that taking stocks when they are on the move intra-day can only be done by someone who is sitting in front of their screen when the precise moment occurs and the order needs to be placed. This reactionary style demands that a stock is watched and stops are taken quickly if the intra-day movement does not follow through.


It can be a very profitable style but if attempted by someone who can’t monitor the action closely it is extremely dangerous and more often than not, a person will miss the proper buy point and end up chasing the move, buying shares from someone else who did enter at the appropriate time and are choosing to sell into strength.


Others, who can't be involved on a daily basis, may look to adopt a much more passive or anticipatory approach, finding stocks that look to be showing signs of a coming move and therefore taking them before they heat up, leaving the intra-day games to others.


In Practice

Cybersource Corporation (CYBS) a stock I have recently been trading, broke out of a high pennant on Tuesday before falling back into its base but still closing with a healthy 2.29% gain. We can use this stock to review how three different types of traders would look to play it.


Anticipatory: Finding this stock a week or so ago this trader would have noticed a consolidation pattern forming as the stock digested its recent strong move post earnings. The stock was fading on light volume back to a critical support level in the 50 day simple moving average and looked to be showing signs that another move was coming. The anticipatory trader would have entered during this consolidation period with a stop on a clear break of support. The trader would have then pared back some of his or her position, locking in gains as the stock broke out.

Reactionary: This individual would have been watching this set up develop over time, waiting for the break to take place before entering the trade. Drawing a line from the February 1 top through the February 7 high, one can clearly see a short-term line which would serve as temporary resistance. Each day, the trader would have waited patiently for this line to be breached, which eventually took place on Monday, February 8. The trader would have entered on the breakout, placing a tight stop on a failure of this break, and then look to pare back into further strength.
Combination: This individual would look to pursue a combination of the previous two styles, taking a starting position in anticipation of the break and then adding on the break. This individual would seek to capitalize on the entire move from start to finish and adjust stops appropriately depending on the entry point. What would be important to remember, however, is that the stop would correlate with the point of entry and the style for those particular shares and not be universal for the entire amount.

Many individuals who venture into trading first must learn just what style fits them the best. More often than not, a part-time trader attempts to pursue a style that can only be fully capitalized on by a full-time trader. Remember, it's important to understand your time frames and take a real assessment of just how much time you will have to devote to your trading.


Raju

Another good example of the above two: all trend following systems are reactionary while all trend exhaustion based systems are anticipatory.

One of my favorite intraday trades: anticipating the last leg of a parabolic move, i consider as anticipatory.

the concept deserve great rating and wide spread acceptance..........still some idea on system vs. discreationary r called for.
basic idea where r u?
whether u can try to be a trader?
can u really understand what trading is..........these soul searching clarify further aim..ability to stick to learn to trade
at this level systematic search for profit oppurtunity which suits u............call for.
and then comes ANTICIPATORY VS. REACTIONARY TRADING
discussion by raju and trader111 r gem.\
............
now is after thought..............how u read market.......and where u r specialist.....
simply follow ur system...........if wrong proven by price ........get out early to prevent capital.........READ SIMPLY CV AND SAINT

OILMAN5[HE KNOWS WHAT HE SPEAKS]

Jack also claims his always in the market system consistantly makes 3*(H-L). Thats interesting, did you get similar results or do you know anyone who has done that?

On this forum we have got 100s of trade example of reactionary trading from SAINT and most of them have been as it happens live or almost live (even intraday trades).

Can you give some examples of the trades using your anticipatory system/style. Live, as it happens trades will be just great, but even after the fact examples will do.

Regards
Sanjay

i voted for Reactionary Trading.

Very nice......Thanks Raju/Trader111!

When I am playing pivots,purely reactionary.......When I am playing patterns,am a combination (using the definition above).

Saint

__________________
"You cannot change the direction of the wind,but you CAN adjust the sail..."

Whenever we trade, we always anticipate first which comes from theory of probabilty. In trend following method if we anticipate that trend will not change we react and trade long alongwith trend and when we anticipate trend changes again we react and trade short. Trading is always reaction of our own anticipation.

Cheers

Himadri

thank you ppl for ur replies.

thnks SGM, noted ur post, shall repy later.

I understand I gave a bad example. I do not follow anyone. If u see my prev posts in TA section, I post little, but 100% relevant.

first thing firsts, I'll hate a trading duel with anyone, even my wife.
There is nothing like my system. Let us consider what works and what does not.

As mentioned earlier, it is worthy to consider all trend exhaustion based tactics as anticipatory, since a contrary position is taken right at the top/bottom. Professional day traders take long position on a big down day to profit from other's short covering/value buying etc.

I'd actually like to give live eg. However i cannot post abt live around the first/last hour, as u can understand how crucial that time is for daytrading.

I am posting one of today's peculiar trade. NCC has been strong in past sessions. In premarket, it witnessed strong buying since DOW pointed to 100 point+ open as well. I was however anticipating selling today. I went short straight 15 min. to market open, and held few minutes after opening, taking only 1/3 of the move which actually happened. Profit: 147$.

Attached Files

	untitled.part1.rar (100.0 KB, 22 views)
	untitled.part2.rar (32.1 KB, 10 views)