"Borrowing" trade signals

[brownsfan019]

	Quote:	notouch
	I definitely think it's better to follow different markets than to follow only one but I wouldn't put different positions on correlated markets e.g. one position on ES, one on YM, one on NQ and one on ER. Better to go all in to the market where you see the best signal that way managing your trade post execution is easier.

notouch - please do not think I am attacking or anything, just opening this discussion up some more.

Your comments ring very true to me. I thought the same thing - why not just focus on one of the indexes and push your hand there. The problem arises when that one market does not give you a signal to trade, meanwhile another index or instrument may have (as Mark illustrated).

Now, the part I put in bold raises a question - you said to go all in on the 'best signal'. What does that mean? I only take my 'best' setups period. I don't consider an 'ok' or 'mediocre' setup... I don't understand why someone would enter a trade that they consider anything but their best. We know trading is hard enough as it is, but if you take a trade w/ little confidence, I can't see how that would work out in the long run.

And in the end, even your very best setup can fail or not provide as much move as you expected; whereas by simply applying your best setup to another index may have provided the profit target you expected even though the setup didn't even appear on that chart. The best example I can provide is the ES vs the NQ. The ES doesn't always move nearly as much as the NQ can. I realize the points are worth different amount of money, but even with that difference, there are times when the NQ is by far the best choice at that particular time. Again, there's no way to know that going into the trade, so if you are in the ES, NQ, and YM and all move in your favor, you made money. And of those three, one will normally provide a bigger return than the other 2. The problem however is that you don't know that till the trades are completed.

[brownsfan019]

The other part of this equation is of course your psyche. The human mind is a beautiful thing, but it can be your own worst enemy. How many times has anyone here taken a trade and while you made money, you could have made more and your mind turns a winning trade into a mental struggle? So, if you make money, your mind thinks 'what if we had made more' and if you lose money, your mind thinks 'that does not feel good'.

Point being that if you focus on just the ES and the YM was where the 'money was at', why not be there? Why not have a position in all three markets and guarantee to yourself (and your mind) that if the trade does what you think, you are going to make the most money possible? Instead of wondering if the YM or NQ was the better trade that you missed....

I really think that a topic like this can do more for your psyche than anything else. It's too easy to get wrapped up into one market and one trade and miss the bigger picture that is right in front of you...

In addition to putting the odds on your side that you will maximize the return on the trades, your mind will be much more stimulated and active in the trades themselves. Instead of staring at one chart, you now must stay focused and manage all three positions. Yes, that can seem overwhelming at first, but for me (and I think I might have ADD) this is great! I know this will not sound right, but by having three open positions it's like a game for me. My brain is incredibly active and reacting at top levels; whereas taking one trade on one market can literally bore me to death. And the setups/risk/reward/etc is all the same - it's just over 3 markets at the same time.

I should also note that I am not recommending increase your position size by 3 to do this. If you are comfortable trading 3 contracts, then you could in theory do this over 3 markets at 1 contract each.

[Anonymous]

First, the astute among you may have noticed that a valid pattern might of appeared on the 3 minute Euro. That is the Down aspect.

Now, B.F., how would you be entering the trade(s): at the market or limit ?

Wouldn't your quick style hamper your ability to both get in and out of all the markets? Just curious, not criticizing.

[cooter]

bf,

I think you are being a bit too myopic by limiting your focus to just the equities.

For example, try trading the 30yr bonds off the 10yr signals. Similar moves per tick, but double the profit. ($31.25/tick for 30yr vs. $15.625/tick for 10yr).

Or try trade one of the grains (say Corn), off of Soybeans or Wheat. Or Soybeans, off of Soybean Oil or Meal.

But I do see notouch's point.

If your signals are correct and sound, you should be able to go ALL-IN that market that gave you the signal (assuming the signal was valid for that contract to begin with...)

And if you can't commit your capital to your signals, well, you'd probably best stick to simulation until you've got it just right, or risk only a portion of your capital.

In fact, as I think about this, what it means to me is that you're not psychologically ready to risk ALL your capital on one shot, so you may as well cut back until you are.

So, in your example, instead of spreading 3 cars (1 each) across 3 markets, just trade the 1 car in your chosen market until you feel that the risk/reward ratio is suitable for you to ramp up the volume.

[Anonymous]

	Quote:	brownsfan019
	notouch - ............. Now, the part I put in bold raises a question - you said to go all in on the 'best signal'. What does that mean? I only take my 'best' setups period. I don't consider an 'ok' or 'mediocre' setup... I don't understand why someone would enter a trade that they consider anything but their best. We know trading is hard enough as it is, but if you take a trade w/ little confidence, I can't see how that would work out in the long run.

Nice.

I have never understood why some people have more than one signal type AND trade different amounts on each. For example, 10 contracts on signal A. 5 contracts on B and only 1 on signal type C.

If signal type C does not warrant a full position, then why take it in the first place?

If signal type A does not show up enough, then trade MORE markets. Here I would of course favor the SISTER trade idea, where you actually trade one market but are taking the clue from another correlated market. Or alternatively trade more timeframes. Even better: do both and using A only.

[NihabaAshi]

	Quote:	brownsfan019
	...Again, there's no way to know that going into the trade, so if you are in the ES, NQ, and YM and all move in your favor, you made money. And of those three, one will normally provide a bigger return than the other 2. The problem however is that you don't know that till the trades are completed.

Hi brownsfan019,

My experience with this type of trading is that it was too stressful for me and things seem to be occurring too fast when the markets were moving.

Simply, most of the time it was overwhelming and difficult to manage especially when sometimes I got a trade signal to reverse the position into the opposite direction.

It's the only reason why I don't recommend such even though it was profitable.

By the way, I was using DAX, CAC-40 and ER2 sometimes and other times I was using ES, ER2 and NQ.

Also, I do remember having a rule where as soon as one of the trading instruments reached a WRB profit target...I exited all the positions at the same time.

With that said, if someone can do that and not have that feeling of being overwhelmed...keep doing it.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

"Volatility Analysis will open the door to consistent profits."

[brownsfan019]

	Quote:	cooter
	bf, I think you are being a bit too myopic by limiting your focus to just the equities. For example, try trading the 30yr bonds off the 10yr signals. Similar moves per tick, but double the profit. ($31.25/tick for 30yr vs. $15.625/tick for 10yr). Or try trade one of the grains (say Corn), off of Soybeans or Wheat. Or Soybeans, off of Soybean Oil or Meal.

Understood; however with my smaller VBC charts, I simply cannot have 20 charts up of all different things. I am looking to exploit in the indexes due to liquidity.

	Quote:
	But I do see notouch's point. If your signals are correct and sound, you should be able to go ALL-IN that market that gave you the signal (assuming the signal was valid for that contract to begin with...) And if you can't commit your capital to your signals, well, you'd probably best stick to simulation until you've got it just right, or risk only a portion of your capital. In fact, as I think about this, what it means to me is that you're not psychologically ready to risk ALL your capital on one shot, so you may as well cut back until you are. So, in your example, instead of spreading 3 cars (1 each) across 3 markets, just trade the 1 car in your chosen market until you feel that the risk/reward ratio is suitable for you to ramp up the volume.

cooter - perhaps some was lost in translation but I am not a sim trader. Way past that part of my trading life. When I said that I was concerned about trading 50 contracts, that was not a random number.

The point was lost as well - a signal showing on the ES simply tells me that the market may move up or down. That's it. Now if the ES is going to move up, so too will the YM and NQ.

Now, we also know that just b/c the ES provided the setup does not mean it will provide the most profit. There's no correlation. Actually, as I stated earlier, you can actually get a BETTER fill on the other markets b/c the one that provided the signal happened to be leading the others at that point in time.

So knowing that, would you not want the best possible fill on a winning trade? If so, then perhaps this should warrant consideration. If you only want to trade the market that showed the actual signal, so be it, but I am quickly realizing the amount of $$$$ being lost by doing so.

And, like I said, if you drop 50 contracts at one level on the YM, not only is slippage going to be a concern, I'm not looking to 'raise red flags' either. Perhaps that's just being paranoid.

[NihabaAshi]

	Quote:	PivotProfiler
	Nice. I have never understood why some people have more than one signal type AND trade different amounts on each. For example, 10 contracts on signal A. 5 contracts on B and only 1 on signal type C. If signal type C does not warrant a full position, then why take it in the first place? If signal type A does not show up enough, then trade MORE markets. Here I would of course favor the SISTER trade idea, where you actually trade one market but are taking the clue from another correlated market. Or alternatively trade more timeframes. Even better: do both and using A only.

Hi PivotProfiler,

The main reason why some traders have different strategies (signal types) is for different types of market conditions and/or different types of price action.

For example, a simple example, the Bullish White Hammer pattern is for one market type and the Bearish Engulfing pattern is for another type of market.

Now here's a more complex example, a method designed for breakouts and another method designed for fading breakouts.

Lets talk a little about position size management (different positions for the same pattern signal or different pattern signals).

Some traders know the statistical value of their strategies.

Pretending, lets say signal A is 78% reliable and signal B is 69% reliable during normal volatility to high volatility market conditions.

However, during low volatility or stagnant volatility (no volatility peaks)...signal A is 71% reliable and signal B is 58% reliable.

Lets say I trade anywhere between 1 to 9 contracts and today is a high volatile market action due to something said by the Fed Chairman.

If I get a signal A pattern...I most likely will go in with 9 contracts.

Later if volatility declines dramatically after the market begins to absorb the Fed Chairman comments and signal B pattern appears...

I most likely will do 3 contracts.

Now, lets pretend there's a new strategy called signal C that needs to be tested with some real money after passing my backtesting course.

For a few weeks or months I will only trade signal C with 1-3 contracts to complete the testing process.

Later upon completion of the new strategy testing process...I'll allow trading it as I trade the other signals.

My point with all the above is that the market is different from one trading day to another trading day (big trend, small trend, tight trading range, choppy, flat, earnings driven, breaking news driven, driven by foreign markets, driven by geopolitical situations et cetera).

Position size managment will allow you to be properly position to better manage your risk exposure as the risk levels change from one trading day to the next trading day.

For example, lets say you have statistical facts that most of your profits occurs in the morning trading session and most of your losses occurs in the afternoon trading session.

You need to have a good explanation why you will trade with the same position size or trade at all in the afternoon trading session as you did in the morning trading session.

Simply, to trade the same position size every time is to imply the price action is always the same along with having the same risk exposure.

This is far from the truth about the dynamically changing markets.

Therefore, knowing when to increase your position size and when to decrease your position size is an edge.

By the way, today's market environment I'm trading with 1/3 of what I use to trade many years ago when the markets had more volatility.

Thus, as the volatility declined over the years, I've managed the increased risk exposure via reducing my overall position size.

P.S. Some traders don't trade on FOMC Announcement days because they tend to lose money.

Staying on the sidelines even though they had valid pattern signals is a position size management (0 contracts).

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

"Volatility Analysis will open the door to consistent profits."

[brownsfan019]

	Quote:	PivotProfiler
	First, the astute among you may have noticed that a valid pattern might of appeared on the 3 minute Euro. That is the Down aspect. Now, B.F., how would you be entering the trade(s): at the market or limit ? Wouldn't your quick style hamper your ability to both get in and out of all the markets? Just curious, not criticizing.

Pivot - good question. The Euro is actually a problem based on my analysis here. Reason being there is no other 'sisters' that I am comfortable with.

I have not considered the multiple timeframes as that is just too much up at one time. In order to keep things simple, I have one ES, NQ and YM chart up at shorter VBC intervals and that's plenty. If one triggers a setup, trades are entered on all markets.

[GCB]

	Quote:	PivotProfiler
	Nice. I have never understood why some people have more than one signal type AND trade different amounts on each. For example, 10 contracts on signal A. 5 contracts on B and only 1 on signal type C. If signal type C does not warrant a full position, then why take it in the first place? If signal type A does not show up enough, then trade MORE markets. Here I would of course favor the SISTER trade idea, where you actually trade one market but are taking the clue from another correlated market. Or alternatively trade more timeframes. Even better: do both and using A only.

This is a considerations that has occurred to me lately.

Sometimes, usually later in the day, if I am up, I will start taking half positions on my trades so as to not blow away my existing profits on stop outs. Seems prudent at first glance. But wait! I've noticed that it tends to be an excuse to get into a half-assed setups because nothing else is going on, or is just a reflection of chickenheartedness, and neither is a good habit to foster. If the latter and if the trade works out I kick myself for not taking a full position.

A trade is either worth a full position or it's probably not worth the trouble. In or out, black or white.

Another way to look at it is to ask: Would I take this trade with double my usual position (assuming your account could tolerate such a trade)? That tends to clarify things.