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Old 08-11-2010, 01:09 PM   #1

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Rethinking EVERY Concept

Well not every concept, but as I just was spinning my wheels in the scalping thread I wanted to start a new thread with new ideas to discuss and keep them separate for those in the future searching and browsing this forum.

Basically this search has got me questioning everything i'm currently doing (as its not going to well) and looking at everything I used to scoff at and ignore for ideas to apply.

What i've found is that it seems like all of my trades are too "finite" and what I mean by that is i'm killing myself for a couple ticks here and there and the moves typically aren't there on the smaller timeframe to reward proper R:R.

As i've said when I started this thread i'm throwing everything i've done out the window and i'm re-evaluating it all. Specifically longer and higher timeframes in the currencies. When I started out I was trading a 4H chart and I had phenomenal account growth with simple pullbacks. I think the thing that worked for me was that when I was entering into a 4H trend I had multiple factors in my favor that I no longer do:

- Stronger momentum vs. "noise" signals.
- Follow through would lead to massive winners (>100 pips) vs. my current 6 tick "winner" and thus better R:R.
- Less noise.
- More movement... even the bad signals had opportunity to go 20 or so pips and let me get to par easily.
- Lots of time to get out... if things were looking hairy it seemed like there was a lot of time to analyze the situation and wait and see what price did. If it came back against you it was ok because you could still jump out at breakeven or near it.
- Less "fakeouts".

I am beginning to realize a lot of my failure has come from trying to dissect everything down to a finite level where i'm playing for minute amounts of ticks. If something worked on the 4H chart then I was trying to apply it on the 4M chart so I had more signals. The ironic part is I never thought I was the guy who wanted the action... I just wanted a few good signals a day. But in my process to reduce timeframes on every concept I think i've ended up chasing my own tail by producing too many entries.

I've stumbled onto two great thread on FF that really peaked my interest. I'm trying to come up with a simple cross application of both and using basic ideas and the broad profitability of higher timeframes to lead me out of my dry spell.

They are:




Now before MadMarketScientist comes in here and bans me for linking you to another forum please read them if your so inclined and report back for discussion.

I find the idea of these massive stacked winners very intriguing as well as the bare bones simple entry method of 3MW method... when you start looking at charts like that in basic pullbacks to an ema or something and using that entry criteria I see a lot of opportunity previously oblivious to myself.

I've put SOOO much detail into an entry criteria... maybe its time to go zen on these bastards and simplify EVERYTHING. Worry about the R:R and let the trades appear in the most simple manner.

Anyway, like usual probably not the most lucid discussion but i'm eager to hear what you all think like always!


(I've attached three PDF's of summary's of the two threads if you'd like a quick skim of the "meat" of the ideas)
Attached Files
File Type: pdf Building an equity millipede page 44.pdf (12.99 MB, 4509 views)
File Type: pdf Threes Explained.pdf (1.06 MB, 543 views)
File Type: pdf Threes Explained 2.pdf (100.2 KB, 875 views)
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Old 08-11-2010, 03:16 PM   #2
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Re: Rethinking EVERY Concept

Thanks daedalus
The equity millipede - I like - for some reason it really reminded me of Jim Rogers. While he is a fundamental analyst and sefl confessed terrible trader some of the portfolio management seemed similar. He may keep a net short in something - eg; the EUR, but will also recognize when to build a long, with some small stops, with the idea that the market may turn and he can then ride that. Its the separation of positions into "bundles" that is more portfolio rather than money management.......
See post #47 for an interesting theoretical example.
plus post #53 "you need to know when a good setup is forming for a low risk entry. This is something you need to accomplish first. Position management will come to you when your ready." - an important issue.

ultimately it is a matter of running profits for when a large trend occurs...... if no trend occurs, then you will ultimately get chopped up - but you only need one or two large trends to pay for a multitude of losses.

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Old 08-11-2010, 05:55 PM   #3

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Re: Rethinking EVERY Concept

Most of the "Market Wizards" that we all aspire to be were longer term trend traders who built positions as the trend developed. There were few scalpers and they tended to be pit traders who where awesome pit traders. A pit trader had a theoretical advantage over a screen trader in that they do not put their order into a queue like we do.
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Old 08-11-2010, 07:52 PM   #4

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Re: Rethinking EVERY Concept

Originally Posted by MightyMouse »
Most of the "Market Wizards" that we all aspire to be were longer term trend traders who built positions as the trend developed.
A very good point, MM, that is too rarely acknowledged here and elsewhere.

Best Wishes,

I remember when ...
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Old 08-11-2010, 08:49 PM   #5

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Re: Rethinking EVERY Concept

Excellent start. I am going deeply it to get comments and ideas.


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Old 08-12-2010, 04:22 AM   #6

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Re: Rethinking EVERY Concept

Hi daedalus,

Let me start off by saying that for whatever reasons I seem to be in conflict between scalping and a swing'ish style approach. I tend to find the swing trading time frame a lot easier to analyze and get right but due to my own personal hangups and long built beliefs I am also drawn to the 'work' of scalping. I have never been able to make scalping really work for me on a consistent month over month basis, but like a blackhole it still seems to suck me into revisiting it every now and then....

I agree with virtually everything you say about larger time frames. I'd also add that IMHO, the real market moving forces in FOREX don't even see the small noise people try to scalp around. Aligning with their actions and time frames makes it a bit easier.

I find the 24 hour nature of FOREX difficult to accept for swing trading because I do not want to give up my control to enter and then manage the entry. I sometimes feel that if I could find a way to accept or an approach that manages that somehow then I'd be gladly swing'ish trading the FOREX. But so far I have come up nil.

I guess everything I am saying here points to me not yet at peace between not scalping and being more of a swing'ish trader. As usual with trading, everything is a trade-off

I like the idea of going all zen too.

Finally, thanks for the pdfs and links. I like what the millipede guy is doing to some degree. What I __try__ and implement is to swing trade but campaign based upon my trend model - which is mostly a 4H chart view. This is sort of like his approach of adding more legs except it just gives me a little more control to re-evaluate before going back in. Yeah I know....I sound like a control freak, but I'm not honest - haha. I just feel that if I'm putting orders in at X, Y, Z and walk away or go to bed then I need to put my stops way further back (essentially no stop) and this would obviously not be so good for the famous R:R people love to talk about

I have high hopes for this thread. Off to a good start.

With kind regards,
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Old 08-12-2010, 12:57 PM   #7
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Re: Rethinking EVERY Concept

MK - you nailed what is the hard part - the scalping black hole that sucks you in.
We constantly try and capture too much, yet we are constantly reminded by all the great traders - the money is in the sitting and waiting - Patience is often undervalued in trading.

Plus the point of a lot of these things is R:R ---- for the time being --- ignore it if you want to sit and run things - you need to free the mind of the idea of the reward. How many times have you heard great traders say they are look for low risk entries, or they just watch what they can loose and they dont mention their reward.... problem is its fricken difficult to sweat drawdowns and the constant break evens.

Applying a simple Thales/123/ABC entry with a quick move to break even and then just letting it ride is part of all thats needed.
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Old 08-12-2010, 01:08 PM   #8

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Re: Rethinking EVERY Concept

"Most of the "Market Wizards" that we all aspire to be were longer term trend traders who built positions as the trend developed."

Adding to a winner, what a novel concept! Probably one of the hardest things to learn how to do in trading (at least it was for me). Think about it...there are a couple of aspects to doing this that make it difficult for most to accomplish. You're in the market, price has moved in your favor...now you're going to add more to your position? #1 Most people look to hop out and book profit never mind add more to their position. #2 Psychologically it's hard for most to add at a price that is worse then their original entry.

The key is scaling in and out of positions dynamically rather then using static entry, stop, and target prices. Once I began to trade dynamically not only did it became much easier to add to winners...it also became easier to let the market work for me and produce bigger winning trades.
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