[Marko23]

Originally Posted by DugDug »

sorry - previous example chart uploaded.

Should I have taken part profits?

Yes, you deserve the profit. There were short opportunities during the first third of the session and long opportunities during the last third of the session.

If you use the 5m chart to get early into a trade from a 1h chart:
when the 1h chart triggers, you get the stop from the 1h chart. Your risk is lower, if your entry was good, but the stop is from the 1h chart.

[DugDug]

Originally Posted by Grey1 »

I also like to add a note on stop loss.. instead of continuously thinking where to stop loss I think you must spend more time on TREND identification and not where to put that stop,, The trick in stop loss is not to stop at this or that level,, the trick is to reduce your position size and have a wider stop based on the instruments volatility and instead let the profit run ,, this is the back bone of risk analysis and traders should concentrate on putting less pressure on their CAPITAL than having a larger pos size and tighter stop loss.

Grey1

Good point about stop losses. A lot of the time when we focus on the stop loss, its almost as if we are telling/reminding ourselves the exact wrong thing when trend trading. By giving the brain this as a focus, there is the risk you fixate on it - and hence look for a reason to stop yourself out.
By having a wide stop loss, with less position but equal risk, I find that so long as I can convince myself, that its OK to let a profit turn into a loss, or at least break even, then it allows me to pyramid into a position as it trends..... hence you end up having a larger position on, with not that much more risk (well it does increase for gap risk, you you also have a greater margin as you have profits already) and if the trend continues and really goes, you make a lot of money. It always amazes me, and should amaze others, how much money can actually be made without a lot or risk per trade.!

I would add it is maybe not so much about trend identification, but trend CONTINUATION. I call it this as often (and i fell into this trap before) its not so much the entry that is hard, its the hanging on to a position that causes the issue. So identifying why/how a trend continues is better.

[DugDug]

thanks Thalestrader and his thread of real time charts for this little article.
It actually covers a few similar ideas (amazing how sometimes timing works).

quotes of note for this thread.....
1) "I could have a position on with a directional bias lasting two to three months and i would continue to trades a market leaning to one side. What you do is supplement those longer term positions with lots of scalping"

Exactly what I end up doing (or trying to do)- except I guess the point of the thread is to work out more about taking profits.... or getting long/short and staying long/short.....

2) "When you average a position, what happens is you'll always average the losers but you'll never put more onto your winning trades when they start to go up"

This I found interesting, as I felt it contradicted a little about the previous quote.
example; you are long 3, take profits of 2, run 1..... later on you buy 3 more, take profits on 2, run 1 --- total long 2 contracts..... this means you are averaging winners.
Or is she
long 3, selling 2, buying 2 back, all the time, thus staying long 3.

If the second choice ,then I guess that's similar, but I find that mentally harder sometimes, as you it seems that you are actually picking tops and looking for re-entrys, as opposed to taking profits, and then looking for new trades with the trends.....

Is this just a mental thing? Is it effectively the same thing....but just a mental block/view that needs a rethink to put it in a new perspective in order to be able to find it easier to do?

I think also a lot of it boils down to focus.... trend trading you are trying to distance yourself a lot, whilst intraday trading requires far more focus.

[Grey1]

Originally Posted by DugDug »

I would add it is maybe not so much about trend identification, but trend CONTINUATION. I call it this as often (and i fell into this trap before) its not so much the entry that is hard, its the hanging on to a position that causes the issue. So identifying why/how a trend continues is better.

Excellent,,,,,,,,,,,,,,,, ,,,

[sep34]

Originally Posted by DugDug »

This thread is ideally about discussing good/interesting/profitable ways of being able to manage and combine strategies.

This is both in the respect of asking the questions
- how to manage and combine various strategies
- how to manage and combine long term trades and short term trades- how to manage taking profits v letting them run.

While I dont wish to get into arguments about what works, whats best, etc; etc;
So ....I would like to start off with a few assumptions with which to begin a discussion.

Assumptions.
1...Trading with the trend works - is easier, less stressful, less timing is involved.
2...The big money is made in the big moves with fewer trades.
3...Psychologically tricking ourselves is actually very important - more so than discipline
4...Discipline is important in that you have to follow what ever plan you devise
5...While a lot of ideas can be backtested, context is important, as is flexibility, hence a lot of discretionary trades, whilst having a basis that can be somewhat tested, are not binary, and hence very flexible as to what works and when to apply it - in other words dont take anything too literally if you cant profitably test it as human input is vital in trading.

.........................
It has dogged me for all the years I have been trading that there is always a conflict between letting trades run, and taking profits. Mainly because, we are all told to let things run. That is were the money is made.... however its really difficult, as we always prefer to capture short term gratification
We think that - by taking lots of little profits that the market offers, we can capture more PL.
Example: a currency may move 15-20% over the course of the year, yet it move 1% a day (possible 255% a year). We extrapolate to think well if we can capture even only 1/3 of that we will still make 80%

- We also think that the less time you spend actually exposed to the market the less risk that you have. Hence the desire to get the timing right so we make quick money and then exit waiting for the next opportunity.
Problem is with this the maths. Let’s say your chances of being right are 50% (50:50) if you buy something and get it right, then sell it taking profits, looking to buy it again on a pullback etc; Are you not actually increasing your risk?
I always thought the probability was that getting it right, AND getting it right AND getting it right was along the lines of 50%*50%*50%.... etc; which means that ultimately you actually made it harder foryour self to get it right over the long term.
(now I know this varies, and this is possibly nonsensical …. Just go with the flow for now)

Yet buy and hold also does not necessarily work either – that’s why we want to try and beat the market with ideas etc and develop trading styles, strategies and plans to better the odds in our favour.

We also know that doing the same thing over and over again is boring – even if it works, and that psychologically trading is difficult. Basically our brains are not really built for it (read Your money and your brain by Zweig plus other books)

So how do we combine – trading less, trading with the trend to capture the big moves, and yet still manage to satisfy our needs? One of the ways seems to be in combining systems and strategies, and being able to take profits, as well as running trades.

This becomes then a question of …. Is it not then one big system?

Eg; you short 3 contracts, buy one at a level that allows you to cover your costs, buy one at a level that allows you to move the stop for the remaining contract to Break even and then run the last contract.
The argument is that its one system – why not just sell three contracts and let them ride. OR
Is it three different systems – one for each contract.

Lets just assume for simplicity sake that they are just one system, and that this system is designed to help make it psychologically easier for the trader to follow, by satisfying their base desires, and also allowing them to run it.
So to the crux of the discussion.

Do other traders have thoughts on how best to do this?
What do they do in practice?
What do they find hard and or easy about each aspect of it?
How can they trick themselves if need be?

Nice op subject DD,

I believe I can relate to what you are pondering, that is to say… I had similar thoughts at some point in my trading.
In the past I have used scalping, daytrading, intraday position trading, swing trading strategies. Although I was fortunate to achieve a degree of success with each strategy, There was something unsatisfying about each style in isolation.

What eventually satisfied me was a Diversification of strategies, or better put Diversification of trading styles.

*To me scalping is when trades are initiated with the goal of taking 1-2 ticks and a scalper will place hundreds of trade in each session and will not hold overnight.

*To me daytrading is when trades are initiated with the goal of taking 1-2 points ( ES points for example or 10-20 YM points) with an average 5-10 trade in each session and will not hold overnight.

*To me intraday position trading is when trades are initiated with the goal of getting positioned to and capturing the days big move 70-90% of days range, very few trades per session 1-2 trade in each session to get positioned and will not hold overnight.

*To me swing trading is when trades are initiated with the goal of capturing the longer time frame swing points (Time frames of 60m or greater). There are short term & longer term swing trades and will hold positions overnight.

In the process of achieving a harmony and comfort, I realized the following.
-Scalping for me just did not fit my personality so that was Discarded.
-Daytrading for me required that I stay glued to the screen, we never know when our trade will form-for those that trade with real money understand that if you miss one profitable trade it can have a big impact on your P&L. 2nd factor, the risk of a daytrade for me is similar to the risk of a Intraday Position trade…the difference is that intraday position trade has the potential of much larger reward.
-Intraday Postion trading had most of the criteria’s that satisfied my needs with regard to span of time being in front of the screen, Risk Reward. What was lacking was
A. that on some days 10%of time, Im unsure of Price Action which means I cant position myself early, thus missing the proper entry.
B. By closing all my trades at session end, I was not able to exploit the positions that were the beginning of a larger multi day move.

A and B caused me to combine swing trading into my trade plan. Allowing me to exploit positions that have the quality for multi day continuation. Further more, swingtrading also works as a hedge for me. On days that I fail to get positioned via Intraday postion trade style, more often then not I have swing position on that will cover this missed opportunity.
The final addition is Daytrading, when and only when I have a intraday position trade on that has profits locked in I allow my self to look for some day trades.

My point from all of this is, in order to for me to be satisfied I had to identify what was the source of my discomfort. Almost in all cases it was some how related with RISK, or better put unnecessary RISK. This kind of risk will cause traders anxiety and no matter how much discipline you have it will not get rid of it.

I have found Strategy/Style Diversification to be one of the best ways to manage and hedge RISK.

My goal was not talk about myself, and the reason for my writing to continuously reference, “Me, For Me, etc..” is this, I don’t want to make absolute statements of what Im suggesting is right for everyone while anyone trading anything different to that is wrong.
I wanted to share my view of trading and managing RISK and at same time being Satisfied and Content, emotionally and mentally with ones Trading Plan/Strategy/Risk management.

[thalestrader]

Originally Posted by DugDug »

perfect example -
sold on a 5 min chart as part of a plan to pre-empt a larger move in the daily charts.
It initially went my way, would have been a good intraday trade.
However it reversed and stopped out.
Should I have taken part profits?

Hi DugDug,

Trying to gain an early entry on a daily time frame opportunity using a 5 minute chart is mixing two entirely different degrees of trend. I have been burned recently trying to use a 15 minute to give me an early jump on a 240 minute opportunity in another market. As Marko has often said elsewhere - it is usually a fatal flaw in a planned trade to mix degrees.

If a five minute gets you in, the five minute has to get you out. I took the liberty of marking up two charts showing price action throughout your trade. In the first chart, I used a 15 minute of the ZN to show your entry. The 5 minute and the 15 minute both give me the same short entry. I would have scaled out in two stages and thus flat before the trend turned. Where I mark the trend turn, that also would have been a long entry for me on the 15 minute, and you 5 minute indicated such as well, though not as cleanly as the 15 minute. Even had my plan been to short and trail hoping for a runner, I would have been stopped no later than that long entry point.



I have a friend who trades notes and bonds only. He trades off the 5 and 15 minute time frame, and he does not trade for targets. He trails every trade. I applied an ATR-type stop using his settings to the ZN. Interestingly, using a natural stop to trail would have taken you out at nearly the same point as his volatility stop.




So, what's my point?

At any point, price is either going to continue or reverse, that is all it can do. Yes, it can go sideways, but that is really just resting while it decides whether it is going to continue or reverse. The big profits come when you trail a continuing trend. But you need to make sure that you do not mistake a trend visible on the 5 minute chart for anything more than that - after all, on a daily chart, that nice short trade you let run back for a loss is a pretty bullish bar! Your short has been erased.

One issue that the trader needs to resolve for him or herself is that one must decide what kind of trader he or she is. I am not, for example, very good at trailing these markets when day trading. So I use targets. If I do happen to catch a strong draft, I will lift my targets, and add further to a position. But that is not a daily occurrence.

You, on the other hand, may be the type who likes to trail for the potential trend day. If so, that's great. And here is the point I wanted to illustrate with the charts above: If you are going to use a trailing stop to catch lasting trends (whether "lasting" means for an hour or months) you still need a mechanism that either lets you recognize when the tide has turned against you, or one that does it for you. Otherwise, though you may be in for the three or four big trend days of the month, you will give too much back during the other 16-17 days when price does the range and whip.

Excellent topic for a thread, by the way! (I hope I managed to stay on topic)

Best Wishes,

[Head2k]

I liked that part about different "trend degrees", Thales. While I am still a beginner, I focus a lot on knowing exactly what the situation is on several degrees (I don't use a term "degree", but rather "wave scale", "trend scale" or just "scale").

I recognize at least 4 scales important for every trade:

Large Trend Scale - framework for the ranges I trade
Trading Range Scale - the range I want to trade
Intra-Range Trend Scale - the trend I seek a reversal of
Entry Range Scale - a range within the Intra-Range Trend which I use for entry timing

As you can see I am basically a range trader and I do mix scales or degrees. I use stop proportional to the Entry Range, but target proportional for Trading Range. But I have defined setups which allow for that. At target I exit only a half and I trail the rest. The scale used for trailing is the Intra-Range Trend.
If the trading range is broken, then I can take a continuation trade if my criteria are met, and in such a case I have no target and I just trail.

A trend trader trading just breakouts uses more scales for making trading decisions if he waits for a breakout of a more significant level than just a high or low of a trend which he plans to use for trailing his stop. OTOH, if he buys a new high in a certain trend and places his stop under the last swing low of the same trend, then he uses just one degree.

But since the target is always uncertain once a range is broken, trailing a BO trade seems the best option to me. For this purpose, I consider the trend scale used for trailing to start in the BO. So I don't allow for hoping that I jumped into something bigger.

[sep34]

Originally Posted by Grey1 »

Market

open a position lets say with 3 contracts close 2 contracts as soon as you have moved 0.5 unit of volatility in your favour with stop to break even point and walk away and I mean away from the PC for the rest of the day ,,, Grey1

Simple right... and at the heart of most winning methods, you will find this simple concept as the core of their managment and yet a lot of traders dont realize this.

Originally Posted by Grey1 »

Market
The trick in stop loss is not to stop at this or that level,, the trick is to reduce your position size and have a wider stop based on the instruments volatility and instead let the profit run ,, this is the back bone of risk analysis and traders should concentrate on putting less pressure on their CAPITAL than having a larger pos size and tighter stop loss.

Grey1

Correct... trying to cheat volatility you will allways lose.