[DugDug]

Great input from everyone

Sep34 Diversification of trading styles - good analysis. (Plus you nailed it for me its about dissatisfaction.... hence the need for me to re-evaluate my trading)

I think the core is that you can really tie "unnecessary RISK" in with the other ideas from Thalestrader, Grey1 and Head2K.

In terms of getting into any position then by eliminating the unnecessary risk.

Thalestrader - there is the case of creating unnecessary risk using a smaller frame to leg into the larger ones.....however while I start from a larger time frame then work my way down the time frame bars in order to trade....
(while it works over the long term, it probably gives me too many losses, trying to get in early...this leads to other issues of second guessing, dissatisfaction blah blah blah...)

Hence the matching the 5min entry with a 5 min exit - or at least a breakeven - clearly seems the right idea. I should at least hit a BE and not turn it into a loss..... but be very prepared to re-enter again....it would probably be a better trade if it gives a second go.

For me in this instance I cant agree with the idea of saying the 5min becomes an uptrend - while it may just be true.... it would defeat the idea of getting a short in early for a longer trend, and I am not concerned with trading the 5min - that I can do.... this is about taking profits, yet allowing the opportunity to participate in larger trends. This is key for me.

Thats the point of the thread..... I know I am not disciplined enough, NOR do I have the patience to really try and go short, go long, go short again by trying to build a short.... This is what gets myself (and I am sure others....as I have seen it) into trouble.

As what happens is you sometimes forget what the original plan is - you end up being right and then having the wrong position on....DOH!.
I am more of the intra-day trader...not a day trader or scalper so I avoid the intensity.

I think Head2K offers a good idea of adding another level.... "If the trading range is broken, then I can take a continuation trade if my criteria are met"

It seems once again that its heading to the inevitable conclusion I always come to when it comes to improving the trading by improving the timing - the more patience the better.

Maybe this has absolutely nothing to do with taking profits???

More thoughts to ponder.... to modify, improve the plan.

[MidKnight]

Great thread here guys. Something I have recently started experimenting with is the idea of campaigning my with the trend trades. I don't define trend as conventionally as most do, and I'm also not suggesting that one only trades with the trend as I prefer to keep my mind open to opportunity. Maybe it is best described with an example. Lets say the definition of trend is saying UP. All the profits from long trades go into a campaign pool of which each trade gets sized with the base risk (ie. say 1%) and then whatever amount of the campaign pool one chooses, is added to this base risk.

ie.
base risk (1%) + campaign risk (50% of campaign pool)

I have loose guidelines on when to 'reset' the campaign pool back to zero that is based upon longer term S/R and/or the severity of the trend and feeling like it needs to reset soon for a deeper pullback. Grey1 and DD made good points about risk and analysis of the trend. This is an area I have been putting great effort towards over the past month or so.

This is sort of like adding to your winners. Keep in mind I'm experimenting with this as on an intraday position trading model with the odd swing trade. The results have been enormous when actually catching a trend.

Again, awesome thread with great content thus far!

With kind regards,
MK

[sep34]

Originally Posted by DugDug »

Great input from everyone

Sep34 Diversification of trading styles - good analysis. (Plus you nailed it for me its about dissatisfaction.... hence the need for me to re-evaluate my trading)

Maybe this has absolutely nothing to do with taking profits???

More thoughts to ponder.... to modify, improve the plan.

DD,
I don’t post that often but I liked the OP and I felt I understood or could relate… so I figured why not.
I didn’t go into more detail, its very hard to go into detail and at same time offer something useful, specially because I don’t know much abut your trading . I only explained the diversification since It’s easy to carry that across as general idea that can be apply to many combination of styles.

Trade-management is difficult for most and specially the profit taking, which falls under the trade-management subgroup.

What helps me is to my confidence in getting the trend right… or better put the market condition right more often then not and Im not talking about the micro term trend i.e. the 1m or 5m or 15m interval trend etc.
I’m referring to the force that causes each day to close above its open… day after day or vice versa. It can be called anything one likes. The key is that its real, it exists and it’s a force that I respect since it affects every facet of my trading.
Im referencing the longer-term trend, because the few big moves that occur within each day regardless if the day is Trend-Day or Narrow-Range-Day will always be in the direction of the longer-term trend that is to say the bias will be in the direction of that trend.
Therefore having a method of determining the This Longer term trend consistently & accurately is an important element… what you call it is not important. What’s important is to A. realize its effect on ones trading B. recognize it this phase as its occurring.

Now every longer-term trend at one point will begin to exhaust, during this phase the bias begins to balance between bears and bulls. This is referred to as ranging, consolidating, MP users call this bracketing or balancing market etc… again the label is not important. A. realizing its affect on ones trading is key B. being able to recognize this phase as its occurring is key.
In the beginning stages of the exhaustion phase the bias is on the side of the existing trend, but the bias might change ever slightly as the opposing sides might try to test the waters.

Why is A& B important, because a trader can adjust strategy and management of trade accordingly.
After this exhaustion phase we will continue the trend or correct the trend or reverse the trend.

Up to this point what I have mentioned about trend is nothing new nor ground breaking, so what’s the use in mentioning it. The value can only be realized once a trader can see the affects of this trend i.e. Force on every facet of their trading. If there it is not perceived as valuable then the trader can move on.

Obviously if there is value in it then finding a way to define and identify this force becomes necessity and I strongly believe once its perceived as something valuable and proper thought & focus is placed on it, its only a matter of time of being able to accurately recognize and determining the longer-term trend/force).

For my style of trading I can’t fathom trading without knowing the bias of this force, I would be lost, not knowing what to do. I would see lots of entries but I wouldn’t know which have the potential of moving considerably.

Off course the trend identificationis only part of the whole, but its a big slice of the pie. The next step is entry timing... for another post if time allows.

Those who know me beyond these this forum, past trading chat rooms or trading pals
Know that all my entries are via a 1m chart, regardless if its day trade, intraday-position-trade, long or short term swing trade. 1m is not an easy interval, it can confuse a trader about the bigger picture. One of the key elements that helps me is my long-term-trend analysis, it give me perspective.
Another element is my nightly homework, during this period I figure out more then 50% of my work for the next trading session.

The purpose of the nightly homework is to know the following prior to the open.

-know which side of the market I will be leaning on before the market opens.
-know if I will be Looking to initiate an intraday position trade only and close it before market close or if I need to initiate more contracts because I’m planning to keep the remainder as a swing trade.
-know what levels are important to me and how I will react.

In short a lot of the details are figures out before the opening, I don’t like to be forced to make fast decisions and the nightly prep is very helpful.

By the way I forgot to mention this in my last post… regarding risk.
Along side the Diversification of styles, equally as important to me is a max draw-down that is in place at all times. If the max draw-down is reached during any one session I stop trading, no exceptions. Its also worth mentioning that my max drawdown is purposely set a to equal the average profits of one trading minus 1.5 SD. I know if I reach this level in any single session then Im not in sink with the market and I call it a day.
It is not very common but its not uncommon either and I don’t mind it one bit, in fact its one of my favorite parts of my risk management and very liberating. It allows me to exercise my right to control the risk of my capital for each session.


Last of all, you mentioned Dissatisfaction of trading style, and I would suggest, which I think you are already doing, to look at it as glass half full situation. It precisely these moment in our trading time line that we make the biggest leaps. We have identified what we don’t like therefore we know exactly what we like…which is a good thing because its the beginning of every accomplishment.


~

[DugDug]

Midknight - interesting you have two pools - similar to what I do, separate accounts.

When it comes to defining trends I did a lot of work on similar systems eg; turtle system, trend definition etc;
Man....that is a whole different kettle of fish....where do you start and end.
What has been interesting is looking at a lot of longer term trend traders, and short term volatility breakout guys this last year have all had pretty flat to bad years....so make sure the data set is a long enough time back to really gauge ideas. (or if the trends are more short term intraday, then even this year appears to be different)

Sep34 - dont worry too much about my trading - as I mentioned I am price action - very similar to what it seems Thalsetrader does but more trending (I think), so I also take breakout more, but also very discretionary - hence trying to formalise and change a few things a little - Lets say going back to basics to refill the glass ..... hence the thread is really about ideas and the way I write things is more about it being a discussion - and the best discussions are where you actually rethink your own position or ideas. (Who knows after all this I might actually just go and join a nunnery)

Additionally as there is no right or wrong way for anything (or as you say defining the trend). There are many ways to skin a cat.....each of them personal, each of them designed to fit a personality, however you still have to get the skin off and there is no need to reinvent the wheel if someone can suggest any new ideas.
So I am sure anyone reading says thanks.

I am building a document with the myriad of options available, and what I think works, yet also adding other ideas.... lets hope it only takes weeks not months or years.

[BlowFish]

Hi DD,

Most simple trend following systems have a general characteristic of a fairly low % of winners. Of course you could add all sorts of filters discretion or what have you to try to improve this. Tough job that. However there is an easier way to deal with this. Sweeping generalisation number two most trend following systems utilise fairly aggressive pyramiding of winning positions to produce acceptable returns. Without this approach to MM they are unlikely to perform well.

I should say so far I have only read your original post.......you have been busy this weekend!

[DugDug]

Hi BF,
yes most trend trading does have pretty poor looking right/wrong trade ratio, in the realms of 60% + losers.
While the pyramiding is an important part of some trend trading systems....its not always crucial.
The pyramiding basically means that they are sure to have the maximum position going, and hence will maximise the profitable trends.
I mean we all want to have our biggest positions on our winners, and the smallest on our losers.
There are a lot of trending systems that look to get on lots of smaller term trends with vol breakouts and then run a position - if it happens to just go their way..... without necessarily pyramiding.
Thats the beauty of trending systems -there are so many ways to do it.

There are generally two other crucial elements of a lot of the longer term trend traders
1) The diversification over a lot of different markets. They dont trade often, but one good trend in any market can really pay.
2) the money management and position sizing - But for ease of this thread lets leave this one alone, and assume its covered in terms of how many contracts - lets just refer to them as units.

I am more interested in trying to meld the short and long terms, and the idea of taking profits yet still being able to participate in any trend that may develop. Ideally by developing a structure/plan and method of doing so..... one that works for me as there are so many different ways to do it. To me its all about being able to at least give yourself the opportunity of participating.....whilst you may not necessarily increase the percentage of winners that develop into trends - its about taking small profits on the losers that dont develop.... (I think that makes sense)

While it may be difficult - nothing is impossible! (especially as this is now a focus for a period of time)

[MidKnight]

I know a guy that trades a LOT of options stuff and a lot of his trades have this sort of a look to them. He will take a large theta positive option position usually in the form of short straddle or exotic no touch barrier. I've mainly see him do these with exotics so I'll discuss that going forward. The barrier is usually set to expire in something relatively short, like up to 2 weeks. He will then use the spot market to trade into his barrier, increasing size as it gets closer to hit. He never tells the details of why he is entering or exiting the hedges, but he usually gets very sizeable payouts from the hedge and the barrier expiration.

I tried this type of thing about 3 years ago for a couple months with mild success. I did struggle with working my hedges in a consistent manner because it was against my bias for the no touch barrier. This type of trading probably needs maturity than I had at the time. Maybe a revisit is due soon!

Is this the sort of thing you are referring to when you talk about 'short and long terms'? If not, I my apologies for the OT post....

With kind regards,
MK

[BlowFish]

The thing is the short term trades (if they are trend follower too) will have that similar 60% 65% figure. Of course if you are talking about mixing another strategy with trend following to smooth the equity curve that is a different matter I dunno I think there are fairly fewer ways to 'do' trend following.. If you are taking contracts off along the way I would evaluate them as different trade types (that just happen employ the same entry setup).