DugDug

I agree with James..... options trading is hard work to learn, and a lot of the time the only reason the high returns are quoted is due to the extra leverage. they dont tell you about the time decay aspect of it. Its worth doing if you put in the hard work, however..... think about this. There are plenty of brokers who will tell you to short options - "collect the time decay", and then there are others who will say to buy options - "leverage yourself into the big moves, makes 1000's%" Until you understand how both of these players can be right and make money at the same time, then I would suggest you be care full of options brokers systems. Plus a waiting list to subscribe - please if they make so much money from their systems this is the one area you dont want people coming to spoil the party as they will reduce the liquidity of the options they want to buy- sounds like Bernie Maddoff - no, no no..... OK if you insist, and its just because I like you..... doh!

MidKnight this is also relevant to me at present.....in my thoughts about trend trading and profit taking. My thoughts are largely coming from the angle at present.... If you chose a direction to go at from a larger time frame (LTF) and then trade it from the smaller time frame (STF), you still have to make sure that the STF entries and exits match. (This is still key) By using the LTF I am thinking its best to ONLY look for STF plays that head in the direction of the LTF trend. (yes you loose flexibility, however you maintain focus) To do so means you clearly need to define what the trend for the LTF is, and apply the appropriate STF strategies, eg, swings highs, breakdowns, sell rallies OR swing lows, breakouts, buy dips. Each STF strategy can then be pyramided into the LTF period. eg; if a LTF strategy is to get short, there will be intraday STF signals, that you can run....these may get you in early for the LTF..... however this is the old sell 3, TP on 2, run 1 scenario. clearly this is all suiting my preferences, history and biases.... but I hope this helps. (I must say I picked a really sh...ty time to try something different as this falling mkt is normally the bread and butter....of sell and forget (walk away) my focus has not been on it.... at least I have not been bullish):doh::crap: there will always be plenty of opportunities!

I dont understand either..... but I think Felix is saying, "as everyones OHLC and time will be different - everyone can see different patterns - which makes them largely irrelevant to test":)

I am felling bearish, however... if this is a retracement of the recent rally, ready to rally again, I feel this could have a lot of upside.

Here is a good story regarding stocks - I can tell you there are days where one particular trade will move a market for no other reasons than they just cannot find volume on their opposite side. Yet they insist on and need to get set. (I have plenty of these stories as I traded about ten stocks very closely for about 8 years) example; (This involves option concepts, so hopefully I explain it clearly enough for most to understand. a bank stock I was en equity option market maker in - one day somebody walked in and bought 1000 OTM call contracts (each contract was over 1000 shares) hence a potentially 1mil volume share trade. At the time these were out of the money and had a delta of about 6 (out of a possible 100) (average daily volume was 3mil shares a day in the underlying) 4-5 months later this person came back into the pit to sell their now deep in the money call options, 20 minutes before the close, the day before the stock went ex dividend - so they had to either excise, or sell or they lost the dividend value in the call. There were only three market makers here at the time normally 5, and we recognised the order coming back, so we organised with the broker to do this in the most orderly fashion possible...... so we sold the ended up selling about 1 mil shares (a third of avg vol) in 20 mins as our hedge, buying his calls back. A straight market maker arb, Anyway the stock got slammed about 5% in the last 15mins. He made about 1.7mil from a $100,000 investment. We took our small clip off fair value. On the charts it looked a bit abnormal, the press and brokers reasoning the next day were - "possible rights issues", "bad loans", "big investor bailing", blah blah blah.... when in reality we knew what it was....none of the above (one reason I am a sceptic) However, it took about a month before the price rebounded..... make of that what you like.

Revised numbers - this has always been the case....I find it crazy, but that is why if looking at fundamental numbers you either need to look at the trend for those numbers - to make longer term fundamental decisions, or really focus on the expectations of those numbers, factor in the context of the market moves and trade off expectation v actual numbers on the days....there are some big global macro guys I know who combine both pretty well over the long term. But once they got whacked 15% in a month by a Swiss inflation number that caught everybody out....in the final analysis it was shoes that caused the issue and in the revised numbers, the shoes were taken out of the equation.... too late the market had moved and they were stopped out. It seems you either need to be short short term and avoid the numbers, or longer term where the numbers make less impact....in between can hurt. Re historical data.... this is a tough one for a retail trader. Some big quant houses collect their own data, I heard one of them spends $2mill a year collecting and storing. For the rest of us we have to make do. Thats why I have done some simple testing (I am not a programmer), whereby I use it to test the overall idea, the parameters that tweak the system and make sure that the numbers are reasonable.... however I never believe my numbers because I dont believe the data is real.....hence why real time paper trading something is vital with real data live time - not just walk through trading of historical data. Overall I still dont think the technicals change that much, its just that some of the simpler patterns/ideas work in some markets better than others.....eg; any mean reversion system or support based system is more likely to fail, or not look good in a sustained downtrend. Its still all about context.

I like the attitude Richard.... I dont think many people like salesmen especially those who deny they want to sell something. I particularly like the quote above..... I mean who cares what the internet is saying, so long as you are either selling, or the market is whispering sweet nothings into your ear.

JonBig04 - as aside - you sound similar to me.... trying for the bigger moves, and I hate BE for the same reasons as you, but also love it for the same reasons as Thales. stopped at BE/small loss today twice when I normally might not have.... but stuck to the plan and made money.... so feeling good today.....such is life. This is all just my current thinking on it.... Previously I was pretty loose with stops for your reasons (disciplined but loose) .... I think you need to be, and be prepared just to say I am wrong, and have a wider stop to account for the volatility.... less contracts but more scope. Its like you only have two choices - be really tight, or a little looser.... but not in between if you know what I mean.Each have their advantages/disadvantages and each have differing reentry and or reversal levels I feel. I am currently trying experimenting a bit with more shorter term trades to complement and complicate things, but had another thread going here about trend trades and taking profits, covering some of this. I am putting together a list of thoughts, solutions etc that when i get finished I will post there. Otherwise, its all about fitting styles to personalities.

I dont want to make any judgements but Its amazing how often I hear that. Also there is nothing wrong with a pattern that works well in one particular type of market. bear, bull and range bound markets do trade differently. You just need to know when to turn them on or off.

hi Statsign, please correct me if I am wrong here, as I dont have a lot of programming experience your suggestion only works IF you have intra bar data? ie; if using hourly charts, with OHLC only for the hourly chart, you need to be able to look inside the bar.... ie; the data must be in the form of tick, or say minute data. If my data is say an ASCI imported file, it might not have this Is this true? ....thanks

Cut last short in FESX at BE, I figure this should have accelerated down..... it may, however the next larger move may be to the upside, if this ABC forms into a range, with upside potential above the highs at B. blue line is not yet set, as there might be a better early trigger. Plus early AUDUSD short was good - took profits at 8820.

thanks Marko - when you say no new low, where would I expect this... I would have thought the lower donchian channel was the new low, and the lower highs was the important thing. I ask as in trying to follow a few of these ideas, - figure its been easy for me to miss a few simple nuances

Resistance near old highs from a few days ago as well (given everytime i have tried this of late its cost me - possibly go the opposite way )

AUDUSD Also coming off yesterdays high.

I always find what moves the market interesting - not from a fundamental point of view, but how people react, and people ticking things. It comes from my days as a market maker. but I have never been a conspiracy theorist of sorts. This may boil down to definitions..... In this discussion I would separate the quants, the arbs and the market makers a little....just as a matter of definition - totally up for debate of course. was LTCM a quant or an arb player? Mainly with the quants actually taking positions - not just trying to detect disparity in pricing (ideas of value v current price, relative values etc) , but also they were/are also BIG momentum quants. These definitely moved markets in Aug 2007 - the buyers disappeared and the quants all had the same positions on.... they forgot about liquidity. So was it the buyers who by disappearing manipulated the markets? Its a bit like blaming the lawyers for the global financial collapse by helping design the contracts, that allowed/encouraged the leverage. I dont know.

Hi BF - I always wondered about the rise in high frequency trading, and if the majority of their trades are arbitrage/market making OR if they are actually trying to scalp and trade direction, I figured most were arb guys, selling Russian bonds to hedge against Indonesian Palm Oil. Definitely a lot of quant trading can move markets - especially when they all go one way and when they look to all get out at the same time.... whoops. So I guess they can be seen as influencing market moves rather than manipulating them. What about initiating market moves?

Not sure re easy language etc- my coding is very basic.... sorry, I just understand some of the issues involved. I am sure there are plenty of examples around that might show this in these and other forums..... it should be possible, if not then it could be argued the systems are not lfexible enough.... I used excel to backtest my ideas because of this - slower but easier to use and completely transparent. maybe one day I will learn more.

Others who are better at programming will be more likely to be able to help you here.... but in brief depending on the system you use. If say you are trading off hourly charts you need to have the information/data that makes up the hourly chart.... that is the tick data, or minute data. Otherwise the computer does not know the sequence of trades that occurred. example; The bar you trade on has a high of 102, low 99 - your system tells you to sell at 100, stop 101 within this bar. did the order trigger at 100, then stop you out at 101, OR did the high occur before the trade triggered. A computer will not know unless you provide it with the data. I know Multicharts tries this, as do some other programs, some making a few assumptions based on the open and close of the bar....but ultimately you may have to accept most things become a fudge unless you account for every tick.... I hope this helps at least understand the issue.

All of the above plus realise you are never going to get rid of fat finger errors - unless you have so many bells and whistles you will never want to trade. These sort of errors ideally should be dealt with as part of your trading plan.... what to do if they occur..... and they will. If you are dyslexic - give your money to someone else, or trade upside down.

This potentially could be a very inflammatory thread.... might be interesting watching the "we are all doomed club" My two cents.... Markets may be influenced over the short term by people ticking instruments, but over the long term they will do what they want, no matter what anyone does. Its the self correcting nature of the beast. So it depends on your trading time frame.... longer term has less effect. However it definitely appears that over the last 30 years, increased volatility has increased whipsaws - see long term trend trading returns, and market comments on this strategy - the continually adjusting players here have done better than the old school ones. There will always be trends, bubbles and crashes. I dont think technicals have changed over the long term, its just that nothing works all the time, and you need to be flexible enough in how you view certain patterns/indicators/price action in the context of the market. Clearly the largest change of recent years has been via technology, direct market access (DMA), increased leverage, increased volumes, narrowed spreads,more traders (retail and institutional). My point of view is that this has actually made the markets more transparent, more liquid and more open to increased players - all a good thing. Clearly people have changed their styles - high frequency trading, day trading - previously tough for most to do on the floors. Even market makers have changed their styles. Global risk books are more the norm than individuals running a book. Lets not forget that bucket shops have always been around - Jesse Livermore, Dutch tulip trading... .......... things to watch out for.... Pressure on reducing leverage - not a bad thing, so long as its not demonised, but I always thing anything over 25 times is asking for trouble. Taxation - this affects returns (as its only after tax returns we should be concerned with), it appears that the world is slowly moving toward a global taxation system - trying to get rid of the tax havens and regulatory arbitrage. Ultimately this will not stop people from wanting to make money, I doubt this will make much affect in the behaviour of daily traders - more so investors. Regulation - this is the elephant in the room....really no idea, as the regulators seem to have no real idea either...... however ultimately the big players are all regulated anyway, they will find ways around most things eg; setting up elsewhere, calling prop trading market making- Bernie Maddoff does not count as he never actually traded! China/India - China - well.....its still a communist country, people forget that but Watch the volumes explode in these countries over the years. See first comment - the market will do what it wants anyway... I am currently trying to amend my trading styles to incorporate more short term trading. learn adapt survive.

Thanks Thales - for me a time stop is important, as I prefer to see acceleration, within a few bars, for certain trades - this would be one of them. So I shorted at 2811 (not actually where it might look like - but on the bar that closed below the line. I'll get more accurate on that for future reference.) buying back now at 2813., short below 07 again - looking for acceleration again. (I guess all this might lead to over trading - arrrghrhh!)

Hi Thales - I was wondering, if you had a time stop on any of the trades. eg; you have an entry point - and either get stopped out, take profits or GET TIMED OUT. I have attached a live time chart - posted previously - now updated:) If it continues to go side ways, without really moving do you have a "stuff this I'm out time frame"? or possibly just keep amending the stop down? thanks.

Yes - trend following is the ultimate educator in many aspects - running profits, cutting losses, position sizing, discipline etc; I actually started reading the Soros on Soros book the other night.... I think his track record shows he is the ultimate market wizard. "Being so critical I am often considered a contrarian. But I am very cautious about going against the herd; I am liable to be trampled on" "most of the time I am a trend follower, but all the time I am aware that I am a member of a herd and I am on the look out for inflection points" He also does not necessarily diversify.... like typical trend traders in the CTA managed futures camp. His forte is really going for the jugular when all the ducks line up and as he says :"be a pig", pyramiding in, running it. (it was Drukenmillers idea to short the pound, George told him to do it in a bigger size and go for it.) (Now to emulate George Soros and only do a fraction as well as he would be nice....however his returns over the long term are only high 20% - great returns on large money - but it was his business that really helped make him the money. Starting with 5mil getting 30% a year, still will not make you a billionaire unless you trade other peoples money as well.) There are great websites devoted to trend trading by itself.... very different to here. They cover a lot of this. but its not as fun a site, and not applicable to many here. I digress, this is more intraday trading, and building a position.....

This is exactly why over the years I have tried to best capture trend trading- in previous trading i was always get long get short and hang on. I guess now though (in my current situation - more time, more disastisfaction ) I am trying to see if you can get the best of both worlds. Intraday jobbing, and getting on trends early to minimise the losses inherent in taking every trend breakout. Smoothing the PnL. But I am approaching it from the point of view of building a position from the intraday jobbing. This may be tough/hard/impossible, and I am leaning to the opinion that while it all forms part of a portfolio strategy, you really do need to actually separate the entries and exits out and match them to their time frames and individual strategies. Like a mini fund to funds. This creates its own issues, as even having a very simple trend trading strategy in itself has so many variables in terms of what can make it profitable etc; plus the varying markets it needs and the capital drawdowns etc; This also raises the issue of trading a portfolio using trend trading v trading the trends in an individual instrument..... very different. However - on saying this my thoughts are still going back to the simple method of for whatever strategy you use, take two thirds off, and let one third run when the strategy goes with the overall larger trend (counter trend trades by definition should not be run)... this will naturally allow you to participate in a trend, allow you to pyramid (off the smaller time frame entries) and allow you to also take part profits - smoothing the PnL. Without really doing too much more than letting the market dictate what it wants to do. No real need to worry about multiple strategies etc; you kind of end up being a trend trader by default. (Clearly however this raises the issues of when to exit....this should be covered in some definition of the longer term trend) The only downside I see (assuming you can combine strategies) is that what would be considered a profitable intraday strategy would have its PnL results/returns bastardised. In two ways... 1) you either have to take a bigger number of contracts on entry (than normal), and hence any losses would be larger OR 2) if you take the same number of contracts on entry, your wins will be smaller as there will be many trades that you should have taken a profit on, but did not, and they return to BE or a loss.

FESX - however given my trading of late.... do the opposite.