optiontimer

Very typical results in that there is a mix of many small wins and small losses, and the majority of profits come from just a few of the trades, hence the saying, "cut your losses short and let profits run." This is why failure to take all the trades signalled that fall within your risk parameters and a habit of repeatedly cutting your profits short out of fear that the market will "claw them back" will have disastrous effects on one's long-term profitability. There are only two reasons not to take a siganl: 1) The initial risk is too great as a % of equity, or 2) An objective analysis of support & resistance indicates that further price action is required to prior to making a commitment, e.g. it is desirable to get a short entry at resistance, but it is not desirable to take a long entry with price at resistance. -optiontimer

You're mixing timeframes - Optiontimer is a daily chart, but you were expecting an intraday response;) See my post directly below yours. -optiontimer

I don't feel it was harsh. I feel that it accurately depicts the implications of the stance Ingot is taking towards his trading. I know he is not the only one doing it. Before I go any further, I want everyone to re-read this post from SIUYA (I added some emphasis in bold/italics): "Objective and empirical facts," not subjective "perceptions" should dictate when to "break the rules." This is what I mean by "learning to see." The impression I get from Ingot is that he is allowing his opinions and feelings about things external to the technical action of the market to influence his decision making. However, the only thing we mere retail mortals can rely upon to make good decisions is the technical action of the market. If I fail to make this point and if I fail to persuade Ingot and others similarly disposed to eliminate reliance on opinions, feelings, and personal sentiment and instead rely only on the technical action of the market, then for that trader, his own failure will be the inevitable result. Harsh? You tell me. Now, let's get back to the example I posted the other night, and see if that may help make my point with an objective and empirical example. That chart from the other night was of the USDCHF from 2009 - June of 2010, and that trade ran for a max of 1600+ pips, which would translate to 800-1300 profit depending upon stop management and how well one reads long term S/R. I shorted the 6S Swiss Franc Futures at that time (the futures move inversely to the spot). The futures ran 1200 ticks, and I was stopped out with 1000 of them. Here is the chart I posted the other night: Here is how it played out over the ensuing five and a hald months: And here is the weekly futures chart showing that the rally had reach a significant prior high resistance level (note the elipse drawn on the entry area): Here is the daily chart of the corresponding futures, withan ellipse drawn at the entry area: I know I have said in this thread that weekly and monthly charts should be monitored periodically for long term support and resistance implications. Support and resistance take precedence over any moving average, any oscillator, and central banker, any politician, and wealthy Billionaire, and certainly over the opinion of any of us mere retail mortals. If you are going to "break the rules" of the system, it has to be based upon what SIUYA calls contextual considerations, and I assume by this he means technical context. The ability to read these contextual clues comes with experience. But it does not come with all experience. It comes from an earnest, disciplined, and patient application of a sound strategy. That strategy, for us, is to enter positions against minor rallies in major down trends for shorts and entering against minor declines in major up trends for longs. The only clues we should be using to over ride our system should be based upon our monitoring of long term support and resistance. There is nothing objective about "looking for better candidates," unless that phrase is followed by an explanation of the objective bases of what would constitute a "better candidate." This would be a good time for setting aside a weekend to go back to the very beginning of this thread and thoughfully read and take hand written notes. We have reached a point where there is a danger of straying from the strategy without realizing one is doing so. Have a good weekend, -optiontimer

"Slightly" has been struck from the wording explaining our system. It was a mistake to include it as it has caused precisely the confusion it was meant to prevent: I did not want anyone thinking that a signal was "invalid" because price was on the "wrong" side of the ema's. I should have simply said as much, and the inclusion of the word slightly has over-complicated the system while opening it to ambiguous interpretation. Here is the complete revised text of the system as of 8/25/2011 at 9:16 PM Eastern Daylight Time, and shall be known as Holy Grail, Current Edition (I just couldn't help myself): When the 21 EMA is above the 65 EMA, we do not want to be short, and we may be looking for a long entry signal. Only oversold readings of the stochRSI are relevant, and they are relevant if and only if price has retraced back to a level between the EMA's or even below. A long entry is signaled when stochRSI has turned up on a closing basis, and entry is made the next day if price makes a higher high than the prior day if and only if Ingot perceives this to be a good trade. When the 21 EMA is below the 65 EMA, we do not want to be long, and we may be looking for a short entry. Only overbought readings of the stochRSI are relevant, and they are relevant if and only if price has retraced back to a level between the EMA's or even above. A short entry is signaled when stochRSI has turned down on a closing basis, and entry is made the next day if price makes a lower low than the prior day if and only if Ingot perceives this to be a good trade. When this system issues two consecutive losses, then no further trades will be taken until one of the following three criteria are met: 1) Price must retest the last signficant resistance level as support or last signficant support level as resistance. These levels should be clearly visible, easily identifiable areas from where price has previously "broken out" in the direction of the major trend. OR, 2) Or price trades higher than the high of the second losing long trade, or trades lower than than the low of the second losing short trade, then pulls back, then issues a new signal. OR 3) Our EMA's signal that the major trend has changed from the direction of the two previous consecutive losing trades. -OT

So, our system has been revised in the following manner (revisions highlighted in red): Here is our system. I would think it should need very little tweaking. I have tried to make it easy and clear to follow. Please, if you have questions, and if anything seems unclear to you, let me know here. As I said in the previous poll threads, I have two goals with this project - 1) Not to lose too much, and 2) to keep it simple, very, very simple. When the 21 EMA is above the 65 EMA, we do not want to be short, and we may be looking for a long entry signal. Only oversold readings of the stochRSI are relevant, and they are relevant if and only if price has retraced back to a level between the EMA's or even below. A long entry is signaled when stochRSI has turned up on a closing basis, and entry is made the next day if price makes a higher high than the prior day if and only if Ingot perceives this to be a good trade. When the 21 EMA is below the 65 EMA, we do not want to be long, and we may be looking for a short entry. Only overbought readings of the stochRSI are relevant, and they are relevant if and only if price has retraced back to a level between the EMA's or even above. A short entry is signaled when stochRSI has turned down on a closing basis, and entry is made the next day if price makes a lower low than the prior day if and only if Ingot perceives this to be a good trade. When this system issues two consecutive losses, then no further trades will be taken until one of the following three criteria are met: 1) Price must retest the last signficant resistance level as support or last signficant support level as resistance. These levels should be clearly visible, easily identifiable areas from where price has previously "broken out" in the direction of the major trend. OR, 2) Or price trades higher than the high of the second losing long trade, or trades lower than than the low of the second losing short trade, then pulls back, then issues a new signal. OR 3) Our EMA's signal that the major trend has changed from the direction of the two previous consecutive losing trades. What I really need is SIUYA to join in and summarize what I am trying to find words for here. Unfortunately, I believe that he is in the middleof a move and may be absent from us for a few weeks. Ingot, you are not good enough to "perceive" anything yet. You need to learn to see. The title of the thread is, after all, usinf trend, momentum, & timing with strategy, discipline, and patience to trade well. At the very least you introuction of your subjective "perception" has undermined the discipline component, and likely the strategy as well. Let me ask you this, Ingot, and be honest with yourself (forget about me, you can tell whatever it is you think I want to hear - but be honest with yourself): Do you feel a sense of relief when you look at your charts at the end of the day and find no acceptable trades? Do you feel relief when you are both out of the market and able to justify remaining out of the market? -OT

It is mathematically impossible for the historical value value of an ema of closes on a specific date in the past to change based upon price action that occurs after that specific date's close. Impossible. That goes for any time frame whether one minute or one year. Now, if you mean that an ema crossover can create "whipsaws," with an up cross being immediately followed (within one to a few bars) by a down cross, that is a given. But your post was fairly explicit: You are claiming that the 21 ema of daily closes of the GBPUSD was below the 65 ema of daily closes on 8/11 (or thereabouts) and that two or three days later, the 21 ema of closes was now above the 65 ema of daily closes on 8/11. That is not possible. What are you saying? Were you watching an intraday chart with a tick by tick recalculation of the ema's? There is no way that what you say happened could actulally have happened. -optiontimer

One problem - I too have just come up with the holy grail, and as it is 10:45 PM Eastern Daylight Time, I'd have to say that my grail is the true current edition. Your edition is so five days ago, dude - Keep Up!

You seem to be saying that on 8/11, the valuee of the 21 day ema was less than the value of the 65 ema on 8/11, but that on 8/13, the value of the 21 ema on 8/11 was now greater than the value of the 65 ema on 8/11. That is impossible. A moving average based on daily closes cannot have its value for a particular day change based upon subsequent price action. It is just not the nature of how a moving average is calculated. Didn't qualify as what, exactly? It certainly qualified enough to generate an order. The fact that price did not pull us into the market does not "disqualify" a signal. Some signals lead to active positions. Others lead to nothing but unfilled orders. Also, I did not mean to imply that a trade had to be filled the very next day after a signal is generated. If I am not mistaken, my current long notes position was filled on two days after the initial order was placed. The signal is good so long as the conditions are still in effect, i.e. the relation of the ema's to one another and the direction of short term momentum. Now that is an interesting statement, Ingot. What do you mean by "much better candidates"? How does this one look to you, Ingot? This might be a tough one - its been in a vicious looking down trend, price managed to rally, but here we have a long signal with price below the ema's, and while the 21 ema is above the 65 ema today, it is likely that even if the tradeis filled tomorrow by a higher high than today's high, that the 21 ema will be at a value below the 65 ema tomorrow (today's values will not change, of course - for the last bar on this chart, the 21 ema will always and forever be above the 65 ema at the close of that bar, no matter what tomorrow brings. I'd like to hear from everyone on the above chart. According to our system, we have a long order to place tomorrow. How does this candidate stack up? Is it ideal? Is this what we should be looking for? Or should I pass on this one? I mean this exercise in all seriousness. I'd really like to hear everyone's opinion on what they see in this chart. Thank you, optiontimer

That would depend upon what you call "a living." "Win or lose, everybody gets what they want out of the markets. Some people like to lose, so they win by losing money." Ed Seykota Good Luck, Cory! Be a winner! (Just be sure you know what "being a winner" really means to you;)). -optiontimer

Until the conditions that created the signal are changed. For example, if a short is signaled, but the next day price rallies to a new high and turns momentum up as a result, then the short signal is off the table until momentum again turns down on a closing basis. However, if price consolidates after the signal day, but momentum continues flat or down, then the entry would still be made on the next lower low than the signal day. This is usually the result of "inside days" following the signal day. Thank you for reading along! -OT

Here's a quick update: I have an order to short the 6A, which is the futures equivalent of AUD.USD, and I shorted the Dow mini (YM) last night at 11312. Yes, that was just a bit early - "do as I say, not as I do!" I had my reasons. To make matters even more complex I shorted 5 of them, which at the time left me little "margin" for error ... I'll not hold all five through the close unless it closes the session with a +300 or better profit. My stop loss on at least four of them will have to move down both to lock in profits and more importantly to prevent a 3 AM Fed operation from crushing me while I sleep. Total realized loss on the combined coffee/cotton operation was $3647.19, which is about 65% higher than my plan. However, I was willing to take on the additional risk given the position of the market and my past experience trading both of those commodities. Again, do as I say, not as I do. I was also no doubt emboldened by the open profit on the ten year note, which is currently nearly twice the realized loss on the two closed losses. Without that open profit, I would not have taken the chance on coffee or cotton. Have I mentioned that you should do as I say and not as I do? I'll be busier today than I had initially thought I would be, so I do not know if I'll find time and opportunity to place any additional day trades in this account, and with the open short on the YM, I have little remaining capital with which to fund such trades anyhow. Well, back to work! -OT

The main thing is to get into the habit of sitting on your hands while your position is in a profit. The secondary thing is to use certain aspects of price action to determine, to some extent, how far along we might be in a particular trend. That is mechanics, and I think that will come easily and with little effort as you do the hard work of following your method and sitting tight on your profits. In market wizards, T-Bond trader Tom Baldwin says about trading that it is like any other job - if you do it long enough, you have to learn how to do it. That is true, I believe, when it comes to the mechanics of price action. There is nothing new under the sun, and price repeats the same behaviors year after year in market after market. Learn to control you fear of losing money, and while doing so, you will come to learn the mechanics of price action. I think the time has come for everyone working along with us in this project to read Edwin Lefevre's Reminiscences of a Stock Operator. This is for everyone, even if you have already read it. It is time to read that book now that you have all adjusted your eys to wearing Kroll-lenses. It is the story of Jessie Livermore, and Livermore was Kroll's "mentor." -OT PS I have been known to day trade from time to time. It is a different type of focus, day trading is, compared to what we are trying to accomplish here. I think, Ingot, that you may have to learn to adjust your focus just a bit more away from that which you fell into when you were primarily day trading. Tomorrow I am scheduled to be in my office, and whenever that happens, I tend to take a look around and do some day trading if an opportunity presents itself. I will probably be quicker to lock in a "windfall" profit of 50 or 100 pips on a day trade than I would be to move to lock in a portion of a 1400 pip profit on a position trade. Everything else is the same, except for that of scale. You are still bringing a day trader's perspective of the scale of price action and profits to a position trading project. To borrow a phrase from pop culture, it is a bit like bringing a knife to a gun fight. Now, I have to shut this thing off and get going. There are 105 miles between me and home, and between this thread and several phone calls from my kids, I am about an hour and half behind where I was hoping to be at this time. Remember: Read Reminiscences!

That was a very old trend as far as trends go, and it had become almost parabolic during the last few weeks. I had been long the 6S for what seemed forever, but was really since June 2010, and I closed it all last week, but not until giving back over 500 ticks from its high. My profit was 41 handles from the original entry on that trade, and I had held through several 400-600 tick pullbacks. But it was an old trend, and the momentum of the last few weeks looked like end game to me. The market may prove me wrong, and I am ready and willing to climb back aboard. You did fine. Yes, the 1400 pips was a huge profit to see eroded as it was. The only fault to be found with how you aquitted yourself was that you traded this as though it were early in a possible long term trend change, when in fact, this had been an extremely long and giving trend, and your entry was, possibly, the last great gift it was to give. That is an easy enough problem to fix. What was most important was that you were able to hold through that give back. That took discipline and patiences, and a lack of either of those is not an easy fix. Right now, you ahve been learning a new way to trade, a new way to view the markets. As a result, you have narrowed your focus on the last few bars on your chart, which is natural. I would caution against any predetermined take profit level as part of your trading plan, because as you yourself suspect, doing so will mean you never will get to feel what a 4100 pip profit feels like. What you do want to do is foster an awareness of the age of trends, the changes in momentum (and here I mean actual price movement and not the movement of this or that indicator or oscillator) and, of course, long term support and resistance. I think that you should consider all the good that trade did for you, and do not mourn the loss of profit, but celebrate your adherence to the method. Have you ever had a 1400 pip open profit before? Probably not. But if you start limiting your profits to avoid giving them back, nor will you ever have another 1400 pip profit. Nice trading, PWP! Be happy for yourself, and allow not a moment of regret. -optiontimer

I had a feeling that I'd have to choke down some toast with that coffee trade yesterday when I heard Smucker's was calling for lower coffee prices ahead. You can almost be certain that if a commercial is talking a commody down, it is going up. And up it went! Bailed out of my cotton bales today as well. Both trades were higher risk than I would have liked, but both also looked to be set to be in the initial stages of potential downtrends, so I was willing to press the pedal a bit. I'm about three states from home, so I do not know the total damage, but my best estimate is that together these two combined for about a $3200 loss. Notes are still open, and with an open trade equity of about 5K +/- (again, I do not have access to exact figures as I do not log onto my account when using public wifi access). Bean oil is still holding with aprofit of perhaps a handful of dollars. I haven't seen today's chart yet, but bean oil should be close to rolling over again if the down trend is to continue. But from the looks of things, the commodity bull has awoken again from a "cat nap" and it is looking to carry prices higher. If so, bean oil will be stopped within a few days if not sooner. I'm pressed for time, so I will answer what posts I can before I hit the road, and we will catch up this weekend. -OT

Not much to update, as all four trades are still in effect. Noes are consolidating (or reversing) but still show a 5K+ profit. Bean oil is stil profitable, coffee came within a few ticks or a point or so of taking me out, which is the second time the stop has been threatened but held since the trade was initiated, and cotton is showing a small open loss as well. That is the nature of the game, however. I tend to give a lot back in pursuit of taking even more. As I am using 20K+ initial margin, I feel I am maxed out on positions, so no new trades until I fold one or more of the current positions. How are you all doing? Its been quiet around here, I see. -optiontimer

They get all the credit. They decided that this is what they wanted to accomplish this summer, and they have spent the last six weeks training for it. And the last time I ran a 5K, I did it from behind the wheel of a '72 Camaro and I was being chased down by the uniformed pilot of a Ford Crown Victoria. The Crown Vic won. Oh, to be 18 again ... -optiontimer

SIUYA said to me once that what he finds most interesting in all this is how the same principles we discuss here apply to short term trading as well. I was in the office this afternoon, and took advantage of my proximity to a computer to do a some day trading in the project account: Short the YM mini-Dow at 10970, stop loss 11027 (risk $285 + commish/fees), covered at 10718 (had ten ticks of slippage on my stop on the exit). Put our indicators on a 5 minute of the YM, and you will see how right SIUYA is (you will see that after entry, price came within 11 ticks of the stop loss). No matter what the context - whether an afternoon game of whack-a-mole, or a long term march toward negative long-term yields as the world unwinds, the principles are the same (except that on a day trade, the market closes, and so must your position). It would be nice never to take heat, but in the real world, the only way not to feel the heat is to trade in a disciplined, patient manner with strict money management rules so that stop outs really mean nothing more than a cost of being in the game. -optiontimer

Yes, and if I calculated correctly, I am looking for a 1/10000 risk of ruin, with the "Tilt: GAME OVER" level coming in at $8K capital remaining. -optiontimer

I will catch up on the thread tomorrow afternoon ... My family and I are fresh in from celebrating ... my two daughters completed their first 5K race this evening in which they came in #1 and #2. Granted it was a field of only twenty, but I'm one proud daddy nonetheless! -OT

Stock is now $61.12, so you paid a 4.7% premium based upon your cost basis, exclusive of of commissions and fees. Stock is now $31.07, so you paid a 9.7% premium based upon your cost basis, exclusive of of commissions and fees. Stock is now $24.48, so you paid a 4.1% premium based upon your cost basis, exclusive of of commissions and fees. This is the type of risk I was warning of earlier in your thread, when you seemed only to focus upon your potential ability to buy stock "at a discount." It is a discount until the stock continues to decline, now it is a premium that you paid. That discount you thought you were getting turns into a premium very quickly. As SIUYA cautioned earlier in this thread, when it scomes to selling options, And, if I may, here is another lesson worth jotting down in your notebook. I do wish you well with your trading, and I hope other would-be options traders do not follow your present path. Options should be used to magnify gains and limit losses. You have it backwards. -optiontimer

I hope you all buy my book, soon to be released on Amazon.com, entitled The Portable SIUYA. In my opinion, every trader should have one ... Thanks SIUYA!

How does it feel to start your trading day at 5PM EST/EDT and be finished by 5:05PM? Once long, I stay long until the market goes short, then I get short. I am only flat a market once it stops me twice in the same direction without having made further progress in that direction. Once short, I stay short until the market goes long, then I get long. I am only flat a market once it stops me twice in the same direction without having made further progress in that direction. I may not have mentioned this, but I'm stupid, so I prefer to keep it simple.

I did nothing with my current positions. I would not allow news to shake me out of an open position. But, if something that has never happened before occurs, I would personally rather wait to see how the initial opening imbalances work themselves out before placing my order in the market.

I respectfully disagree (pay particular attention to the comments regarding stop placement vis a vis the 65 ema): As to a short term exit strategy, I suggested a few in the quoted text above. Here is how you get your head around it: This approach will almost always result in trades wihich are initially profitable. After this initial move, many trades will retrace back into a level where the trade will be showing an open loss. Of those that do, some will then resume a favorable course, others will not and instead will move through the initial stop loss. A short term startegy will use a short term guide to capture smaller, quicker profits. This will result in a higher win/loss % than a strategy that seeks to hang on to the position through that intial retracement with th objective of rising a potential trend for much larger profits. If you want to be in and out of the market, then you have to define your exit strategy accordingly. I gave a few suggestions above when this issue came up earleir in the thread. If you wish to hang on for larger profits, then the exit is not going to be defined by short term considerations. You have to decide for yourself what you want to get out of the markets, and then set you course to achieve it. If you were to ask me (and since y'all kinda did ask me) I'd say there is too much fear of being in the market at all and not enough desire for money (i.e. greed) in this thread. Fear & greed - you need to control and strike a balance between the two. Too much of either, and too little of either, and your results will be less positive than they could otherwise be. I have a close, personal friend who is following along with us here, and he has taken the exact same four trades as I have - long notes, short coffee, cotton and bean oil. He is already flat. We entered within fractions of a tick of one another. He has a net loss of over -730, as he panicked himself out of coffee on its big intraday rally on Friday and closed the other three to cover his coffee losses. Of course he closed his Notes on an adverse pullback. Had he let his positions alone, and allowed his stop losses to do their work, his P/L would look like this instead: I reiterate - the market could gap open tomorrow and stop me out of all four at a full loss. But it does not matter. I fully expect that I will net 100K on this little 25K account over the next 11 months. And if this volatility continues, then that net could be even higher. But I know what I want to get out of the markets. Do you know what you want to get?

Whenever there is news out that is outside anything I have ever experienced, all orders other than resting stop losses get cancelled. I was not willing to enter anything on stop at last night's open. If I had felt compelled to have an order in the market, it would have been a stop limit, not a stop market. -optiontimer