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BlowFish
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Posts posted by BlowFish
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Blowfish,Does your ego think that you are better than the markets, or that the markets "owe" you more $$$, so you trade more or overcapitalize your next trades?
Its a couple of things I guess. Its looking for some sort of affirmation/validation through the markets. The old adage 'would you rather be right or rich'. Obviously (or maybe not) I would rather be 'rich'. The ego of course would rather be right and screw the making money. For me this manifests itself through closing trades too early perhaps before the 10 ticks/pips! This allows the ego to be 'right' but certainly adversely affects the bottom line.
I am lucky enough to have retired from my previous profession enjoying some moderate success. I think I am looking for some sort of 'validation' through the markets to replace what I got there. Ironically one of the reasons I was paid so well was that I was not fearful of making decisions they would all be right at the time and if later proved wrong they would be reversed re-worked replaced whatever it took. A fine ethos for trading. I knew I was damn good and I just did it. The ironic part is I find it much much harder to do this trading! Of course I know to be 'right' all I need to do is stick with the plan and that it is nothing to do with any particular trades outcome.
I really have what I think is a good solid and more importantly realistic view of what the markets are and how they work. Intellectually I know there is no room for my ego.
Anyway that will do for now. I re-read Zen in the markets by Eddie Toppel recently. A great little book - he promotes the idea that most trading errors are due to ego and that to really experience real success and get in the 'flow' you must completely eliminate it from your trading. I don't share all his views but it was Eddie that first turned me on to the idea that the ego was at the root of many trading errors.
Cheers.
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Carter legit. Setups Lame.
Well lameish - some of the underlying principles are sound (e.g. BO after volume and volatility dry up). More valuable to just see a 'squeeze' and understand whats going on behind it.
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Ego.
In answer to cooters original question. I think thats the major reason for me.
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I think Fischer goes into time projections but not in any great detail. Have to say his book never really 'clicked' for me but it is fairly comprehensive from the point of view of topics covered.
I wrote some tradestation code a while ago to find potential turnng points. Basically I'd load up a a whole bunch of intraday bars and record all the swing hi swing low points. I'd then project all the major fibs in time and have confluences marked as a histogram based on the 'stregth' of confluence from memory I didnt bother unless there where 3 or more.
While it was a fun project it didn't look good enough to trade. Just seemed to indicate too many turns that didn't materialise, but to be honest I didnt go much further trying to improve it.
Cheers,
Nick
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I think you miss my point. Let's say you randomly enter long or short ... based on nothing - just flip a coin.Can you come up with a strategy to make money under that condition?
I think you will have an easier time doing so if you have a chance to scale out and move your stop up to let the other half of your position run.
I met a trader who was complaining about losing money and was looking for a better entry technique (aren't we all). He took a mentorship with Linda Radsche - who demonstrated that she was able to make money based on random entries (long or short) by using proper money management. She demonstrated that it NOT ABOUT THE ENTRIES ... IT'S ABOUT THE EXITS.
Yes its pretty easy to come up with a stratergy to make money on random enteries, try it, it works. If you can do it with a small basket of diverse instrumens you can actually make reasonable and consistant money. Also I agree with what you say about exits being key, (though of course good entries can help :-) (sorry I did not get that from your original post).
If you scale in and scale out thats fine but to make any sense of what you are doing you must evaluate each part of the trade sperately. For example if you enter with 2 lots and a stop of - 1.5 take half off at +1.5 and trail a stop on the rest -- evaluate this as two seperate trades (that share the same entry criteria) a 1.5 scalp with 1:1 RR and the bigger swing with trailing stop.
You will surely discover they have different characteristics. The 1:1 almost certainly will smooth your equitey curve and often times is actually more profitable than the trailing part. Also if you take say 3 losses with 2 contracts you will need to have 6 wins at the 1:1 target or a win where the trailing portion goes to +7.5 points to get back to where you started. With 5 losses (inevitable with a 50% 60% or even 70% system) things can start to get ugly. Of course each to there own but I prefer to take everything off at 1:1 and have a higher % winners or trail everything if there is good momentum going.
Really the big advantage of the scale out type senario is psychological. The thinking goes once you have 'paid for the trade' you are 'playing for free'. It certainly wont increase your bottom line - either the trailing piece or the fixed peice will be more profitabe. It can be no other way. If you look at your results (real or simulated) you will see this clearly.
Many 'pros' will actually advise scaling in rather than out. (certainly the trend traders). The thinking is that a trade is most at risk early in its life so it is better to take a loss on a small portion of your position. From a maximising profit point of view this is a better propsition. Of course maximum profit is not the only objective. As I mentioned before psychological comfort and or a smooth equity curve may be more important to you. If you dont run the figures how can you know?
My point really is do your own due dilligence - examine your figures (with a simulator if you dont have real data) and really understand what effect changing parameters will have. If you wanna know if coin toss entries work and how they work - try it for yourself - thats the only way you can be sure.
And of course really understand RoR. That really is the key figure for deciding position size. While it is partly true to say that most traders fail due to undercapitilisation or overtrading (trading too big for there account size) imo its because they do not understand the RoR.
Cheers.
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I guess it is safe to say there is often more than one agenda going on most times. It is not hard to make an argument that a thin market is easier to mark up/down for whatever reason. The 'smart' money may not actually be 'smart' they may simply be A US company hedging $50 million against European sales. I am talking multinationals and even governments when it comes to forex.
Another type of 'smart' money are the 'insiders' like specialists and market makers. They are likely to play in thinner markets thier only agenda may be to find order flow and exploit it. Incidentally anyone who can read a chart can make a pretty good guess where there are orders likely to be bunched.
Having said that the chart under discussion does look very 'blocky' and thin. It is one I would be wary of trading when a lot of the bars are just a few ticks wide and opening low and closing high or vice versa. It just dosen't have well formed bars.
Like any analysis VSA isn't perfect and I think thats due in part to my original point. Often there are various participants with conflicting agendas. You can often see the fight but sometimes the outcome isn't clear.
As an example differentiating stopping volume in a down leg (that allows the trend to resume) from 'climatic' volume that signify that the trend is over can be subtly hard. I would say actually sometimes it is impossible.
Maybe I'll post some charts - not to try and "catch anyone out" but I know if I can better identify the difference it will improve my trading. Perhaps discussion will allow us all to see things that we did not before.
PP I have to say I am very inclined to look at the currencies despite the fact you use tick volume as a proxy they seem to be a much easier read than the indexes. Now it could be that you have selected 'clean' charts to illustrate a point. I'd be interested in seeing some tougher ones.
Cheers.
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I understand that you are trying to keep the risk to a small % - but explain to me please what is the difference from the trades perspective if you place 2 contracts with a 5K account or 2 contracts with a 25K account. The market doesn't know.--Snip--
The reason people keep limit risk on any single trade percentage of there margin is to prevent blowing up. Your risk of ruin grows significantly as you put more margin at risk on any single trade.
As an example if you had a rigged roulette table that paid red 60% of the time would you bet all of your stake each spin? How long would you last? Would you bet 2%? 10%? 50%? Why?
If you had a roulette table that paid 70% of the time would you risk more? How much more?
The objective is to stay in the game, money will come if you do (and you have a positive edge of course).
Cheers.
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Hey there WS. You might take a look at Joe Ross' law of charts. He has a way of rigorously defining congestion. He has what he calls a 'measuring bar' (a wide range bar as opposed to a wide body bar). Essentially all the time bars/candles have an open of close within this measuring bar you have congestion. Early recognition of the type of trading you are in is one of the several important concepts in trading imho.
I am not saying yay or nay on JR however his law of charts is an excellent place to start for a basic blueprint of price action. It defines pretty unambiguously trends, congestions, 'ledges' and corrections.
btw the formation you describe is an 'upthrust'/'test' in VSA/Wycoff speak or a long leg doji in candle speak.....before you say "BlowFish you are out of your mind" ...let me qualify that...it is one of those formations over two bars. Put another way the formation you describe on a 5 minute chart would be a long leg doji on a 10 minute chart
Cheers,
Nick.
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Fib welcome to the forums, I am fairly new here myself but its a quality venue.
Isn't the YM 5$ a point? that would allow 10-15 point stops @ 2-3% (if my quick mental arithmetic is not out - it often seems to be nowadays).
The 2-3% rule is a great rule of thumb that people quote to keep other people plunging in the deep end and drowning in a fairly short time. It goes hand in hand with "conventional wisdom" that you should pursue something like a 1:3 risk reward. The key thing really is risk of ruin and the amount at risk on each trade is just one component of this. Obviously if you have a higher percentage of winners in comparison to losers you can put more at risk on each trade without increasing the overall chance of ruin.
Ironically one of the main ways to increase your percentage of winners is widening your stops (in comparison to your target). As you quite rightly point out having stops that are too tight can reduce the efficacy of any method! I linked this in another thread TradersCALM - risk of ruin menu talks about RoR far better than I could.
Cheers,
Nick.
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A couple of random but related thoughts. I think there are very few 'regular' businesses that operate like this (finish at monetary target). I don't know of any that give there sales people the remainder of the month of when they have made there monthly goal!
I think it is valuable to set your 'normal' hours of work. Of course one of the great attractions of trading is the freedom and flexibility it affords. Despite this it appears a good idea to have some core guidelines to when you are going to do business, an important part of your trading plan.
It strikes me having a trade working at the close of play is quite similar to a normal business having a 'rush' on or taking an order that needs filling quickly - whatever. Work an extra hour or two and give the staff (you) a bonus or some time off in lieu!
With most of the trade management platforms out there its easy enough to leave a working order with a trailing stop and target. Though that might not suit some peoples style of trade management.
Cheers.
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Amen to all of that Notouch. I watched a presentation Trevor did for the CME recently. I noticed he still talks about 'buying' and 'selling' when of course we all know each trade has both a buyer and seller. A lot of the stuff that is presented is simplistic and based on stuff that just aint true (imho). Of course that dosent mean that the tool is no good.
What it does shows broadly speaking is which side market orders (including stops) are hitting. If you can use that information to better guage order flow I can see how you could build successfully strategies around it.
Some people like to use an absolute value during the open to gauge if a sustained move for the day is likely. They reckon that it requires a certain imbalance to get things really cooking.
Cheers.
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The various trade station indicators work well enough. Investor RT with MD really is an expensive tool. Personally I prefer to buy rather than lease also. I'd probably go with Neoticker if I wanted to do delta analysis. That would also allow you to do order book analysis or in theory to construct the delta of an index from underlying stocks if you so desire! (if your hardware will cope with it).
I have gone back to looking how volume develops as a bar builds without regard for whether its on the bid or ask. For me it was a bit of a "cant see the forest for the trees" type situation. I do go back now and again and watch it for a month or so (using Multicharts and public domain indicators) but while it does provide a microscopic view of the market I wonder if that really adds that much to my trading.
Cheers,
Nick.
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I wonder if its the good old subconscious doing what's best for you (not). You know the drill - had a few losses - felt a bit uncomfortable (or worse). I can protect you from this says the subconscious. The same mechanism that stops you touching the proverbial hot stove. Of course we know intellectually that losses are all part of the game and that there is nothing inherently dangerous about the market. Even knowing this it can be difficult to reprogram the subconscious so it stops getting in the way. I know it is for me.
Cheers,
Nick.
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Glad something positive came out of it. Did you check out that traders calm link about RoR?
Cheers.
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how would you setup your first index futures account/strategy/risk management/position size/profit target?i just closed out my last swing trade today so should be getting setup in the next few weeks. i'm looking to open a $5k tradestation account. trade YM, 1 contract.
i have been thinking a 10 point stop, 20 point daily profit target. do those sound reasonable? I would like to then add in another 5k to the account once i'm consistent to be able to scale with 2 contracts.
any general mistakes anyone made they would like to share that might be able to avoid?
also, did anyone not blow up their first account? I realize that may be a given on this account.
They sound like pretty good ballpark figures. Certainly not totally un-realistic expectations that some have.
I have never blown up an account though I have suffered the thousand cuts...it just hasn't resulted in death. I guess one thing I was pretty good at was realising fairly quick when things weren't working. It doesn't take that much to see your account is steadily going down rather than up. I have still managed to do reasonable damage to a couple of accounts though not managed a real spectacular blow up.
They say that once you have enjoyed sustained success you become vulnerable to blow up again. Over confidence I guess. I'm looking forward to blowing one of those multi million dollar babies (again expecting that I will pull the plug somewhere between 25%-50% drawdown).
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3 consecutive losses and I'm done for the day in that contract. More than $200 up to $500 in the red overall and I call it a day.For gains, $1000+ is a good day. $10000 is an exceptional one.
$200 is mediocre, and usually happens on choppy days with losers.
N.B. A scratch is treated as a loss due to commission costs.
The 3 strikes and you are out rule is a another life preserver. As is the limit to daily drawdown. If you executed flawlessly and stuck to the plan then those trades where great trades (learn to love your losers is an adage that many bandy about).
I have to admit that usually I can identify errors that contribute to trades that get stopped. Normally its simply wrong bias. If after taking a break and clearing my head I feel 'OK' I'll get back to it and often find I am more focused and more importantly 'in tune' having been proved 'out of tune' on the 3 failed trades. Some of my best trading often ensues.
Having said that I'm striving for 'lazy' trading at the moment - 1 decent trade shortly into the session and done for the day. One of the points of trading is the freedom it provides right? Actually it is proving hard as I love watching the market. I have got it down to Europe open - lazy time - US open - lazy time - US close (sometimes) - lazy time. There are also psych issues right there as we are taught from an early age that generating 'wealth' and more broadly 'success' goes hand in hand with 'hard work'. I have a bit of a leg up being intrinsically a work shy layabout but there is something that gnaws away at the subconscious maybe guilt.
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Some of the most effective trading strategies incorporate a three-prong approach to entering a trade.- Consider the overall market sentiment, trend and whether there is congruency in the e-mini futures (i.e., NASDAQ, S&P 500, Russell, Dow)
- Consider whether the the financial instrument being traded is trending or consolidating.
- Determine whether the trade set-up is a "high odds" trade or "low odds" trade.
As more evidence of a potential "high odds" trade is gathered, the position size can be increased accordingly. The reciprocal is also very important to consider. That is, when there is less evidence of a "high odds" trade and a trade signal is given, the position size should be reduced.
Great advice however to adopt this sort of approach you need to evaluate your high odds trades separately from low odds trades and size appropriately. They should still be evaluated and sized appropriately for the trades characteristics.
The OP is suggesting that size somehow will determine the outcome. The one sure thing is too large size will greatly increase the chance of ruin.
The other thing to perhaps concider is 'streakiness' of your trading. For example if you are a discretionary trader and finding you are 'out of tune' Thats another good time to reduce size (or take a break!). A similar idea, how about this reduce size on lower odds trades. This is kind of a corollary to what lrushing is saying. If you are more mechanical you can test to see if some sort of filter might reduce losing streaks.
Heres another thought - you can always add to your trade on a pullback once the market has tipped its hand.
Btw those first two '*' points in the above post for me are the golden ones I prefer to trade tiny and just not sweat number 3. If the market makes the right moves you can always add.
Cheers.
P.S. I found this kind of interesting (and strangely hypnotic).
Its a video of a guy scalping the DAX. Now for all I know it may be some lonely guy making videos of himself paper trading but having watched a few there is some consistency (though he seems to flip between two approaches).What I found interesting was how he scales up to 20 and back out. He explains the rationale in another vid. Oh its 4x speed I think..
- Consider the overall market sentiment, trend and whether there is congruency in the e-mini futures (i.e., NASDAQ, S&P 500, Russell, Dow)
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I should of searched the web first. This was one of the first hits that says it far better than I managed!
TradersCALM - risk of ruin menu
Please give it a read it will honestly only take 10 minutes. Absolutely guaranteed to make a positive difference to how you approach your experiment.
btw I have nothing to do with the website above. I don't even know what they do as I googled past there home page into the above.
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Wow guys, I really didn't expect to get so many responses. This is great. I appreciate all the insight.I have been thinking about this large size trade and I realize I need a different set of rules. One being, if I am stopped out, it would be equal to 5 days of stop loss limits. That alone will really make me really really cautious. I have to think this over. It won't blow me out even after two straight losses. After that this experiment is over.
Also, for those who warned about blowing out. No worries. you see, I have a few futures trading accounts spread out over several brokers. I did this first to test out which broker I liked but also I can use one for swing trading, one for daytrading and a third to test out new trades, like longing a position I am short in another account.
Another advantage is not having all my eggs in one basket so I don't buy too many lots that would do alot of damage.
I have to be devils advocate here. However "good" your system you should absolutely expect 2 consecutive losses, hell its quite likely in the first two trades. If your experiment is gonna be over after that personally I wouldn't bother doing it. If you are going to stop under those circumstances you are gambling. (Incidentally it can be shown that if your system has not got a positive expectancy you are far better of staking everything on one spin of the wheel)
This is all just a function of probability and statistics. Read about 'risk of ruin' - my favourite account is in "The futures game, who wins, who loses, and why" by Tewles. Van Tharp must covers it too. There are probably free sources on the internet. Risk of ruin is subtley different to blowing out. It covers the probability for depleting any chunk of margin depending on trade statistics. It need not be all your margin (blow out).
Even with a method that generates 80% winners (such as momentoms) you will get strings of losers!! I guess if you are risking 2% equity or less (stop * size) on each trade you should be safe for a while but even if you are a completely discretionary trader you should have a good grasp of the (simple) stats behind the scenes. How else do you determine size? Determining size on a whim is far more dangerous than determining entries randomly! Personally I am so under leveraged it would make your granny blush. (saves me having to keep revisiting the maths!)
Also I get the impression you are trading without really adhering to a method. In your first post I kinda got the impression that you where hoping larger size would help you find better entries rather than stick to your already well established method for entering.
Honestly trading larger size to find better entries is a recipe for disaster. Sorry to be the one to put it so bluntly.
Cheers.
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Momentom thats a far far more comfortable way of trading imho also. It must be very hard to use 'traditional' trend following methods (the turtles method springs to mind). I believe that though profitable (in large due to fairly aggresively adding contracts to winning trades) it had somethin close to 70% losing trades. Sounds like you would not have made a very good turtle
I am pretty sure I woud have strugled.As an aside the youngest (and apparently most succesful of the turtles) has written a book. Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders. I hear its a good read if you like acounts of traders and trading (rather than looking for some 'secret' trading method).
Of course "whatever works for you" is the sound bite of the day. If you do try Bfbusa it would be interesting to hear how you got on. Just be careful out there
.Having got the cliche paragraph out the way, might I ask Momentom roughly what your risk reward ratio tends to pan out at?
Cheers.
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Momentum sounds like you have found a trade that has a much higher chance of winning and so increased size acordingly. I wonder how much you put at risk on each trade is that 5 times as much?
If you can get up above 65% even towards 70% the risk of ruin starts to drop fast. That one of the reasons I would perconaly prefer a 70% method that uses a 1:1 RR.
The OP is saying (if I read it right) that if he trades larger size he will find higher percentage trades. You have found a higher percentage trade and so are trading larger. There is a subtle (and imho important
) difference.Cheers,
Nick.
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The point is you should be pulling the trigger to get in and get out almost without thinking. The more you have on the line the less likely you are to be able to do this. Whether your base unit it is one lot or one hundred lots you should folow the system in the exact same way if you do not you should probably stop until you figure out why not.
Think of the largest drawdown you have had recently. It is quite likely to be 5 or maybe more losers in a row (depending on what sort of % winners : %losers your aproach has). If that string of losers produced 3 times the drawdown how would you feel? Confident and ready to pull the trigger unemotionaly on the next trade?
I recently opened a spread bet account (essentialy allowes you to bet on the underlying market) this allows me to bet $1 a tic essentialy. Funily enough I still make the same emotional errors (closing way too soon) even though the amount is fairly negligible. I know this perhaps lends wieght to your argument
However I think the real problem is my fear is of being wrong rather than loosing cash!Try the oposite bet small size on a low value instrument until you can get in and out without any emotional pangs at all!
And as was said before really know and understand the risk of ruin. I always am surprised how likely it is even with a reasonably positive system if you use too great a size.
Its a risky gambit - literally!!
Cheers,
Nick.
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OK i think I understand so for junior you look at the delta filtered for trades between 10 & 50 if it's positive you plot a x below and negative a cross above? The bars with no cross presumeably had zero delta possibly due to no trades between 10 & 50 contracts.
The dot I guess does the same things for trades greater than 50.
Cheers.
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Weiwei,
Intresting chart.How are you determining 'buyer' or 'seller'? Is it something to do with volume@bid/ask?
Fibonacci Confluence on Time
in Market News & Analysis
Posted
Another guy I like for confluence of levels (rather than time) Is Jim Kane. I got all his stuff and while I don't trade fib it is quality material (caveat - imo).