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Posts posted by karoshiman




    I would not mind taking on a few skilled professionals in my team , but I am not looking for just any one .


    Let me guess, do the "skilled professionals" have to pay you to get in your team? Wouldn't surprise me… After all, you will teach them how easy trading is, especially making 100 pips per week with only 0.000xx% drawdown… lol


    I hope no one here is stupid or desperate enough to fall for you.


    Don't get me wrong, there is nothing wrong with providing services and getting money for them. But if you expect money for your coaching, you should have disclosed this properly right from the start and not by starting various threads where you portray yourself as a professional trader who is frustrated by his "idiot" traders, who is looking for a live room with 100 pips per week performance, etc.



    Besides for most people the market is recreational activity for which they are willing pay a fee.



    Lol… I'm not sure though whether they view it like this completely… most behave like this certainly.




    Mike Harris in his blog argues based on statistical analysis results that the markets have been very generous even to gamblers.This is very interesting analysis that claims that about 35% of all traders of SPY have made some money even if we assume they traded randomly that that is based on the distribution of returns of a coin toss trading system.


    Interesting analysis, especially for everyone still looking for the holy grail.


    Has anyone done any investigative work around this as a specific entry concept - i.e. "this is where I predict a large number of sell stops must lie based on other participants having established a long position due to the preceding price action, therefore if price moves to this area I will try to scalp around it" . . . ?





    As a discretionary and technical trader you can view this quite often, as there are certain price levels where a stop "makes sense", i.e. makes your trade idea invalid. If too many are on the same trade, it's more probable for price to move in the opposite direction, as too many stops are at the same level.


    But without access to order data at the exchange you can never know in advance with 100% certainty whether a move is only a stop hunt… only in hindsight, when price continues to move sharply in the original direction (opposite to the stop hunt).




    All this being said, we're essentially talking about retail traders here, and they're such a minority of market volume you have to wonder whether where they place their stops is entirely diluted by commercial volume . . .



    Exactly. You read often in these forums that professionals take advantage of retail traders… well, they are in a sense as most retail traders lose money trading. But this is mostly due to their own behavior and not the professionals purposely trying to trick the retail trader. The volumes of retail traders are just too small in order to be of interest for a professional participant. Professionals make mainly money from other professionals.


    We are basically just a microorganism in this huge "shark tank"… we can just hope to stick on the right shark and move along with him (with the direction he is betting on) :)

  4. Good point but this is the name of the game. Can markets operate in more "user friendly terms"?


    That's a good question and almost philosophical… I guess, the 'taking advantage' can only go so far as long as a market exists, i.e. people/institutions continue to participate in it, although they are being screwed from time to time.


    Btw, it is not only the retail trader's stops that get hunted but also those of professional funds… there are many different participants in this big shark tank and everybody tries to "eat the other" :) … sometimes one party "wins", sometimes the other… that's what keeps participants in the game… the conviction that overall they come out as a winner… naturally this can only be true for some of them over a certain period of time… and for less and less participants the more this time period is extended...


    …Everyone knows what the trend is relative to their time horizon. Your counter-party (broker, market maker, bank) also knows but they fill your order to do their job and make the spread or commish. HOWEVER, they also trade their own account because it is even better than spreads & commish. So they punish you for making them sell when the trend is up (and vice versa). They also trade much larger, a huge advantage.




    Excellent post!


    The only thing is, it's usually not the broker or bank that hunts stops (with the exception of some CFD and spot forex brokers). In former times the locals did that, but nowadays it's specialized funds that do that.



    I do have one question about leverage if you or anyone can answer it. If I was to trade full time with 25k would a 4:1 leverage from the broker be able to make a living? Or do I need 100k plus of my own money to trade without using brokers money? How much does everyone here started with if you don't mind answering?


    Thank you all!!


    Cheers !


    This depends also on your expenses and living standard. And if you are still young, you can expect your living standards to rise over time, probably considerably. So, you have to factor that in as well.


    Plus, trading income is very irregular and fluctuates month by month depending on how many opportunities the market provides. You cannot force the market to provide you X$ each month. So, IF you have a certain track record in trading already it would be wise to be more conservative with your income estimates going forward.


    However, your first goal should be to become profitable on a consistent basis (!), e.g. a year or so at least or with a minimum of a few 100 trades in order to have a large enough sample size before drawing any conclusions. That is your first challenge and believe me, it's a difficult one! If you can master this with a live account (and that only after you have traded sim profitably for a while) you can think about making a living with trading.


    Don't get the wrong impression here, most traders on these forums don't make a living with trading (myself included). Most are even not profitable (I am).


    In terms of leverage, be aware that it is a two-sided sword (increases volatility in your equity). And it depends also on your trading strategy. A good start is to not lose more then 1-2% of YOUR equity per trade, i.e. IF you have your strategy developed and sim traded it with an amount realistic for your situation (e.g. if you want to trade with $5k live don't sim trade with $1 million) you can move backwards from there.


    As every beginning trader you focus on how much you can make… I've been there as well… but it's about how much you are ABLE and WILLING to lose in order to make a profit. There will inevitably be periods of drawdowns with every strategy. So, you must be able to withstand these with your equity, financially AND psychologically.


    Anyway, be prepared to have a VERY long journey ahead of yourself.

  7. My argument is probably pretty unclear from the start, as everything you say above is obviously correct.


    My point is that, depending on the trading style the 2% rule is open to debate, and that it is more open to debate where no leverage is used, as a 100% price decline is necessary before a position is unavoidably closed out, whereas when leverage is used there is less ability to quantify risk one a trader's own terms and greater likelihood that this will be determined by exchange/broker and margin requirements.


    If you're unleveraged, you can trade without a stop with little chance of losing all your equity. If you're leveraged you can't.


    None of this is anything that won't already be obvious to yourself, but might help a newer trader in thinking about risk and how/who defines it.





    Ah… I see! Now I understand… and agree! :)




    I very much agree - I think that daytrade999 needs to work out some concrete answers before taking up any idea that has been introduced in this thread.




    True… the advice so far in this thread covered many different aspects. daytrade999, I hope you can still "see the woods" albeit all the "trees" thrown at you at once :)

  9. I haven't misunderstood the 2% rule.





    I'm not sure whether I've understood you correctly. I have now understood that the 2% you mention are supposed to be the margin of a futures contract in % of your trading equity.


    This seems to be VERY conservative. That would mean that you would need $192k per 1 ES contract traded as the initial margin is currently $3,850. This would be a "leverage" (if this is the right word in this case) of clearly below 1 (ca. 0.4). The notional value of ES is currently ca. $83k per contract (I'm using the e-mini S&P as an example as many futures traders trade this contract).


    I've often read that people suggest having $10k equity per ES contract traded as a minimum (or ca. 39% margin/equity). However, as far as I understand, this assumes no overnight positions. For instance, my strategy includes holding positions overnight. Hence, I try to keep a minimum of $15k per ES contract in my trading account (or ca. 26% margin/equity). Only in rare occasions do I trade 2 ES contracts with this amount of equity.


    Anyway, beginning futures traders should keep in mind that the notional value of a futures contract is fluctuating.


    The applied leverage can only depend on the risk appetite of the trader and his trading strategy, which has defined risk characteristics, in order to be able to work. That means that certain stop loss levels are required per trade in order for the strategy to work, i.e., at the end such "%-rule" of margin/equity can only be a function of the %-loss on trading equity one is willing or able to risk per trade.




    The "2% of capital" rule comes from managed futures, and if you're trading un-leveraged stocks it's not entirely relevant. Do you think that Buffet only invests 2% and leaves the rest in cash? *


    Say you use all your available capital tomorrow to buy shares of GLD. Now, is 100% of your account really at risk? Is the value of gold actually going to fall to zero at any time soon? The only scenarios in which this might happen are "end of the world" type scenarios in which the value of your shares will be the least of your worries.




    BlueHorseshoe, you have misunderstood the "2% rule". It relates to the losses that can be incurred by one trade and NOT the capital or margin "invested". It's the same for futures as it is for stocks or the GLD example you give.

  11. If you wanted to get really smart (referring to my original example), rather than use SPX, you'd use 'KaroshimansSPX' - a bespoke index calculated by netting the price changes of A and B off the SPX.


    Otherwise . . . Suppose A and SPX exhibit strong positive correlation at all times. A certain amount of the reason why SPX behaves as A behaves is because A is a component of SPX. Though it may be true, the information you have is therefore part tautology, and so not very useful!


    You'd also want to know exactly how the index is weighted. What happens if you take the APPL component out of QQQ, for example?


    If you want to discuss any of the other implications you have in mind, please go ahead.


    Best wishes,





    BlueHorseshoe, I'm sorry, if you were offended by my post as this was not my intention. It was a hint for daytrade999 to think about the logic for a trading approach before applying it as you just gave an outline of an idea. Maybe I should have directly gave my ideas on this and not just ask a question… my bad. The question was meant to stimulate to think about the logic...


    If stocks A and B are part of SPX and SPX trended up, didn't A and B participate in the trend if we see a long signal in those stocks? If so, that would mean that we would buy stocks that are not considered very attractive as the market clearly favored other stocks (those that made SPX move up). Hence, the potential for A and B are probably limited (low beta).


    If A and B participated in the trend of SPX, do we wait for a retracement of A and B (and SPX)? If we see a retracement, how are we "sure" it's a retracement and not a reversal of SPX? etc. etc. etc.


    Although, I'm a big fan of simple approaches, the logic of any approach has to be understood before applying it. That's what you, daytrade999, have to think about when putting together a trading approach.

  12. Not a bad question....do you wonder why no one offer to answer?


    First the technical answer....cash indices (like the SPX) are composed of stocks....the technical reason the SPX goes up or down is straightforward....during the trading day the current price of the SPX is the "weighted" (SPX is "market value" weighted) sum of the last prices of the individual stocks.


    What you really want to know (I think) is what makes those stocks (the "market") move and there the answer is less straightforward.....it depends on the day....for example...ask yourself what made the market move on Friday.....earnings (nope)....economic reports (nope)....concerns over Russia declaring that it would defend Syria if the US or NATO decides to attack (bingo!!!)


    Of course later in the day....after the dust has settled, look what happens, as "participants" say to themselves "oh...maybe the world isn't coming to an end, and I notice the stock I used to own is now cheaper....I'll buy it back at a discount"


    So my answer to your question (to the real question you ask) is on a given day, if you want to know where the market is likely to go....you have to look at the big picture and ask yourself what factor or factors are likely to be pivotal or to have the most significant impact on participants...will it be news, economic reports, or earnings or some other factor....if you can figure that out prior to the open....you have a "real" edge over those who simply show up and watch moving averages wiggle....lol



    Thank you, Steve!


    I had the feeling no one understood my question the way it was meant.


    I would have even been happy with the technical answer you gave as I was focusing on the "method" BlueHorseshoe suggested:






    1) Overall market trend SPX is up.

    2) Stock A gives a signal for long entry.

    3) Stock B gives a signal for long entry.





    The technical answer to my question has some implications for the 3 points quoted above...



    In its simplest form, the idea would be something like:


    1) Overall market trend SPX is up.

    2) Stock A gives a signal for long entry.

    3) Stock B gives a signal for long entry.





    Now, the question is: What makes SPX go up? ;)

  14. You give the answers yourself in your posts above:


    - Your stops are too tight

    - You are probably undercapitalized


    Because of your small account you fear to have a losing trade. Hence, you trail your stop… but ironically that is the reason why you lose.


    So, as you know the problem you can now solve it. The question is, how long does it take you to solve it or how much capital do you have to destroy until you get it?


    No offense here. As MidKnight said, we all have been there. I've read all these trading rules before I've became profitable, i.e. the knowledge about those rules didn't make me profitable. I had to experience the need for these rules myself until I finally got it right, i.e. was able to act on them accordingly.

  15. I've published my trades so far on this forum as well as on another forum and for a few weeks even on Twitter and StockTwits.


    However, I've decided to continue my trading journal only in one place, a publicly available blog, and not in different places.


    I will, of course, continue to be a member of this site. I've just decided to have my own site (it's kind of cool :) ... and to my surprise very easy to set up, even for a non-tech guy!).


    If anyone is interested to follow the blog please PM me or check out my profiles on Twitter or StockTwits.


    Thanks for your interest.




  16. Was short in ES today too...


    My short order was triggered when the earlier low of the day 1664.75 was breached. My original plan was to cover somewhere around 1650, but I was at dinner and had no access to real-time data and/or a chart, so I deviated from my plan :(


    Just saw on my cell that we have been at 1653 already and last delayed (!) price was 1655.xx. Called TradeStation, they gave me current price at 1658.75 and I've decided to cover my short position at market as I didn't have a chart and was not comfortable without one to look at. Should have used a website on my cell which shows charts... and keep my calm...


    Okay, but on the other hand, I've made 21 points in ES this week with only 2 trades by making money on the long side and the short side... increased my equity by 5.6% since last Friday... so, I shouldn't be too hard on myself... but will do better next time in a similar situation :)



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