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Market Wizard
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Everything posted by roztom

  1. I know many of us focus on everything else but put MM last... In reality the goal should be to lay off risk and get to risk neutral asap... Any trades specific outcome is random..now before you tell me you have 60 or 80% winners, can you tell me which one will be the next winner? Can you tell me whether you will have a sting of losers? Nobody knows...all we do know is that we have to manage the risk to stay in the game... So How? I'm going to assume you have a non-random executable setup... You must know what the probability is for that setup to hit a specific minimal MFE and what the typical MAE is.. (based on the market traded). Ex.. If you know the ES has an average 1.5 point counter rotation..wouldn't you want to scale at or just past that rotation to lay off risk... ? If you trade a 2 lot (3 is better) then your goal is to get the first scale.. If you are trading a 2 lot with 1.5 pt risk = 3 pts, then if you scale 1.5 you have no risk going forward on the second contract... With 3 lot you would then have reduced your risk to 1.5pts on 2 lot...Then you would scale #2 at the next logical target subject to your plan and then manage the last runner per your plan... Some will say the R/R ratio doesn't work..I say the probability of getting the scale is the primary initial objective...after that it is up to the market participants to either carry the trade to its objective or for it to fail... That outcome is not under our control... but execution, Risk management and trade management is... I am a discretionary trader. To me it's all about the risk...the profits take care of themselves. Get risk neutral then you've protected your equity and then you can let the trade work... Emotionally it allows you to be more detached from the outcome... Also, make sure you know when the trade fails...it should be something structural, not $ driven if possible...
  2. Greetings to all of you... I see we have some traders here... ES trend is still up...Friday sell-off imho was Responsive...Friday high 66.00 is a weak high..it will be revisited... Market tested 53.00 area (key dividing area). and also 1 ticked Thursdays Opening Swing High before the extended range bar from Thursday...showing OTF buying interest in the 51.00 - 53.00 area. It appears to me that OTF values prices and depending on GLobex Sunday night and relation to previous RTH I will be primarily looking to position long... Of course it is possible to test to 1445.50 area but I am currently favoring long... You guys look like you have been having fun here... I wish you all happy trading.. :missy:
  3. A set-up should be well defined.. Typically homework is done, areas of interest identified and then depending on the open, range, rotations, etc...execute your plan. (Many) Most successful traders do their thinking outside of market hours... homework. During the market typically it is a matter of executing based on several potential scenarios that have already been planned out and then unfold. The plan should not, imho, be hatched during the heat of battle. When the markets open then it is waiting for the market to approach your area to do business and then execute based on your pre-defined set-ups. After your entry, then risk control, scaling to lay off risk and then target/exit management. One thing that is important is to have a non-random entry/trade mgmt, exit process... Example: One of the hardest things to do is to trade a 1 - lot... It is really important to trade at least 2.. The idea is to have a consistent/high probability scale out to reduce/eliminate risk (depending on your stop). Typically the average rotation in the ES is 1.5 - 3.00 pts... Therefore it would make sense to enter potentially after a rotation greater than 3 pts (or more) if your setup shows and then assuming apx 1.5pts rotation you can get a scale to give your trade room but also take the pressure off.. Just a thought.. There are many ways to do it... Assuming you are not trading randomly then you either have a fixed $ exit or a descretionary target for exit... Just 2 cts here ... there are many here who may help... Trading is a very individualistic endeavor...it must become yours and fit your psycology. The mental game is the true obstacle... Good luck..
  4. Emini are free...but I don't really know what is included I think it is only minis'...
  5. As far as FCM's... you really need to find a stable platform and an interface you are comfotrable with... If you read reviews here you can find one. also , some of the data feeds are compatible with IRT. Infinity / TransAct is free ES Data, as well as some others... If you plan to trade other markets you will need a feed like DTN IQ, etc...expensive ..if only e-mini's than a good broker feed will work... but the feed must not aggregate the volume otherwise the VP gets messed up. Infinity has a good free feed... some other free feeds are bad from a volume point of view so you need to do your homework.. Let me know if I can help..
  6. I have used most platforms over the years.. currently I use Linnsoft: IRT, Pro Ver.. Costs about $90./mo plus depending on your data feed it might be more but it is inconsequential today. Also for historical data you need DTMA backfill, excellent about $20./mo. GO to Linnsoft.com and look around.. Personally I believe it is the best or at least one of the best MP/VP packages out there... It is probably one of the best if you are in to Volume Profiles which is one of the tools I lean on...
  7. I'm not familiar with her... I think I was in his first class.. materials were very crude. I can't remember but he rented space maybe a block from CBOT..might have been west of Wells on W. Jackson...can't remember anymore... It was early 80's... As N: will attest, statistics is not my thing so it was more difficult for me since Pete S. came at it from that side but I had figured out myself about market rotations (auction theory). Initially it was those guys running the stops but my thinking changed that the market would need to go there to do business..not to pick off the stops (unless it was mine getting taken :rofl:). Early on I started with AG's and then went to AG spreads - Old Crop/New Crop Bean spreads... there's an easy way to get carried out in a bag... Once I understood spreads I moved to currencies... Early on I really enjoyed T-Bills then T-Bonds and then S&P when they were introduced. A lot has changed since then... I bet we know some of the same guys. I spent time at CBOT and CME... but I was always an upstairs screen trader... I couldn't deal with getting stabbed with a pencil in the pit... :helloooo:
  8. I watched the GLobex open and trade last night off the news and "expected" this thing to flush... Now I see short covering and a good buying tail so it "appears" we over shot and are rejecting the balance area 41 - 54.00 so this should be interesting... are we going to balance up here? I would have rather seen good selling on the open then a short squeeze but heck I don't lead... SO we gap lower on RTH - then what? We have several distributions up in Globex, 54.50, 51.00 ish - midpoint... etc... Always a conundrum.. :missy: Good trading everyone..
  9. If I believe in a random distribution of outcomes, which I do might just be my therapy, it allows me not to "invest" an expectation beyond my desire to have properly executed my plan. While my results are substantially better than 50/50 I certianly do not know what the next trade will bring. I always believe the next trade will win until it fails but I expect 50/50 for that trade. If I have 4 trades for the day and 3 are winners or all are winners then why would the next day bring 3 losers ? Same criteria and same set ups and same execution..putting aside the markets variables from a distribution point of view I see it as 50/50. It is the way I allow myself to let go of the need to be right and embrace the need to execute and not change things or bring random behavior into my process. This may be semantic and it does not deserve any more discussion IMHO. It is a way at least for me to keep my mental state where it needs to be - detached from any specific trades outcome..
  10. The 50/50 is specifically related to the next trade. Otherwise we wouldn't have days with multiple sequential loses... if you have a 60% expectancy then does that mean 6 in 10 will win? When will that 6 show up? Is it possible to have 6 losers and then 4 winners and then 4 losers and then 8 winners or some "random" distribution of data? The 50/50 is to my way of thinking 1. letting go of the need to be right and 2. acknowledging that the same trade with the same setup will have different outcomes at different times depending on what the participants in the market do at any given time. There are many things we can tell but we can't tell when an OTF will drop a 500 lot on the market or a HFT will diddle around and negate our edge.. Hence 50/50 for the unseen variables that can bust a trade.
  11. Yes he did. I took a class from him right at the beginning at his Market Logic School.. The handouts were crudely drawn Zerox TPO's. His assistant was a Brit named Peter Moon..was that the guy you met? It was the first seminar I paid for and it wasn't inexpensive back then either... I could not trade with it at the time and I spent a year trying. Also when the CBOT LDB came along I thought that would help but it didn't help me. I was trading T-Bonds with it back then - or trying... :crap: He clarified for me the concept of auction theory..which I had mostly put together from my own observations watching extremes get tested and stops get cleaned but not in a organized manner... the description of a Dutch auction was new to me. That was the eye opener - the auction ..and how the market would go to each side to attract buyers and sellers, etc. BTW back at that time I had started trading the book for a FCM and then became a CTA in the mid 80's... from there a crash test dummy.. :rofl:
  12. I understand that "meaning of statements written" can lose a lot in translation or be shaded by the preconceptions of an individual. I would like to comment on your statements. Just so you understand I am not taking exception to them but rather am observing the context and your interpretation of my meaning - obviously a deficiency on my part or the medium.. I do not have a rigid plan at all but I do have hypothesis that is laid out beforehand. This is part of my pre-trade preparation. I trade context so I want to know where we are, where are we trying to go and how well are we doing it... Currently we are moving to new level lower in the market. The underlying product (ES) is being revalued based on new information... no big deal.. I am prepared for opportunities from both sides. I also know where important areas of the market are and how trade into those levels can present opportunity for substantial moves.. I would suspect that when RTH opens Monday morning we will potentially see heavy selling... While there may be opportunity on the short side initially with the late sellers, I will be watching for an extreme for at least rotation (retracement) to squeeze the late sellers and potentially for the market to rebalance... The news, however, may beperceived as extreme ... that is where ACH comes from... my plan allows for ACH. As far as 50/50. The next trade is 50/50.. it doesn't matter what your expectancy is...over a sample size hopefully there is a distribution or edge for a trader but the next trade is 50/50.. In any sample of trades the distribution is random..you will not know where the positive skew will show up. Hope this clarifies a bit..
  13. If someone has 90% winning trades I'd like to meet them.. I will write a check..this is assuming that there is a true positive expectancy net of costs, slippage, etc. I have found that winning percentage is not very important..anything over 50% helps... In fact setups aren't that important relative to everything else. I will always come back to risk management since most traders focus on surgical entries, the setup, the magic indicator, seeking the special sauce..it doesn't exist... The issue is what do you do with a trade once it is on... Do you wait to get stopped out if you are wrong? Does one use a fixed money stop? Why? If it moves your way then retraces then what? When do you get out? dump the trade, scale out, exit a winner? These are the answers required to make it in this business. Is the traders execution random? Discretion creates randomness.. does the trader keep changing things, a tweak here, a tweak there - more randomness - exponentially. Most want high percentage of winning trades but that does not lead to profitability..it does however fulfill the need to be right... something that is contrary to success in this business. High probabilities come from short targets.. profitability comes from longer targets with more uncertainty... Again, trade management, one of the last things traders ever think of working on, is what will separate the winners from the losers in most cases. I'm sure there are exceptions. It depends on time-frames, etc. I am referring to daytrading. Trading is multi-dimensional with various components that must align. Many never get to understand that profit comes from risk and trade management potentially more than it does from entry...
  14. I tend to agree with some of Rande's implications: The need to predict what will happen (Need To be Right) Holding on to a belief that the market doesn't agree with. Not letting go and adjusting to the market. Not seeing trading as a execution of an edge with a random distribution of outcomes. This is not a counterpoint to other posts here but with few exceptions we bring learned behaviors to trading that are contrary to success in an uncertain world. Even the basic "fight or flight" will cause traders to impulse and dump a trade when there is nothing structurally wrong with it. We run from danger in the real world but stand in front of danger in the trading world. In fact, typically the best trades are entered when there is the most uncertainty If someone has a viable method and cannot execute it then either it is not aligned with their psychology or they have an attachment to money that is interfering. I think it takes quite an effort for we mere mortals to change our relationship with the need to avoid loss, be right and have our self-worth validated by the next random trading outcome... logically we should understand this but emotionally we still experience the other.
  15. I know, I know..you keep a punching bag next to the desk... I keep a few extra keyboards in the closet... :helloooo:
  16. I am just generally saying that anyone who wants to be long for this business should figure out first, based on their risk capital at what percentage loss per DAY, how many trades will they get at a fixed percentage of original starting capital... before going out of business.. I think that most are not adequately capitalized and are risking too much on any one opportunity. My belief is in this business you should (my belief) assume the worst not "hope" for the best. A new trader must anticipate the issues that will arise emotionally when initially putting $ at risk and how that will lead to random results and also sequential losses. The objective of a newer trader is to survive the learning curve and this is assuming they have a viable edge that they consistently execute. Hopefully they have taken the time to SIM trade and have done the necessary work to recognize an edge and can execute it consistently. Hopefully they have a trade plan - a business model so they know where they are going and what it will cost to get there. (Losses are cost of production) If you can't manage your overhead you are going out of business. This is a business first of survival. The $ will come if you stay in business. Another issue is the psychological impact of strings of losses and when the percentage of capital at risk is excessive this has an exponential negative impact which can lead to a downward emotional and financial spiral for the trader wannabee. Trader wannabee is anyone who is not consistently profitable - no matter how long they've been at it. If anyone wants to see what this is about, pick your starting equity and then take a percentage of that amount and figure how many trades you get before you go out of business. I keep my daily losses to around 1.25%. Not only do I protect my account but I protect my mental state since the percentage of loss does not impact me psychologically. I also understand that the next trade has a 50/50 probability of being profitable. Even if I have an edge, which I do, I also know that I can have strings of losses.. Do you know where they will show up? I don't. When we lose it can set off all kinds of mental issues. Revenge trading - I want to make it back.. I don't want to lose today... I'll take one more trade, then another and then all self-control is lost. A manageable lose turns into a large loss and the odds of recovery both financial and psychological go down..it is like having to try to push a huge bolder up a hill. Accounts get severely damaged or blown out under those conditions. I have learned this the hard way. There are just some times that I cannot get in sync and rather than do damage that is difficult to recover from, I just step back with the knowledge that there is always another bus coming by.. In addition, trade management is the next important item to reduce risk.. Assuming again you have a viable trade plan, trading multiple contracts allows you to quickly reduce risk by scaling out. One may think this is more risky since you can take a large hit if you are wrong before you get your first scale. It happens. On the other side, if you know where the high probability areas are where you will get your scale you can reduce or eliminate your risk on a trade. Obviously, this is not for novices but trading all in/all out imho is ludicrous and does nothing to reduce risk. IMHO, this business is ALL about risk management. Most novices spend 90% of their energy on setups/entries. Regretfully, that is not the problem. It's everything else. Risk management and Profit management - the Exit. If you don't have those answers then this will be a short term hobby for most.
  17. I'm not as savvy as you guys but here is what I would do. Based on the percentage of capitalization what % of equity on a per trade basis can you lose per day before you go out of business? If you are starting out how many chances to you want before you go broke? Just do the math... Pick a number, $25K...if you risk 2% per trade = $500.. Lose 3 X in a day = $1,500 now $23,500... I can't do the math but a person would go out of business pretty quick - long before they ever get to figure this game out. I have a daily risk limit.. If I'm off my game or can't get in sync with the market I stop trading for the day. If I trade in a particular direction and I am wrong 3X I am done unless I go the other way or I hit my risk limit then I am done. I use scales to reduce risk... I put risk management before anything else... Profits are easy its losses that will put you out of business...
  18. 1980.. went into the business - just in time for the Hunt Silver crises. Wanted to buy a seat. Couldn't afford it. Became a broker, then a CTA.. Managed $ for firms and then my own.. became consultant to banks, etc. Became financial analyst, blah, blah.. One of Peter Steidlmeir's early Market Profile students... couldn't do a %$&^ thing with it.. Worked with George Lane the inventor of Stochastics. Had an Apple 1 computer - high tech #%^&. Searched for the Holy Grail - thought it was indicators and oscillators - not.:doh: Bought every system, software, gadget, book, pipe dream... can't remember... invented indicators..thought many times that I had found the key but no, I didn't. Did system design & testing..watched good ideas fall apart in real-time... was a pioneer and got arrows in my back. Best thing I ever learned: Classical bar charting. The next thing..years of screen time... Most important lessons learned: Set Ups least important. (where most put 90% of their effort) Mental Aspect the biggest obstacle. Daily Trade Plan Money Management/Trade Management/Risk Management Scaling To Reduce risk. Simple beats complex.Become a minimalist. There is no right in trading only "right" execution. The next trade is a coin-toss. 50/50 at best. The edge shows up but only when you consistently execute your edge. Do not keep changing what you do otherwise you create randomness. Plan your trades, execute mechanically when your setup shows up. Capitalization is key. You need to trade at least a 2 lot and 3 lot should be the minimum if you are a daytrader so you can scale and layoff risk.. If you can get to a risk neutral position then you can let the market do it's thing... Remember , you are trading in the Superbowl and you are going up against the best in the World... figure out where you are on the financial food chain and then make sure that you are not on the bottom...
  19. Gosu: Interesting coming from the Mike Tyson school of trading...be in the moment, etc... I have to say that I have traded from both sides.. However, most of the trader wannabee's fail because they become shooters or impulse traders with no plan. Usually this leads to over-trading, trading in poor locations and a short career towards becoming a sad statistic. As you know, I have over 30 years at this and when I started I did plan but only as far as reviewing charts. Monthly, Weekly, Daily with channels and Trendlines... yes, I did use them once upon a time... I learned trading with classical bar charting... that was all there really was... Realtime data and charting was just becoming available and was very expensive. Over my career I have seen many traders and trading advisers come and go.. other than the guys on the floor most upstairs traders like me did not survive.. I also had my bad times... Back in the day there were no computers and if you wanted to test an idea you had to do it by hand... a nightmare.. As far as a plan goes, not everyone has to write a plan out everyday..I have done it on and off but the last years I do write out a plan... Mostly to get the sense of the market but also to do my thinking in a non-distracted environment, stress free environment. If you're going to war, you don't make your plan on the field of battle - you execute it. I think of trading in many ways like executing a sport or having a flight plan. I don't want to make it up as I go, I want to focus on execution. While variables come into play all the time and we must respond to it, even Mike Tyson has a plan for the next fight, he reviews tapes, he spars and formulates a strategy before he steps into the ring. I doubt anyone would be Champ if they didn't. Having a plan has helped me. One of the things that it does is help me have the discipline to wait for the market to get to a key area.. I like to trade on the edges and I also like to align with a higher time-frame participant..like we saw on Friday... My plan outlines where they should potentially be active or if not that their perception of value or fair pricing has changed.. I don't think there is any one right way to do this..only the way that works for the individual.. the problem is most do get a chance to go through the learning curve and discard all the crap that doesn't work for them. I have found that many traders who move size do homework... It might only take a few minutes to a half hour but they do it... Of course, once you have it as an ongoing process it doesn't change much..only the levels change.. I know what I will do on Monday but I do not know what the market will do... I have gotten out of the "prediction" business a long, long time ago. Predicting creates attachment to being right. I don't care about being right. All I care about is properly executing when my edge appears.. that's all I have to do... to make consistent profits.. When I stray from that, my numbers go down.. Glad to hear you're cleaning up but I would never encourage a trader wannabee to not have a plan.. If they don't have one or can't put a functional plan together then they have no business trading since they will be on their way out of business...
  20. Glad you got to pick up the "free $." Days like Friday are why we are in this business... However, I want to comment on something of interest... Obviously we don't know what will happen Monday - there are key elections in Greece3, France, etc which can have a significant impact on the markets. We will certainly get some sense of that Sunday night and Monday, etc. We have a CLVN 1360.00. We cleaned the stops under previous low of 62.75. 56.75 is NVPOC so we are sitting right over osme key areas..with 53.50 under there.. and 47.75 a major CLVN... Given the lack of meaningful rotation Friday, I "suspect" we will continued early selling then... ? Wish I 'knew" but that depends on Globex and then where RTH opens in relation to previous range and what kind of open we get... I'm not telling anyone anything they don't know - right... When I set up my trade hypothesis for Monday I will have defined the areas to do business and then will wear a helmet... :helloooo:
  21. I understand what you are saying since I understand market but some of the specifics I don't... since I don't trade with channels, etc but focus on price and volume at price...it doesn't matter of course as long as we bring home the bacon - right..? Today I did not take the morning short or buy on the reversal after we ran out of sellers... I did however, get long in the afternoon @ 95.75 and scaled and banked 7 pts per unit... my unit is 3 so I scaled close + 1.5, +2.5, +3.0. Not exciting but it will pay the electric bill... One of the reasons I don't trade breakouts often is that I need to see where I can lay my risk off... Obviously not all BO's are created equal... If we are near a recent High/Low or some area where there will be stops then I will target that as a high probability scale... Yesterday was rough since I had bought near the LOD but had closed my trade before we took off... I have changed my priorities from profit to laying off risk... If I can get high probability scales - which I typically do then I have protected my P&L and then have bought the risk capital to work the rest of the trade... The scales BTW are not necessarily as close as today's. That is all I had to work with... and my location was roughly upper 65% of the range so I had to hit & run.. Still it was ok for one trade for the day.. :missy:
  22. No disagreement... However, it is just a personal choice of my trade plan... I did have one chance around 1401.00 I think but the risk for the size I trade was more than I wanted... One of things I look for is at least a high probability to scale and it would have not been a good location or I would have to cut my size way down so I let it go... after all it is only one trade out of many.. my philosophy is there is always another bus coming by. Along the way I have shifted my thinking from profit first to laying off risk first.. then I concentrate on the profit. I keep my P&L much less volatile with careful trade selection and also putting risk management first. In addition, once I reduce or neutralize my risk, trading is a lot more enjoyable and less stressful. Again, just a personal adjustment for my own psyche. As I write this we just tested the single from yesterday in ON trade at 95.75. Normally I would take that trade but I did not with this mornings ADP report coming and coffee still brewing.. MCVPOC 92.50 is a big number dwn there.. imho
  23. Glad you had a good day. I am not a breakout trader, since it doesn't usually align wit my risk management... I am a continuation trader after a breakout which is why I commented that there really wasn't any rotation so I had no entry. Glad you had a set up to capitalize on yesterday..
  24. I wish I knew what you were talking about but I'm glad it worked out ok for you...
  25. Today's ES range was 20.5 which fits right in... We settled 1400.25 a key CLVN... After today's action it seems a day of rest is in order... maybe an inside day... I know I need a day of rest after today... It took me by surprise.. Initially I was looking for a rotational auction kind of day with a slight upward bias.. I got long right off the open, got some scales and exited my long at 1398.00 NVPOC... felt pretty good about it until it kept going... but that was my plan.. Saw one spot to get long against 1400.75 CLVN but took a pass because of risk... Twiddled my thumbs and then got short against 1409.50... with stop 2 ticks over MCHVN 1411.25...got stopped at HOD :crap: Tried a long at just under IBH... ended up losing 2 ticks there. All together when the dust settled I had a small losing day... The main reason for the loses was not getting scales on my last 2 trades.. :helloooo: I try to get risk neutral asap... Fortunately, while days like this are greed inspiring and challenge one's discipline, I got away unscathed... Many traders will chase this kind of day and pay the price for it.. The impulse to "not miss out" is very strong - and can be costly. A little rotation might have been nice, though to get on... do you think? Hope you all did ok..while getting a nice piece of days like this can be exciting and profitable, I suspect most Day traders lose $..maybe I'm biased - hope you guys banked some $...
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