I ran a direct access futures trading workshop where, for an exercise, I got the delegates to trade a one lot and to always be in the market. They couldn't look at the chart, just the current price and depth of market. The idea was to get them focusing on the current price and learn to interpret it. As a floor trader I only read the current price and figure that it is a critical skill. One of the interesting outcomes was that the market seemed to slow right down, all the delegates found this, they had more time to make their decisions.
IMO wanting to be always long or short a market is one of the best ways to destroy your account (and your sanity). If you're not a market maker, floor trader, or specialist, then there is no reason for you to give up the one biggest advantage you have over those traders mentioned -- the ability to wait until risk/reward ratios are optimal before commiting capital. Always having a position can really mess up your objectivity, and discretionary traders should strive for the opposite -- trying minimize exposure time as much as possible. If given a choice between taking a trade that targets 50 pts but 2 days to unfold, and a trade that nets 8 pts in about 1 hour, I'd always choose the latter.
I agree with illiquid - the presumption that you MUST always be "in" is invalid. It might work great if you've got a system that can fairly accurately pick tops and bottoms of swings in whatever timeframe you're trading. But generally, presuming that you must take the reverse position when you stop out of a particular active position will usually end up chopping your account up. Typically, if you stop out of a position (using whatever method you like to use), you don't just want to blindly reverse. You want to get a confirmation that the reverse position is the right one. There are lots of time I'll get a buy signal and trail the stop and finally get stopped out, only to get another buy signal a while later that produces a profit - but there's no intervening sell signal. If you can filter out the time when your particular entry method needs to be out of the market, your overall profits will be higher. Even if you're trying to just use a simple moving average crossover system and hoping that your stop management will protect you, you can get whipped around when the market's just chopping around. Adding at least one additional confirming indicator could save you from being in when you should be out.
I tried it today on es which is all I trade. 2 sessions. 11 r/t +1.25. So once again I made more money from IB than they made from me, although they did try to tilt the odds in their favor with a system failure (showed me long when I was short and I couldn't cancel or enter an order.) My only rule for this is always trade at the mkt. If you can buy the bid or sell the ask, what's the point of reversing? I reversed when I was down anywhere form 2 to 5 ticks. I believe it is important to trade the market and not just use a stop loss formula. I want to try reversing with a profit. They say it can't be done, but I know it can. Not for everybody, but just what the trading shrink ordered for me personally. Thanks again for the comments. Also, I am encouraged, because you wouldn't believe the stupid mistakes I made today. Normally, I would have been a little dejected if I'd gotten out and had time to kick myself.
Right Malcomb, What got me interested was scalping with 2 tick stops. I observed the exact phenomenon you talk about. Also, I noticed that my hit rate with 2 ticks was really no worse than my hit rate with 2 handle stops. So all I had to do was figure out a way to allow for much larger profits to help fight off the commission bite. That is where I came up with this crazy scheme. (well actually, there are better ways, but of all the ways, this one is the least mentally fatigueing for me.)
Like when you are driving and you see a cop, then 55 mph seems like a snails pace. But if you had a car where the accelerator was stuck at full throttle, driving around through the city, narrowly missing nuns and babies in carriages, driving up on the sidewalk, plowing through street vendors fruit stands, after a while, seems normal.
I know a very good trader who trades the SP and he is always 'in' the market. However he doesn't go right in full size all the time. He ups his size if he likes it and its going his way.
Well they said it couldn't be done for a reason. I checked all my trades and every single profitable trade I reversed made the next trade a loser. But every losing trade I reversed ended up either a scratch or a winner. Now this gives me concern, because what it has degenerated into is a scheme to turn losers into winners. Every free lunch has always ended up costing me money. But how many times have you been stopped out at the absolute high or low of a move? I once went long at the high for the day but that is really the only time I can think of. I can think of plenty of times if not most when my stop has saved my ass because the market just kept going. I don't know, it's working so I guess I'll just stay with it for a while.