Swan Noir, I get where you are coming from and I hear you. My background is a bit more analytical vs. yours, which appears to be more of a businessman type role. I've worn both hats, so I can relate. It may look simple, but to be honest, one of the hardest things I've found through experience (and still find tough), is to actually formulate the problem before you even analyze it. You will likely not find that type of analytical candlestick body threshold sweep in any other book. It is a sensitivity analysis, and is one way to evaluate the problem within an objective framework. Someone could have countered argued that the fixed commission can be swamped out if you trade in larger size, but it is just another variable that needs to be dealt with and considered. See, there are dozens of books on candlesticks,elliot,etc... and dozens of interpretations as well. The seminal candlestick books would probably be Nison's, yet, while he distinguishes between hammer, doji, and shooting star, Brooks takes all the distinctions and jumbles them into just one (doji); desecrating old school knowledge. Yet, Nison's work is subjective as well-- so it opens itself up to different interpretations. Although there might be wisdom buried in their ideas, it takes some thinking to translate these concepts to objective, verifiable analysis and that is likely the hardest part. Now regarding excel or tools. I can only recommend the way I learn things, and that is-- force yourself to try to solve examples. Go get some very basic book and excel, The visual quickstart ones are very simple and great to learn: http://www.amazon.com/Microsoft-Off...=sr_1_1?ie=UTF8&s=books&qid=1252736121&sr=8-1 you can probably get some at the library, or the dummy books for free. Then, find one that has financial models, so you are motivated: two great ones come to mind: http://www.amazon.com/Financial-Ana...=sr_1_1?ie=UTF8&s=books&qid=1252734588&sr=1-1 (I have the older edition). http://www.amazon.com/Financial-Mod...=sr_1_4?ie=UTF8&s=books&qid=1252734561&sr=8-4 If you want one that is geared more towards trading, I recommend http://www.amazon.com/Trading-Syste...=sr_1_1?ie=UTF8&s=books&qid=1252734679&sr=1-1 Although, be aware that he uses a combination of excel and trade-station to validate his ideas. There is also an EXCELLENT site by a retired professor with copious excel examples for finance (minimal vba, mainly excel): http://www.gummy-stuff.org/ I had the pleasure to inspire him to work some examples for me. He is very helpful and gives generously of his time. I could go on with the recs, but you really need to practice, practice, practice, and think of some example you want to solve (it will inspire you to practice), then find a way to solve it. Cheers, dt P.S. You can also ask for help here and there are plenty of excel forums, where they will kindly help as well.
dt, I'll start by learning Excel without much (if any) reference to what I will use it for. I'll order your first recommendation -- Excel 2007 For Windows -- and once I have an ability with Excel I will move on to another title. I like Gummy's approach to knowledge ... it might not work but hey ... take it or leave it. Thanks
I don't know if you are still reading Brooks book or not.. But keep at it. Dr Brooks terms and definitions are often his own and you won't find it in any other book. I had to read the glossary a couple time to get his terms all down. And it often takes reading it MANY TIMES, to really See and understand it. It is not mechanical so back testing it isn't possible, so give up on that Idea and is a waste of time. Read the book, it learn it and Trade it and you'll see that it works. Trading is gambling so you will have winners and losers, but learning to keep the losses small and letting the winners run is VERY IMPORTANT. Trading one lot is very very very difficult. As you are trading ALL IN and ALL OUT. uou have to have 70% winners just to break even. The only way you are going to learn to trade is by Trading. If you need some help with understanding these methods send me a private message and I'll help you... regards David
David, Thanks for your post. I do think there may be a great deal of value in much of what All says. That said let me respond to two points you have made: 1) It is not mechanical so back testing it isn't possible, so give up on that Idea and is a waste of time. dtrader's approach has convinced me that while a discretionary approach such as Al's can't be easily codified into a mechanical system that does not mean that discrete set ups can't be tested to have a more objective view. 2) Trading is gambling so you will have winners and losers, but learning to keep the losses small and letting the winners run is VERY IMPORTANT. I have played poker all my life and a few years ago checked into an Atlantic City hotel to play smallish to medium stakes no limit hold'em. I spent 10 weeks in AC playing five days a week six to ten hours a day and although I was a small winner those winnings barely covered my modest expenses. I was playing poker. I was not gambling. I had many winning hands and even more losers. Yet, because poker is a game of skill, I was investing heavily in some hands and minimally in others. Just because a particular game has elements of chance -- even significant elements -- does not make it "a gamble". Shooting crap is a gamble and a bad bet. You face off against a house edge and, no mater how you twist and turn by laying bets that give the house the smallest edge, that edge, over time, grinds you out. I appreciate your offer to PM you and will, I'm sure, take you up on it. I am very temporarily not trading as my mother is ill and it is taking much of my energy to cope with that. The good news she is recovering and I hope to be back to trading in a week or so.
Black Noir, If I were limited to giving you only one piece of advice in trading it would be this: If your intention is to trade strong trends, then you want to be holding the smallest number of shares/contracts when you enter the trade and holding your largest size when you exit. Now, when I say this I mean that your initial risk with NEW capital is only on the initial entry. Any subsequent add-on point will be taken in a way to where the current price action will NEVER BE ALLOWED to go against you past the point of a scratch trade. If you trade this way, then you can survive at this game full-time with only a 30%-40% winning pct because each win will cover far more losses because your avg loss is kept constantly small while your winners are 3x to 40x more than that (assuming we're talking about trading the e-minis). I'll bet 90-95% of the at-home e-mini traders out there start each trade with the largest position they ever plan on taking in a trade and "peel off their contracts" to "lock in profits". All this effectively does is to put higher demands on your winning pct. because this lowers your avg win / avg loss ratio (aka payoff ratio). No one ever would have heard of Larry Livermore (and for that matter, "Reminiscences of a Stock Operator" wouldn't have been written) had he traded like the run-of-the-mill e-mini at-homer. He was great because he started each trade relatively small and leveraged up as the trade continued to go his way. As the book stated, when he was on his game, he was 7 out of 10 in his picks. Getting a 70% winning pct. in leveraged-up trading is how you get rich. This is the exception, not the rule. Getting a 30%-40% win rate still affords a nice lifestyle with much less stress, imo.
Steve, I have been advised, re-advised and advised again to enter with X contracts and scalp Y contracts (a third or half of X) and that this "locking in" of profits will be a key part of my eventual success. Having read Reminiscences as a kid (and having reread it two or three times since then), I had a nagging felling that if Jesse Livermore believed that intelligent speculation dictated the opposite I might be ill advised. During my last reading of the this great book it occurred to me that while the "stripping off" of contracts as you describe might not be a sensible approach the fact is in his early "trading" in the bucket shops he bought X and sold X intraday without adding to his position. Given that a well setup trader has nearly instant execution I believe that his bucket shop approach was not substantively different than what successful scalpers do today. Given that I am new to trading I have decided to use NQ primarily (love the $5 tick) as my vehicle. I trade a single contract, do not currently add on and keep my risk profile very low as I learn. Since NQ has a high commission to to tick ratio I don't think it makes sense to scalp it. I play for the intraday swing, move the stop to break even (usually at plus eight ticks) and move the stop again at plus 14 ticks to protect six ticks ($30) of profit. I have an annoyingly high number of scratch trades and the winners are mostly of the six tick variety. Of course my losers are even more annoying than the scratches. The few that run are covering the losses, the scratch commissions etc. and leaving me with pennies of profit and, hopefully, an increasing store of knowledge. I am still closing out the real winners too early but getting better at letting them run. I look forward to the day when I have the confidence to add on but it is a way off. I hope to find that adding on is as valid intraday as it is for those that trade in longer time frames. I am, at this pint, not willing to take any position to bed.
Gummy has a peculiar sense of humor. But he sure gives a lot of practical and objective wisdom that can be replicated (including free examples to do so). BTW. Make sure to get the quickstart excel book that matches your version. If you have 2007, the interface will be different. I think 06 and prior are the same, but double check.
70% just to break even? That blanket statement is completely false. Your risk:reward ratio is going to dictate the percentage of winners:losers one needs to break even. It is certainly possible to have less than 50% winners and still be net profitable.
http://eminiplayer.blogspot.com/2009/06/friday-061209-end-of-1st-week-on-live.html True...that link shows a day where I had a quite shitty 20% win rate in the ES and a 28.5% win rate in the NQ but a positive P/L due to keeping the losers tiny.