thank you for your comments. I was hoping to make the connection among: 1. percent risk per trade 2. Percent of capital involved per trade 3. Percent of capital in market, and 4. number of streams of capital you used.
Back when i was trading stocks: 1...... .2% towards the very end i was up to .4% 2...... 20% towards the end 25% 3...... 50 % to 80% 4...... 1
It took me over three years to develop and comfortably use my best working strategy.....and I have been trading since 1978...
When I look at 2 and 3 I get a sense that 4 would be 2 or 3. Sort of like you were trading a few stocks at any given time and you were protecting yourself quite extremely. I went through the transition in the 50's where individuals began to trade their own accounts in contrast to the norm where most wealth was managed by people who used the theme of balancing portfolios according to very traditional themes. This made me a sort of rebel or some such. I didn't do any money management as it is reported in ET nor as you do it. I think kicking was suggesting to you an alternative set of values other than the ones you use. In the fifties fundamental analysis as you describe was not commonly done by the individual but it was the basis of managing wealth. I am TA oriented and I avoid having to spend any time on the fundamentals and market climate. This factor, for me, is entirely eliminated automatically nowadays. In the fifties I did it by charting and backcharting. I felt then as now that the charts of all the stocks I would consider all have to look alike and they have to do the same thing. I guess you could say these characteristics define the fundamental character of all the stocks I work with. I was very happy to see that in modern times, data purveyors got around to allowing this kind of sorting that had to be done manually in the 50's. I conclude that for the first 14 months of what you did, you didn't have the right or correct values mixed together. As you say, you finally moved closer to the environment where these values allow some money to be made. I am much more risk adverse than you are. I do not believe I could ever trade any of the stocks that you did. My small list then as well as now is very very narrow because of risk considerations. Stocks that make a lot of money in very short times are almost always risk free for trading. Because of this I do not use any money management. In your introductory comments, I was very surprised by your comment that it was a very positive thing that so much information on the wide variety of possibilities for making money, was always available in ET for consideration. There certainly are many money making possibilities. Picking and choosing pieces from this array to compose a personal approach was also mentioned. What was surprising to me was your advice with regard to these matters. I know that a person can only go through beginning once. Once a person is past the beginning it cannot be repeated. We, of course, are polar opposites regarding beginning. I have never figured out, by observing others, how anyone was capable of making the judgements that you advise are possible. I certainly ran the other way. How can a person beginning ever be able to look at what is available and be able to pick and choose anything from this huge plethora of stuff? Obviously people do it as we all see. I just began in a vaccuum. I was unable in the 50's to find much of anything except what I read in 4th ed of Magee. Very narrowly I just began to position trade stocks that did the same thing over and over again. It just worked over and over for me. I will never forget the distain others directed at me about the time in my trading career where you are. I am speaking of the NY financial community and NYSR types I married into where I was coming from a science community orientation. I was told in no uncertain terms at the annual family golf tournament (Labor Day) that showing up in a foreign sports cars was a real dumb thing to do just a few years out of college. Your explanation of the time required sounds like the old traditional way to make money; I would understand your disagreeing with the idea of position trading a very narrow universe of stocks that all do the same thing. Stops for me have to stay out of the way of the normal cycle of activity during the short term cycles that I trade. Yours seem to be so tight (and arbitrary) compared to any normal price activity, that you must have been stopped out all the time. I don't go out of a trade at the break of the cycle trendline (below which my stop would be set); I exit well before that at the peaking of the price cycle as indicated by the leading indicator, volume. Now that you are in YM, and trading its potential, I see that you are not applying what you know from stocks. I started commodities with the DJXX, before the e-minis were invented. For whatever reasons, I just followed thesame stategy as the stock strategy by shifting from position trading to intraday trading on another fractal. It was a time compression of about 25 and there was the leveraging of capital as well. Still to this day I do not see any differences in stocks and commodity indexes as far as my TA approach is concerned. You will probably be doing the same series of research and prep to trade YM. I guess a lot of people do that. For me it is just a technical problem of handling being on the right side of the market all the time. I think it is more difficult to trade commodities than stocks. But it is necessary to do both because of application of capital constraints. You can't use much capital in commodities but you can use an unlimited amount of money (as an individual ) in stocks. For me, there is about a 50 to 1 ratio in money velocity, one compared to the other.
Very interesting post of yours. I guess one of the main reasons i don't use the same mythology in YM as i did for stocks is I look at what compromises the YM... its the DOW 30, and the specialists that run those stocks are the best of the best. I believe differently now about stops as when i was in stocks. Trying to constantly hit a 3:1 R/R ration is not easy... its hard. And yes, your right... i got stopped out all the time. I don't want to be playing the tight stops game with DOW 30 specialists. Also not looking for high R/R ratios anymore.... currently targeting for only 20 - 30 pts / day. Why not just take higher probability trades? Like i said before, one can become wealthy with a horrible batting ave. but with a high sharpe ratio. OR... one can become wealthy with a crummy sharpe ratio... but with a high batting ave. I now believe its easier for me at least, to go with the latter. Also believe its better for the psychology of a trader. I have several techniques i use in YM.... but i use two indicators to always let me know if my play set up that is about to trigger has good odds or not. Now i hear all the time in here how indicators don't work... they work... they work very well... its how you apply them. I will now explain how i use them: Its the Stoch & MACD. These 2 old standbys can bring in more money than any other timing tool if you apply them like i do. I briefly explained this before but no one really commented on it. I call it the elevator theory. Imagine being in an elevator (elevator "A") thats going up, now imagine that elevator inside a bigger elevator thats going down "B". Now imagine elevator B being inside still a much larger elevator... which is barely going up........ Heres how i time my plays to go long the YM (opposite for shorts): I wait to get a buy signal on both the Stoch and MACD on the daily time frame (from over bought conditions) .... once that occurs i now focus on the 60min time frame. Once i get a buy on 60 min i now focus on the 15m time frame... when i get a go on that one..I TAKE THE BUY SIGNAL ON THE 5MIN CHART and stay long till momentum runs out or gets overbought. These signals don't come by very often... sometimes i forgo the daily.... but when they do come, i have no doubts about being long with the signal. Thats one method i use for high probability trades. I barely made any money for a long time with stocks.... was too afraid to lose.... Thought i needed high R/R ratio. Grob... how does one know what to pick and choose from the array of information available here and out there.... there are countless advisories out there. How does anyone know what is legit and what isn't? Whos talking shit and who isn't? How do you formulate your plan... if you don't know who to take information from? There is no straight answer i think. I used my gut feeling. If i call a trading service with a question... but im told i have to wait until mkts close for someone to get back to me, versus another company who always has someone right there.. that is happy to talk to me.... and pepper me with things and services i should buy.... which one does my gut tell me i should go with?? The first one ofcourse. Its part luck... but in order to find the right person or service that will work for someone... it must be a style that fits you. And like i said before... one knows how to trade... long before one knows themselves... only when you know yourself as well as you do the mkts.... only then will $$ start to drip in.
Thank you for your response, I appreciate it. We share the belief that multiple fractals can give good signals. Also, I use the MACD and two different Stochs. Since I prefer to remain in the market always and collect profits periodically, I use the slower fractals (elevators for the continuing context. The DJ is definitely where the smart money plays. Since that is true, for commoditie indexes, I play where the lessor competition is and use the smart guys as signal generators. when the more modern data methods came into being, I reset all the defaults on the indicators to correspond to modern times. The old defaults leave a person in a lagging position and most people use those so I feel I have another slight advantage. I generally use second dervatives on comparisons over time of the values being generated by the indicators. Since the data base for generating the indicators is not actually continuous, this consideration I just chuck out the window since it doesn't matter that much anyway. As an older person who can remember the sound of ticker tapes in offices with stuffed leather chairs, I think of today as a time when a PC is a better thing than a chalk board on a wall, but the market behaves the same way as in the past. What happened to me slowly over fifty years was that I got conditioned to be able to follow the markets. It is just like knowing the song that is playing in advance. My conclusion from reading most posts in ET is that people are unable to get their screens set up in any manner that lets them follow the market. I guess that's why so many people look for things that they call edges. sounds so risky to me since they can't see what follows anything they do anyway. again thanks for responding.
Whats better odds.... a buy signal on the 5 time frame with the 15min and 60 min going against you... or one with all the higher time frames in tandem with the smaller one? Ever wonder how sometimes a buy signal on the 5min chart only makes the YM rally 10 - 12 points and other times the same signal will generate a run of 30 or 50 points? Its not random. Of course i use diffrent methods for diffrent types of days. On choppy days i will use a alot of pivot strageties versus Oscillator signals... which is lagging and will get you killed in a narrow trading day.
totally depends on the position of the 5 min signal.......that reversal of 5 might be the reversal of run...........if divergence is big, pts can also be big.......