The new method I am designing is manual ,a method which I could trade daily and make consistent profits without the draw down periods of automated systems.I still have another occupation which takes priority during the day , because it pays my bills.The other occupation is declining . I find too many things on my mind , designing and trading automated systems,doing another job and day trading.Maybe I can not give enough quality time to trading.
Maybe it does end up being psychological for some of these traders. The only way to really know is to compare what their results would have been had they stuck to their discipline vs. what they actually achieved, since it could be that even if they had followed their strategy, the strategy had simply ceased to work. That's always tough with discretionary trading. Also, it could be the case that by tweaking their previously-profitable strategy, they come up with something better. No guarantees of that, of course, but also no guarantee against it. Or, it could be the case that switching strategies is prudent, provided the new strategy better matches their current psychological problem, e.g. if they have a psychological barrier against going long breakouts in a market they think is overbought, they could switch to a strategy of buying dips to get long or a method which shorts breakouts. There's always more than one way to skin a cat. BTW, I only make between 0 and 4 trades per day, with the average being just a bit under 1, and I let the market determine if I end the day flat or not, so I don't hold myself out as a "day trader" per se, I just know that once I settled on my strategy, the old issues I had blamed on "psychology" went away. Not immediately, but eventually.
Trend lines are trend lines in your time frame. If you're trading off that 5-min chart, you're looking to capture profits from price swings in that time frame. So draw your trend lines across 5-min pivot levels. When these trend lines hold on pullbacks, they won't always be perfect to the exact tick/pip because traders may be vying for fills at the value level and so price may not make it all the way to the trend line (strong trend). Price may dip through the trend line slightly as well, attracting the opposite camp and trapping them if price holds up close to the trend line (weaker trend). Entering trades with limit orders at or near trend lines is definitely more speculative, but the advantage is tight stops. The biggest failure on the attached chart is all the lines. First, you need to ditch everything except the price bars and maybe a 20-period EMA, which serves as a strong mobile support/resistance level during trends. Then begin at the left edge of that chart, cover up everything else and describe what you know as you reveal each price bar. Without seeing what preceded the left edge of this chart, there's not much revealed until the failed breakout during the 18:35 bar. Buyers step back in at the bottom of the range, but they fail to take control as shown by selling off lower highs. You can position yourself long on any of the visits to support, but have a set of stop and reverse orders just below that support level because the failed breakout attracted a lot of breakout longs who are now potentially trapped and the bears are licking their chops, waiting for a break of the range low to sell. Signals that an intraday trending move is about to occur: Failed upside breakout, lower highs, strong support level tested half a dozen times. This is a descending triangle formation and strong moves come out of this formation. If support holds and price move back up through the heavy resistance around 1.45755, an upside trending move is likely. If price breaks the triangle support floor, a downside trending move is likely. The nice thing about price action trading is that you don't have to predict which way price will go. Be prepared to trade either way and take advantage of the move. I personally would be positioned long near support, with a double stop just below support. When price broke through a previous bar's high in the descending triangle (break of the 19:15 bar high during the 19:20 bar), I'd expect follow through to break previous resistance and then test the high of the failed breakout. When price began selling off after hitting a lower high during the 19:25 bar (failed triangle breakout), I would move my stop loss to break even and leave my sell stop in place for the downside breakout. By listening to what price is saying, I protect myself against any large loss, and take advantage of a solid profit by joining whichever side exerts solid control. Once price is trending down, there is no reason to even consider a long position until a higher low is followed by a break of a previous resistance level (higher low/higher high) OR price bases around a key support level from a larger time frame. At the close of the 20:55 bar, we see support established at a higher low and previous resistance (20:40 bar high) broken. Price is now likely to retrace 50% of the range from that failed breakout high through the new low, so it should push to around 1.4557 before indecision between the bulls and bears sets in. Where do you buy in this potential intraday trend reversal setup? Draw a trend line across the lows of the 20:30 and the 20:50 bar and place a limit to buy a pullback to that price zone, which should get lifted during the 21:20-21:25 bars. Alternatively you can place a buy stop just above the high of each closed pullback bar until a long position is triggered. If you entered using a limit order, you can place a tight stop, because you want the trend line to hold, not fail. Better to take a small loss and try again, than to allow for a larger loss when trading counter to the previous price move down. If you entered using a buy stop, place your stop loss below the low of the pivot that took you into the trade, or below the entry bar itself if price action isn't too volatile. So far I've described two setups to take advantage of intraday trending moves. If this was a daily chart, you would likely swing trade it the same way.
that reminds me of the saying: snatch defeat from the jaws of victory. if you don't try, you will get 50/50 setup, like flipping a coin. I don't know how you can get 80% failure rate, unless you intentionally go against the market. The typical way of failure is holding a loser too long, not a low rate setup. If you have a low-rate setup, you have failed before you start trading.
A failure can reverse quite quickly in a ranging market.80 % failure rate is not correct, for day trading using 20 pip stop and 20 target,and move to b/e after 10 to 15 pips.It will probably result in 2 break evens , 2 losses and 1 profit in a choppy market .20 % win rate , 40 % loss rate and 40 % breakeven. In forex the intra day moves can be very small in a ranging market.By the the time several blue bars have developed for an up move , the trader goes in , the move is over and often a reversal takes place hitting the stop.There just isn't enough time and evidence on small time frames to get the direction correct more than 50 % of the time.It can be done with longer time frame directional bias. If trader is taking positions when price has moved up or down 50 % of atr,the set ups in the direction of the trend are more likely to be profitable.If trader waits for set ups in the directional zone , greater than 50 % set ups will be profitable .Add to this the longer time frame and fundamental bias , the chances of success are greater than 80% .The success rate is affected by stops and targets.5 pip stop and 80 target will probably drive success rate to 10 %. On a good trending day , one can enter and exit several times, one can make good pips.There are not enough trends on intra day basis.If one can survive 3 to 4 choppy days and make small profits, and make the money on a large trending day , day trading can be profitable. Stops of 12 pips are taken out more frequently than stops of 20 pips,the greater the stop the less likely stops get hit.Same applies to profit targets , the greater the targets the less likely they will be achieved. Deduct the spread and day trader is at a disadvantage to start with.To make money trader has to be on the right side of the market and in the right direction. Market ranges 80 % of the time ,therefore to get good profitable runs of 2*stop is less likely to be achieved.If stop is 20 and target is 20 , the direction is correct > 60 % /70 %/80% , day trading can be profitable.Profitability depends on direction.If stop and target are same , and direction is correct 50 % of the time,, trade is a loss due to spread.
Yes, one can make money when the market trends, or is in a range, but not when its random. 1) If the market is in a trend, go long in up trend, and short in down trend. 2) If market is in a range, sell the top or buy the bottom. 3) If market price is random, don't trade. So when I say 70% of trend setups work, I mean when the market is in a trend, they work. Also, yes we want to measure the movement of swings during the time period we trade for the instrument we trade. For example, lets assume the range is only around 5 ticks and sideways, then this movement while not random is indeed chop or barb wire, and it should not be traded. From Art of War: 1. Sun Tzu said, The good fighters from old first put themselves beyond the possibility of defeat, then waited for an opportunity of defeating the enemy.
How do you determine a random market? Trending markets give good rewards , and risk reward is better because trending markets give higher highs or lower lows , and supports and resistance have more strength.
I found a great article.I hope it is O K to copy and post from SEC. http://www.sec.gov/investor/pubs/daytips.htm Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage, but running the risk of higher losses too. While day trading is neither illegal nor is it unethical, it can be highly risky. Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring. Here are some of the facts that every investor should know about day trading: Be prepared to suffer severe financial losses Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status. Given these outcomes, it's clear: day traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, retirement, take out a second mortgage, or use their student loan money for day trading. Day traders do not "invest" Day traders sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True day traders do not own any stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses. Day trading is an extremely stressful and expensive full-time job Day traders must watch the market continuously during the day at their computer terminals. It's extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends. Day traders also have high expenses, paying their firms large amounts in commissions, for training, and for computers. Any day trader should know up front how much they need to make to cover expenses and break even. Day traders depend heavily on borrowing money or buying stocks on margin Borrowing money to trade in stocks is always a risky business. Day trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. Day traders should understand how margin works, how much time they'll have to meet a margin call, and the potential for getting in over their heads. Don't believe claims of easy profits Don't believe advertising claims that promise quick and sure profits from day trading. Before you start trading with a firm, make sure you know how many clients have lost money and how many have made profits. If the firm does not know, or will not tell you, think twice about the risks you take in the face of ignorance. Watch out for "hot tips" and "expert advice" from newsletters and websites catering to day traders Some websites have sought to profit from day traders by offering them hot tips and stock picks for a fee. Once again, don't believe any claims that trumpet the easy profits of day trading. Check out these sources thoroughly and ask them if they have been paid to make their recommendations. Remember that "educational" seminars, classes, and books about day trading may not be objective Find out whether a seminar speaker, an instructor teaching a class, or an author of a publication about day trading stands to profit if you start day trading. Check out day trading firms with your state securities regulator Like all broker-dealers, day trading firms must register with the SEC and the states in which they do business. Confirm registration by calling your state securities regulator and at the same time ask if the firm has a record of problems with regulators or their customers. You can find the telephone number for your state securities regulator in the government section of your phone book or by calling the North American Securities Administrators Association at (202) 737-0900. NASAA also provides this information on its website at www.nasaa.org/QuickLinks/ContactYourRegulator.cfm. http://www.sec.gov/investor/pubs/daytips.htm
Nodoji, thanks for taking the time to painstakingly provide the details on the fundamentals of price action trading... Please note that your efforts are highly appreciated by many. Since you've stated that you probably won't write the book on daytrading, then perhaps you'll consider opening a trading room (with a discount to fledgling ET traders ) thanks again for your time... Btw, which books would you recommed for becoming efficient with setups and trade management (i.e. Reading Price Charts Bar by Bar - Al Brooks; Trading in The Zone - Mark Douglas; Micro-Trend Trading for Daily Income - Thomas Carr; etc.)? thanks, Walter
Lets talk again when you start day trading from this - http://www.egmcartech.com/2011/03/21/brabus-ibusiness-2-0-mercedes-s-class-gets-apple-ipad-2-800-hp/ Otherwise its as good as a pie in the sky