My previous forays into trading have been ... shall we say lackluster. I feel I need to get down to the basics to improve my trading. So in the beginning I will be focusing alot on the who's, why's and where's ... I am also a 'chartist' at heart ... I love looking at charts (It is said that the eyes are the window to the human's soul ... then I must conclude that the chart is the window to the market's soul) I will be posting alot of charts. This will be my journal of discovery ... Feel free to add your wisdom, your thoughts or simply your observations ... So without further ado ...
Earlier tonite I was going through some charts in a attempt to figure out a trading plan. I was getting frusated (just like the past few previous nites). The more charts I looked at the more frustrated I got. I felt as if all the studying in the world wouldn't bring me closer to figuring out where the best place to put a stop would be. It also seemed that I wasn't any closer to figuring out the market's next move when looking at a chart ... it felt like 1/3 of the time I was right, another third of the time it would reverse (just to spite me), and then another third of the time it would seem to move randomly around. I was discussing a chart with YooHoo over at this thread http://www.elitetrader.com/vb/showthread.php?s=&postid=1234739#post1234739 when it occured to me ... "So let's just say that hypothetically no matter how many charts I look at I can only predict the market's next move 33% of the time ... and I thought about the above trade/chart where my reward to risk was only at about a 2:1." "I thought; how can I glean a profit if I have a reward/risk ratio of 2:1 and if my 'predictive' powers only net me a 33% likelyhood that I have 'guessed' the market's next move" "I'm going to need to focus on my reward to risk ratio ... a. I'll need to look at how many trades I do (because commisions will eat away at my reward/risk ratio), b. I'll need to look at where my entry is in relation to where my stop will be placed (this is something I really didn't concentrate on in the past - my entry was usually based on what I saw in the chart and my stop was a after thought (as if the market would ever go against me ...), c. I'm going to need to focus also on a concrete target(s), d. I'm also going to need to use appropriate stops that net me profits on the move up; but dont get me stopped out too early and that dont let gains fizzle away ..." So maybe I dont need to be more then 33% right with my chart predictions (although I hope to someday be); maybe I just need to improve my reward to risk ratios and choose my battles wisely.
Good luck. The problem I have found is that it is extremely hard to predict your reward. The stop is easy but how do you know how far it is going to run? You can use fibs, equal moves etc. but I have a hunch they will only be right about 33% of the time.
I dont First I look at what the formation is that I am going to trade - then I decide how far would it go if price was just based on this formation. Second I look to see what trendlines/support-resistance is near the move. And I look to see how strong those trendlines/SnR lines may be. Third as the move progresses I look to see what the candles show. but ya I hope to improve on that 33% - it seems that 1/3 of the time I call it right ... then another 33% of the time it reverses on me - and then another 33% it sputters around and does something I wasnt even thinking about
I posted this on Optionpro's thread and I wanted to link it here because I want to try to implement this in my trading to see if it can help me break some 'unhealthy' practices. http://www.elitetrader.com/vb/showthread.php?s=&threadid=78981&perpage=6&pagenumber=6 There are alot of things I want to work on in regards to trading ... - minimizing the amount of trades that I will do a day (in futures); the idea of 1-2 trades a day (in the past I had done from 10-15 rt a day (this in turn had eaten into profits because of all the commission and spread. - Sticking to my trading plan - and when entering a trade having a pretty set stop-loss spelled out and a target. As the commodity moves moving the stop loss to keep profits and still be able to ride a move (this will vary depending on target and T.A.). These are just a couple things I want to work on ...
YM2min 10-18-06 simulated trades I decided I was going to do some simulated trading before I started throwing real money at the futures market (again). I'm not sure if I will be posting all my trades everyday or what - just got time here and I am doing it now. Basically I had a few objectives today: 1. Start up some simulated trading so I could get my feet wet. 2. To limit the amount of trades I did - I want to retrain myself to trade less 1-2 trades a day (in a given market) and dont overtrade overall. I wasnt going to have too much time to trade today (was gone for about 3-4 hours in the middle of the day so I made the best of it). My first note was to myself - in that in the past I probably would of faded the gap since I had a downward bias myself. But it would have been a wrong move and I would have blow at least 15 points. 1. I entered the trade in the middle of that large red candle and set my BS at 71 (manual) (I wasnt totally sure if I would hit the BS key if it just touched or what - I need to work on a plan that I am comfortable and confident with). I was very nearly about to pull the trigger with the one trade at the 70 mark. Then I was about about to pull the BS trigger with the second pullback (flag). My BS was moved once the YM traded down to the 15 level it was moved to the 25 level. I sent a market order in to sell once we started to pull up toward the lower channel. 2. My second trade didnt fare so well ... I had just gotten back from running around all day and thought I saw something in the chart so soon placed the trade after a short glance (the above isnt an excuse its just the facts). Then after getting in I saw it more as a broadening formation; so as the YM pulled back more I was worried we'd head much lower so I exited. I exited somewhat quickly which is good - but I didnt relax a bit more after being out and I pulled the trigger too soon - so thats not good. I need to come to trading with a peace of mind - not a racing mind. The first trade worked out really well; I'm glad I made the trade - the emotions were tough to deal with at each pullback.