Thanks. It's difficult to know when to "trade scared" and when to allow price to go against you for 5-6 points to stay in the trade. The basic SLA rules as described here - as I understand them anyway - require that you exit when the SL or DL is broken. In many cases that will let you exit with a "small loss" (1-4 points or so). On the other hand that same rule will keep you out of almost the entire up move that started at about 10:30-ish (because the DL keeps being violated and then fanned). Instead of a large profit one ends up with a series of small losses. If one is to deviate from the basic SLA rules and you stay in because you anticipate a possible fan, price may well go against you 5-6 or even more points. It is near impossible to know in real time if price will resume it's move and put you in the green again or if you would have been better off exiting per the original, basic rules. The chart you posted for today looks great but I for one can't do that in real time: http://cdn3.traderslaboratory.com/f...ne-nq-100-futures-1-minute-20140414165022.png So. How do I get to that place where I can do that in real time? Did any of you SLA:ers do it today? Edit: To be fair, I don't think the basic SLA rules says you should reenter on every retrace in a long up move like that. Personally I just take the first retrace and if that fails I stay out.
Take the chart I posted. Mark where you would enter your first short. How far would price go against you before the continuation?
Thanks, I will redo the entire chart with this in mind. I have some other stuff I need to take care of first but I will report back here, eventually.
Don't do the entire chart. Do just the first entry. On the basis of your results from that backtest, you'll have some idea of what to do with the next entry, but only the next entry. Nothing will be accomplished by doing the entire chart all at once.
Not trying to butt in here, but I find myself in the same conundrum as Trip, so I figured it couldn't hurt to go through this exercise. If the first entry were held, the SL was compromised at #1 but the up movement wasn't maintained. The next bar had a 'close' outside, but price promptly went down. Even so, in real time, it made me uncomfortable and I exited. With an entry of 64.50, price went up to 68.25 = 3.75 points against. With the 2nd entry if taken at 59.50, price went up to 61.50 - 2 points away (#2). Almost strangely, the 3rd entry noted had the least risk as price did not go against until the SL was broken. It was broken with very vertical price and immediately followed by a HL. Right after the first 2 entries had an SL break, neither long was triggered. But it was enough to shake me out of a short. I think I'm with Trip - when to hold and when to let price go against you a bit?
You're setting up a row of dominoes; when one falls, they all fall. If your SL is too tight, it will be broken. Then when price recoils, you get "stopped out". Then you draw a demand line that would not be drawn if the supply line hadn't been too tight to begin with. Since this demand line is usually irrelevant, any long entry taken off of it is not triggered or, if also set too tight, is triggered then stopped out. This prevents you from being in a psychological position to take the next short but to wait until the one after that, which is so late that it will also be stopped out by a recoil. You want these lines to protect you from failure. That is not their purpose. Their purpose is to track supply and demand. If you're obsessed with your entry and whether or not you're in profit, all that goes out the window and you are in effect wasting your time, focusing on your P&L rather than price movement. Backtesting will tell you how far away from the ret your entry has to be in order to avoid being tripped by a meaningless tick without being so far away that you are nearing the end of the move. I use a point, and not just because it seemed like a good idea. Backtesting will also tell you how much of a recoil you can expect after entry. If the entry is correct, the recoil will not be more than a few ticks. I know this because of my backtesting. I also know that if for some reason it recoils more than that, then no entry would have been correct. There is a high probability that the trade is bad to begin with. Your entry has nothing to do with price movement. If you had simply allowed price to come back and make a lower swing high, you would never have exited. If you can't allow price to make these retracements without jumping out, then go ahead and exit and, if price makes a lower high, re-enter immediately instead of waiting for another, lower retracement which will put you in exactly the same situation.
First of all - I hear you - I really do. I'm sure you feel like your words are falling on deaf ears at times. I really AM listening. I think this is an area where I'm confusing the idea of scratching a trade initially with allowing price to move somewhat from the intent of the trade. I know that I have to be comfortable, but with the first entry, price DID go down. Is that movement enough to confirm that the trade was good? Currently I'm combining ANY recoil with the notion of scratching.
I just finished reading the posts that were icluded during my trip. I am not sure why there is a sudden cloud of doubt coming over the SLA thread again. It has been explained to exhaustion by Db. Is it the only way to make money?. Sure it isnt, but is a great one specially for screwed up traders. If someone doesnt like it, they can go somewhere else an open an algo trading thread or a MAXO thread or whatever, if there are other traders interested they will join, if there arent they wont and those will fade away. But please leave the SLAs threads alone. For those in chat, I have a proposal I want to discuss tomorrow, is not that different from the one made a couple of weeks ago, with the difference that I already made part of my homework. See you tomorrow.