Thanks for your detailed response. Do you hold overnight positions? If you do, how do you handle gaps that go against you passed your predetermined stop loss? Do you handle differently gaps that go against your assessment of the trend and gaps that go in favor? Regarding your discussion with random trader. The two of you differ in your views of the trend. Would you consider anyone who was short overnight as a trader picking a top? (Just want to be clear.)
Yes, I hold overnight positions at times, but only when they are in the direction of the trend. In terms of gaps, if one gaps over my stop loss I typically close out my position. I don't hold hoping it will come back. The other possibilities really are too numerous to discuss. Gaps in my favor I may profit take at times...but not always. Gaps in a new trend I'm more apt to sit with. Gaps late in a trend I may profit take. And of course, it depends on the reason for the gap and the size of the gap. Too many variables here. Same thing the other way. Gaps against what I believe the trend is could be a gap I would tend to establish a position if I'm not already in one. Too many different possiblities. Actually, here's what we were looking at in terms of trend this AM. The DOW Industrials broke out a couple of days ago and traded at a new high just yesterday. Clearly the trend is up here by anyone's definition. The Transports closed at a new high yesterday. Again, trend up. The NDX closed at a new high for the move yesterday. And opened higher this AM. Trend up. Ditto Nasdaq Composite. Russell 2000, new high close yesterday. SP Midcap and Smallcap both at new highs yesterday. So again, clearly the trend is up in most of the market as defined by these various indexes. The SPX had not broken out. But as of this AM was within a couple of points of the high. How by any objective measure could you call the trend down here? Worse case is someone might claim the trend in the SPX is sideways. But clearly the trend is not down. What I read Random Trader saying is that the "bias" is down. I don't know what that means, do you? But what's equally clear here that if the trend is up, or at least sideways in the SPX, Random Trader is top picking. And so is anyone else who was short last night. Now, just because they're top picking doesn't mean they won't be right. Maybe they will be. That remains to be seen. OldTrader
SPX trend was up through late June. Since then I read sideways. My down bias means what's coming next more likely is a down trend, hence it's more likely to make money on the down side. The down bias also means I will trade only from the short side. Since I am anticipating that the trend will be turning down (I agree SPX is not in a down trend yet on the weekly), you may say I am top picking. As a result, I am always early. This is not a problem. I made money last year though I was early often. I lost money this year because I refused to believe the trend was up from March to June. This should not happen again.
The difference is this time if my system tells me the bias has changed to up again, I will trade from the up side. I overuled my system in March through June. Do you see the difference in attitude? Whether my system is good over long time is a different matter. I hope you don't dispute that.
Not disputing your system, just that you read "sideways" and you are short. When my system says "sideways" I am out, or if I already have a profitable position, have a very tight stop on it.
I am short because I believe the next move is down. As long as it remains sideways, I don't lose anything. I don't see any problem in this. If one is buying puts, then it's a different story.
Roger that, it depends on the vehicle. For me, the only ones I let hang or move against me are dividend bearing stocks or bonds. To become profitible with futures I had to learn to quicky exit in the beginning if it didn't move my way right away. So while I will hold some NQ/ES winners for days, even weeks, the most time i'm in a loser is about 5-10 minutes. Most of my trades (about 2/3) are small losers or scratches. Anyway sorry I read you wrong, but don't worry, my journal will be up in the next month or two and you can come give me a ration of $hit about how I don't give my trades enough time to develop.
I will quote from Market Wizards again. It's the book I reread the most times. Some say it's worth its weight in gold ($2000), I think it's worth its size in gold ($40000). One trader said missed trades cost you more than bad trades. Most time there is a mechanism such as stops to get you out of a bad trade, but there is no mechanism to get in a missed trade. For example, if I am out in a sideway market and then the OldTrader scenario happens on the downside (a gap down followed by more down), I don't know how or when to establish my short position. That's why I am early often but I don't why too much about it.
A quote from Dr. Van K. Tharp's Peak Performance Course. "Successful trading involves developing low-risk ideas. It has little to do with prediction." He is also in Schwager's, "Market Wizards" Book. gotta_trade