I'm going to try this. At the very least it will be a good trading exercise drill for me. Who knows? Maybe I'll actually start hitting the occasional big winner if I can just walk away and not have to sweat out the little retracements while physically sitting in front of the computer. Thanks uptik
Scalping is an intentional, focused strategy with very explicit objectives. While it suits many people who also happen to be impatient, it's not necessarily appropriate for someone just because he likes to jump out quickly. If fear is an issue, Corallus is less likely to pull the trigger on his cover stops because he won't want to "lock in" the loss. Wide cover stops with small profit targets may be a recipe for disaster if his system doesn't define support and resistance properly. Additionally, his notes on this chart seem pretty confused (not the notes themselves, but the action that he's supposed to take and should have but didn't or did but shouldn't have). Scalping might only compound the problem. --Db
You trade ES at 4 am? First off your 5 point loss on that first trade should never have happened. There are two types of moves- one type produces wide range bars on the 5 min chart. Such a move really has no well defined support/resistance. Don't be the first to discover where that support/ resistance might be. That kind of market can just keep on moving. The counter trend traders can get squeezed again and again, providing more fuel for the move. You never want to get on the other side of a move like that. That is what was happening on your first trade and you got on the other side of the market at the first 'pause' which you took to be support. When the market breaks through what you think support is, you've got to consider that its going to move even more. Don't wait to be proven wrong, just take the 1/4 point or 1/2 point stop. The second type of moves are range bound markets- trading ranges, triangle, flags, crowns, reversals etc... This is the kind of market where you can aggressively be a counter trend trader, getting in front of support or resistance. Just don't stay with the pattern too long or you'll get squeezed when the pattern fails. You need to figure out which type of market you are in and trade accordingly and you need to be aware of how things may look should your theory turn out to be wrong.
To trade the parabolic sytem, you really need to be strong mentally because, even filtered properly, it will give a lot of small losses and a few big profits. I don't think that this system is appropriate with your actual state of mind. I have worked in investment banks dealing rooms for 5 years and was succesful. I resigned to trade my own money and was not succesful at first because of the same kind of problem you face. So I am more a scalper now and have targets of 5eurostoxx pts in the morning and 1sp point in the afternoon. This works for me. I have good backtested longer term systems that I don't trade for the moment. Once size becomes a problem scalping, I will trade them with a view of diversification.
I didn't actually mean for him to become a scalper, just that he should perhaps address his impatience to wait out a move. 9 es points is a big target to have and if he doesn't have the patience and or confidence that that target is going to hit then perhaps a methodology with more easily attainable targets and tighter stops may be better.
In this case, he turned out to be correct in that what he thought was support turned out to be support. The "test" of support is not so much that it holds without any give whatsoever but that a violation of it can't hold. If price comes back quickly and holds where it should have in the first place, then the support level is valid. The problem is that situations like this encourage the trader to think that he's right and all those other traders are wrong, widening his stops or abandoning them entirely. And that, of course, is when support turns out not to have been support after all and the trader is screwed. Therefore, it really is better to take the small loss and wait for proof that what you thought was support really is. A 5pt loss is no way to start the day. --Db
Understood. However, unless support and resistance are clearly defined and the setups are very specific, he can wind up getting stopped out again and again in bits and pieces and slowly bleed to death. Unfortunately, few people are willing to be specific about their systems, so it's difficult to provide specific advice. If the system backtests well, then it supposedly defines support and resistance well and also provides good setups. The next question, then, is why he doesn't trust it. If he doesn't trust it, then there's a problem with the system or a problem with him, and it's a lot cheaper to go through the system yet again than sign up for therapy. If he finds that the system can be trusted, perhaps he can find ways of dealing with his fear without going through analysis. --Db
First of all, hang in there - this can be done. You are not the only one fooled by today - I missed the boat on this one also - so through my own self-critique I have seen what I missed - perhaps this may help you. I hope so. I notice that your pre-market trade (- 5 points) was decisively counter-trend - one thing I have worked to give up is trying to call the point of trend reversal - you went long without any confirmation of trend reversal (such as a multiple point testing of the support level followed by a series of higher lows). I think if you look at the chart again you'll see that there was really nothing to stop it from dropping more except for a historical number - but a level is only support or resistance if enough traders think it is - in this case there really was no bounce. Then, like me, you failed to be patient and wait for the Opening range Breakout - today it happened later than usual, but there was a nice 10 - 15 point Long trade there that I also missed because I had hit my loss limit for the day trading in the chop. But I bet the patient traders nailed that one. Most days I would have. So we live to fight another day. Good luck. Paul