If you think you can pinpoint the probability of future market action with numeric specificity, and to the decimal point at that, then you are mistaken. What you have presented is a frequency distribution of past behavior rather than a probability distribution of upcoming behavior. If-then market relationships are rather more vague and any predictive value is best limited to "balance of probability" rather than assuming numeric specificity. If you haven't yet come to this conclusion, I assure you that you will. "Maybe not today. Maybe not tomorrow. But soon and for the rest of your life."
I am looking for the statistical "structure" of a "normal" market profile for a given day. I then observe the "flesh" as it were , being applied to the statistical "skeleton". It works for me, maybe not for others.
Sorry Gabbie, I was more focused on the predictive statement at the end of your remarks, and not the interior. Of course I am more interested in the distribution history of past behavior!! What else is there ? If your methodology is predictive without using the statistical distribution / historical tendencies of what constitutes a median profile in a given time frame , then I would recommend reading the first sentence of your previous remarks.
Never let a profit turn into a loss. On the face of it, this looks like very sound advice. However I find quite often adhering to this rule costs me money although I am right about the direction of the market. Here is a scenario as an example. Go long at 37 stop at 31 profit target 47 market gets to 42 move stop to 37 Market comes back stopped out at break even market makes new high, buy at 43 stop at 37 profit target 53 market makes 48, move stop to 43, get stopped out then market continues to make another new high. This can happen a number of times so that I end up buying the market higher and higher. The market moves way beyond my original profit target but never the less I close trades at break even a number of times until the last one gets stopped out with a loss. Is there something wrong with this supposedly golden rule of trading or am I doing something very wrong. I, obviously, am since I find myself very often on the right side of the market and still end up loosing money. Can anyone tell me where I am going wrong Thanks First things first...what market are you trading? I don't like to assume but I won't be responding again so I assume that you are trading the S&P eminis. If you reread your post you will see what your fatal flaw is...greed and fear. As per your example when you initially placed the trade your stop was 6 pts with your "target" being 10 pts away from entry(that is one hell of a move on the ES in one shot). This gives you a perceived risk/reward of 2:5(risk 2pts to make 5 pts). So once price moves in your favor 5 pts you move your stop to break even and now you are risking 5 pts(those are your points and not the markets at this point) to make the additional 5 pts left til you reach your "target". If your trading plan calls for you to only take trades with a greater than 1:1 risk reward your stop should be moved up more aggressively than break even. To many of you guys trade expectancy based systems that are predicated on you making numerous trades but you are afraid that you are gonna make your broker rich or some such nonsense. Trading is a business and should be treated as such. The time to worry about commissions is when selecting a broker not when selecting a trade. Average 5 pts a day trading the ES and you will see how dumb it is to let a damn 5 pt winner turn into a break even trade and I don't give a damn what system you use or who you talk to about it. Day trading is about consistency and discipline and there is no way in hell you shouldn't take some profits and remove risk from the trade if you have 5 pts of profit on a trade in the ES. I remember when the daily range on the ES was less than 10 pts and a lot of you guys are gonna be hurting big time when the volatility goes back to "normal".
First things first...what market are you trading? I don't like to assume but I won't be responding again so I assume that you are trading the S&P eminis. If you reread your post you will see what your fatal flaw is...greed and fear. As per your example when you initially placed the trade your stop was 6 pts with your "target" being 10 pts away from entry(that is one hell of a move on the ES in one shot). This gives you a perceived risk/reward of 2:5(risk 2pts to make 5 pts). So once price moves in your favor 5 pts you move your stop to break even and now you are risking 5 pts(those are your points and not the markets at this point) to make the additional 5 pts left til you reach your "target". If your trading plan calls for you to only take trades with a greater than 1:1 risk reward your stop should be moved up more aggressively than break even. To many of you guys trade expectancy based systems that are predicated on you making numerous trades but you are afraid that you are gonna make your broker rich or some such nonsense. Trading is a business and should be treated as such. The time to worry about commissions is when selecting a broker not when selecting a trade. Average 5 pts a day trading the ES and you will see how dumb it is to let a damn 5 pt winner turn into a break even trade and I don't give a damn what system you use or who you talk to about it. Day trading is about consistency and discipline and there is no way in hell you shouldn't take some profits and remove risk from the trade if you have 5 pts of profit on a trade in the ES. I remember when the daily range on the ES was less than 10 pts and a lot of you guys are gonna be hurting big time when the volatility goes back to "normal". [/B][/QUOTE] I actually trade the UK FTSE index. I normally use a 2 minute bar chart. The figures I was quoting in my example was, for exampe, 5237, 5231,5247. So my initial "perceived" risk reward is 10 to 6 slightly less than 2. You do make a good point that once, as per the example, the market reaches 5242 by bringing the stop to break even the my risk reward is one to one. If I understand you correctly I should move it to a level to maintain the same risk reward. Do I understand you correctly?
I actually trade the UK FTSE index. I normally use a 2 minute bar chart. The figures I was quoting in my example was, for exampe, 5237, 5231,5247. So my initial "perceived" risk reward is 10 to 6 slightly less than 2. You do make a good point that once, as per the example, the market reaches 5242 by bringing the stop to break even the my risk reward is one to one. If I understand you correctly I should move it to a level to maintain the same risk reward. Do I understand you correctly? [/B][/QUOTE] Exactly my point..so you do understand what I am saying. Too many people want to place their illusion of certainty over commonsense and practicality. Your "target" is the most irrelevant part of the equation because it is "your" target and has absolutely nothing to do with anything or anyone but you. The only certain parts of your trade are your entry and your stop...everything else must be managed due to the market conditions. The market is dynamic and therefore you must constantly monitor the market action so as to extract profits when the markets present the opportunity. As the trade in your example evolved the 5 pts of unrealized gain then became another part of the equation that was certain. So now you have 3 known variables(your stop, your entry, and 5 pts of gain) and 1 uncertain variable(10 pt target which is now 5 pts away). So if you are even confident that your target will be reached you should still lock in at least 3 pts of profit therefore you are now risking 2 pts to get the remaining 5 pts that are left until you reach "your" target. You have traded long enough to go back and review your trades and you will see that you would be better off locking in profits especially after the market has made a significant positive excursion in your favor. How you define significant positive excursion is up to you whether that be 3 pts or 10 pts but you have to realize the ATR of the market you are trading which will determine what is to be reasonably expected. Average 3-5 pts a day trading the FTSE and you'll never work for someone else again in your life. It is a personality trait that causes people to value what they want over what they have. Protecting what you have is Job #1 and keeping what you earn is Job #1a.
Actually, my approach is more reactive and timed at what has historically shown me to be low-risk entry points. But I do not kid myself about numeric specificity. As I noted earlier, it is more about general tendency best described as the "balance of probability." I believe this is a more real-world approach to uncertainty than misguided reliance on numeric specificity. Just my opinion, of course, and maybe a reflection of my own limitations. (But I don't think so.)