Allright Nwb... I like your attitude and especially your work ethic. I've been where you are prob around 10 months ago (Sept 04). I've come a tremendously long way (21 fully automated pts today in ES on 1 contract even amidst the 4 point gap loss because of today's Globex nonsense). I too am still in the 9-4 thing just out of necessity to be somewhat active and with health insurance coverage. You will probably hear over and over that you need to blow out and this that and the other from a number of people who may or may not have already mentioned this on this thread. I have yet to blowout, I won't even mention winning streak. Optimism IMO, is better than pessimism. Although I would make an effort to provide some advice to all of your questions, I'll try and address that which I believe to be the most pertinent. Just within the first few paragraphs, you mentioned two things which strike me as nwb hurdles/hindrances 1) pessimist 2) loss... It's odd and may be heresy, but neither of those two items is something that I believe to be relevant. The broader context for trading is money making. Where as you identify a pessimistic opportunity as short, I orient to shorts, longs, and laterals as money making opportunities. Nothing to be pessimistic about. I presume then, pessimistic for me would imply a trade moving against me (ie. failure to be profitable). I strongly believe that the optimal mindset is to be neutral/unbiased (ie. if the trend is tight and lateral, bracket for long/short money making). Then your paradigm becomes what's the next opportunity for making money... Better yet, you never need to predict ever. Not having the ability to reverse on the very next bar does have some disadvantages and thus you are limited to only half of a price cycle to make money. So be it, profit in the segment of the cycle that you are accustomed to. I would encourage you to strive to be neutrally biased (ie. seeing short opportunities just as easily as long opportunities). Eventually, you notice that these opportunities are EVERYWHERE and then you find yourself in a strange place working out where not to waste your time, better yet optimize capital efficiency of your time (I'm still trying to nail this one) LOSSES This is probably the toughest issue to deal with especially for a nwb. My worst loss on any single position is commision + a single tick. I feel that it is absolutely imperative to know that losses need never happen and thus the single most powerful trade is by far a wash/breakeven. Reason being is that losses only occur once the market moves back past your entry point, thereafter, losses accumulate. Any loss that accumulates after your entry is a Profit in the opposing position. Thus why hold onto anything that is losing? You'll find that Hope/Fear directly stem from the inaction to wash/breakeven. People fear the market moving back and thus exit too early, and hope that the market comes back so that there losing position can then become a winning position. Getting rid of these useless trading emotions can be regarded as an edge. I don't believe in edges but do believe that there is no place for these emotions. Some handle the emotions well and thus can manage large losses without too much heartache. The sooner one can deal with these trading emotions, the better. Personally, a wash disables both of these emotions. With a wash. Imagine the worst case, a crap load of consecutive bars with the same exact range open and close. This is the worst case and your broker thanks you for the accumulated commission. However, no one else gains in this scenario either (well at least not on the immediate fractal, the sub fractal is possibly profiting unless your sub fractal is the T&S/Tape ). In this scenario, losses will be entirely to accumulated commission which IMO is always better than trades that continue to move against your entry. It's my belief that not washing is exactly like a deer in headlights. The deer (the trader), sees the market heading directly at them runs them over, and then past them. The damage is now done. Washing just gets you out of the way immediately. Most seam to get run over HOPING that the movement is only briefly against them (ie. a market accident). The failure to get out of the way was due to their fear of not having profited amongst other reasons, and suddenly the emotion turns into a hope of not having to realize a loss. Too many of these scenarios is bound to leave one a CRIPPLED trader (ie. blowout). Fortunately, should your worst case trade be a wash/breakeven, then you find that the above described worst case wash scenario is brief (a few bars). Then what... Ans. Profits immediately up ahead... I hope that you may find some useful information in my comments... Kindest Regards, G33M4K (non-BEginner)
I would definitely agree about swing trading as a possible alternative, or trading futures. I think you ultimately get the best education for a lifetime of trading by learning how to mix technical analysis and market data that you would not have otherwise doing pure intraday trades. Straight daytrading demands all of your attention during the day and has a very narrow scope--if you dive right into prop you'll find after two years or so that it'll be hard to branch out into other careers. You'll have a very powerful degree behind you, and if you can muster the cap to trade your own money while working a normal job you get the best of both worlds. I don't know many people who do prop for a long time. There's a lot to be said for getting experience in the field you're in which you're educated and trading to supplement your income.
Makosgu - good post. However, I think that only works on a fast fractal? I tested on Wealth-Lab reversing after every bar against you, using daily data. The whipsaws kill you. You go long, it closes against you while you are at work, you reverse for the next day - it closes against you again. Losing, losing.
I'll respond to this loosely with a Q since this type of whipsaw on a "fast" fractal is alot more frequent than on a daily. Why wouldn't there be a stop a tick below your entrance if one weren't monitoring? That would be an automated wash. The next day, an attempt to reenter, if same scenario, automated wash takes me out again. -=comm... Next day... etc... -=comm... Eventually, your wash doesn't get hit, now a long is in effect since it didn't wash by days end. IF1/IF2/APA... Remember, the market can always get choppy, the wash prevents you from staying in chop. Precisely when you don't have back to back washes, you're a la profit. I am actually more algorithmically efficient on longer period fractals than the intra day since my trading paradigm is abstract and fractally recursive... I jumped in today to intra-swing GOOG + $7.90 today (H-L = $3.71). This was crappy execution because of the institutional noise on the T&S. What it all boils down to when you start asking yourself money making questions is what action is required to put positions at or near the HI/LO of any bar and I used the word bar very loosely since trends and bars from my vantage are exactly the same.... Only diff is my open and close on the bar are aimed at the extremes. It takes work to move positions to these extremes and would require several more posts to explain the abstraction of this. Kindest Regards, G33M4K (non-BEginner)...
Makosgu, thanks for your reply. I dont trade based on a backtested strategy - though I do use backtesting to find out what things work and what dont - then I use myself and a checklist with bar by bar monitoring as the 'system'. ... ...Though, re: backtesting, tight stops usually kills returns. VERY tight stops as you suggest always seem to lead to the poorhouse as the big R-ratios cant compensate for the extremely high percentage of losers.
A few final comments. I both forward and backward test with ticks nonetheless. No indicators, no equations, just market points. R-ratios??? losers??? 1 ES +20.75 1 YM +489 GOOG +$7.90/share ??? My broker luvs the comm fees since I wash & reverse frequently but it has failed to kill returns and this has been the case in the worst of interday trading days... This is related to the algorithmic efficiency I mentioned in a prior post for longer period fractals. Let's not assume a percieved inevitability. I relentlessly seek failures in my paradigm so that I can eplore them. The only point in time that stops are tight is right at my trade action points and it is to immediately get to the right side of the market. The limiting case you mention definitely exists, and automation encounters it a dozen or so times during the day. However, the majority of the trading day does not reside in the limiting case and this is fortunate for all traders... Kindest Regards, G33M4K (non-BEginner)
"it's just a game where I have a 50% chance of winning, and over time the 50% that I lose slowly slips from my memory." Let's clear thing up. This statement is far from the truth. If you have a 50% chance of wiining then why do 95% of all traders lose ? Making $500 of fun money is a hell of lot different than HAVING to make 2,3,4 k a month to pay bills. "does my -$500 calpine experience count for that?" It depends on what was learned from your loss. i"s it possible to work a 9-5 job in the U.S. and trade?" Yes, but it is very stressful and there is a huge conflict of interest, If you want to trade for a living you have to give it 100% and treat it like a full time job and not a hobby. " Should I go balls out and see what happens with just trading a few months? " Are you saying you want to trade stocks for a living off of a 7,000 account ? The pattern daytrader rule has you screwed and I will say it will be almost impossible to make a living off with these circumstances.
Makosgu your posts are very interesting. Your logic makes sense but two obvious questions come to mind. Firstly, in the case of intraday trading, how do you identify the likely extremes of the bar/trend,cycle where you place your trade with a worst case wash or best case success in mind. Secondly and less importantly, how do you take profits, do you trail or just reverse when you get to the opposite end of the bar/trend. thank you F