Indeed this is true DB. It's important to ask why. I missed the short signal at 1380 on Weds. Yesterday I wasn't around for the short signal at 1348. So at this point it looks like the problem is not the method, but the dope behind the method. I did not trade today but like every day I go to the chart and identify the best entry and exit of the day. Attached. I also compared the "pivot breakout" method to the "pullback method", with the same trend filter (both were trend down all day today-- meaning take shorts only). At least today the quality of the entry was better with the pullbacks. But again the real issue is I have a harder time trading the breakouts. They make me feel uncomforable from the get-go because I feel like i'm chasing. The pivot breakouts are marked with the short arrows on the bottom, pullbacks larger arrows on the top. Knowing how I trade, with the breakouts I would have 4 losses of at least 2 pts (x2) = -16 1 gain of 10 pts on one ctc, and + 1 tick on the other = +10.5 TOTAL -5.5 For the pullbacks I would have 1 + 1 tick (x2) = +1.0 ,and +8 pts on 1 ctc, holding the other over the weekend TOTAL +9.0 + an overnight holder Side note, see how that 1336 support became resistance today.
If you read the pullback method document it talks about three levels of pullbacks: when the pivot is above the 9 sma (for longs), between the 9 and 18 SMA, and piercing the 18 SMA. If you trade all of these on multiple charts you will be innundated with entry signals. Also, a "level 1" on one chart might be a "level 2" on another, etc. etc. To keep things standardized I stick with just the "level 1" pullback (must touch or cross the 18 SMA) and watch multiple charts. This way I can compare the performance of the various types of pullbacks in a more systematic way. The various charts take turns at making money but I have found the most reliable are the 200,300 and 875 tick charts. The win % is roughly 33%.
When I first started trading this (simulated) I had the idea to make one contract a scalp, taking +5 pts on it no matter what. Turns out it wasn't a good idea, in the long run the money comes from hanging on. If I could get the win % up it might work, but I haven't been able to.
I wish I had some sort of way to incorporate volume into this. As you can see I watch the volume on all my charts. I believe that all of the price based indicators are just redundant info and try to stick to the chart. However, volume is a separate piece of data, currently unused. On the other hand, everything is working fine, if it ain't broke don't fix it.
Starting Monday i'll be limiting by trades to just TWO per day, preferably one in the morning and one in the afternoon. This was pretty much my recent average anyway, but I hesitated to put a hard limit in the method for fear of missing out. My wife reminded me that my "fear of missing out" led to some losses in the past. I reviewed my trades and noticed that losing days would have multiple losers concentrated in the morning or the afternoon, with a nice winner during the other half of the day (which hardly ever made up for the multiple losers). I also noticed the winning days usually had between 1-3 trades. Once I latch on to a good one, I tend to spend a lot of time in it. With a hard limit of two on the trades, I will make sure I don't overexpose myself to a particular day's lousy conditions. I see something like 3-4 entry signals every day. Almost every day, at least one of them turns out to be a really great trade. With only two trades I have a decent shot at getting the good one, while avoiding lots of very bad things, including: Getting whacked for a large cumulative loss on a choppy day Getting tunnel vision and missing out on the big picture of the day Taking trades outside the system Forking over too much money to the broker (sorry guys)
There are several key things I had to learn to become profitable: Develop an ambush mentality, rather than predictive. The purpose of the system is to capture a particular type of market action. When the market acts in a particular way, it makes money. When it doesn't, it doesn't make money. I can't control or predict when the good action will take place. I can only open a position and quickly determine if the action is there or not. If not, I get out, and I don't let it hit that stop. It's just like setting up an ambush. You hide and wait. If the poor fools don't come along to get whacked, you get up and leave. You don't just sit there until something bad happens to you. I consider hitting my initial stop a bad thing, even though it is only 3 NQ points. Let the market teach me to trade. For one, it's free. To design the system, I looked at the prior day's chart. I looked for the big moves. I found what chart gave a good entry signal and caught that move. From then on, I kept track of how many good entry signals showed up on that chart, vs. crappy ones. Eventually I decided on several charts that usually give the good signals. It's an ongoing process. I keep track of how things change from month to month. For example, August had a lot of 10-15 point range days and the 90 tick had most of the good signals. This month it's moving a bit more and the 300 tick is the big money maker. Study Exits. When someone discusses a method you always hear about entries but hardly ever about the exits. I use the same process to study exits as I do to study entries. I have a table of what the best exit was and the number of times it occurred. Once I have a winner going, I may begin to see some of these exit signals. I can make an informed decision about getting out because I have an idea of the odds. Make money by keeping losses small (just like poker). The winners are easy (if you study exits). The goal is to add a large amount of small negative numbers together and get a total WAY LESS than those winners. Trading maxims cannot be applied blindly! Everyone has already heard the long lists of trading maxims. Good stuff, but I had to learn to do my homework before applying them. For example, "letting your winners run." How long should I let them run? By studying exits I have a good handle on how long. Another example is "trade with the trend." Well, there are only fifty million different trends you can trade with, and they're usually all different. I chose a particular trend which is aligned with my winner holding period. Be patient. There's no rush, take your time. And now, the best for last: Successful traders are obsessive-compulsive rule followers. Corallary: Don't trade like an ass-monkey.
Today's action shows why I trade both day and swing trade positions: the swing was a scratch but the day trade pulled in some bucks. This helps me a lot psychologically. I'll get a few good swings once in a while, but it sure is hard to keep my head up when that's all there is. The details: Started the day still trend down with a gap up, so that trigger finger was ready to go on the short side. The first hour was slop. Then there was a very sneaky, but excellent, signal on the 200 tick (first arrow on the chart). Sneaky because is followed some slop without much warning. (I've noticed many good signals follow this pattern.) There was also a continuation signal on the 90 tick. We got down to Friday's low and I closed the day trade position as soon price moved above that doji (second arrow). Then we had the rally; the swing stopped out for + a tick (as usual). Another note, the method did not capture any of that rally. Price just took off too fast without any decent pullbacks. Fine, i'll take what I can get. It's a tradeoff in risk as far as i'm concerned. I like not having to risk a lot, but still having some good trades.
I spoke a mistruth: there were a few pullbacks in that rally. What I meant in my previous message was that none of those pullbacks were of the variety that I have in my sights. A pullback has to be on the 200, 300, or 875 tick chart, and it must touch the 18 SMA on those charts. I experimented for a while taking pullbacks on the 30 tick and 90 tick, but found the best trades of the day were almost never from these charts. So why trade 'em at all?
Just a couple of paper cuts for me today. That's what I call my numerous small losses, averaging about one NQ point per contract. Trend down all day. No decent pullbacks on the early selloff, but after the bounce off 1305 there were two short signals on the 300 tick. I took both entries. I was conscious of the bounce off the big resistance. In hindsight I think I should have just tried once, and saved my second trade for the afternoon (where it turns out there were some great signals in the afternoon selloff). The trendlines you see are used to trail my stop until the trade gets to breakeven.
I stopped out both my attempts at getting long today (marked on the attached chart). In the first trade price dropped below the pivot low. Taken out by a tick. One of the true joys of trading the NQ. I continually gatheri statistics on this effect and on my stop placement in general. I compare the amount of money saved with stops vs. the amount of money lost by missing good trades. I believe this is the only way to answer the question all new discretionary traders have, "where's the best place to put my stops?" In the second trade the market eventually moved up, but dropped below the pivot low for a while first. The method does not capture this kind of market action. Also notice there was a great entry before my 1st trade today that would have stuck. I bugged out because it was a double pivot low. I had never seen or considered such a thing before, so I didn't go for it.