Weekly results: 7th week of 2015 I saw big improvement in trading during this week. I traded much calmer, took less trades and this all resulted in very nice statistics for the whole week. I had the highest weekly profit since the beginning of this year. 75% win ratio and just 16 trades. Equity since January 7, 2015 Statistics since January 7, 2015
I received some comments in the past suggesting that my strategy is way too complicated and I got several advices to start trading more simpler approach. Something more KISS. So I decided to write an article on my personal blog and explain why I don´t like to trade simple strategies. I was also accused that I am stealing the internet traffic to my own blog (where I don´t sell any services) so I decided to publish the whole article here for everyone who is willing to read and forgive me my english Here it is: Why simple trading approach rarely works Since I started to post my daily results on my blog I got several responses suggesting that my trading approach is too complicated and I NEED to use something simpler, something easier and I even got several suggestions as to how should I trade (EMAs envelopes seems to be one of the most popular strategies out there). I appreciate any comments so I decided I will write an article about why I think simple approach doesn't work in trading. Markets are not easy First of all let me tell you that trading KISS (keep it simple stupid) strategy is like ''Brain surgery for dummies'' or ''Rocket science made easy''. It simply contradicts itself. Before you even start to think about trading, you have to understand what is the market. People see market as something abstract and they don't have any idea why the market moves one way or the other. Market is the representation of millions people's decisions around the world. They all watch the market and place their bets (buy or sell orders) according to their best knowledge. If it sounds too chaotic wait for the next piece of information. Every single time when your order gets filled, somebody on the other side of the market auction has to place the opposite bet. In other words - always when you buy, somebody else screams ''what an idiot, it is clearly going down'' and he happily sells you the instrument. This is how the market works. If the markets would be so easy and the simple strategies would work, there would be simply nobody to take the opposite side of your bet. And that is clearly not the case, it is quite the opposite as you will discover soon. There is not such a thing as free lunch Most of the traders are lured to trading by marketing. We see some sort of advertisement promising us lot of money, yachts, big villas and financial freedom. And all it takes is just to learn these 5 basic rules and you can start making tomorrow. Sounds familiar? Most of the people who are selling trading courses are not profitable traders themselves. They simply make money by selling trading strategies to others. Did you ever wondered why are they so successful in their fraudulent business? It is simply because they are selling people exactly what they want: ILLUSION. It is the same concept as weight control pills. There is nothing like pill which will burn fat for you. Everybody who understands a little about diet knows that, but at the same time diet supplement companies are making huge profits by selling the lie. People simply don't want to hear the truth. They don't want to hear that they actually have to work out in the gym, that they have to do cardio, that they have to adjust their diet and then it takes time and effort to loose weight. We live in a fast world and we all want everything right now: money, perfect body and success. And even if we know deep down that the only way how to achieve those is trough hard work we cannot resist the illusion of shortcut. Some magic pill which will give us what we need right now. No hard work, no effort just the outcome we wish for. And that is why people will continue to buy weight control pills instead of changing their lifestyle. They will remain fat and supplement companies will keep rising their profits. The same goes for trading. Instead of hard work, and studying the markets people will continue to look for a magic pill. Some easy approach or holy grail which will tell them when to buy and when to sell. If there would be such a thing like indicator, or simple rule when to enter the market, then the markets will simply cease to exist. Who in their right mind would want to take the opposite direction in these cases? Only holy grail which you can find in the markets is to understand them thoroughly. That is the holy grail which will give you an edge over the others who are still believing in magic pills. Easy prey for market makers You probably already heard about the rate of success in trading business. Nobody knows for sure but it is estimated that between 80% and 90% of all traders loose money by trading, 10% or 5% break even and only the rest 10% or 5% actually makes money. So, if we consider just this statistics, what do you think is better for you when trading? To go with the crowd, or to go against it? It is obvious that you would fare better if you go against it. But who are those 80% who are constantly loosing and how do they trade? Let's look at those successful 10% first. Who are they? Who is constantly making money in the markets? The answer is obvious - banks, hedge funds, market makers. Those are the players who created this game and don't be naive, the only reason why they did, was to make money. We all know that trading is a zero sum game (that is not really true but more about that in some other article), so in order for the big players to make money somebody has to loose money. And who is the looser? Some of you probably guessed already. It is you - the retail trader. Your only purpose in this game is to believe in the illusion of free lunch. That is everything what it takes to loose money. So, how do big players transfer money from your account into their account? Do you think they use some KISS strategy to do it - like crossing EMAs, or CCI divergences? You really think that is how professionals trade? That is why they hire the best brains in the world? That is why they hire mathematical geniuses? So they can tell them to enter long when EMAs cross? Not likely, is it? Those guys are hired to mathematicaly program the behaviour of novice traders into algorithms which are then used to automaticaly trade the markets. And how do they program the behaviour of millions different traders around the world? They can't of course and that is why they concentrate on a specific group. The group has to be big enough so it provides enough liquidity for them and now comes the most important part of the whole puzzle: The simpler approach the group is using, the easier for the programmers to program their behaviour into algorithm. In other words, the easiest prey for the market makers is the novice trader who believes in the illusion of free lunch. Those traders are looking for some simple strategy because they want to make money NOW and without much effort. So which path will they choose? Are they going to start studying and watching the markets for months or years? Of course not, they will google for some simple approach and most of them will end up using Woodies CCIs, EMAs or price action patterns like double tops, double bottoms etc. Most of the novice traders will start with very similar account (5 -15k USD) and they will use very similar money management rules - max. stop loss 2%. With that information in mind, the programer's job is very easy. He knows at which price level will the novice trader enter and he can guess quite accurately where is his stop loss. So what is he going to do with this information? He will program the algorithm so, that it will constantly lure the novice traders into the markets. Then they will make sure to push the market to the opposite direction to take advantage of their stop loss (which is basicaly market order) and trade the momentum created by them. It is like watching the flock waiting to get slaughtered. If you learn to understand the orderflow in the markets, you can watch the slaugthering every day over and over again. How not to get slaughtered in the markets? First of all - don't be the sheep in the flock. Remember the success rate in this business. If you behave like the others, you will end up like others. And 80% of them end up being slaughtered. They say that trading is the hardest way to make easy money. Trading was never easy and it will never be. The best advice I can give you is the saying from Sun Tzu's Art of War: Know your enemy! And I will just add that when it comes to trading, everybody is your enemy. Know also who are the ones who are donating money to others (if you don't know exactly, then it is you). Know who are the big players, how they play and what they want to achieve. But most importantly understand the market, understand why, when and how it moves. You have to know why the market moves one tick higher or lower. If you don't know the answers to these questions, you are not ready to trade and no KISS trading approach will replace the missing knowledge you NEED to succeed in this business.
Got to disagree on this 1, the simpler I can make it, the better I do, you just haven't gotten to a level of simple enough which works yet, maybe your just not as brain dead as myself to ever get there EMA crossing CCI's, candle stick patterns, tea leaf reading and the rest of the general KISS approaches are ofcourse total rubbish, there just not KISS enough. Simplest I can trade is, the market is going up ( short term ), join it, the market has stalled, hopefully take thy profit Banks, know how we trade, they know we'll buy 1.5300 cause of the 00, with a SL under it, so they'll blip it under hit the SL's then send her up same with a double bottom, look for SL hitting blips and reversals then join the counter move. They just want you to trade like them, then it backs up there method as being the best despite there losing, then it must just be luck why there losing, not cause there method is based on tea leafs or something equally as ridiculous.
'the simpler you make it, the longer timeframe necessary for you success?' shortest timeframe (1) tick. longest, lifetime. do you agree with this proposition? sniper, like post
No, momo doesn't translate to longer TF's well, after the fact fine, but not live, think Tick chart almost.
It's a matter of perspective based upon our experiences and exposure to other information...something that's simple for someone else may be difficult for you or vice versa. Therefore, its guarantee that if you're using a simple method...somebody out there with less experience will see that simple method as a complex method. Thus, its like two people looking at the same cloud in the sky...one see's a particular shape while the other person sees a different shape and yet another person may agree with one of the others. Lots of psychological studies confirms this type of difference in perspective. Yet, a more simple analogy is your former school or college. Some students consider the class difficult while other students in the same class will consider the class to be easy (simple).
I know couple of successful traders who are actually using crossing EMAs. The trick is they use it exactly the opposite way, many times as profit targets not as entry points. I also understand that most people will disagree with me. That is actually very good sign The thing is, I am extremely paranoid person. People who know me, make jokes about it and I don´t blame them. I simply won´t trade strategy which is well known to everyone, because I KNOW they know it and that they use it. I KNOW FOR A FACT THAT ONE OF THE BIGGEST MARKET MAKER ON THE CME EXCHANGE (I think they are the 3rd biggest subject on the CME) - RSJ - IS USING MATHEMATICAL MODELS OF TRADER´s BEAHAVIOUR TO PROGRAM THEIR ALGORITHMS. And when I watch the orderflow (tape) I CAN SEE THOSE ALGORITHMS. And I can usually predict where the algorithms will enter the market because of the SIMPLE KISS strategies used by most novice traders. They even lure them into the market by moving the market up and down. Here is an example: Most of the KISS traders, when they see a big move up they enter long because that is the simple way to trade. Then they get trapped by those algorithms which will keep eating their long market orders by placing more and more short limit orders. And market will move couple of ticks higher and as soon as the novice traders stop placing new market orders there will be nobody to buy and the market will fall with trapped novice traders at high. They will soon be in agony when they see the market moving against them. Algorithms will test the usual stop loss areas - for example 6-8 ticks in ES, 10 ticks in NQ and YM. As soon as they reach those SL area you see A LOT of short market orders being triggered. Those triggered stop loss orders will create secundary momentum with necessary liquidity for the market makers to close some of their position or even to build up their position. This is how the novice traders are slaughtered again and again, day by day, week by week. I am watching it all the time. And I don´t want to join the flock. At the same time, I am not saying you can´t be successful by trading something simple. I am just saying that by doing this, you have simply chosen much tougher enemy. I much rather join the pros and steal little profit for myself than try to fight them head on.
And I strongly disagree with the simple strategy of buying when the market goes up and selling when it goes down. There are exceptions to this rule of course but in general it is not a good idea. It is the same principle which repeats itself over and over again. Take gold for example. Always when you hear that buying gold is the perfect investment from every TV station and newspaper - the opportunity is over and those who have big positions in gold (banks, hedge funds etc.) just need the flock to provide them with liquidity so they can dispose of their positions. That is how it works. And this principle works in the markets since they have been created. There is a very old book, written in 1923. It concentrates on events from late 19th century until beginning of 20th century but it describes these principle with astonishing accuracy. It describes how big players always need to lure the flock into the market when they trade heavy positions. It is called: Reminiscences of a stock operator by Edwin Lefevre. If you didn´t read it I strongly recommend it to everyone.
I go long just as the market turns up after a down move, SL at new low, but I use a well tested dynamic range, which works well, stops me falling for the newbie trap, spike to attract trades hit SKs then reverse to kill retail again and again. My method is only simple to me I keep slipping back to many losses falling for above, normally when tired, less so these days.
February 17, 2015 That’s the way I like it Today was very short trading day for me. I was done after first 30min since opening. Took two trades, picked bottom and top and reached my daily profit target. T1 I took the first long after I saw no interest of bears to push down. I had 3 ticks heat for approx. 2 seconds. I took the first momentum. +10 T2 I was trying to go short 2 ticks higher. The market touched my limit order but I was not filled, so I chased the market a little at still acceptable price level but that was the lowest price I was willing to accept. If the market wouldn´t fill my order I would miss this one. I took the primary momentum again. +9 After these two trades I reached my perfect daily profit and quit trading. Results And how would I best describe today´s trading? Probably with this song