Since I have you pegged as a smart cookie, I am somewhat surprised you cannot see that an instruction can be both specific and yet arbitrary at the same. Your entry instructions are very specific and clear to understand. The arbitrariness I was referring to is in their result. I compared the usefulness of your entry rule to a coin flip. If I instructed you to flip a coin at the beginning of bar 2 and go long on head and short on tail, that would be very specific and clear to understand and just as arbitrary in terms of entering on the right side of the market. I was expecting something along the line of, what entry rule isn't arbitrary and could I provide an example? And my answer would be, not with anything limited to the first two 5m price bars that start the day. At least, not if entering on the right side of the market is the objective. If the objective is to just get into the market, then of course a rule such as yours is perfect. I can make up a perfect rule too with a little tweak: For a long trade, 5m bar 1 has close LOWER than open; enter if bar 2 breaks bar 1 high. For short, bar 1 has close HIGHER than open; enter if bar 2 breaks bar 1 low. My rule is intended to catch traders on the wrong side who think the close relative to the open in the first 5 minute bar means something. Now if you just go and do your homework and choose your preferred method of trade management - placing a protective stop, setting a minimum profit target, and deciding whether or not to move your stop to breakeven at any point, oh and knowing when to reverse when you're on the wrong side, and be sure to make a trading plan first, and also get a spreadsheet and backtest, and put in 10,000 hours, and listen to people who hold themselves out as "consistently profitable traders," and read Al Brooks, and definitely read Mark Douglas's Trading in the Zone, have to read that - and soon enough you too will be laughing all the way to the bank. Good luck!
Yes, please fill us in.... As I recall, Dr. S is in the "retail trading is impossible unless you're already rich" camp. But people online say they can make thousands of dollars a week trading futures from home in a 25k account. Dr. S says no one makes a living trading a 25k futures account. Or a 50k account either. But some people here and elsewhere say yes you can. I wonder.... has Dr S changed his opinions?
Very interesting, Surf. I am aware of his work of course, but not as closely as I would like unfortunately. Somehow stumbled upon Mark Douglas mentioned by NoD above and found his works to be very pragmatic and useful. Denise Shull is great too, no further as last weekend I was reading her article about the role of red color in trading. What books by Dr. Steenbarger would you recommend to read among first? P. S. Somehow financial psychology never was my business in the sense of specific counselling, though it would sure be interesting occupation to be busy with some day. My 11 years of counselling practice are mostly related to personal issues so far, of course I helped friends every now and then with their trading related emotional issues, but that never really become a business. Yet.
And you of course would like someone spoon feed you 100% mechanical "holy grail" setup with exact entry/management/exit criteria given for every particular market so that you immediately start making big money trading it without putting in any efforts? Oh people, people...
Is anyone going to try NoDoji 5-min bar breakout idea? I'll try it now. Let's see how it goes.... Friday: long trade. MFE = .40, MAE = 2.72 Thu: short trade. MFE = .16, MAE = 1.71 Wed: no trade. Tue: long trade. MFE = .12, MAE = .88 Mon: short trade. MFE = 1.77 (finally a good one with no heat) Fri: long trade. MFE = .23, MAE = 1.20 Hmmm... seems most days there's more money going in the opposite direction of the breakout. I don't know what to make of that. This is confusing.... I bet Brett Steenbarger would be pretty surprised to know you can make money trading by doing breakouts of the first 5-min bar. If I can figure out how to do it I'll be sure to let him know. Or maybe Surfer will figure it out before me.........
How are you supposed to figure MFE anyway? MFE in the next 3 bars? Next 10 bars? MFE by the end of the session? MFE reached before price touches other side of opening bar? MFE before price returns to entry point? MFE reached before XXX amount adverse movement? etc. Lots of choices....
Yella, based on how you calculated MFE/MAE, you will not be trading this play with a wide target that holds through retraces, will you? See how well doing your homework works to keep you out of trouble? I'm a scalper with a minimum profit target of .20. On a 5-min chart I calculate MFE as the number of ticks price moves in a given direction before retracing and breaking in the opposite direction through the high/low of a previous price bar. My stop is never greater than .12 on a breakout play. Hope that helps
Historical chart, spreadsheet and some patience answers most of such questions, but that's usually too high price for a holy grail by ET standards.