While I do not disagree with the general message contained within this suggestion at all (i.e. do not spend more money on trading tuition than is absolutely necessary), in my opinion there is one fundamental flaw in it: It is very difficult to build statistical evidence on the positiveness of a system's expectancy if one doesn't normalize the trade outcomes for volatility. As a result, by sticking to one contract alone, one may be lead to draw a false conclusion on the system's performance (or lack thereof). The best remedy, I think, is to adjust position size on a per-trade basis. Sure, once one gains more experience, the position size can again be adjusted, by weighting with subjective setup probabilities. But to initially convince oneself of an edge, I think position size should vary to make dollar risk constant.
Gabe, I have two things that might be worth saying to you. First, put any and all trolls on ignore. There is not one human being alive who is a successful market operator who is going to sign in to an internet message board on a Saturday night to flame a struggling trader. Not a one. I've not been at this game very long, but I have read enough old and new threads here at ET and at TL to know that most of those posting are not making any money at this, and those who troll are losing money hand over fist, that is, if they are trading at all. AAAbeltway posts mostly in chit chat and politics and religion. He wants your rules and set ups because he doesn't have any of his own that work. Put him on ignore. And I know from my own personal experience with HurricaneUS that he is a serial stalker who knows about as much about price action and how the markets work as most do here at ET, which is very very little. Use that ignore button and don't feed them, i.e. do not respond to them. Second, I have not read your whole thread. I did read the first several pages, which for me is about 120 posts, and then I skipped around through the middle and picked it up here at the end. A few observations: 1) You have nodoji's ear, and from what I have read of her posts here at ET, it is a very good ear to have - If I were you, I'd appreciatively take advantage of any help she is willing to send your way. 2) You said you were part of a chat room and that you got your current system from one of the guys in the chat room. I think (a) you need to get out of the chat room while you get to work on the business at hand. I've been invited by some very nice people to participate in their chat room, and I have thus far resisted my own desire to have some company during the day because I know that I might be tempted to second guess myself if someone else second guesses me first. And (b) It is great that you found something that seems to be clicking with you at some level. For me what clicked was a chance reading of Wyckoff's Studies in Tape Reading/The Day Trader's Bible and finding a DbPhoenix thread on a google search one night. Most everything I do has come from DbPhoenix, even my understanding of Wyckoff. I trade the NQ, same instrument as he does. I trade it using support and resistance and judging what price is doing at those levels. But, while I trade based on his method or system, my particular use of his approach is still different from his particular use of it. Most of the time, I would bet he and I are in the market or out of the market more or less at the same times, and when in the market, we are without a doubt facing the same direction. But as to when each of use get in, and when we get out, and how we manage an open trade is no doubt slightly off, because each of us has found our own way of reading the price action and each of us has his own way of trading the markets that fits whatever differences in personality, risk tolerance, etc and so on exist between us. So you also would probably benefit from stepping back from your chat room buddy and taking sometime to work this method out for yourself without constant feedback right before and during and at the possible end of each and every trade. That gives me a third observation that might be worth saying to you. You might find it helpful to put your demo trading away for a few days or even a few weeks and just watch price for a set time period each day. During that time, record your observations in a notebook. Don't be thinking about where'd you'd buy or sell or stop loss or any of that. Just mark your observations. What was yesterday's high? It's low? What does price do when it approaches one of these levels? What does it do when it breaks one? Is each break the same? What happens when it breaks a low by a tick and reverses? How does price behave when it is trending for dozens and dozens of ticks? Does it pause? If so, for how long? What sort of range does it pause in? How does it act right before it ends its pause and resumes its trend? Or right before it ends its pause and reverses? I know that both DbPhoenix and NoDoji recommend this observational phase. I did it, and I can't tell you how much it really gave me the foundation to do make money trading. So, to sum it up, ignore the trolls, and find your own way to trade in the context of a method that you know from observing others trade actually works. Good luck to you!
As an example of how two traders trading alike might differ - DbPhoenix recommends trading multiple lots so that you can take some profits along the way while letting some contracts run. Even though everything I learned about the markets and about trading came from DbPhoenix, I have chosen to trade like NoDoji here, and I am all-in at once and all-out at once. The issue was whether or not to trade multiple contracts and then scale out in partial profits, not whether or not to vary position size relative to some sort of risk to reward calculation. For what its worth, I will put on as few as 5 contracts and as many as 50 contracts on a trade. The "risk" in dollars is not my concern. I am never risking more than 8 ticks and if I do scratch with a loss it is usually 3 ticks or less. I size up depending upon what I think is coming up next and the odds of a big move. If I see high odds of a big move, I bet big. If I see a mere 60% chance of a retest of a swing high just a few points away, I'll bet small. The risk, or the "stop out" point is always the same for me, so I vary my size on what I judge the potential reward to be. "Different strokes."
This makes a lot of sense if trading multiple instruments, vary size based on the nature of the instrument. I trade more contracts of NQ than ES, more of ES than CL. But when trading one instrument, any expansion in volatility is compensated for automatically by the fact that my technically feasible stops have to be a bit wider and the profit targets get significantly larger.
Are you referring to CL? Because I've never traded more than 6 contracts, and as a scalper I can't even imagine trading 50 without "the market" taking notice, LOL.
I only trade NQ. I can't say that I've noticed the market taking notice of me when I trade big, though my fills often come in spurts and my stop limit is usually stretched to the limit by the time I get the last few filled, rather than getting all filled all at once. Those few times I'm pressing 25 - 50 I am usually not alone - viewed on a five minute chart, these times that I'm going big are usually during a volume spike. My default size is 15, and has been since abut August. I adjust up or down from there.
>>I've not been at this game very long, but I have read enough old and new threads here at ET and at TL to know that most of those posting are not making any money at this, and those who troll are losing money hand over fist, that is, if they are trading at all. AAAbeltway posts mostly in chit chat and politics and religion. He wants your rules and set ups because he doesn't have any of his own that work. Put him on ignore. And I know from my own personal experience with HurricaneUS that he is a serial stalker who knows about as much about price action and how the markets work as most do here at ET, which is very very little. Use that ignore button and don't feed them, i.e. do not respond to them.<< I'm going to ignore the ad hominem aspect of this, for now at least, but I would ask you to reconsider one thing. Perhaps I was asking for his methodology so this thread would make some minimal sense to me. I have a lot of experience, and I have often helped newbies. You rightfully are annoyed by flamers, but how exactly is one supposed to make useful contributions when the rules, if there are even any being applied, are all a secret? I think getting help from Nodoji is a great idea. In fact, I would advise him just to listen to her. Too many suggestions lead to confusion. ps. Do you really think I am interested in stealing the secret methods of an unprofitable newbie?
I already gave you something extremely valuable. I told you taking 10 trades a day in a discretionary approach was not going to cut it. Is this a real money or play account? If it's the latter, I'd advise you to stop wasting time and do something useful, like maybe some serious backtesting of alternative strategies. Understand the concept of MAE. What exactly gets you out of a trade? You trade the CL. Do you know who Mark Fisher is? Ever heard of ACD? I'm not endorsing it, but since a lot of the floor follows it, it's important. Whatever. This is why I generally stick to P & R. An endless parade of know-it-alls who can't make money but feel free to piss on people who do.