Cool - Thanks KP And away we go... k p said: with enough careful analysis, you can see which trades require a bigger stop, My thoughts (in no particular order) Each trade has a rationale for taking it / entering – when the trade breaks down and that rational no longer valid – breach of that is the stop loss placement – any bigger is wasting $ capital..., and burning through emotional capital This statement has the connotation of forecasting/ predicting…, potentially even knowing – we simply can’t fall into those traps…, ever ================================== k p said: High win rate and small profits per trade are almost the exact opposite strategy of low win rate but a high profit per trade. First the whole notion of win rate It proven that a < 50% win rate is overall profitable with correct risk (money) management The term win rate – for *manual systematic traders (*a term MO coined that I very much like)..., is a made up fallacy/ talking point – use by shills – to entice us into buying their services / wares No matter the win rate – we make our pay check by managing each and every trade that break downs – first and foremost…, period =========================== Now…, with regard to the statement overall Winning consistency is not determined by how frequently one trades…, or how quickly one takes profits Winning consistency is a direct result of correctly identifying the current context…, then waiting on / taking the appropriate signal(s) within that context The amount of potential profit available is determined by the PA The actual amount of profit realized is determined by the trader’s acumen ===================== Additional thought But first – a thought on time frames Imo the term Time Frame is a misused label – instead…, it should be called Time Sample It all the same exact PA…, and it all contiguous – it simply a matter of the sample size we choose to break it into for our own personal consumption I believe the term "Time Frame" erroneously leads folks to view PA as somehow discrete…, and unique to that particular TF picked ================= Anyway The way this statement is (actually both statements are) framed up – comes across as using two discrete time frames (samples) to trade from / compare results In fact we should only ever be using / referencing one TF (time sample) to trade from / as comparison Yet irrespective of the TF used for trading – the approach one uses should remain constant Now…, I realize what you’re trying to say is; There is more opportunity on a smaller TF – and yes…, potentially there is – but…, there is also the practical side Yes HFT (computers) can…, and do – exploit these smaller TF opportunities Humans however…, can only take so much of this crack candy before becoming overly saturated – and rendered completely ineffective…, if not (and more likely) exceedingly detrimental – to their trading ======================== On yet another note; In response you mentioned scalpers – so let’s define these day trader scalpers Scalpers…, historically…, were traders who attempted to captured the spread – that type of trading is mostly dead – HFT nailed the coffin shut...,imo Do these scalpers still exist – likely they do…, and I nowhere near qualified to say they don’t Day trader scalpers – which includes me – strive to capture a portion of each “move” There are of course a handful of additional categories day traders fall into – but not germane for categorizing scalpers =================================== Interesting. What I mean with the first is I think that if I plan to take a REV at a key level and get in right at the level, I could almost keep a tight 2 point stop, so if price overshoots by more than 2 points, its more than likely that the reversal didn't/wont happen. The “pat” answer would be – what does your back testing show However it no secrete – I’m not a big fan of back testing for manual systematic traders If every moment in the mkt unique – how the hell can one use past data for future happenings I do think back testing (rather studying / reviewing historical data) useful for seeing/ familiarizing what past iterations of one’s decided signals look like / can morph from..., even into It also useful in identify the evolution of an instrument’s behavior…, also with learning mkt mechanics 101 =================== Anyway – to address your above comment specifically In this business…, like no other – information costs dearly Too little costs…, as does too much Too little – one is entering prematurely…, and with not enough supporting PA – which leads to increased losing trades (trades breaking down more frequently as one never really materialized anyway – think death from 1K cuts) Conversely too much – one is entering too late – price has moved away from the correct stop loss placement (where the trade breaks down / reason for entering no longer valid) consequently risk has increased Incidentally regarding this last one – the potential profit (move that can be exploited) is reduced The way to identify/ define optimal entry is; Experience – with experience one’s PA deciphering skills improve Learning the behavior of what you’re trading – and though behavior does constantly evolve – knowing the instrument intimately allows one to pick up on the nuances of the evolution quicker / easier Keeping a journal and logging each trade – as over time tendencies do emerge No way around it – in the beginning…, nailing entries is a crap shoot at best Survive this…, while gaining the necessary experience/ knowledge/ insight – trading becomes a whole lot less burdensome (notice I specifically did not say easier – as no matter how easy some days are – other days will more than make up the difference) ======================== But if I buy a breakout, maybe a RET after the breakout, lets say 3 or 4 points above the level, then a logical stop would be below the actual level that price broke out from, so in this case, I'm thinking a 4 or 5 point stop would be prudent just in case price tests the level again that before was resistance but now could be support. BO means there was a range for price to break out from – breach of the upper range (for a BO up)..., or breach of the lower range (for BO down) is the stop – anymore of a stop is wasting money We pay in either a wider stop…, or comish and fees to reenter – comish and fees are way less costly than an increased stop You’re going to find…, when in a losing trade – it like having a big ass boat anchor tied around your neck tugging you to the deep 6 A loser costs monetarily…, and it costs psychologically Get out of the loser…, save your $ capital…, preserve your emotional capital…, free yourself up to trade again Compared to spending the coin for another fee and comish – this akin to an ubber blue light special at Kmart (look it up on Wikipedia if unsure of the reference) As for trading the RET (retest or retrace) – stop would be the breach of either (breach of the low…, or high – made by either) Why draw a loss out any further in hopes price will return We never trade the signal – that is entering too early (on too little information) We trade the supporting PA of said signal As for the second, I'm not sure why could would be inaccurate. Some traders prefer scalping and require a high win rate, whereas another trader might be going for big win, attempting to catch a bottom of a huge move, try a few longs and get stopped out a few times, but keep trying to eventually get that huge move back up. To me, these two strategies are like night and day. (although I guess both make sure of a tight stop, but the win rates would be much different) I addressed this previously – more frequent entries and reduced profit targets – do not equate to more winning trades Creating proper context…, then waiting on / taking appropriate signals within that context – does So long as it done reasonably…, and within the constraints PA is providing Damn I'm wordy today RN
Regarding: "...whereas another trader might be going for big win, attempting to catch a bottom of a huge move, try a few longs and get stopped out a few times, but keep trying to eventually get that huge move back up..." This is every trader's dream, catching the bottom or top for the huge reversal move. The problem with trying to do that is you're fighting a huge army (the with-trend army) and getting "stopped out a few times" means your taking a hit with each stop out. By the time you're finally on the right side the action, you're often so badly wounded that you're unable to hold for the big move. Instead you're praising the Lord if you manage to get back to even, or you're moving your stop to break even on the first retrace after your position turns green. You want to control the opposing side all by yourself instead of joining the powerful side or waiting for the powerful side to align with your personal opinion of what's worth fighting for. By trying to enter into a huge reversal move without any evidence that the big powerful army has your back, you end up paying far, far more than if you get in at a far "worse" price by waiting until a new trend asserts itself. k p, just look at how many of your entries you posted that were nearly at the top/bottom of significant price swing in the other direction and you didn't have the psychological ammo to hold through a wee bit of price action noise. Please provide us with links to trades where you tried a few [longs/shorts], got stopped out a few times and then caught the huge move.
I can't remember a single time when I ended up holding for the Big Move. I was so grateful to get back to even after my top-picking excursions, only to watch price run about +$5K more without me.
I can see I'm in good company here. I of course cannot show trades where I tried a few times and then caught the huge move, mostly because if I try once and it doesn't work, then I'm scared to try again. This is partly why I was also a bit happy with Thursday, even though I kept shorting an up move. Just the fact that I tried a few times made me happy. Seeing though as two very good traders here, RN and NoDoji, come from exactly this same mindset, it means there must be hope for me too. I do still believe though that this isn't entirely always accurate. Big moves do often happen at either previous day highs or lows, overnight highs or lows, or other significant levels from an hourly/daily chart. Perhaps fading each and every one isn't a smart strategy, but I think the risk:reward ratio is quite good IF a trader can manage to hang onto the trade and use a tight stop, but of course not get out early just because he has a chance to get out BE if the trade at first went against him a few ticks. (not something I have shown I'm able to do, but mentally, I understand what I'm trying to do)
Kp, Instead of giving you advice, let me try something different.. What do you think your main problems are..? The things that are holding you back..
Here's an example of this with a CL trade I made a few days back: * Going long early multiple times only to be stopped out continuously or flattening because it obviously wasn't working. * Impatience when I should just be waiting for a reversal around the value area low. This is bad trading because I'm letting my opinion of what's going to happen overrule what I'm seeing happening. * Finally nailing down a good trade (I use volume profile when setting targets which is why I was able to luckily take profits at the top in this case) but with the weight of screw-ups taking a large chunk out of the profit. While that entry was good it was simply too early information-risk-wise; that being said - it was a limit order at a low volume area based on the thesis that price would find support around 56.20. * Not adding at 11:00 or (probably more safely) 11:05. Here's another where I did some losing late US session trades within some chop nonsense, made up the majority of them with a gimmicky cross-session short, then actually traded like I knew what I was doing during the London session: * Multiple shitty entries at a time I simply just shouldn't have been trading it (post pit session close is usually crap). * The 57.92 short was taken after flattening out of a non-working situation with the assumption that the Asian session would reverse. While it did, it's still a gimmick IMO and the exit was an obvious "past-sins" early exit as leaving it would have been much better. * I then come back later for some late night London session trading which went well for me. The 57.32 entry may look sketchy but I'm going off of what the German market did (rejecting the low value area), watching ICE Brent, and watching DX at the same time - so it's hard to convey the entire context with a chart. A less ballsy and potentially better entry probably would have been around 57.28 IMO. To some people that 57.28 area appears like a scary place to enter, but it's actually the best place to enter. What may look temporarily bearish is not actually bearish - it's an opportunity for great entries with low risk and if it doesn't work out you didn't lose much. * Final short on a nice limit entry before flattening out and going to sleep. BTW: This is what I mean by not chasing - dictate to the market what is acceptable to you and know it's going to retrace during profit taking and weak hand shakeouts. One can get some killer entries by doing this and if it doesn't hit your entry, then oh well, there's probably another chance and if there isn't, find another trade later. There's also a personal theme here of crappy/cold trading and then better trading following that. Psychologically that can put one in a bad head space unless they really recognize the reasons for their bad trading and that they're separate trades entirely from the next one. I did not let the past mistakes take me out of the game or send me home with my tail between my legs. They were simply screw-ups, bad reads, etc. The market is not out to get me, I am out to get me and I recognize that when it happens.
I can't speak for RN, but there was no real hope for me until I learned to grit my teeth and buy when price is making new highs and sell when price is making new lows. Our beliefs control our behaviors even when scientific evidence or our personal experience tells us to behave differently. Struggling traders believe they can somehow identify which of their valid setups will result in profitable trades and which will result in unprofitable trades, when in fact there is no way to know with certainty the distribution of gains and losses for any given set of variables that defines an edge (Mark Douglas’ 5 Fundamental Truths of Trading). More than once I made it clear to you that you're on the WRONG PATH. Your statement above is a signpost pointing you to the RIGHT PATH. The WRONG PATH is the path where you're searching for some way to make yourself feel certain about either a) the outcome of each trade or b) the placement of a miniscule stop loss order. If you feel certain about either or both of these, then you're a believer. If you're a believer, putting on the trade is so easy. As long as you remain a believer, holding the trade is so easy. In fact, if you're a believer, chances are pretty darn good you can hold onto a trade until you puke the position out for a massive loss. Funny how when you're in a losing position every retrace contains Hope and when you're in a winning position every retrace contains Fear. Now that's the power of belief! The RIGHT PATH is the path where you see a promising a trade idea (buying support or selling resistance at certain key levels). You conduct a statistical analysis and you see that certain S/R levels produce "huge" reversal moves when they hold and you define "huge" as "more than 10 NQ points". You discover that when price goes more than 2 points through these key S/R levels, it's "more likely" to continue against you and you define "more likely" as "63.7% of the time over each consecutive series of 100 such trades". The RIGHT PATH is the path where you mindlessly place your initiating order with automatic stoploss/profit bracket order in place every time you see price approaching one of these pre-defined key levels. The RIGHT PATH is you work on this perfect execution process in a simulated account until you can hang onto the trade and the powerful positive results make you a believer. Then you take your confidence and trust into the live trading arena and watch profits accumulate week after week.
Excellent question. At the root of it is absolutely that I don't have a solid enough trading plan that tells me exactly what to do and when, how many times I try the same trade, at what point I stop and reverse, and at what point I just leave it alone in that price ara. I do believe that since trading is a bit of an art form, and no moment is ever the same, and the fact that there are no absolutes, then you have to be a bit flexible with what you want to see, with where your levels are, etc. So a trading plan has to be somewhat firm, and yet somewhat loose. Saying this though, I do also believe that perhaps much of this doesn't matter. At some point, you just put the trade on and let it hit either profit or stop. And since I can see over and over again that juicy trades of easily 10 points can be achieved at the levels that I am looking at, then it should be a no brained to take the trades and just accept the risk. But in the moment, I of course start to question. I use the excuse that I don't have a solid enough trading plan to give myself permission to get out of the trade at BE, even before hitting the stop, just because it initially goes against me, but at the same time, just knowing that with a 10 point target and 2 point stop, I've only really got to get it right one out of every 4 to reach BE. So essentially, I've got excuses for taking trades, and excuses for not taking trades/getting out of them too soon. I think I should be doing more work to analyze better what needs to be seen to enter trades, but with such tight stops, there is only so much you can analyze before you just leave it up to the stats of chance. One of the big things I've also seen is that when the day starts not too well, I go into catch-up mode because I just want to end at BE for the day, but of course where I start the day has no bearing on how the next trade will turn out. I might start with a string of wins, a string of losers, or anything in between, and none of this is dependent on that first trade, other than the fact of course that I am the variable. To sum up, I find it a bit difficult to take a loss because I assume that I'm getting in too early, too late, and this has certainly been the opinion of some trades here, but its all based on how they trade. Without putting on the same trade 10 times though, i really have no idea if that type of trade has an edge or not. On Monday and Tuesday, I think I put on one trade each that would have gone 10 points, but I got out too soon. My not so great day on Thursday I think it was has a bunch of losing trades, and then I didn't hold on to the one that would have gotten me my 10 points. In essence, I'm not allowing myself to let stats work for me because I assume I'm doing things wrong, but at the same time, I can see that my results would be so much better if I just let the stats do their thing, and as i960 keeps saying, just leave the damn trade alone. I might very well have been up for the week if I just took every trade as I wanted to and let it hit either my profit or stop. Jesus, I think I just babbled too much without even answering the question well enough.