I guess the point you're attempting to sell to us is that Dennis would not have traded his particular method had Globex trading simply been available. I say "sell" because I don't think you know this at all. Huge volume has been traded in the bond market for example for quite some time...and yet Dennis did not choose to "scalp" this market from off the floor. Dennis certainly had the ability and money to set up a communication system to scalp bonds didn't he? He was a member. So why didn't he? To make the point one last time...I'm not suggesting that you hold your trades for months, weeks, or even days. I'm suggesting that you get into and hold trades and have the potential for larger payoffs. There is literally no need to leap out just because a trade made you 2 points. You leap out when the trade starts to fail. It's calling "letting your profits run"....one of the oldest trader statements of all time. Why take 2 points when you can make 5 points, 10 points, or 20points? Yesterday it was possible to make a trade that within the space of an hour ran something like 27 points. During this move there is no reason to sell at all...at least no technical reason. When I look at the intraday charts I see swings that are clearly bigger than 2 points. So WHY the fixation with 2 points? OldTrader
Since you don't use indicators or charts, how do you define "technical"? Who said anything about 2 points? --Db
You don't include complete information. The way you phrase the question obviously someone would always want to make more money if possible, but the reality is different methods have different risk parameters. You might make 20 pts on that one trade, but maybe you only have a 35% probability and are risking 8 points. Compare that to a very short-term method that risks 2 points to make 2 points but has a 70% hit rate. Another reason to only "settle" for those 2-points is because in the time it takes you to make those 20-pts, I may have averaged 4 trades, all with much higher % success. Also, "2-points" may or may not have been all that was available in that trade. Different methods have different ways of determining when to exit. As I stated earlier, there is a benefit to short-term trading in that you crank that money wheel more often and let positive expectation do its thing. If I make 8 trades in one day with a risk:reward of 1:1 and 70% win rate, what is the probability that I will have had a positive day? Compare that to a method that maybe makes only 2 trades in one day with a risk:reward of 3:1 but only a 35% win rate. Your wins will be larger but you will have more losing days and larger drawdowns. I personally prefer a smooth equity curve. Slow & steady is the way I make money. [Note: this is not newbie speculation but direct observation from my own trading.] "Letting winners run" is old trading wisdom that we all agree on, but it has to be done within the framework of the particular method you are trading. It is also not the only way to trade. But it seems what you are trying so say is "don't use a profit target" but instead use a trailing stop loss as a way of "letting winners run". All I'm saying is there are many ways to use a profit target and take money off the table in the markets, especially on short time frames. I don't want to get into a "which method is better" discussion because that was not the point of my reply. The point of my reply is that you implied that Richard Dennis, a former scalper, did not trade short-term time frames off-floor, therefore if he wasn't willing to do it then "Johnny" shouldn't either. My point is simply that today's technology is much different and there are many people making a nice living trading short-term time frames off-floor. P.S. I'm not "selling" anybody anything, just sharing my personal experience of successfully trading short time frames. Unlike Richard Dennis who went from scalper to long-term trend follower, I started as a position trader and moved to short-term day trading. If it wasn't for the great computerized order-entry systems available today, I'd still be a position trader.
Perhaps you should do a little reading around this site, starting with the post right below yours by Dottom. I'm sure you'll find many references to 2 points. I've also seen references to 1 point. But if that's not what you're talking about then why don't you simply STATE what you're talking about instead of asking questions. Who said I didn't use charts? I've never said that at all. I've said I don't use intraday charts. And if you don't know how to define "technical"....look it up. Evidently your point is that a newbie should trade in a way that is consistent with his personality. I think that is absolutely wrong. My point is that you're going to have to find methods to trade that work...and that they may have little to nothing to do with your personality. All personality's are not cut out to be traders, and all methods do not work. Sorry to burst your bubble. OldTrader
And Quah uses 3. Or one might use 5. Or one might use the spread between the bid and ask. But no one is "fixated" on 2 points. You said that there was no technical reason to sell yesterday. How could you know this without an intraday chart, unless you have a special definition of "technical"? --Db
Do some reading of my prior posts....they set out how I trade. I don't have a "special" definition of technical. I just don't use the prepackaged indicators that all of the newbies use. OldTrader
I have, but they're not terribly specific. I ask these questions because I want to understand how you're using these words. Without that, there's nothing to discuss, much less debate. You don't use indicators and you don't use intraday charts. Therefore, you're not using price and volume bars or pattern. My question as to how you define "technical", then, is a legitimate one. If you'd rather not answer it, that's okay by me. --Db
I use daily bar charts. I look at some of the moving averages on the daily bar chart, like the 10, 20, 50, and 200 day averages. I look at where the important trendlines are, and support and resistance. I look at the volumn characteristics. I follow all of the important stocks like IBM, GE, GM, INTC, MSFT, MMM, C, etc etc. I also follow important sectors, like SOX, BTK, BKX, bonds. I follow these and other large numbers of stocks on both an intraday and end of day basis. My goal is to find out where the leaders of the index are going, since my active trading activity is focused around indexes. I also follow tick, trin, and vix...I've followed tick and trin for years, vix since it originally started to received some publicity. I pay particular attention to how the future acts when it nears or reaches an important point, like the prior day's low or high, or a prior major low, like the july low. Or when it reaches an important support or resistance point. Note that the market tends to migrate between highs and lows, support and resistance....it's a price discovery mechanism. When it can't move farther in one direction, it tends to move the other direction. Intraday charts don't add alot to the mix for me. I have them in my software package. I'll look at them periodically at night to refresh my memory of the day's action, or to see what you guys are talking about. I pay attention to the news, in particular how the market responds to it. Today for example the market shrugged off a negative Michigan Sentiment index....a positive sign which if acted upon could have led to a large gain. I don't have a system. My "method", such as it is, is more like that of a detective, searching for clues of the next direction. Thursday for example after trading a little higher we rushed down to take the July low out. That's a negative of course. But in this case it turned immediately, and started back up. I love trades of this type, because they permit me to enter with a close stop, which is what I did. The result of this was a large gain almost immediately. I might add, I also review a set of technical indicators in the evening that I access through decisionpoint.com, indicators like the McClellan Oscillator, participation index, highs and lows, etc etc....standard stock market indicators. Yesterday we took the prior day's high out with no difficulty at all, and then proceeded to fill the gap left from the day prior, trading up to what had been prior to this functioning as a kind of resistance area....800-810 basis the SP. There was litterally no technical indicator of the variety that I watch that would have caused you to sell at all yesterday. In fact, with trin under .40 in the afternoon, the odds of an important reversal were extremely low....meaning reactions downward could probably be bought. Again, I have discussed my methods in prior posts. Perhaps what's confusing is that I don't use the techniques that others here use. But I do use standard stock market techniques and standard stock market technical methods. I don't however use a system. I use my head. I don't normally scalp. I make a trade that I think is going somewhere important other than a couple of points. There are some days I don't trade because I don't understand what's happening. Other days I'm more active. I use mental stops rather than preset stops. I like to be in the decisionmaking mode rather than the automatic mode most of the time. If I'm up on the week, I will increase my size. If I'm up on the month, I increase size. When I don't think I'm trading well, I decrease my size. It works for me....whether it would work for anyone else is hard for me to say. I've been in the market a long time, making my first trade in 1965-1966. I lost most of my money trading sugar in 1969. Let's just say I have a long history with the markets, I'm not a newbie. My methods reflect my experience. Back when I first started trading we couldn't possibly jump in and out like people do today. For starters, commission were way too high. The NYSE was still on fixed rate commissions ($80 for 100 shares), and most commodity brokers were $70-$100 per round turn. So when you traded a stock you needed it to make a move. Daytrading back then for most of us was not practical. So my experience partially reflects that. Nevertheless, I've spent my time scalping, both on the floor and off. I think it's the route to small money. Maybe that's OK with you....it wasn't with me. I remember a guy on the floor named Glen. While the rest of us were scalping, he was holding positions for a longer time...perhaps the day, or maybe even two. This guy was a huge trader....and he made big money, lots of size. Glen was all of us scalpers idol at the time. While we were chipping out a living....this guy made the big dough. Today what I believe I've learned is that the market changes constantly....this is why it's difficult to use indicators....things are never quite the same. The big money is in a bigger picture. But if you're focused on the small picture you'll always miss the big one. I don't want to be influenced by MACD, stochastics, etc. I want to see the market through uncluttered eyes hopefully for the reality of what it is at that time. When I take a position I'm willing to get out immediately if it starts acting wrong....but when it starts out right, I'll stick with it, ride it, make all I can make out of that particular move until something about it changes my mind, even if temporarily. Hopefully this explains my views somewhat. OldTrader
Thank you. Your general methodology is interesting, but when you apply it to a specific case and provide the detail necessary to see how it works in a real rather than simulated situation, the information is of greater practical value to someone trying to learn how to trade. --Db