Working on Consistent Profitability

Discussion in 'Journals' started by tlow, Aug 24, 2010.

  1. Hey fishin' I am pretty much a newb here at ET, and maybe I'll get schooled for saying this, but I was trading ES Friday... the downswing at 10am was brutal, and it came right as Bernanke's remarks were finished with the press-release embargo... I saw the prices heading down the toilet and assumed it was the market puking all over Bernanke's remarks *again*, as they have scores of times in recent memory... I say to my shame that I followed the herd down, had a $500 profitable trade, viewed it was the morning trend and held it as the stampede north happened. The point being that the swing down and corresponding swing up were so close to Bernanke's remarks, that you thought the swing north was this was a typical pullback in a downtrend...

    I did the thinking ahead you mentioned, and decided that I was following the herd when they reacted to Bernanke... I obviously need to tweak my money management and reversal spotting skills...

    He definitely made the right choice and I envy him 'cause I lost far more than I would have gained... should have put a protective stop at my entry point, but that's hindsight too... I'm still forcing myself to learn that preventing losers is more important in this game that scoring winners. A $25 dollar gain is better than a $1000 dollar loss... easier said than done when you already saw that $500 dollar profit. Note to self... Stop-loss is my friend when I use it.

    Cheers,
    \gg
     
    #31     Aug 28, 2010
  2. NoDoji

    NoDoji

    Hey GG, I also watched market dump off Bernanke's pre-release notes and had "down" stuck in my head the rest of the day no matter how hard the price action tried to tell me otherwise. The stop-loss was my ticket to profitability despite shorting against the confirmed up trend from 10:30am until 2:00pm ET. The lesson is that you can be a stubborn, blind-ass trader on any given day and still avoid damage via risk management alone. The hard stop-loss makes the hard decisions for you, and it's like full body armor when you get a strong opinion on.

    As for a DECENT profit coming back to entry price, just get out before it turns into a loss; you can always get back in.
     
    #32     Aug 29, 2010
  3. Gatling Gun
    Maybe you missed my point, I was talking about targets. Targets are predefined profit objectives, the price area in the market where you would close-out your position.
    And what, you wanted $501 or $5001? That price area held for Tues, Wed and Thurs, we all must learn the hard lesson of taking profits when they're available. I don't trade the ES (I said that before) but the probability of those prices falling at least to that area seemed very high to me.
    I've learned if I follow the herd, I'll end up in a manure pile at the end of the journey! Don Vito Corlene said, "keep your friends close, but your enemies closer." Do you know the position limits of the ES? You should. 20,000 contracts (I think) and tlow is trading 1. If 60% of trading volume is done by 2% of the traders (HFT) we better learn to A. Take profit B. Walk away & C. Be happy! When prices hit the launch code and I'm on the wrong side of the market, I'm literally Va-poo-rized.
    Why, why put a stop a BE? So you can exit the trade with nothing and pay your commissions and bleed your account down $5 at a time? This market was falling into the area of the LOD of the last three days 43,37 & 41. According to tlow's charts Wed's low was 1037.00 if you used that for a target and didn't get filled (Fri's low 1037.25) shame on you, oink, oink! It appears 1040 was close enough for many traders.
    True, BUT putting in targets and taking the cash that your well thought out analysis projected is a lot more rewarding both financially and emotionally. Sure, many times I've taken profits at my target only to see prices continue on without me, it's a lot easier to smile and wave bye bye when you have $500 in you pocket :)
    Me too

    <*)))><
     
    #33     Aug 29, 2010
  4. NoDoji

    NoDoji

    This all looks really easy in retrospect, but with the market losing the bid on high volume so quickly, off a lower high in a steady macro downtrend, a with-trend trader would be now targeting a lower low, a breakout of 1037.50. A with-trend trader might take some off there in case it did indeed re-establish a solid price support, but if you're trading 1 contract, you have the choice of trusting the trend and keeping your profit target of a lower low, moving your stop to b/e, or waiting for further price action to see if a reversal is imminent.

    The close of the 10:05am ET 5-min bar was a big red flag for the short seller. Solid price support established yet again and that originally big red bar fully reversing to close green on high volume. That's the signal to cover upon break of the high of that bar or keep a stop at b/e if you want to ride it out. In fact, that's a strong trend reversal long signal, so a stop and reverse (SAR) trade makes a lot of sense for an aggressive counter-trend trader at that point.
     
    #34     Aug 29, 2010
  5. NoDoji is correct, below... maybe there is a bit of a mismatch in trading styles that we're in... I follow the trend, herd, stampede, whatever... and while your price target exit may be safer, my investing goal (which is certainly aggressive) is to capture much more of the daily movement than I have in the past... with an account funded as it is, $500 is an normal take for small swing w/ the volume I trade. When the 2.5 minute gap in the bid/ask is 20,000 contracts (!!!!!) at 10am ET, do I want really want to sit on the sidelines or scoop up nickels with the pack? I greatly value the input from you and NoDoji, regardless of having some different styles.

    Geez, gimme a little credit... when I say put it at my entry and pocket $25, that's $25 *after* commissions :)... I set it just higher than purchase price so if I stop-out, I have the consolation of at least a couple of lunches... there is no doubt, I'm swinging for doubles and triples right now... I'm honestly bored with the easy 15-minute gains, and if it turns out that I can't swing like Barry Bonds, at least I can always plink myself to happiness...

    At the same time, I've literally executed over 1,700 trades so this year... I use retail S&P ETFs, so the commissions aren't as obscene as trading ES futures directly... but my broker is still very very nice to me when I call them. I'd like to find a way to capture some of those $$ I'm sending their way, cause the yearly run-rate comes out to what many people get paid for full-time jobs... and those trade volumes come because I've got a hair trigger when I see stuff going against me... and many times I find that it was just a temporary 10-minute jog against the trend.

    It's a calculated risk I'm taking at the moment... I'm trying to become a sharper trader when spotting fakeouts... maybe it's just impossible... I'm trying, and I'll see where this goes. I'm also sensitive about not hijacking the OP's thread... if I need to post my own journal, lemme know.
     
    #35     Aug 29, 2010
  6. Thank you, this is very helpful feedback... while I normally use 2.5m charts for a tactical market view, I definitely see your point...
     
    #36     Aug 29, 2010
  7. tlow

    tlow

    First off, woohoo, i've generated some conversation and discussion. This is great stuff guys, thanks!

    Went Fishing:

    Yes, I am not planning on being a scalper. However, I am interested in learning more about trading in the middle of the day, during choppy times...I know I know, one thing at a time. But going forward, after all this craziness dies down (if it does) I feel I need to know how to trade a market that only has a 3 point range through the whole day. Again, beyond my ability now, but I guess I have it in the back of my head. Ok...moving forward, I will try and remember to write the targets down so you guys can "critique" me :)


    Ya there was definite support around the 1037-1042 range and that is why I was nervous about the speed and downward momentum. What if my fill was at 1042, bounced down to 1039, 2 seconds later I get stopped out at 1045?...that is why I stayed out, I didn't want to deal with the bounces, potential stop outs, swings, etc. Im just not confident enough to handle those "reentries"

    So I don't want to get into an long drawn out discussion of what PA actually is...But here is what I like to do...Have my trades primarily driven by PA, Charting, and T&S or whatever else you want to call it. I like to look at Fib retracements/extensions and pivot points for potential Support and resistance to keep in my mind for potential targets. If someone were to say, you can only use PA, I would say fine...no problem...I don't mind dropping Fib and PP if I have to. And lastly, yes, I understand what you and Bol are trying to say about not getting runover :0


    Thanks guys and girls for the support and encouragement...like I said before, I am starting to understand why all the pros say "trading is tough" But I don't mind putting in the work or effort so hopefully it will pay off in the long run. And Yes, I can start posting some 5m charts for comparison, no prob.

    Maybe GG and I have something in common at the moment, and maybe it is a common trait among newbies...there is definitely a fine line of "capital preservation/stops" and knowing when to take profits and being happy with those profits...Im constantly thinking about how much I am risking per trade and there is always a huge relief as price goes in my favor even 1 tick. But as newbies, it seems we are doing the coulda woulda shoulda stuff. I've noticed, like most things in life, confidence is huge. I feel much more confident about gaining 2 points and exiting early vs. staying in the trade and either being stop out for a loss or a B/E. I guess in the back of my head I know with time I will understand how to take better profits and let the winners run as they say.

    NoDoji:

    You comments are what I am hoping to becoming... a trader that knows when to get in, when to get out, and when to stay on the sidelines...but more than that, know how the market is reacting and what trades are appropriate at that time. I don't want to be only a "trend follower" or fader or scalper or whatever. I would like to be a pro at all those things...IMHO, the markets are constantly changing and the more tools you have the better suited you are over the long run. The pros can feel free to correct me if Im wrong. I work on cars a lot and I think of it as, well a wrench will work, but what if I had a crows foot, or ratchet, or speed handle. Again, there is probably a fine line between keeping things simple and not over complicating things.
     
    #37     Aug 29, 2010
  8. NoDoji

    NoDoji

    I believe the ability to let winners run is what takes up that final 3000 hours of the magical "10,000 hours of screen time" necessary to become a successful trader. I often feel like the dog chasing its tail from one trading day to the next. One day I cut my winners short and the next day I try the tactic that would've worked yesterday and I watch my profit run all the way back to break even. One day price runs and fully retraces and runs and fully retraces and I've taken $200 out of $600 moves, so the next day I adjust my tactic only to find myself fighting a pure trend day!

    Price action trading helps remove a lot of this, but the chasm between what I know and what I do often seems unbridgable.

    One thing I started doing in my daily bar-by-bar analysis is noting exactly how much heat is taken on each trade that reaches profit target before hitting the stop loss. Many of these hypothetical trades (sadly my real trading is still in the pick and choose mode that separates me from the pros) move in my favor, reverse to red, then run right on through my projected profit target. I'm expecting this exercise to eventually reinforce the fact that my habit of moving stop to b/e too soon is depriving me of a decent pay raise, though it feels to good to have almost no losses.

    The only time this makes sense is on with-trend trades. On counter-trend trades, I ALWAYS move my stop to b/e as soon as price moves a fixed number of ticks in my favor. I have no problem with counter-trend trading, but I give the trade no mercy. Remember, you can always get back in when a potential trend reversal becomes truly confirmed :)
     
    #38     Aug 29, 2010
  9. Dumb question... what does b/e stand for? Buy-entry???

    My experience is usually that I sell off during a jog against my position, it peaks out the opposite direction some time later (but at this point, I'm not sure whether it's a true reversal, pause, or beginning of retrend)... and then races past my entry point only to sag at a level I'm hesitant to buy at... long minutes later, it starts moving with the trend again... bottom line, when I've considered buying in again, it usually comes at the cost of a higher price, and not always something I'm ready to pay at that time.

    Also when you say "bar-by-bar analysis of how much heat that trade took", can you elaborate a little more on that... are you talking 5m bars? How do you quantify heat?
     
    #39     Aug 29, 2010
  10. NoDoji

    NoDoji

    b/e is break even.

    I sent you a PM so as not to get too much in the way of tlow's journal.
     
    #40     Aug 29, 2010