MightyMouse

The 95% number has no basis. I think that it's a number put out by brokerage houses to be on the safe side. They probably tested stats from 70% to 99% and realized that they would open as many accounts if they said 95% as they would if they said 70%, but the number of accounts opened would taper off if they went above 95%. So, now if someone loses and complains they can say that you were warned that 95% lose money. In agreement with you, I think the #1 reason for failure is that traders are under capitalized. So, they may be making money (not failing) and realize that the return is just not enough and because of financial obligations decide to do other things, or they may be trading a decent system but with too much risk and the draw down swallows their account and they simply have no other funds to add to the account and they stop trading. In a sense, the later group was unlucky. Also, a lot of traders are trying to trade a system that they simply cannot win. It is amazing. As an example, scalping is a dead art for the small trader. As a pit trader, you could, or still may, be able to make money if you are skilled enough. In the pit, it is possible to buy at the bid and sell at the ask or even to buy at the bid and sell at the bid if you have to. This gave the scalper a theoretical advantage and yes, you could make money a tick at a time. This is not as possible in the electronic markets. In most cases you will end up paying the spread to exit. So, on a tightly traded contract, say ES, and risking a tick to make a tick, the market has to go up two ticks to make a tick and down only 1 tick to lose a tick. A one tick spread and commissions guarantees that you lose in the long run if you are trying to take 1 tick and requires you to have a system where you are correct 80% of the time to make 50 cents per contract traded if you try to take 2 ticks. So with all the different mind sets that enter the market it is very difficult to determine what the true long term success or failure rate is. A good idea would be for someone to conduct some sort of trading exit poll.

If you are up, it is profitable. No question about it. You captured something with your system that takes money from the market.

So when you move your stop up to 100, you will make either 100 or 150? If that's the case then you are saving yourself on some and stealing from yourself on others. Sometimes its going to be better that you do that. sometimes its not. All the data in the world will not tell you which way will work best in the future. I would suggest that if you are going to move your stop when it goes 5 ticks past 100 that you move your target up by 100 or so that your new target is 250 instead of 150. My thinking is that if the market is so strong that it does not come back and take you out at your stop, that it has a good chance of going past your target. There really is no right or wrong answers.

You nor no one has to look at it this way. It it makes you feel better, then you can think of yourself as the middle man bringing buy and sell together. Curious though: How are you going to get rewarded? Or, who is going to reward you? Is there a tick fountain somewhere that everyone goes to to retrieve ticks that I do not know about? Is there a liquidity provider redemption center?

Biz, I stick to 2-3 markets. I will trade only one at a time. I think 2 or 3 is more than enough. Usually if I start off a day trading oil, I stick to it for the rest of the day. Lately I have been trading oil almost exclusively but I watch oil, gold, and now the grains. I used to trade ES, but have changed the way I trade and I need volatility and ES simply does not have the volatility I need for the period of time I want to trade. I believe that you need to get to know how each instrument trades before you commit to trading it. MM

Sure, I will tell anyone here what I feel in my best moral judgement is the right thing for them I am not suggesting I know what is right for everyone. It is of course only my opinion, but in the market I will take every penny you decide to put in front of me if i can and I will do everything I can to prevent you from taking any of mine.

Carlton, Its all going to depend on what you are trying to accomplish, what your risk tolerance is, and the size of your account. A 1 to 1.5 R/R is mathematically a valid R/R depending on your percentage winners. To get the 1.5 reward, you are going to have to leave the position on and not second guess the success or failure of the trade before it succeeds or fails. The fact that you have pulled the trade at 1 to 1 is actually reinforcing a bad habit. You have to let it stay and figure out the real success rate of the method you are using. If you are trying to do a stop or target method, then leave the computer and let either the stop or the target to get hit. If you continue pulling the trade before the trade is over, your size winner will begin going down even though your percentage winners remains high. You will be frustrated because you are mostly correct, but you are losing money. I have lived this. Lots and lots of traders have. The sooner you fix this the better. I literally walked away and came back 15 minutes later. While i was away, I simply accepted the fate that I would find when I get back. When I got back most of the time it was still at my entry even though I thought i was stopped out. I would leave again until i was filled one way or the other. It was great. It was like a grieving process for the death of fear. Soon I was able to just sit there and not think about it and follow my trade. If you are going to trade live, risk as little as you possibly can until you can turn a profit. You won't miss much if you risk less than 100. If you miss out on trades that make 150 gross per trade, you aren't missing much anyway, but if you are trading with a small account, 100 could do damage pretty quickly. Good luck MM

Randy, If you do not mind me calling you Randy, If Steve was like a deer in headlights when he was supposed to trade as you described in your original thread, he was losing money and not supporting his family. I understand the use of stories to sell concept in your business, but what you are describing is just not real. Like everyone else who can't get a grip on what is real in trading, he was likely making multiple mistakes and judgement errors because he was unable to properly deal with his emotions. We all stare at a chart and think, gee I knew it would turn at that point and wish you got in. You think you are brilliant when you do call the turn but ignore the majority of the times that you knew it was going to turn and it didn't. If Steve comes back to you looking for a better weapon, tell Steve that that there are many other businesses that he can get involved with that he will be able to support his family. And I love the naive assumption that someone who is good analyzing a chart or writing indicators can be good at trading. Priceless! In most cases, it is exactly the opposite.

The fact is that most people should take my advice even though it is against my best interest for them to take my advice. Your "Steve" who you helped solve his fear problem went onto live happily ever after, making money in the market? It has a sort of fairy tale ending to it. In your fairy tale, Steve is afraid to go into the woods because there is a big bad witch, but you gave him a sword and now he can combat the witch. What is Steve going to do now if he comes across an Ogre who has a bigger sword than he does? Is he gong to come back to you and get a machine gun to defeat the Ogre? And once he has a machine gun, and he comes across an American President who has influence over the US congress who will in an emergency session send 600 sorties to completely annihilate Steve and the habitat in which he lives, because the US feels that someone walking in the woods with a machine gun, trying to defeat American Ogre allies is also a potential threat to American interests and does not represent American values. Then what would be your advice? If Steve had been able to realize that the witch was not real, he would never have taken a sword into the woods, or he could have simply stayed out of the woods. In either case he could be alive and possibly working for SIUYA.

Good point. Nice of you to come into the cabin of your yacht to post.

I think the best thing to do is make the risk small so it doesn't bother you. I would rather risk 200 a trade for my account size and if a really bad day occurs I lose maybe $2000 for the whole day than to risk 2% and potentially lose $2000 a trade. Its easier for me to deal with a series of smaller losses. If trades and lose $2000 a trade, I will soon begin to think twice about whether I want to take the next trade. With $200 I don't even think about taking the next trade. On the winning end of it, I press and sometimes end up with as much as 8 times the position I started with. I do not do this every trade and frequently end up disappointed at what happens but when I hit, I hit pretty big. We are all human. At some point everyone begins to worry. Figure out where your breaking point is and stay away.

Well try to pick the tops and bottoms, if that is what you want to do, but do not think that someone else can do it better than you because they cannot. Not for any length of time at least. The above story is about a guy with a great ability to trade who is fearful. The ability to trade is the ability to trade without fear, not the ability to pick tops and bottoms to the tick. If a guy can't trade without fear he is not a trader. Picking tops and bottoms is a temporary ability. Real traders go from picking tops and bottoms to the tick and making good money to not being able to do a thing right and taking losses. No one gets it right all the time or 80% of the time or makes money every day, though they would like you to believe that they can and that can make you feel badly about yourself. The fact is that they feel badly about themselves for not having the ability to actually do what they say they can do and they want you to feel as badly about yourself as they do about themselves.

Tradewinds, If you are going to believe that someone can actually consistently pick trades to the tick and see a reversal happening before they happen, then you will never be happy with yourself as a trader because you are comparing the reality of what you know about yourself to the ego driven lies told to you by others. You will never be good enough if you compare yourself to the fantasy they sell you. Trading is hard work and it is hard for everyone and not just you. Run in the opposite direction when someone tells you that they make money every day, week, or every month. Run when someone tells you that they consistently call the reversals to the tick. Or if you do not want to take my word for it and run, then put them to the test. Make them show you real time that they can call the market to the tick. Not one will expose themselves.

Steve's dollar risk is too high. He should lower the dollar amount that he can lose. If he keeps lowering it and he still remains fearful, then he should really choose another career. He is the proverbial square peg. Have him become a clerk on the floor of the exchange if he wants to be close to the action. As a trained professional, you should advise him that he is too far from center to ever make it and all the counseling in the world won't get him where he needs to be. If the counseling does help, then he will likely have bouts of relapse in the future and he will once a gain be staring at a screen not able to take the set up.

That's great. Sounds like more people should do what you do.

Tim, I am not considering what you do after the first contract is scaled out. My comments above only concerned the first contract. If you take it off at +2 or -6 and increase your accuracy to 90% from 85% that trade is a -$2 loser over time. That means that at 85% it loses slightly more. So, if you remove that part of the trade, you automatically improve your profitability by $2 per trade. In the long run, that 2 bucks makes a very big difference. If your first contract is not +2 or -6, then I am mistaken, but that is what I understood. If your system is profitable, the second part of the trade is carrying the trade and over compensating for the long term loss created by the first contract. Hence, my comment that you can improve the trade by not scaling out the first one at +2 ticks. I am taking for granted that you are achieving the statistics you are reporting. Given those statistics, the first part of the trade is a drag on your overall trade. 85% sounds great. 90% is even better and at 90% the first contract is not profitable because of the costs. MM

Tim, The first leg of your es trade is a -$2/contract loser over the long run even if you attain 90% accuracy, given a normal distribution of wins and losses, taking into account normal commission levels, paying a 1 tick spread, and ignoring slippage. You would be better off trading only 1 contract and moving your stop to -4 ticks when it moves 2 ticks in your favor.The overall profitability of the trade will depend on how far the second leg of the trade goes. You can improve the profitability of that trade by changing your first scale to 4 ticks from 2. That would give you an $8 expectancy over the long run with an 80% accuracy rate, given the spread and commissions. I know you didn't ask my opinion, but I figured I would point it out since it was staring me in the face. Keep in mind that I an mot questioning your accuracy; instead, I am taking it as given that you will be able to get 85%. You can probably do your own study and of your actual trades that made 2 ticks and compare them to the trades that you got stopped out of. Over time it will approach something near the -$2 over time. Good luck

Steve, Based on your current analysis, should you be getting short the euro again or should you be considering a long? MM

Do you mean you take half off at +2 points or +2ticks? What do you do with the stop on the remaining contract? Also, how big an area are you using for the trade? In other words, how much bigger is your target than your stop.

Thanks for saving me the time and effort to prove what I intuitively knew and accidentally tested some time ago. Not with a child's scribbles, but I noticed how the market "reacted" to stray lines on a chart. I have heard other things too. A trader I know showed me a chart of the weekly Es back into 2008 and he showed me how " to the tick" it bounced off the low of a weekly bar back in 2008 and he took it short. Well, the fact is that a continuous contract chart of any futures contract plots an estimate or representation of where the market was then relative to now. A Zenfire chart may not be the same as esignal or TS. So, everyone is looking at a different low for that week back in 2008. And the fact is that the low was not the real low of that week in 2008 if you were there live in 2008 and is probably off by about 5, maybe 10 points. Nothing begins until you enter the market so if its going to get you into the market and you are smart enough to learn how to take money when you are in it then scribble, dart, or Fib is just fine.

I am not suggesting that a child's scribbles will create a a winning strategy. I am suggesting that the scribbles will be as effective as the Fibonacci levels. If all factors are taken into account, then in the long run, the scribbles will provide as good a level as the Fibonacci levels do. Or they will be just as bad as each other. The 15, 40 and 70% levels will work out just as well as the scribbles and the Fibonacci levels. The Fibonacci levels were not developed as a trading tool. Someone at some point, looking for magic, in the market superimposed the Levels on a chart and saw things. The fact that a lot of people use them suggests nothing more than the fact that a lot of traders are looking for magic in the market. People can look at a window pane and see the image of the Virgin Mary. They see it because the want to see it and I suppose they really believe it is there and they are seeing it for a reason. Traders look at charts and see things too. I am not saying that yo should stop using Fibonacci levels or that you should not use gann or any other sort of voodoo market indicator. If it allows you to get in and stay in, then it doesn't matter if it is the arse of a dead house fly or a Fibonacci level, then use it to your benefit. It is not everyone against the market. It is a zero sum game. if we do not consider spreads or utility paid or gained from trading. In order for there to be a winner there has to be a loser. otherwise everyone pays the spread and goes home. Your take is your pips you minus the spread you pay to play in the forex market. Yes forex is large.but you are mistaken about liquidity. Liquidity typically won't dry up completely though it did last spring, but there are periods every single day in nearly each forex pair where there is poor liquidity. In fact, when you are in a trade, your hope is that liquidity dries up opposite to your trade. That is how a trend occurs. A market goes up quickly when there are few sellers and a lot of buyers, poor liquidity. A market goes down quickly when there are few buyers and a lot of sellers. In each case nearly all buyers and sellers are in agreement about price direction. The faster the move, the more they buyers and sellers agree. It happens every single day. If it doesn't happen you will categorically exclaim that the day sucked. A range or a period of high liquidity is when traders disagree on price. MM

Sam, You do not need to demonstrate the effectiveness of fibs. I have tested their effectiveness. You may want to test the random scribbles of your child and compare them to the fib levels to determine the relative effectiveness of the fibs. As your own test, change the retracement levels to 15, 40, and 70 percent and you will see they are just as effective at calling turning points or targets. They will work, and be precisely as "self fulfilling". I do not trade currencies, and I do not avoid them because they are too easy to trade. but I think you may be grandly mistaken if you think that you do not need to consider the action of large institutions because the market is too big. You would be mistaken if you did not consider the actions of any size traders since they all matter and play a role in the market. If you understand how a market works, then you know that when you lose, a trader or group of traders took money from you. When you win, you or a group of traders including you made other traders exit at a loss. The absence of large buyers could create a liquidity struggle among small traders who need to sell. Astute traders who are watching will begin to mark down prices and make those in need of liquidity suffer. Of course they will gladly buy them back lower from you. Trader 101 stuff. Good luck convincing people that the market allows you to tip toe in and tip toe out, with disregard of other traders, because of a system you use. MM

OK. Which Fibonacci level works? And If they work, then why would they be any different than levels drawn on a chart by a child with crayons? Price reacts at every single tick or pip. You can choose to assign meaning to it or not. Your child's crayons would be just as effective as trading Fibonacci levels, so what is the benefit of signing up to provide you with satisfaction when we could have our child draw on our charts and give them the satisfaction that you seek? Your idea of someone not needing to be a loser is somewhat flawed or at least not well thought out. If you enter long and, as you say, an institution is taking the other side of the trade and could care less that you are trading because they are simply liquidating a position as a result of commerce, then when you and your other traders need to sell, who are you going to sell to? If you are doing this for 5 years, you should know that you should not enter a trade unless you are pretty sure that someone is going to be willing to pay you for the risk you are taking. It sounds like you willfully paying someone else. If you can't identify who the loser is going to be, then the likelihood is that you are the loser in the trade. Do you enter trades based on hope and magic? I will give you a simple example. If your group and I are the only traders trading and I am an institution squaring my books and you buy all the currencies I have, then who do you sell too if I never intend on buying back? MM

Seems like you understood, but there is a lot too it too. The market usually goes down a lot quicker than it goes up so the volume on the way down in a down move is usually higher than on an up move. And I only consider what is happening now relative to what happened most recently. So, looking at the sell off from the high and comparing that volume to this volume on the way up doesn't apply on a sub level. If you widen your time frame and look at the move up then the move down and then this move up, this could end up being an unsustainable move up if overall the volume on this up move is too low. But, I never argue with market direction. If the direction remains up, I want to be long. When the direction changes, before we get to the high and we then sell off with higher volume and a wider range, then I want to get positioned short. But that will usually happen after it retraces up on low volume so there is an opportunity to get short without having to call the top. The low volume up move could be followed by a low volume down move, in which case you would want to remain long or get long or wish you had stayed long. The top will happen on its own. If you are in the market, you may have to take a loss when it transitions if you got in recently and not at the beginning of the move. If you got in early, your loss some of your profits but end up with a really nice trade. You do not have to get in at the low tick or get out at the high tick to make money. I am always willing to give up some on both ends to give me confidence that I have the directions right. Also, you can't just look for high or low volume either; the volume is just a part of it. As an example, in an up move, if there is a high volume sell off that occurs in a very small range, then that may very well be a bullish sign. It could be the result of a news event where weaker traders hand over their positions to stronger traders who get the opportunity to buy a lot of shares at lower prices without having to bid them up against themselves. The most information we have available to us is price, volume, and time without cheating. I try to use all 3 and avoid markets that I do not have all 3 such as the currencies. My feeling is that somehow someone else has all three in the currencies and I do not so I am at a disadvantage. Like flying a plane with one eye. MM

The move up is on decreased volume. If you look closely, you'll see weak volume on each attempt to sell off from the 16th. So the volume on the down moves is lower than the volume on the up moves. if you need to, add up the volume on the moves and divide by the days if it is not clear. So, with price rising and volume stronger on the up moves, I want to be long most if not all the time. This can continue for days, weeks or months for all I know and wouldn't question its ascent. When volume does increase on the down move, and then decreases on the up move, It will set up another correction like we just had from the high. It will not likely "VEE" back down. So you do not have to try to call the top. You will have plenty of time to take a short. The move down from the high pretty much erased all the gains for the year and now we are climbing back up again. We could be forming a range, or we may simply break out above the high and continue higher. Volume will give you a clue, but whether we break out and continue will depend on how much more demand there will be as we go higher. It looks like there is still a lot of demand. Anyhow, that's the best I can do in 200 words or less. MM