MightyMouse

Sorry about the confusion. 1 es contract has a value of about $50000 since it is almost at 1000 again and hopefully will exceed 1000 this week. Earning 350 a month is about 4k a year which is about 8% on 50k. I suggested 3 pts of risk per contract traded merely as an example. I am not suggesting that 3 pts is some magic stop loss number. Your stop loss can be any amount you want it to be, but you have to work that number through the equations.

I am not suggesting that you limit yourself to anything. I am looking at it from an average earnings per contract traded, taking into consideration losses and commissions. 350 a month is equal to about an 8% return per year on the amount at risk ( almost 50k for ES). 650 a month is about 15% or so. If you were consistently earning 15% you would be heralded as 1 of the top traders on the planet. I know it sounds like very little but 350 is a rational amount to expect per contract commensurate with a risk level that won't destroy your account. If you expect to earn 1000 per contract, that puts you somewhere in the 20-25% return area. That means that you expect to earn more than most major Wall St trading firms. That’s not rational to me. It really doesn’t matter what you trade. The numbers all work in a similar fashion.

I think a reasonable expectation is to expect it to take about 4 years. So, if someone does in fact become a profitable trader in just a few months, he or she was extremely lucky to have been on the right side of the market most of the time while they were learning the hard lessons of the markets. Of course, they could be full of s___ too. In addition, what do you mean by profitable? Do you simply mean your plusses coming out ahead of your minuses or do you mean that you are earning something that is significant and not a waste of time? Or, does profitable mean that you earn enough money to make a living trading? If you want to make a living trading, then you need to know how much you need to take out of the market on a monthly basis and have at least 6 months of that on the sidelines in the event that you hit a dry spell. So, if you need to make 10000 a month, you need to have about 60k set aside separate from your trading capital to fill the gaps if you hit a drawdown period. Then to earn 10k a month in the first place, you need trade somewhere in the area of 30-40 contracts per trade (assuming you trade ES) to earn an average of 10k a month. It’s truly unreasonable to expect to earn more than 350-650 per month per contract traded. So, you need to address the capital requirements of trading 30-40 contracts per trade, given a reasonable tolerance for risk if you want to make a living doing this So, giving yourself 3 pts of risk at 1.5% risk, you need about 300k-400k to earn 10k a month. If you plan on earning more than 350-650 per month on ES per contract, you are basing your plan on a dream. There are only a handful of traders who average more than that just like there are only a handful of people who win lotteries each year. A lot of people fail at this because they put a heavy strain on their trading capital; they tried to earn too much with too little capital. I am not implying that this is the only reason people fail.

A good way to decide which is more important is to compare the reaction of price at the high TPO low volume overnight activity to the price reaction at the higher volume low tpo areas from yesterday or from earlier in the day session. Many times you will see that the high TPO low volume overnight areas trump the high volume low tpo areas in terms of reaction. I have concluded that the high TPO's are more relevant for my trading as far as the market profile is concerned. I know a lot of people who only look at the market profile for the day session only. Why look at only a quarter of the picture? I took the Dalton course and know he refers to the overnight activity as "weak hands" which is truly silly since major trading firms all have overnight trading desks and most major independent traders treat the 24 hour markets like a 24 hour market and use the overnight to get in and out of positions. Of course, you can certainly trade without using MP too.

I am pretty certain that the people who got the huge bonuses at AIG where not the people who were responsible for AIG taking on those huge risks. They were in fact people who were hired by AIG because of their ability to place huge amounts of securities with large investment groups, pension funds, foreign governments, fund managers, and other misc institutional investors. These guys and gals were hired away from other companies to come to work for AIG because of their talents. AIG may as well close the doors completely if they cannot place the debt instruments that they underwrite. These "bonused guys" have the ability and connections to place massive amounts of securities. It has zero to do with risks that AIG took. It's just difficult for Mr. Front porch to conceive of someone getting millions in a bonus from a near bankrupt company. Having the govt regulate how much all the employees get paid will result in a talent drain since those who will be effected the most will simply move to a company that is not being regulated. The regulated companies will all flop or have to severely change the way they do business. The result will be forced failure after we inject billions. Not a good plan. The guys that negotiated the guaranteed bonuses will ultimately get paid. It will wind up in court, we will pay extra fees for litigating the case, and they will ultimately get paid because it was a contract. Another bad plan. Not wanting them to get their bonus is an emotional thought. As in many other parts of our lives, letting your emotions make decisions for you is never a good idea.

It would be a fairly extensive survey to determine what % of traders lose money. You would have to break it down so many different ways to get an accurate statistic and it’s doubtful that a futures broker would undergo such a task or is capable of accurately assessing the results. It would certainly be wrong to look at the accounts of a single futures broker and use those results to generalize about traders without knowing the traders timeframe, risk tolerance, trading instrument, number of accounts at other brokers, use of stops, attitude toward risk, years trading, purpose for trading, years the account is open, and etc., etc. So, if you took a cross section of the survey and found a grouping of traders who take positions and hold them for at least a year without the use of stops, you’ll find that the statistics for this group would be closer to 50% So, they may be telling the truth, but citing a statistic that really has no basis. In their business it’s better to err on the conservative side of statistics than to risk the liability of being misleading. So, you can make a lot of money, but you have a 95% chance of going bust, still lures enough new blood to the game because everyone who is curious knows how much a lot of money is. The best statistics would come from academia and if they are citing the statistic from an academic paper, then I would like to know which one.

95% is probably a number of convenience than anything else. I remember stats from the 1980's that were more like 80% which is still high. But, your typical trader who learns a system or finds an edge will begin trading without preparing himself mentally and he keeps falling into the trap of minimizing gains and maximizing losses and blames it on the system. Unfortuately, he tries to change the system, never realizing that the system is not the problem. What's also unfortunate is that the only way to find out what needs to be changed mentally is by trading and making the poor judgement mistakes. BTDT and am still working on it.

Freud could have fun with your dream... Hmmm. dreaming of a "box"? Holding out longer? trouble with your platform when you tried to close? lol

Trader John , you don't need a small account and do not need to be inexperienced to make those mistakes.

I agree. paper trading and the real thing are completely different animals. It's like saying you can perfectly describe the taste of orange juice by looking at a picture of it.

That is interesting because I have thought of the same thing, but I am more comfortable playing poker than I am trading and I am definitely newer at trading futures than poker. However, my max daily loss trading is the same as the amount I bring to play poker, so, I can't relate to the 4000 and 150 thing. I do get affected by my emotions trading, where it is a battle to keep myself from getting out to early. But, in poker, I only feel elated when I win or pissed that I lost, but that is at the end of the hand. So, you are probably right because before I play poker, I practice until I play the odds as close to flawlessly as possible; therefore, I know for certain that win or lose I played perfect poker. That would be akin to knowing your set ups perfectly and losing on a trade that you would take 1000 times out of 1000 if you saw it that many times and you care less until the end. I am really not there yet with trading.

With $1000, I'd probably want to trade other things like stocks or maybe currency etf's which move in lockstep with the currencies. if you learn to make money trading those, then it's a matter of adding funds and risk to trade the cash or futures currency markets. My guess is you've already made your mind up. Good luck.

Your comment on the field of psychology seems incredibly similar to the comments that Tom Cruise made on the field of psychiatry in an interview with Matt Lauer. Simply, one shouldn’t write off or put down the field of psychology when they are not remotely qualified to do so. Having taken psyche 101 or read a few articles on the topic does not make you an expert. Frankly, Darth, don’t be glib.

I read that a few months ago. It was a good and his rules make a lot of sense, but he is a long term positional trader and gives you great advice if you intend to build a position to take advantage of a longer term trend. But, day trading is a very different animal. IMO you really can't apply both of his rules to day trading, unless I am missing something. However, his thought about “not letting the market prove your position wrong” is something to the effect of what I am after. In that, your losing positions when your stops are hit are not as big as your winning positions. Thanks for the reply.

Your confidence level of your position and what the market will do with your position are two completely separate things. A market that is turning your position into a loser will continue to turn your position into a loser whether you are confident about the trade working out or not. Somehow, when you go long for example, you are buying at a level where there is support because in situations similar to this one in the past, support has held up. However, the fact is that, though this situation may look similar to one's you have experienced in the past, it is not going to be exactly like the one's in the past; otherwise, we would all have a “set it and forget it” algorithm and have nothing to talk about. But, you’re really only estimating support and you can be anywhere from 100% right to 0% right about whether your entry was at support. Unfortunately, you can be 100% right about your entry being support, but if you are trading in the wrong timeframe, you could still have a loser. Sure, when you get filled, if the position moves a little bit against you, there’s no reason to panic. But, say, for example, that you are day trading and your signals are generated from a 5 minute timeframe. If the average range of a 5 minute bar is 20 ticks and your stop is 20 ticks and the position has moved against you 10 ticks, you have to agree that you are much more likely now to get stopped out of your position by white noise movements of the market. Maintaining the same level of confidence, here, may cloud one’s ability to be objective. If you were still truly confident about the position, given the new market information (the market has brought you 10 ticks closer to being stopped out with a 20 tick loss), wouldn’t you want to move your stop back another 10 ticks to compensate for volatility, giving you a potential loss of 30 ticks if you are still as confident? That is never a good idea. The point of this thread is to see if we can figure out a way to better maximize profits by minimizing costs. One of the greatest costs in our business is our losses.

Has anyone ever scaled out of a losing position in just the opposite way you scale into a position? In a day trade, it would seem to make sense to have as many contracts on as possible when you are going to be right and as few on when you are going to be wrong. Going “all in” and then “all out” at a stop loss tends to cause big swings in your P/L when there’s high volatility. “Scaling in” minimizes your loss somewhat, but minimizes your gain too if you can’t get the full position on. Scaling out of a loser would seem to have the attractive effect of your right positions having the max contracts on and your losing positions having fewer contracts on than your max. Mathematically, over the same range of prices, in the case of a full loss, the “loser scale out” loss would be somewhere in between the “scale in” and “all in” trades. In the case where you are correct right away, your gain would equal the “all in” gain and be greater than the “scale in” gain. The tricky trades would seem to be the scratch type trades. Anyway, I have never read of anyone doing this and was wondering if anyone has experience with it or have heard of it in any shape or form.

Stock, The MP works like a charm on individual stocks. As long as you have buying and selling activity, you'll have a MP. Whenever I look at a stock, the first thing I look at is it's MP. You can use MP on the 24 hour markets, pit traded vehicles or any other actively traded security

The ensign software is fine. There are traders who use it successfully I am sure. It captures the essence of MP which may be all some traders want. The real matter is what do you want? Is that enough information for you? Can you use that info to trade successfully? If so, then that is all you'll need.

Volume has to do with "popularity" of one indix over an other. YM isn't significantly more or less volatile than NQ. But, because of it's size relative to NQ ( +- 11500 relative to +- 1939) a .5% swing will produce more gain or loss with YM than with NQ. YM = 11500 X .5% =57.5 x $5 =$287.5 NQ= 1939 x .5% = 9.695 x $20 =$193.9 YM gives you more bang or pain for the buck.

Age, I don't do either for a longer term MP. Most data providers I would think have a continuous contract that you can use for charts and backtesting. I Use IQ feed and typically the continuous contracts look something like this: @es# for es, or @eu# for the euro. Tradestation uses @es or @EC. That's the easier way to chart a longer term MP. The data with these symbols is always the front month. I can't remember a time where I wished that I could use the specific contract month symbol. I hope this helps out.

Sure it's available. No question, but, then, given the information, how you develop real time trading rules that offer a favorable risk/reward using the 3-2-1 approach? If you can't figure out a way to trade it so that your gains are larger than your losses, what is the point? Bottom line, why should you pay these people for this info? Also, I think that there are no net distinctions between commercial or hedge markets and non commercial or hedge markets. MP works with every market. I trade many different markets using MP. Each market has a different "personality", but MP is equally applicable. You can certainly prefer to trade one market over the other and defend your decision with religious fervor, but that doesn't make one better than the other for everyone else.

They are interesting rules. But, the rules do not seem to have any practical application before the fact. In other words, I do not think you can create real time trading rules around them that will give you a favorable risk /reward. If the rules don’t do that, then what is the point? Anyone can look at a yesterday’s market profile and say you should have done this or that.

MY 5 cents The Bid and ask will on YM or ES will go up and down, but there will not be any volume if it does not trade and there will not be a profile with no trades. Ym and es do not go up or down EXACTLY like the underlying. In fact ,frequently they will go up by more or down by less than the underlying as market participants trade, expressing their directional conviction or lack of directional conviction in the futures market. The YM, for example, can absolutely lead or lag the dow’s movement and is indicative of the collective will of the futures traders trading that particular contract month. In the case where the YM is ahead of the Dow, it creates an arbitrage opportunity for arbitrageurs to sell the YM and buy the underlying DOW stocks, bringing the index and YM back in line, while snatching a small guaranteed profit and at the same time making the arbitrage opportunity disappear. So you can have a day where the YM is rising in price by more than the DOW and a futures trader looking at the volume may see a lot of “selling” of the YM futures and comment on the oddity of the fact that the YM is rising in price while there are more sellers than buyers. You’ll have difficultly having any room operator explain that one to you. Volume in the futures markets for ES can be very confusing because ES and others are tied to so many different financial instruments, that the motives for buying or selling the futures are not the buying and selling in the intuitive sense. So, a large buyer buying 1000 YM futures at the top of the days range does not necessarily mean that he believes the market has higher to go. It could mean that he is buying the futures and simultaneously selling some other underlying instrument to take advantage of a premium that was created by the overzealous buying that brought the YM to the top of the range in the first place. Therefore, naively following the “smart money” could only lead you into a trap set by other traders who are aware of the intentions of the large contract traders. They will happily sell you a one or two lot and buy it back from you 40 ticks lower. The reason why the S&P and the Dow are so correlated is really just a statistical phenomenon. Any group of randomly selected stocks that = 30 will mimic to a very high degree a lager basket of stocks by about 98%. (If you need to, try it yourself. Randomly select 30 large cap stocks and compare to the S&P). Do not make auction market theory such an alien concept. Almost anything you buy or sell is priced based on an auction process. MOM has a few good examples to try to explain the auction process outside of the financial world. It takes a long time to fully understand MP. Then, after reading and studying MOM for a few months, you need to develop a trading strategy around MP. MP is NOT a trading strategy. If you speak to someone who is a room operator, trader, etc., who uses MP but uses other indicators too, then they really do not know how to use MP. You either know how to use MP and use it exclusively or do not really know how to benefit from MP. Sorry about the length.