Predictor

Okay, there is so much wrong with this thread that I don't know where to begin. I think the biggest misconception is that a trader could just tell you in a few words how to be successful. Would anyone expect to be able to have a little "chat" with a surgeon and go out perform surgery? What about a programmer? What about a pilot? What about just about any other job or field? Obviously, nobody would expect that they could be told the "secrets" to becoming a great surgeon, doctor, or programmer but they somehow think this is true in trading. That's the first mistake.. Successful traders may use a dominate analysis technique and many traders and market analysts will share analysis techniques --such as Barros swings, market profile, Eliot wave, wyckoff, candlesticks, etc. Part of the confusion comes from a basic misunderstanding, it is not possible to teach one how to trade say "market profile" because market profile is not a trading strategy but a way of analyzing the market. Successful discretionary traders tend to have extensive, often multiple year, experience in using their analysis techniques. There are many market analysts and traders willing to share such techniques. Of course, the nature of such methods make this area a "ripe" grounds for unscrupulous vendors. But, the core focus on developing extensive experience in understanding the market is correct. Analysis techniques differ from strategies which are methods that completely or mostly define the criteria for a trade, think "Turtles". Most successful traders will be able to make use of both extensive experience in understanding markets and/or have multiple defined strategies. Yes, successful traders are very concerned about others copying their strategies. It takes a long time to develop a working strategy, and I personally would never share such a strategy for free and don't know anyone else who would either. A third category of instruction is based on training the activity of trading which is seldom discussed in the public domain. I've focused on this aspect in my ebook, webinar, and newsletter. This type of instruction includes both analysis technique but also trading instruction. My personal approach is to simplify everything as much as possible and throw away anything that doesn't prove itself. The focus in this sort of training is on how to combine analysis with execution. There are a few others who recognize the value in this sort of training. - Curtis The Market Predictor

I posted this as a response on another blog. I liked it though. So, I thought I'd copy it Who Should Become A Trader? There are only 3 reasons to become a trader: #1 You are great at it.. you show an amazing aptitude for understanding where markets are going and there is evidence you can profit from that activity. Trading is about service. Just like some people are good at running or playing basketball, some people are good at predicting the market. People should do what they are good at, develop it, and use it for their own and others betterment. #2 You've discovered something that can make significant money that no one else understand. You're not really a market wizard in the traditional/discretionary sense but you've discovered something unique, non trivial, probably quantitative in nature.. Your already a genius in other fields. You shouldn't trade but you might be able to exploit your specialized knowledge by building a system (and trading it or selling it). #3 You're a rich kid. You've got a ton of money. You don't need to be great. If you have at least a million dollars then even mediocre trading may produce more money then you could at any other job. However, if your in this camp then you also have the option of seeking out fund managers who may do a better job. Its a tough camp to be in. ----- Having said, obviously, there is going to be a time before you believe that #1 to be true. This time isn't to be rushed. Its an important time. Its a time for development, exploration.. Its a time when one has to be careful to guard against any negativity. Its important to keep an open mind. Its not a time for big bets. At some point, one will decide that they have better things to do (most people will decide this) but others will carry on... I think during the 'carry on' stage is where mentorship becomes more important. I spent my first year 50 hours per week studying technical analysis. I worked day and night until exhaustion. Every night. Every day. Every week. Belief in certain success is critical to do the type of work required!! In my case, I had a friend, who I had unwavering faith in, who promised to fund me when I demonstrated my ability. He never did but the point was that I never doubted him -- so I worked as if I were already successful. Its not important whether one becomes a trader or whatever they do but that they realize a creative, performance, and rewarding life. Creative work energizes and gives back. It is a form of service. It has potential for growth. Everything is about the service for me. And there is a huge need today for creative realization and for people to become more conscious. - Curtis

For futures trading there are many brokers offering competitive rates and the following are worth considering OEC, Velocity Trading, OptimusTrading (not sure what their rates are), DeepDiscountTrading, Tradestation, AmpFutures (not sure), and InfinityFutures. Not a recommendation. For stocks, InteractiveBrokers and MBTrading offer competitive rates.

I've found that taking small stop losses in the ES doesn't work well. What I do is I read the tape and monitor my trade and try to exit at a better price then taking a hard stop. This requires setting a larger stop and requires one to be skilled at tape reading. I think only hard stops set a good bit away have a chance to work as well. For people who use tight stops, I mean I don't understand that because let's say you're trying to catch a rally or trend and you get stopped out. Okay then what are you going to do? Quit? Go home? Not if you want to make any money. You're going to have to try again. Its the same with trying to catch a reversal... let's say you're off 3 points vs 2 points. You take a 2 point loss and it reverses at 3 points and rallies to 4 points. So, let's say you jump back in. You just lost 1 point profit. Tight stops can easily eat your account up. Let's say you recognize you are wrong at -4 ticks but how often does the market tick back up at least 1 or 2 ticks? If instead of taking the 4 tick loss you took a 2 tick loss -- that's saving 2 ticks per trade which can add up. Sure, on occasion a trade will run against you and you'll end up taking a much larger loss. My rule of thumb is to use a stop 3x-4x my target size. I've found in testing systems and in my own personal trading that such a ratio does work the best. The trick is that I almost never let my stops get hit -- instead exiting before they get hit. This will have the effect of reducing the size of the losers and winners to a ratio closer to 1:1 which has benefits. A good day trading system might only average $50 per trade.. so if you can get 1 or 2 points consistently then why not take them? I would almost never use a 4 tick stop loss -- an HFT system can blast 4 ticks off the book and you get an instant reversal. That doesn't mean I won't take a 1 tick or 2 tick loss.. I just wouldn't set a stop at that level. I never average out my positions because I'm almost always able to exit at a peak or a low -- not necessarily a top or bottom. I try to keep my risk per day at or below 5% but sometimes I've risked up to 12% of my account on a single trade. Risk levels of 3%-5% are fairly reasonable for a skilled trader. - Curtis The Market Predictor

I'm sharing an excerpt below from one my recent "Sequences and Breakdowns" newsletters about having the right mentality to succeed at trading.... Speaking of the basics, let's setup how I might frame the day. Remember, you don't need charts or fancy indicators to be successful at trading. You do need a degree of resolution to see your trades through and you do need a solid framework that allows you to understand the market. Yesterday, I had pegged the day as a range day and knew where the highs and lows were. I hit my target early but kept trading but I wasn't trading with resolution. I wasn't trading with the focus required to win. I ended up giving back my profits, getting serious, and finally making them back. Listen, nothing will help unless you train to execute. This is why I just use basic charts. I can see if the trend is up or down in 2 seconds and anyone else can either. It is not just about knowing what to do but being able to do it. - Curtis http://themarketpredictor.com

Let me suggest something else, stops are the primary cause of losses for traders. Stops simply convert open realized loss into a closed form loss. This can be helpful in cases -- such as when your analysis is wrong -- but they absolutely do not work like insurance. Insurance is suppose to protect you when you are wrong but a poorly set stop loss will cost you even when you would turn out to be right! Options and spreads really do work like insurance but they are costly. It is possible to trade with stop losses and produce a profit. However, the difficulty of using tight stop losses is an order of magnitude more difficult then simply not using them or only setting really large stops. Stop losses can be one important tool for controlling risk but won't magically make a trader more profitable. In fact, there is a very good chance that stop losses will make a profitable trader less profitable. But, this doesn't mean that they shouldn't be used. I use them in all of my trades because I haven't been able to work out a better method... yet. Logically the stop loss converts an open drawdown into a closed drawdown. This can be positive in that it caps the max risk of a trade/day but it has the negative effect of increasing the "load" on the drawdown or realized loss side. Hard stops also tend to move the median/average loss to the maximum stop which can be detrimental... Now limit orders are another matter, they do work in a way that is similar to insurance except one has to question if it makes sense to "take out insurance" when a trade starts to work out. But, I do think that for certain styles of trading -- limits are invaluable... Best metaphor I can give.. stops are like going to a bad dentist with a bad toothache.. Stops hurt but might hurt less then the alternative. Having said all that.. I probably wouldn't be able trade without them.

Averaging down or simply averaging is the idea that a trader can achieve a better overall price by working orders over time. The basic idea is that it is approximately but not precisely possible to bound price. Averaging does allow a trader to improve their entry and refine it as the market moves against them. However, there is a cost to naive averaging which is that the traders risk increases with the improved position. This large increase in total risk at the worst time is generally why averaging is frowned upon among professional traders. Even so, the benefits to achieving a better cost basis would help many traders. If a trading method could somehow be developed that would allow a trader to improve their cost basis without increasing their directional risk then such a method could form a powerful method for trading. The goal would be to find a method to constantly revise our opinion of value without increasing our directional risk and without the risks of taking realized losses that occur with stop losses. One discretionary method that I developed to achieve this purpose was a method that I called Hammer Trading (or Hedging) which involved trading correlated instruments both long and short at the same time. First, I do not think this method as I originally developed it worked well. It required too much skill and may have appeared to work simply because it kept me in the game longer, working harder. Let me warn you that the technique that I'm sharing is extremely difficult to make work and most would lose if they were to try this method. I caution against it. First, it is assumed that one can predict the market's direction. The method doesn't provide an edge in itself but assumes that one already has an edge. The idea for the hammer trade is that I have a directional bias and enter a normal directional trade. But, imagine the trade starts to go against me. Instead of taking a stop loss, I will take an opposite trade in a correlated instrument. In an ideal world I could just clone the original instrument. The idea is that I can hedge out the directional risk against my open position while booking closed profits. Some say this is the equivalent of being flat, and they have a point. But, my perspective is that at least when it works it allows the trader to improve their entry without increasing the risk. In essence when this technique works, the closed profits offset the open drawdown making it such that even the slightest recovery will result in booking a net profit. This is a great method in theory but remember requires an extreme level of trading performance. I named the technique "hammer trading" because closing out one side results in taking a directional risk on the other side, aka dropping the hammer. Hammer Trading Gotchas Ballooning There are many things that can go wrong. For example, I may change my overall bias from long to short. This means that I have to change the ratios of my short and long exposures. But, let's say I change my mind again which means I must increase size yet again to get the a directional exposure on the "other side". This overloading can easily lead to an out-of-control phenomena I've termed ballooning. The effect is to increase the risk and make it harder to exit the trade gracefully. Ballooning can be controlled by capping the max size regardless of the delta. Pinning Pinning occurs when both positions get trapped in a loss. This is a stressful situation even though one rationally knows that one side must yield a profit. Spread Widening Sometimes the spread between the instruments can widen. On some days, I've seen the NQ/ES spread widen to over 1%. This is a danger because it means that losses on both sides can grow unexpectedly and larger then anticipated. Failed Hammer Drop The failed hammer drop means that I fail to close out the scalp profits at the proper time. In other words, the original trade starts to work but I wasn't able to get out of the scalp. The hedge loss can grow larger then the original trade if not careful Bad Hammer Drop The bad hammer drop means dropping the hedge and the trend continuing to run against one. Again, the method is not an edge if my analysis is wrong. Extreme Trends This method is not as suitable for markets that show strong trends, such as crude oil. The reason for this is that its not possible to book the profits fast enough during strong sustained trend direction. The "Hammer Trading" technique does work beautifully when it works but there are just too many things that can go wrong. The method may work but it doesn't work very well. The concept of averaging does allow one to refine their entry position without the risks of taking realized losses that occur with traditional stop losses. However, the cost of this averaging is the proportional increase of risk. A trading method designed to take advantage of refining ones position without increasing directional risk could form a powerful structure for short term trading. I imagine such a structure would have to involve going long and short multiple instruments such as to achieve a degree of delta neutrality. It would require finding a way of offsetting new long positions with new short positions. - Curtis http://themarketpredictor.com

Most of the professionals day traders I've spoke too make consider anywhere from 30% to 50%+ a solid return. None of the most credible people I spoke too mentioned making over around 50% to 80%. You can look at World Cup to see what those traders are doing in their accounts. I consider 30% a good base level return because most people don't want to experience more then 30% DD and a 30% return at a 1:1 reward/risk. Speaking of returns without risk doesn't tell you anything. I consider also consistently making 30% on risk per day a top of the line return. This gives about a 4x return to the account size -- if risk is kept below 5% which is aggressive. Many consider the 4:1 reward/risk ratio an excellent goal. Few will manage better then 2x. Long term among tracked CTA funds, few manage a sharpe above 1. A 1 sharpe will translate closely to a 1 calmar or 1:1 -- in other words there aren't many funds that can do better then the 1:1 ratio. Of course, some traders may have an excellent run and do a lot more. I don't think it is useful to compare yourself to those though. Traders at firms may do better but I know some of those managers and they aren't making as much as you'd think. One futures firm said a good trader will do 250k before splits... so after splits you're making a good salary but not getting rich. A top stock prop firm told me that a new trader will do good to make 50k in the first year. As for Larry.. he made his returns by scaling up his size. It is possible to do some amazing returns if one scales up size as the account grows. Most people don't want to experience those type of swings though...

Fast... when using scale out exit you should tend to get the average of the scale out but you will take a loss on all contracts when wrong. I say use it if it works for you but mathematically there is no edge to scaling out. There is no cost either, really. This averaging process once understood can also seen in volume/price relationships.... Many successful traders like to add versus scale out.

My review of OEC... DOM -> Solid and fast Charting -> Havent used it much but it does have a trade entry from charts.. seems basic but could be useful for chart traders Platform -> Lightweight which is good imo Reporting -> Rarely works for me.. lacks stats which is a big downside Support -> Pretty good. They try but they don't always know the right answer. Never had trouble getting them to try though. I'd say support is above average. Commissions -> About average at tier 1. They are good compared to the expensive brokers but many brokers are dropping their rates these days. Overall: Very good but there seem to be many good options these day.

Tradestation is really nice for backtesting. It has built-in data which is a big plus compared to other options. This is a great platform for running systems. Tradestation acquired many of their best third party vendors and is always updating the platform -- pros. Cons is that Tradestation is still weak in some areas of backtesting/system development. OEC has a great DOM for discretionary trading and basic charting. Its a strong platform and lightweight. Ninjatrader is a powerful platform. It used to be extremely buggy..This left a bad impression on me. Its a bit on the heavy side. I'm a professional C# programmer but was never impressed with Ninjatrader's backtesting capability. The nice thing going for Ninja though is that it has a lot of third-party support. I'm even looking at developing some third-party application. Its more geared to the discretionary trader. Don't get me wrong.. its a strong platform too. Multicharts is also another option. The cheapest option is probably going to be OEC.. they have free data and free platform but its only if you are discretionary trader. They run a good outfit. Other platforms you might consider would be Interactive Brokers -> program own interface like Tom, Velocity Futures, and Deep Discount Trading.

Has anyone here used Riithmic's R-Trader DOM? How does it compare to a DOM like OEC has? (I think OEC DOM is very strong) Does the free/pro version support detailed trade stats like win rate, equity curve, commissions payed, average profit per trade, avg time in trade? What platforms will support this level of "built-in" stats for the entire history of the account without me having to generate reports via Excel?

I just trade the futures but I've been interested in trading a basket of stocks. For example, sorta like you're saying.. I can predict the entire market direction -- that's strategy but then there are "tactics". So, there is strategy and tactics. Tactics is how we implement the strategy.. One idea with tactics is to minimize the cost of being wrong. There are a lot of possibilities in stocks that I don't have in just trading the futures. You might pick the 5 strongest stocks to go long based on fundamentals or relative strength. A lot of possibilities.. I think the line of thinking you are on has promise.

>>the Merits of Setting Profit and Loss Targets??? The question in the body isn't really similar to the question in the title. I run analysis on my systems it depends on the type of system and the constraints as to the particulars of how this will work. But, in general not setting a profit or loss will cause your returns to vary widely and go out control. This will mean blowout for leveraged traders. In general your return will take on the return of the market -- for better or worse. -- Of course the market return is often better then what many traders achieve... Profit targets and stop losses, however, don't work in the same way. Profit targets set too tightly will generally increase the win rate of a system but in general won't radically change a system performance but poor stop losses can ruin a system. I'm not 100% sure why this is but I think that profit targets work more similar to insurance then the stop loss. Trend systems often do perform better without profit targets.

I will continue to monitor the situation because I find that most of my ideas will often end up working out if I had used a larger stop. One trader has described the effect of stops as causing strategies to "lose memory". I often that there are good opportunities to take both long and short after being stopped out -- based on keeping awareness of the total game. So, I always try to retain that memory. If I were trading perfectly, I would probably continue to monitor the situation. There is a possibility my analysis was just flat out wrong and that's something I'm always concerned about. I also take into consideration my mental state. Sometimes it is better for me to clear my mind and take a break even if the "optimal" thing to do would be to stay on the trade.

First, let me say that I don't have any stake in this, and do not have any strong opinions one way or another about Roger Felton -- nor any knowledge of his methods. From my own experiences, I can understand where Roger may be coming from feeling "negativity" which is often expressed at the first sign that someone being a vendor, regardless of the merits the vendor has to contribute. Now as far as sim trading, I've did that for many years and believe it to have value.. Some traders can trade in sim and can't trade live. Some simulators aren't realistic and won't give accurate result. If the simulator is using realistic fill engine then I can't see the problem from the student/learning perspective. I share my sim trades on a regular basis, as well as my live trades. However.... I feel it safe to say that no one in their right mind would sit out $1,000 in profits per day just to teach on a simulator. That part raises a red flag... Great traders are highly motivated to do everything they can and I just can't see a great trader doing that. Also, I don't see any reason too and I don't see the sales being that lucrative. And, I'm sorry if I misunderstood Roger but I felt he was claiming that he wasn't trading live during the best parts of the day? It is usually not that difficult to trade both live and on the simulator at the same time. And really if you are averaging 1k per day then that's what 3 days to buy a top of the line computer to run your order engine from? This is the part that I have a problem with. Plus sharing the live fills couldn't do anything but help your sales and credibility. Again, some traders can trade better on the simulator then live. I sometimes go back to the simulator when I have self doubt or when trying new things. I'm often trading on both sim and live at the same time. And, as long as the vendor is clear on what he is doing and why he is doing it then I don't see any problem. But to suggest that a trader is going to sit on a simulator and not trade live just to help students while giving up thousands in profits doesn't make any sense to me -- as a vendor and a trader.

Thanks to everyone who attended. I've made the recording available below. The audio messes up for about 2-3 seconds at one point but I think that's the only point, and everything is good after that. Thanks. Limit vs Markets

The new time is scheduled for Sunday, July 1st at 10 AM EDT. You may register by clicking the link below: https://attendee.gotowebinar.com/3598s/register/575143880675853568 Thanks and look forward to seeing you there! Curtis

In order to allow for more traders to participate, I will be hosting this event on Sunday morning instead of Saturday morning. The details will go out with the newsletter tomorrow morning. Thanks.

Just an update, I will be back before Saturday with all the details. I want to thank the admins here for creating a great forum for sharing trading ideas. And, I'm very excited to speaking on this topic. This has been something that I struggled to understand for several years, and only in the past few months have I came very close to understanding most of the factors involved when deciding which order type I should use. I also understand why some swear by limit and why some swear by market. I think traders, of all experience levels, will be able to benefit. Thanks again...

I'm planning to do a free webinar this weekend on knowing when/how to use Limit and Market orders. It may seem simple but it's taken me years of thoughtful study and practice to learn when it is appropriate to use one order type or the other. I believe that most traders overuse one type or the other. Some traders swear by Limit orders others by Market. This webinar is designed to teach when it is appropriate to use one or the other type and why there is a benefit in using a mix of order types. While the information may be useful for any trader, it is mostly based on my experiences in trading the ES mini future and applies to the futures especially. I plan to do this webinar this Saturday morning at around 10 AM. I haven't yet decided what I will use for the meeting though. I wanted to get this out and see if there is enough interest to do it this Saturday. I expect it to take around 30 minutes to 1 hour max. It shouldn't be too long. Thanks. I will be back with the details before Saturday. Admins feel free to place this where it belongs best. Also, if there is anything that conflicts with that time then let me know and I may choose another time.

OpenECry has a very good simulator for accounts. Ninjatrader also has a good simulator (free). Investopedia has a decent simulator too.ThinkOrSwim also has a paper account feature.

Reading the tape is something I do extremely well and I share several different techniques in my newsletter for doing that. Some are very simple and require no software, others are more do require more specialized tools. One of the most accurate ways to see the transacted order flow is by tracking the cumulative delta, delta, or by using the footprint (MarketDelta)/VolumeLadder charts. No affiliation with MarketDelta. They offer a free Trader software if you have a participating broker that you could try. It is difficult to trade with only order flow though. I'm specialist in ES. Curtis

Okay, I've found one pattern in the DOM that may be worthwhile. But there is no way that I can execute on it. The idea is pretty simple: the volume on the DOM is spoofed and therefore not worth much. So how do we know what is real on the DOM? The only way to know is by watching the inside bid/ask. But, this is going to be spoofed too except when the liquidity providers have to pull out, at which point it will show the real volume. The idea is that whoever is sitting on the LIMIT side has some knowledge and thus when they pull out (offer liquidity drops) then the risk is higher the market will tick higher. So, what you're actually looking for are SMALL PRINTS in the book. This tells you there is more risk to the market moving in that direction because no one is willing to spoof/offer orders there. Again, there is very little opportunity to execute on this manually. It only last for a split second. Likewise, even though it tells you the market is more likely to move, it doesn't help you get in. Best to focus on things we can actually do and leave this to those who have the technology... the market already moves fast enough for me when trading for a few points! Curtis The Market Predictor

Josh... I kinda see what you're saying but think you're not thinking about this properly. I am generally looking only at actionable liquidity because the rest is just hypothetical. In your case there is a lack of ability to BUY at that PRICE. You have to factor in the price. There is always the ability to transact in the market but you have to know the price. In other words, there is no ability at all to buy 10% below the market. Obviously, there is unlimited demand to buy 10% below the market and zero supply. I don't think the market only moves because of liquidity though. Its certainly a big part but I don't think its the only answer. Obviously, there is buy and sell liquidity (or buy/sell pressure). Firms talk about finding liquidity because they need to transact large blocks of trades so they much that they can't get market price. HFT firms try to exploit this by using nefarious practices that involved posting and pulling offers. This is something a bit different. Curtis The Market Predictor