firewalker

... here are some charts I was talking about from a while back (anyone remember dow at 14000? It illustrates that the daily gyrations can sometimes stay in the same range for a while. These are some charts from October 2007, but you can find the same things today. I only look at these to get an impression of what the possible extent of a move could be. At that time the trending ranges were about 200 points. So that's the number you need to have in the back of your head when looking at these charts. Like if we are trending and have dropped 500 points on the YM with 1 hour to go and the market approaching support, it would be more risky to short on the break than when we dropped 50 points with still 5 hours to go. But that's just how I see it, and there's no reason both trades can't be profitable. It's just something that helps me 'filter' my setups and skip the medium probability ones. Credit to those who deserve it, it's something I first picked up in some of dbphoenix' ET posts and I gave it a twist of my own.

That really sums it up nicely. Some real gems in your journal, great stuff!

Do you think differently about taking a new trades if you are sitting on a profit compared to when you are sitting on a loss? I know it's very easy to let these numbers influence you, but the market obviously has no history of your trades and as each new opportunity arises I believe it's important to consider that as a singular new event, with complete disregard to what happened before. Obviously you'll want to stop trading if you continue to make losses in one and the same day, but other than that I think a lot of people (including myself at times) start to trade differently when they are up then when they are down. Just some thoughts...

If you used absolute profits in terms of relative, the results should be the same, but since the "risk-free" return is a % you'll then need to transform that number into the net profit based on the starting capital. Take again example of Trader A: Trader A has a system which gives him a potential of 200% profit/year and the standard deviation of his trades is about 15% (he has pretty wild swings in his account). Sharpe => (200-2)/15 = 13,2. Now using absolute values, (let's say starting capital = $10K). Sharpe => ($20000 - $200)/$1500 = 13,2...

Afaik the starting capital is not included in the formula. You can find the correct formula on Wikipedia or Investopedia. In the formula you'll see there is a so called "risk-free" component which is used to compare your system to the most conservative investment (although "risk-free" these days is relative in itself!), but you know what I mean like a savings account or 10-year bonds. The Sharpe ratio is used to offer a measurement to check whether taking more risk is worth the higher return. The higher the Sharpe ratio, the better you are being rewarded for taking risk on your assets/investments/trades. This does not mean the net result in the end is more profitable, it only says something about the "reward-to-variability". Here are two examples. Suppose the risk-free result is 2%. Trader A has a system which gives him a potential of 200% profit/year and the standard deviation of his trades is about 15% (he has pretty wild swings in his account). Sharpe => (200-2)/15 = 13,2. Trader B has a system which gives him only 50% profit/year, but his stdev is only 1%. Sharpe => (50-2/) / 1 = 48. So although Trader A is more profitable, the risk premium per unit of risk is higher for B.

How do you define 'stalls'? Price does not have to move all the time, sometimes it goes sideways or stays at the same level for seconds, minutes, hours (depending on what timeframe you are observing). So long how does price need to 'stall' before you scale out or exit? Is there a difference between 'natural' and 'gut feeling'? Candles turn red and green all the time and they change colours while they are forming. A small green upbar followed by a big red downbar on the 5 minute will show as a red bar with a wick on the 15min. How about doji's?

Real time would be a trade posted in the chatroom at the time of execution. Many traders here visit the chatroom and actually make those kind of trades public. They also post their stop so everybody knows when the trade turns against them. I think nobody would mind if you can show us a series of real time trades in the same way the rest of us do.

That's why I save a 5-min and 1-min chart of my favourite markets each day It's not perfect, since it's not scrollable and you can't zoom in, but since futures expire every three months most brokers don't provide intraday backfill from the previous contracts...

:shocked: I am surprised how much difference MM can make... would you say it is something you never really taken into much consideration before? Because 300%... well that just seems unreal...

Great work jason :thumbs up:

First of all, thanks atto for providing so much insight in your trading approach. It's been a pleasure to talk with you in the chatroom exchanging live trades. So everything I say here is only to illustrate that there are different ways to skin a cat. I'm not saying this or that method is better, we all need to trade the way we see fit. The second thing I'd like to say is well done on getting your short entry near the HOD. I was actually long (potential support in the area 981-983 and we still had the rising demandline on the 15min, one that I already refered to earlier in this thread). So this is the context: My long was scaled out when we failed to make a new high at 988 and another scale out and the rest breakeven. The red dot shows where I shorted and zoom in to the 5minute to see clearer: The problem with volume climaxes is that there are a lot of them. I (try to) wait for a climax near some important support level before scaling out. I've learnt that the midpoint of a range can also create a retracement, and - depending on how far we moved already - it's one I don't always want to sit through so I scale out. I agree that climaxes often lead to small swings in the opposite direction, but - and I realize many will disagree - I prefer to have a chance of catching the 'big swing' from time to time, by waiting for a reaction at a more important pricelevel. In this particular example, it means stepping back the the sub 1min TF and having your eye on the next potential support (which I had around 961-963). It does not mean you need to give back all of your profits. Stop placement is shown on the chart below: My first exit was when price accelerated on the way down and climaxed. Although volume is not on this chart, you can see that momentum was higher and the spread was widening. The second scale out point was a bit further down the road. And that's where I guess it comes down to styles, personalities,... I prefer to ride my trade out till EOD with whatever part of my position I have left. The way I see it, looking for a new entry means putting on new risk, and the potential of giving back profits made earlier. Let's zoom back to the 15-min chart: We broke the demandline and that's why the odds were a bigger move was coming. Thinking of trading behaviour, you were very early with shorting, I was a bit later (waiting for the break), but all those trading higher timeframes were even much later. Hence my belief that sellers would propel price further down, at least until the next support level. And as it turned out, we even went further down another 10 points in the last thirty minutes.

I found this post on "Exits and Scale-outs" interesting and have nominated it accordingly for "Topic Of The Month November, 2008"

How do you define climactic volume? For me volume wasn't climactic until it hit 976 (with vol 25k on 1min bar). I take it your exit around 958 was in part because it was potential resistance and in part because we failed to take it out after several attempts. Anyhow, after your entry, price came back about 30 minutes later to 947.50-948, which is about where your resistance line shows in the third chart. Did you re-enter there or did you see things differently? Incidentally, your hinge also materialized at a place where it was hugging the demandline on the 15min. That, and the fact that we had a lengthy premarket congestion close to that level was confirmation of a long entry for me. I didn't actually see the hinge the way you did, but it's nice we both saw different things that lead us to take a similar entry.

I would recommended this book: http://www.traderslaboratory.com/forums/f8/techniques-of-tape-reading-492.html

You honestly believe that regulating things means prices will rise less? The only thing that more regulations leads to is less liquidity, less free market, and ultimately more 'over the counter' transactions.

and again... late in the day:

And eventually, although it took some time, we did went up, so I'm still in. But not after a come-back to the midpoint (I didn't change my lines). I think those who entered on the breakout would've easily been stopped out, so again it pays to re-enter...

This looks like one to me... I don't plan on 'doing anything' with it, because I am already in a position (long from 1178). But if it were to break to the downside, I would exit my position. What traders are doing, imho, is coming to an agreement on price. There was a reaction off support around 1175, and another one off 1207. So on both levels a lot of traders could be find (we had a volume peak at 1207 as well as 1175). Here in the middle, trading is risky and has slowed down. If we break this hinge, I think it could lead to a break of the nearest S or R level because by then enough energy could've been stored in the time price spent converging.

if only the markets I trade would move that smooth! Oil is really getting hammered...

I don't look at T&S or DOM... so can't help you there. But what is different about the YM versus the NQ is that the volume is much less, perhaps that has something to do with your experience?

How do you define 'reading tape'?

I finally found what I was looking for, turns out it wasn't in a post but it was a comment in your blog; you wrote: "the technical potential is the bottom of the hinge".

I agree one would expect a more prolonged directional move, but I thought you didn't "calculate" targets nor used PnF charts to determine targets, but just went along with what the market told you... so what would be the target then? Anyhow, I couldn't find the exact post that I had in mind, but it was something you talked about in March/April when the NQ broke out of the hinge it found itself in at that time, see also here. Perhaps we could use that as an example where price didn't move very far (at least not in terms of size relative to the hinge itself), and only tested the bottoms of the hinge before preparing a new advance in the opposite direction.

I believe you said somewhere that the target of the breakout would be the extreme point of the hinge. So in case the low, since we broke to the downside. Despite the $INDU chart on StockCharts showing differently (and the one on Bigcharts too), we opened yesterday with a spike down below 8000. So if I understand correctly, the target would (more or less) already be reached?

We're not moving and we're coming to a standstill! Price refusing to go lower and completely flatlining. You don't see this very often EquityIndexPriceLimitGuide.pdf