jonbig04

Yes you are right. I haven't gotten to the actual trade management side yet, but I will. I will determine my hard stop loss as well as my trailing stops with 3 different stages. Also as you mentioned I will figure out my entries and exits. As far as psychological homework goes, I can't really show you but I AM doing it. What's going on in my head is the equivalent of completely gutting a house before all the new stuff is added. Psychological demolition or cleansing I guess you could call it. Anyways I've beaten that horse a lot around here and decided to start working on my method as thats an easier thing to quantify over the internet

I would like to start off trading retracements. These are what I'm working on now. This is basically an outline of what I want to determine. All the real work still has to be filled in, but this way I know what I'm looking for. Each step is contingent upon the completion of the previous one. I still have some steps to add, but i hope you can get the general idea. 1. Identify the daily trend. Using some way of general trend determination i.e. trend lines, linear regression etc. The trend will have to meet certain requirements (which I have yet to figure out). If it meets those requirements I will be comfortable saying the trend today is X. 2.Asses the strength and probability of continuation of said trend. Using a certain amount of support zones and watching how price reacts when it nears them. For me to consider the trend strong it will have to break though X amount of support areas with X amount of volume. 3. Identify smaller retracements of the daily trend. I will have various criterion (yet to be determined) that the retracement will have to meet.Including a percentage it will have to retrace from the current trend ( I havent yet figured out how to do that). It will have a lot to do with declining volume, and other factors that will indicate buyers or sellers are simply taking a break from continuing i the current trend as opposed to buyers or sellers actively pushing the price away from the primary trend. 4.After the criteria for a retracement have been met I will cross examine the potential retracement with what I've learned about reversals (yet to be determined). This will depend on how many characteristics I can find on reversals. It will be something like: off all the reversals I've looked at I can identify 5 things that price did before it reversed. Each reversal had at least 2 (or 3 or so) of these characteristics so my retracement won't be allowed to have more than 1 or 2, whatever the case may be. This will change in time. If I find that the reversal vs retracment ratio is to high when the retracement has 2 of those characteristics, then I will knock it down to 1 and so on and so forth.

You are right. I realized some of what you were saying a couple days ago when I sort of stopped trading b/c I had no plan (yet). There are some areas where I like the sim. Example: its hard for me to see on a chart how tough it would be to hold a certain position. Sometimes when I look at a chart I just see that price when up 5 points in 10 min, I dont see all the small retracements that are in the same candles, if that makes sense. So it kind of helps me figure out how much I can endure as far as risk is concerned, and I've learned a lot of other lessons not relating to method, but I think at this stage you are absolutely right. All the information I need is in typical not-live charts. Thanks for your advice. As for my plan, I'm getting there. I hope to have something posted here by the end of the day.

Word. The options on futures can be pretty nuts. As you said though you can make a decent amount via calendar spreads etc selling premium with theta on your side. Seems easy the first time you do it. It's not. haha I've made and lost my fair share in options. :crap:

I had planned on simming until I was consistently profitable. Then easing into real money one contract at time.

Oh and I didn't trade today. I got a root canal this morning and was out of the house all day

Not at all, criticism is encouraged on all fronts. As far as I'm concerned enthusiasm is not strong enough a word. When I think of enthusiasm I think of people who ski on the weekends or play soft ball twice a week. I think something as challenging as learning to trade requires all of your attention, pretty much all the time. Thats what Im trying to do anyways. That's interesting what you say about the Sim slowing me down. Why do you say this? thanks

I suppose I could have looked at the lower higher at 9:47, but I don't know. Like I said I was expecting it to fall and congest like it did. Where did I go wrong?

Ahh the frustration:angry:. I only took one trade today. It was a loser. Anyways here was my train of thought behind and during the trade: To me the days bias was an up trend. I looked at some longer zoomed out charts and that's what I determined. I saw the one climax at 8:12 (My chart is 2 hours behind EST) and the pull back at 8:21. Price then congested a little (from what I've learned that can be expected after climaxes) and then resumed its normal pace in the uptrend. Then at 9:27 it happened again. As far as I was concerned the main trend was still an up trend and this was just a volume/volatility climax (term coined by Atto). Price pulled back as expected and congested as expected. At this point I drew a tentative support line at 1950. I waited for it to near it again and it did, and bounced. Also on the fast chart (5 sec) it touched it what looked like 10 times, being quickly pushed back up every time. With all his in mind I expected price to bounce off support again and resume the general up trend. I was planning on riding the main trend and exiting at a volatility climax. I entered near support at 1950.25. Price bounced off and quickly resumed in the uptrend I was expecting. All the way up to 1955.75. I could have taken profits there and I almost did, but I saw no reason to. Sure I was up by a good amount, but is that a good enough reason to sell when you're waiting for something else to happen (thats not a rhetorical question, I really want to know haha). I figured price would jump around with an upward bias for a while (which was exactly what it was doing) and eventually volume would come in hard (sending price up)and that's when I would sell. All the small retracements were on low volume. Of course at 1955.75 price stalled out and started to drop. I really didn't care, but I should have. The high at 1955.75 (11:03) was a lower high compared to compared to 1957 (9:48), also volume was decent and price broke through my support level and stayed there on good volume. By this time there were a few lower highs and now a lower low. Combined with the rest of the factors was the market telling me that my prevailing uptrend wasn't around to save me. So I bailed at 1948 for a loss of 2 or so points. Of course 1 minute later price rockets back up to 1954, then back down to 1945, and back up to 1955. :confused: A couple things. Ninja always erases my stops and trailing stops when I turn it off. I then forget and enter the trade without my stops. If they had been there I probably would have gotten stopped out early on for a point or 2 in profit. Was my reasoning sound here or was I simply mistaken? Was I right about the trend and climaxes initially? Was my support at 1950 ok? I tried to stay in control. I thought I had a pretty good idea of what was going to happen. I guess I didn't. Did the trend itself reverse at 9:35? If so where was my first clue to the fact that it was a climax and reversal and not just climax like at 8:15? As I type price is STILL farting up and down between 1955 and 1945. I stopped trading because I don't know what the hell is going on. A higher high was made at 12:30 hmmmmm.

I have the broken calculator, pencils, and twisted paper clips to prove that it's very much real to me lol:o

It is real....

I think trading itself attracts those who were anomalous in their previous fields. So what you say makes sense. Newbies learning about trading probably automatically assume they will have the same success in trading they did in whatever their previous gig was. The vast majority don't have that same success, but the desire to become an anomaly itself is not what stops them from becoming one. The difference, I think, is that most think that they will rise above the crowd through little or no effort of their own. While some realize that they can achieve the same success in trading, but the odds are even more stacked against them and if they want to get there they will have to MAKE it happen through sheer force of will, hard work, self probing/evaluation and probably a complete over-haul of how they perceive trading.

To be honest, I kind of was looking for a sort of permission/consensus. I'm not the kind of person who coasts into something. If I do it, I'm going to do it with all my heart, soul, and mental energy. What I'm attempting to do right now is simply identify WHAT it is that I need to do to accomplish my goal. As you may have guessed my goal isn't to become profitable, or break even (even though those are stepping stones on the way too my goal) my goal is to be the best. Of course I want to make it past the level of traders who lose all their money, but I also want to push past the psychological barriers that seem to keep good traders (profitable) from becoming great traders (ridiculously profitable). That is a step I haven't seen very many traders take, or make an attempt to take. You may say I need to learn to crawl before I can walk and that's true, but if I can identify the problems that will eventually come into play, maybe I can get a head start on correcting them and be damn sure they don't start to form in my own trading or mind. I'm a very analytical person so it help me to break down into separate categories the broad areas which I will need to focus on. Does that make it any easier? Maybe not, but at least I know my focus will be lasered in on the right place. I think that's important, at least for me. All day I'm on TL listening to you all and learning what I can, which is great for me and I appreciate it because you all, as traders, have a perspective that I don't. You can teach me things which I can just read and follow as opposed to learning it by expensive trial and error like I'm sure a lot of you did. Believe me, I am taking full advantage of your generosity and appreciate it. But I too have a different perspective because I am not yet a trader. I feel like I can kind of get a birds eye view of what people are getting hung up on so much because as of now I haven't really done anything right, and I haven't really done anything wrong. Maybe, just maybe, it will help me get past or at least identify the problems when they come knocking at my door. Hope that makes sense. ps I'm reading your book and have a couple hundred thousand questions, I'm hoping I'm not the first idiot to ask them in which case I will be getting to know the search button very well.

So its safe to say that the difference between people who make money consistently and the people who make BOAT loads of money consistently is psychological. This is what I have really been trying to determine.

Great post. I think we can almost make some very clear assessments now: The majority of traders who quickly blow their accounts most likely didn't put in the work and create a solid well defined and tested plan of which to follow. Those who have said plan and are unable to follow it consistently all the time (I think almost everybody will still have trouble implementing that plan every single time thus this will be a necessary step for everybody) will need to address certain psychological issues that are undermining his trust in himself to actually execute the plan. If you are consistently making money but having trouble raising your investment and thus your profit consistently there are yet still psychological issues to be addressed. After all if you have a well defined method (edge) and you trust yourself to stick to it, nothing should be stopping you from making more and more money with absolutely no limit. The only limit is the one you place on the trust in yourself. Agree?

So I was doing more research on Arnold and I found this: "In 2001, when he was 27, he single-handedly made the company $750 million, according to the Houston Chronicle. In 2000, Arnold was often described by Enron public relations as the person who traded one-third of the natural gas market for the company, Platt's Power Markets Week reported earlier this year. "He was not afraid of size," said Tom Lord, president of the commodity-markets consultant Volatility Managers and a former Morgan Stanley natural gas trader. "In natural gas markets in the late 1990's, there were probably four or five people willing to do large trades. He was one of them." Interesting......

No trading. Still digging.

If what you're saying is true than no one would ever make money consistently from trading or investing. That's obviously not the case, and is not what I'm arguing for or against here.

You are still not focused on my main point. I just used Arnold as an example. He is just some arbitrary hedgie that I looked up and has no bearing on my point. However just in my brief reading of his accomplishments I tend to disagree. He made Enron an estimated $750 million dollars. He then left after Enron collapsed and formed a hedge fund (with 5 million) that has made returns excess off 175%-350%(while managing first millions and then billions) since 2002. What you are saying is once in a lifetime has been occurring for the past 5 or 6 years. As far as I'm concerned, he's got some talent. But like I said it doesn't matter as that is just some arbitrary figure I used to illustrate my main point.

One more thing: Ask yourself this. On Monday take your exact strategy and setup, but instead of trading your usual amount imagine you have $10 million on it. Do you act differently? Does it affect you? Think about it honestly. Does it affect you? If so I submit to you that there is mental work yet to be done which is what this thread is about. I know it would affect me haha.

"He's not God" is exactly what I'm saying, you are missing my point. I don't know anything about the guy, but I bet he didn't walk into Enron and they said "Oh here's 500 million dollars"... he started somewhere, just like us. But he can actually execute his strategy on ridiculous sums of money, he didn't cap out at 100k or breaking even. He pushed and pushed and eventually the amount of money he was risking didn't bother him. Ask yourself how you would feel after a down 10 million dollar day. I bet he had to go through it. Contrary to what a lot of people have said I think its that indifference to money that I think makes the difference between a normal trader and someone like Arnold. Trading is a business yes, but its unlike any business that I know of. Yes money is the bottom line, but its the fact that he probably didn't sit around and go "Oh no I have 10 million on this ohhh ahhhh" and pine over and over about it to the point where it affected his judgment probably made him be able to take huge bets and huge losses, and ultimately huge gains. Money holds a distinct power over all of use and I think maybe releasing ourselves from its grip might be the key to large profits. We must respect it of course, but it is not our master. We control our profits and losses, they don't control us. Maybe its this indifference regarding money that makes the difference between $100,000 per year and the 4 million dollars per day this guy can make. Thoughts?

You are right. Making a $100k trading is a great accomplishment, and to the people that do it you get kudos from me. However most people don't get there. You seem to be implying that the 100k trader is simply "paying his dues" and you may be right, but the statistics say over 95% of the time, you're wrong. That trader will usually blow his account, and if he doesn't he will stay in his comfort zone of 100k, trading only the amount of contracts that can handle without losing sleep. I submit that, continuing with the crawling metaphor, the vast majority of people and traders never get up and walk. And walking is what I want to do and is what this thread is about.

It was never about which approach is better as if you can only use one (even though the title does make it seem that way) what every noobie should be looking for is why SO many traders fail, or at least, leave a boat load of profit on the table. I simply can't go about trading the way every single other person does when almost every single other person either fails completely, breaks even, or make modest amount of money. No I'm not looking for some holy grail. I don't expect some billionaire trader to come in and say "Oh you just have to use THESE indicators...". I expect the answer is much more complex and a lot less tangible than than. That's what this thread is about. Consider this: "In a clash of the titans that is likely to be remembered for years to come,John Arnold took on Amaranth’s Brian Hunter last year in a battle over the direction of natural-gas prices. Hunter, the bull, got the horns when prices — along with his ability to trade out of the supremely dark corner into which he had painted himself — weakened in the summer. Arnold, formerly of Enron, squeezed his foe like a laundress wringing out a wet tube sock. In the end,Arnold and his team of 10 traders — including right- hand man Michael Maggi and natural-gas guru Bill Perkins — walked away from the dustpile with a mountain of cash. Amaranth was wiped off the map. Arnold claimed the bulk of the profits. He guided Centaurus to gaudy returns (on an estimated $2billion in assets) of 317 percent before fees. Apart from one “lousy”year (only 178 per- cent in 2005), the fund has always finished above 200 per- centsince inception in 2002. Of course that is an extreme example, but you get the point. I had to disagree with DB when he said that it was simply that most noobie's don't take the time to develop a winning strategy. I'm sure this IS the case a lot of the time, but I'm not talking about Joe Schmoe looking for the holy grail and who thinks about trading for an hour a day, I'm talking about the people who study and study until their faces are blue, or the people who do have a method, but can only manage to bring in 100k per year. Of course he knows much much more than me and I have learned a lot from him, but I can't bring myself to believe that the difference between the average decent trader and John Arnold who's never had a less than +150% on billions is simply hard work (i.e. strategy development). That would be too easy. There are too many people willing to put in the work and time that simply don't achieve the millions that are left on the table each day in futures trading. So I have to ask myself, what is the difference? I have a hunch, but will save it for later today.

"The Disciplined Trader" is a great book. I don't say that lightly, as I've read A LOT of books, but its amazing to me how he is able to identify and explain human behavior in the market. If anyone hasn't read it I really encourage you to do so, it really will open your eyes to the reasons we act the way we do while trading..or a lot of other activities for that matter.

Sorry for the mix up...Mike, Mark, Mel..what can you do? haha. I wasn't quoting Douglas directly there, just making a postulation of my own. If you ARE in fact in control and have a sound method, shouldn't (like I said in my journal a second ago) the number of contracts be arbitrary? EDIT: I'm not making suggestions as though I am right, I'm just trying to get the very bottom of trading by asking questions.