thalestrader

I uploaded a corrected spread sheet, which also corrects the column C heading. Best Wishes, Thales

Hi Folks, For anyone wondering about how to add position sizing to his or her money management parameters, I put together a little excel spread sheet that will calculate position size for various instruments. Use the drop down menus to select lot size: 1000 (fxmicro) 10000 (fx mini) 62500 (futures 6B) 100000 (fxStandard) and 125000 (futures 6E, 6J). You then select the proper tick value in the next column, .1, 1, 6.25, 10. and 12.50 respectively. Then, as a trade opportunity presents itself, you enter the correct stop loss size and the correct profit target size, both in # of ticks. The spread sheet will tell then calculate the number of lots max for that particular opportunity. I included a set for each instrument/fx lot, and I used as examples two trades form this last week that where posted here by other thread participants before the trades triggered. I used the short EU/6E for each of the three fx lot sizes and, of course, for the 6E/6J example. I used a short GU trade for the 6B example. I think the spreadsheet is self explanatory. You obviously would enter your own account size and your own desired risk level. I kept the account sizes in the spread sheet small as I assume many here are trading small accounts, and this shows clearly how risk/trade is high for a smaller account, especially as one moves up to lots/futures with higher notional values. You do not have to keep all five examples on one sheet. I did this simply to illustrate each lot size. Just keep one set on one sheet, wih your own values already loaded. This way, as an opportunity presents itself, you can easily enter that particular opportunity's ticks at risk and ticks to profit target, and you will know your trade size, dollars at risk, and anticipated profit in dollars at target. If you decide you are going to limit your risk per trade to 2% of account equity, then you must trade the smallest lot/futures available that will let you take the trade while keeping your risk to 2%. If even at the smallest size you are unable to properly size the trade without exceeding 2% (the excel program will calculate a "0" in the position size column), then you simply do not participate in that opportunity. Thta goes for whatever you decide your max risk/trade will be. Best Wishes, Thales EDIT: Uploaded Corrected spread sheet - changed B8 value to 10000 and changed Column C heading to Tick Value Position Size - FX Micro Mini Standard with examples.xls

That's kind of what this thread is all about, Gabe. As I have said many times, I have no secrets, and I have shared all: S/R, fibs, impulses versus chop and overlap, highs and lows, etc and so. Each of these things are included in my "inputs." Best Wishes, Thales

Weekend Reading Credit where credit is due, so I reference a few of our Kiwi's posts from other threads here at TL: Funny thing happened yesterday when I was replying to yet another thread here at TL: Again, credit where credit is due, that aha moment was no doubt aided in part by thispost some time ago by Blowfish: Before today, I had only skimmed the first few pages of this book by Mark Douglas (I would hope this is the Douglas to whom Kiwi refers). I still have not finished reading this book, Trading in the Zone. I turned to it today because of an epiphany I had yesterday regarding why my daughter likely found trading so easy to learn while others have not has much to do with trust - trusting the method and trusting your ability to trade the method consistently. I recalled that Douglas addressed this here, and so I wanted to read what he had to say. From what I have read of this work, I think this would be a good addition to our program here. In fact, I think the John Hill reading from last week combined with Douglas's work here, taken together, offer a potent "one-two" punch, so to speak, toward knocking down some of the obstacles, both technical and emotional, to one's development as a trader, especially one who wishes to trade the approach I have presented here. Best Wishes, Thales Douglas, Mark Trading in the Zone.pdf

I am not familiar with the wmd thread, but BillyRayValentine's was one of my favorites (literally, his is one of 3 FF threads that I have bookmarked over the years). He seems to have abruptly abandoned the thread himself some time ago, however. I'm looking forward to your discretionary contributions, kiwi! Best Wishes, Thales

I sometimes wonder if the difference(s) between a profitable computerized trading system and a profitable discretionary trader isn't much less than I assume (or assumed) it to be. While I would think it difficult, if not impossible to program a computer to trade based upon all the various "inputs" I use to make trading decisions, I suspect that I am. at this point, much less "discretionary" than one would would think. Best Wishes, Thales

Lets talk Chop Zones, and bear with me while I do so by way of (gasp, sigh, growls of disgust) Elliot Wave. For so many reasons I have minimized the EW discussion here. Before I get to your question, DaKine, about your count today on the 6E, I want to make a couple of points. First, the approach I have presented here is a very forgiving approach. It stands on its own without the extra props of Elliot Wave, fibs, etc. I happen to find EW and fibs both useful, but do not alow either to trump basic S/R and price action itself. Second, I do not always see clear EW counts. I do not even look for them. I use them only when they are so clear that even an Elliot Wave Guru could find the right count the first time. So if you do not see a clear five wave pattern or three wave pattern, do not worry about it. The main thing is which way is price impulsing or thrusting and where is is price chopping about and over lapping. I have used the concept of the chop zone here in this thread. This is a good example of why I call it a chop zone, and not a "triangle" as many would do. A triangle, in EW terms, is always the last wave before the end of the current impulse, and therefore, it is always either a wave B or a wave 4. However, looking at price action today, I see what you saw, a triangle like formation out of which EW would ave me expecting an upward thrust before any tradable short would opportunity would occur. Well, price didn't do what EW would have us expect. So, if you were expecting an upthrust out of that formation, you would have missed the short. However, had you used the "chop zone" concept I have shared, where price makes both a HL and a LH in between a last real H and real L, then you should take your cue form that last H and L, and trade in the direction price breaks. Is it 100%? No. But it is pretty darn close. Just go back through this thread and see if you can count more than one or two times out of how many chop zones I posted where trading it the way I have suggested would have resulted in a whip saw. Now, as to your EW count: Wave 3 cannot be the shortest wave in terms of extent, whereas your count has wave 3 as the shortest. Here is how I see it from the comfort of hindsight. Yes, you shorted a wave four the other day and got stopped out. So what? As I said, this approach is very forgiving. Had you then shorted the very next opportunity, which I know you saw, and several others as well posted here in real time, then your small loss on your first short would have been made back with profit to spare to make for a positive day. Do not get hung up on wave counts. Focus on S/R and highs and lows and managing your risk and your emotions. EW is a tool. It is not, at least in my view, an approach unto itself. The approach as I understand it is to trade in the direction price is indicating it is going to move by buying higher highs and selling lower lows. Every trade I make is based upon that and that alone. EW is a tool that remains in the tool box most of the time, but when I see an opporunity for which it is an appropriate tool, I'll bring it out, use it, wipe it down, and put it away until the next time it is the appropriate tool to use. I hope that helps. Best Wishes, Thales

Somewhere along the line I learned an approach to trading based upon price action that allows me to be right a bit more often than I am wrong when I bet on the most likely immediate next directional movement of price; and when I am wrong, it allows me to take losses that are much smaller than the profits I take when I am right. Somewhere along the way, I came to trust my approach, and to accept the fact that any one trade means nothing in the scheme of a great many trades so long as the approach is sound. Somewhere along the line, I came to trust myself and my ability to execute my approach, which, as I said, I had already come to trust. So, for me, at least, step 1) Find an approach that you suspect will allow you to anticipate next move price is going to make, 2) Study and practice the approach until you are able to confirm and to become convinced that the approach does deliver what you suspected, thus allowing you to trust the approach, and 3) Continue to practice, practice, practice so that you come to trust that you yourself are able to execute the approach and win more money than you lose over time. In short hand: 1) Pick you method 2) Build trust in your method 3) Build trust in yourself How? Practice, practice, practice ... or, start as a nine year old girl (or boy) with a teacher in whom you have implicit trust and so you will have steps 1 & 2 taken care of for you from the get go, and then it is a merely a matter of learning trading as you learn any game or skill and thus quickly develop the confidence in yourself that is necessary to trade well. What do you know? I have just had an "a ha" moment. Thank you for that, FXGirl. Best Wishes to you and yours for the New Year, Thales

Hi FXGirl, I am not sure what you mean by a "behavioral goal." But I agree that having a defined trading plan does not give you the discipline to execute that plan. You don't "get" discipline. You develop it by forcing yourself to continue even through pain. Some make it, some don't. Most never really have the chance to develop said discipline bacause form what I have seen, most never really have a comprehensive plan. I see you are in Oceanside. Would that be Oceanside, NY? We have a house in Long Beach. Best Wishes, Thales

Hi Sevensa, I would only add that those figures exist independently of how you choose to try to meet those figures, i.e. whether you are trading futures or selling cars. I agree with you that however you choose to pursue the aquisition of cash you need to consider whether it will be sufficient to cover your living expenses. But trading is so scalable, and, at least for me, so potentially emotional, that a good plan that defines entries, exits, position size, and quitting (if only for a day, a week, a month) is more likely to lead to successful execution than the plan that adds "I need $500/day to make a living." I know I have mentioned elsewhere here at TL a friend of mine who starts each month with 8K in his trading account. He trades only the TF. Month after month he manages to average about 16K/month profit on his 8K. Some months he makes 30K. Other months he loses enough of the 8K that he lacks sufficient margin to execute even a one lot. When tthat happens, he is done for the month, no exceptions. I do not know the particulars of his personal finances, but from what I know of him, I would guess that he needs about 60k to maintain his family's current standard of living. I know he has done over 200k+/year net for five years running. If you were to ask him if he has a trading plan, he would open Word and show it to you. He defines when he trades (and when he won't), he defines how he will enter, what size, how he pyramids, and when he quits for the day and for the month. What you will not find in his plan is a specific dollar profit/day/week/month/year goal. He just knows he will generate profits enough. Trading is scalable. Trade well, and the profits will take care of themselves. Until you have a plan and sufficient capital to trade your plan, you should not attempt to generate sufficient profits to meet those expenses. I guess what I am advising is this: If you are going to make a living out of the markets, then it should go without saying that your profits wil be more than sufficient to provide you with an income with which to meet you normal and necessary living expenses. Focus on your approach and how you will manage your risk, and the profits, assuming sufficient capital to execute the plan, will exceed your needs. Best Wishes, Thales

Hi Folks, I am very impressed with the analysis and trades I have seen posted here over the last few days. Thank you for helping me with this thread! Best Wishes, Thales

I find specific profit goals, whether expressed in nominal dollars, percent ROI or however to be of no value, and I do no such "goal setting." I have defined when I will enter, how I will manage, and when and how I will exit a position. I know how I will determine trade size, and most importantly, I know when I will quit. That really is all you need - what will you trade, when, how much, and when do you get flat and when do you stop the bleeding when it occurs. Best Wishes, Thales

This was one of my favorite threads here at TL. Too bad it has fallen silent. I pay no attention to fundamentals. Best Wishes, Thales

Exactly. Best Wishes, Thales

I see no reason for you not to post your daily PnL. That is for you to decide. I'm thinking of starting another small micro account myself showing a daily or weekly PnL on it (I'm considering doing a $200-$300 account and trade it using super crazy rodeo clown leverage, or rather, position sizing). Just to have some fun and see how long it takes me to blow it up. I'm very interested in hearing how you are doing day to day, and I am very sure I am not alone. You decide what is best for you, but base it on you, not on what you think about what I or anyone else in this thread has to think about it. I am not a thread dictator. If I think something is out of line I'll let you know. If you think it benefits you to tell us about your progress, then you should tell us. I know I have benefited from participating here on a daily basis. I have found it very beneficial to put my thoughts together in a way that allows me to communicate them to others so that others can understand what I am doing. I think you are helping the original intent of this thread more than you know. Cory, this is the problem with having to use FXCM UK instead of US. The UK has "hedging" enabled, which is basically a scheme to get folks to do stupid things that benefit the market maker's bottom line. In the US, hedging was banned by the NFA, so when you entered a position, you could enter it with one order and use two TP's to scale out. Now, with FXCM UK, all accounts are hedging enabled, and they will not let you turn it off, at least not on the Micro accounts. So, what you have to do is enter two positions when you trade (each fo one half the size you intended. This way, each half will have its own take profit porder attched to it. You can also right click on the open positon, and click on "close position." You can there adjust how much of the position you wish to close, and you can close half manually if price reaches your profit target. Again, this is another area where trading retail forex is much sloppier than trading currency futures. Strange, but true. Best Wishes, Thales

When I was writing about position sizing yesterday, I had written, but deleted prior to posting, the following thought: What position sizing does is that it shows leverage for the red herring that it is. Those who have not realized that position sizing is the proper approach to money management get caught up in discussions of what constitutes appropriate leverage. For a day trader who is carrying no overnight risk, leverage is not the concern. The concern is equity-at-risk. Equity at risk is a measure of the position size(Entry - Stop Loss). This is not to say that leverage does not exist, of course it does. But what it does mean is that leverage is not nearly as important as the "traders" posting to ET would have you think. Leverage only becomes a danger when you fail to use position size to control your risk. Best Wishes, Thales

Daedalus, your contributions to this thread are very appreciated. The spirit of this thread is to share and help, and I would encourage anyone who has found something that has helped them to trade this approach, or have found something here in this approach that has helped them with some other method, to share with us here. You never know what you might be sitting on that could be the difference between someone else making a go at this or falling in discouragement. Thank you for your help here this year. I hope it continues into he next! Best Wishes, Thales

I love logging in here and seeing folks posting their trades based on what we've put together here in this thread. What is really neat is that many folks are starting to see the same opportunities as they unfold. This shows that this approach has a degree of objectivity to it that allows multiple traders to see the same things. It also shows that this really can be communicated to one another, which means it can also be taught and learned, and that the hard part is the discipline necessary to put it to work and the emotional discipline to manage your trades properly. Best Wishes, Thales

Brownie, A great thread you have here, and I wish you and everyone another good year in the 2010 thread. Best Wishes for the New Year to you, yours, and all, Thales

Seems a bit too early by a few days to be returning from a vacation, but welcome back nonetheless! Best Wishes, Thales

ID This is a stock that came up last night in a screen I run in Telechart every day (nothing fancy - I look for stocks with daily range expansions), and it was also mentioned by one of the Worden's in their notes sections. Weekly and Daily view shown here. Best Wishes, Thales

ASEI I looked at this last week and thought, "well here is one to kep an eye on for the New Year." Little did I know it would tack on better than 8 points this week. I have attached a weekly chart, which shows that ASEI has held up very well during the brutal bear of 2007-2009(?), essentially trading at the high end of a multi year range. I'd be looking for it to take some rest, and buy a few on a pullback. I certainly will be a buyer if it trades to new all time highs. Best Wishes, Thales

No progress, indeed. I have marked three points on the 15 minute where, had we been both in the trade and awake to mess with it, we would possibly have exited with a small profit. Looking at it now, if we were still short at 1.4334, I would be tempted to exit here (currently 1.4333) for break even/small loss and then re-enter short or long as price indicates. I like small losses. However, the 60 minute view would tempt me to hold the short with my original stop loss. Well, they say "when in doubt, get out." I just wonder if I would be so doubtful if we were really in this trade. Strange trade, indeed. Best WIshes, Thales

As I understand it, his losses resulted from his straying from his usual system and entered discretionary trades based more on guesswork than technical criteria: "By the time he retired in 1988, he had shot himself in the foot by making unusually risky trades--purchasing huge quantities of options just before they expired and became worthless, for example. In one day, he lost $8 million in a soybean trade gone bad. Losses in his personal accounts paralleled those of his funds. Adding insult to injury, an early 1990s comeback attempt flamed out in months." 04/07/97 RICH DENNIS: A GUNSLINGER NO MORE Best Wishes, Thales

Short opportunity has triggered. Target is 120 pips/ticks, but a sensible trailing stop would be a smart way to play this trade. I would hate to see this go to +40 or +50 and then turn into a -35 trade. Bt the way, we are not trading this, but if goes to target, breakfast with my daughter tomorrow will be a bit uncomfortable (she wanted to trade it, and my wife wanted me to let her). Best Wishes, Thales