Anonymous

Thanks to the wonderful people on this forum, I have been able to readdress this issue. In truth, I went back to a book that really shaped my belief system. We all trade our belief systems. I believe in surrendering to the market, in following it. I believe in wanting what the market wants, not what I want. I liken myself to a salmon egg floating down stream, going with the water. I do not know my destination, but I know the stream will get me there. The other traders are more like the adult salmon. Swimming against the current. Struggling to go up when the path of least resistance is down. For the egg, the destination is new life. For the adult, it is not. Okay, so how does this work in terms of stops? Once in a trade, I will only move my stop in the direction of the trade. As I said in another thread, I will only exit a trade with a profit by letting my stop get hit. Exiting at a profit target is speculating on the future when it is not necessary to do so. Allowing the market to take you out, is dealing with things as they are, not as they should be. On time stops. Here is where I had to go back and think about what I believe. If I exit at a time stop, then It is not about what the market wants but what I want. A time stop is saying, " I want x amount of handles/ticks/pips in x amount of time". The market does not care about what I want. It will take care of me, but on its terms not mine. Things are different, however, when the trade moves against you from the start. I believe it is possible to know that you are on the wrong side of the trade PRIOR to your stop being hit. One does not have to wait for his stop to be hit to know he is at least wrong on timing and possibly right on direction. If your stop is 15 ticks away, I find it hard to believe you don't know you are wrong when price is 3 ticks away from your stop. Can the market move 1 tick to your stop and then turn around? Certainly. So have the ability to get back into the market. If you are unable to get back in, well, there will always be more moves. The market will provide. Don't concern yourself with "missed points". Stay in the moment. The real error is not what is "missed/given back" on this trade, it is not being in position to take advantage of the next opportunity because you were not in the moment. But rather still in the past asking "what if".

Volume Spread Analysis leads us in much the same way. Joel Pozen (tradingmentor.net) talks about this concept in this way: *A rise in prices is not caused by increased buying, rather increased buying is caused by rising prices. It is the retail trader's fear of missing out. As price rises the retail trader gets more and more anxious that he is missing the opportunity and rushes in . This is usually on good news. The professional trader, is however, poised to sell into the rush of euphoria. That is why retail traders tend to be buying tops and selling bottoms. News events are money making opportunities for the Smart Money. So a weekend of good news after a week of rising prices would be as well. Tom Williams, Master the Markets, sums it up best: "A professional trader isolates himself from the 'herd' and becomes a predator rather than a victim. He understands and recognizes the principles that drive the markets and refuses to be misled by good or bad news, tips, advice, brokers, or well-meaning friends. When the market is being shaken-out on bad news, he is in there buying. When the 'herd' is buying and the news is good, he is looking to sell".

It is a known fact that currencies have the highest propensity to trend. This is why technical work so well. Personally, I used Price and Volume and follow the Professional Money, but those that do use technicals alone can do well. If you believe that the big boys only operate on larger timeframes, then it is true that economic fundamentals drive the market. If you believe the fundamental tenant of technical analysis, then you believe everything that is known about an instrument is already reflected in price. This is true in any market. Price is driven by imbalances of supply and demand. This is also what gets most traders in trouble. The fact that RSI is above 80, does not make any market turn. What makes it turn is increased supply or demand by the Smart Money. True most small guys are not taking positions for 6 months or longer like some large big money players do. However the Smart Money operates on all timeframes. Sentiment is thus not as static, nor as slow developing, as that implies. There is no such thing as overbought/oversold. This is one reason retail traders get in trouble. They are trading off of something that does not truly exist. Like I said, the market does not turn because RSI is in oversold territory. However, if you suppose that overbought/oversold exists then one has to really understand what it means. In other words, a viable definition of overbought/oversold, would also be a viable definition of trend. The strongest trends tend to have the most overbought/oversold readings. They tend to "not respond" the most to such readings. That is, retrace the least to such a reading. Trends(bodies) in motion tend to stay in motion. This is a basic law of physics and it is true in the market (laziness principle). The proper use of techincals is to define trend and momentum, not predict it.

Due to your location and time constraints, I think you should look at the spot market and trade: 1. EUR/YEN 2. GBP/YEN 3. YEN/USD 4. AUD/YEN Spot does not have some of the advantages of the currency futures, like volume information or market profile information. Of course, some brokers do offer tick volume, just not all. Same with market profile data. For you in particular, James, there is no time and sales. No level II either. Actually, the best alternative may be Yen futures on the Tokyo exchange.

Ignore the news. Not just with currencies, but with all tradables. The major issue with news and currencies has to do with brokers widening the spread. This is not an issue if you trade CME currency futures. In truth, currencies trade more technically than most other markets. This is one reason for their increasing appeal among retail traders. To be sure, the Non Farm Payroll (NFP) can make for a volatile trading day, but you can choose to not trade on that day, or just wait until the news is out and go with what the market is telling you, not what you think the report means. But as I see you showing Pound futures, I don't think you have to worry about spreads like most spot traders do. A 3 pip spread can become 20 pips or more during a NFP release. That can kill a strategy that is looking to only take 10-15 pips out of the market. While the market is 24 hours, it is not true that it should be traded at anytime. The best times start at 0200 EST and go to about 1300 EST. On Fed days, that would extend past 1400. If you want to be more precise, the best times are when the futures are open (Both currency and index) in Chicago. For pivot points, you should use the CME close if you trade there or your forex broker's close time, which is usually 1700 EST.

Keep It Simple Stupid.-- that is what it stands for. Not any particular system but a way of approaching the markets in general.

Here's a couple from Mohan: 1. I totally understand that consistency is more important than being right. Having the desire to be right is for amateurs and making money consistently is what the real professionals do. I am striving to be a real pro everyday by focusing on what is proven to really work, and which produces steady profits while protecting me if a I am wrong. 2. As a trader I establish a straight mental and neurological path to continuous, perfectly executed and managed trades. Each trade is an education towards perfecting the trading art, releasing tension and achieving youth and vigor.

Yes, would love to see some Music Math charts and discussion. I don't use it, but I do think there is something there. Has anyone read the book or taken the classes? How acurate are the various versions of the indicators that can be found if they are not the actual ones based on the harvest?

Great book. One of the best books on trading in my opinion. I interpret this to mean something I was talking about in another thread: Those that make it in this game do something very fundamental, yet easily missed by most; they survive. They survive long enough to learn how to win at the game. The trader that does not beat himself, has a greater chance of being around to beat the game. One way of not to beat yourself, cut your losses and let your profits run. It's old, it's cliche. But it was good enough Livermore. By staying in the game, one is learning all there was to know about it, learning to take reasonable chances, and learning to utilize his knowledge and experience to anticipate probabilities. This survival rate can not be large. Especially if you consider that from birth we are programmed not to be traders. That is , many elements in trading are counter to things we are taught in life. For example, in some schools a grade of 92% is an -A. That's 92 correct answers out of 100. An F could be for 60% or below. Trading is the opposite, if you are correct 40% of the time, you're doing better than most. But this is a percentage that is equated with failure in school.

Nice. I do see where you are coming from. Just a couple of things: 1. The calculation would include first year med students that fail. As the conclusion implies that more first years fail than do 4th year residents. This is what the weeding out is all about. Therefore by the time you get to professional level status, only the cream is left. 2. You are so correct. Anybody with some money and a dream can become a trader. Trader here is defined by the act of trading. Not the obvious skillful way one such as you goes about running a trading business. If more people had your sensibilities as they approached this endeavor, the rate might not be so high. 3. System sellers or not, any search of the various trading forums should lead you to believe far fewer people are making money than are not. There are so many posts out there from people looking of that one indicator or method because they are not profitable. System vendors pray on this to be sure, but they do not fuel the misconception. They don't really have too. Based on the few posts I have seen from you, I believe you are one of the ones who has made it or will make it in this "game". Make no mistake about it though, that puts you in the minority. Regardless of what the actual percentage may be.

Seems to me if you put money into an account you should be counted. That’s the key here. Anybody with some money and a dream can start trading. Clearly that should result in high failure. A lot of very smart people, with the best educations money can buy, have difficulty trading. It stands to reason that the "average Joe" would not be any different. A lot of people will mention psychology. We all have our demons, even if we don't know about them. "Trading the S&P's on a 5 minute timeframe is the best naked psycho therapy.."-Bill Williams. If a person does not have the mental make-up to trade, they can still open an account. Anybody can move to LA and be a waiter/actor. Most fail. Fewer Brain surgeons wash out because they are washed out prior to reaching the end. That is, actually being a brain surgeon. As I just posted in anther thread, Harvard did a study and came to these conclusions. Yes, systems sellors and hucksters may use this to their advantage. But they could not if there was no truth in it. The turth: the failure rate is high. And for a zero sum game (which impies 50% failure) it is more than half. My broker says it is not 95%,but then again he has the yacht

Harvard business study, 2000-2001, I believe: Conclusion-the fewer barriers to entry into a certain endeavor, the greater the failure rate. Fewer people who go to med school and then a residency fail as doctors, but all you need to be a trader is money and a dream. How about astronauts (current events not withstanding) versus actors? In short, where the weeding out process take place prior to becoming part of the established community the failure rate is less than where the weeding out takes place once you have joined the community.

Sorry for the word good. You are correct good has nothing to do with distance. By good I ment, based on reality. And what is reality? what the market is telling you. Not based on an individual's account size or risk parameters. Yes, keynumber (aka floor pivots) can make good stop levels. If the market tells you so. But the point is a keynumber can be further away than most people can handle. A doulble top on the left of the chart may make an appropriate place to place your stop just above. This would be what the market is telling you, but if you place your stop closer merely becuase of account consideration, then it is not a stop based on reality.

1. Please note that I never said "the trade feels" wrong. I have only talked about getting out at predetermined levels in both price and time. In other words, a plan that is repeatable. Not that much discretion here. I also talked about jumping back on board. I said if you method only produces a signal to enter on a mov. average cross, for example, if you get out then you need another cross to get back in. For this type of entry, getting out is NOT good, because you can not get back in quickly. Moreover, with the cross example, before you can go long again , the moving averages have to tell you to go short. So this not actually the situation we are discussing here. 2. The one thing that all successful traders share is this: survival. They have survived the learning period long enough to get to a place where the are now able to make money. Capital preservation is key. You can not make money tomorrow if you lose it all today. I would have to agree with the POP: trading is a loser's game. He who loses best, wins. If you can take the losses and still be around to take advantage of the wins, you make money. You become one of the few. 95% lose in this game. That does not mean the other 5% got that way by winning from the start. I am reminded of the story of a new trader that got a job on the floor of the CME. What was the first thing he learned? Some secret method held tight and known only to the coven of pit traders? No. He was taught how to get out of a losing position 100 times out of 100. Note getting out here does not mean setting a stop and waiting; it means recognizing you're on the wrong side and taking yourself out. a. If it is just about winning, why would so much time be spent on handling losses? b. If it were just about setting stops to be hit, why would so much time be spent on getting out of bad trades? c. (although not what we are talking about here) If it were about winning trades, why wasn't the trader given that INDICATOR so many losing traders are searching for? 3. As far as over trading. Two things: being right and sitting tight. This keeps the amount of trades made down. And the other is what trades you enter to begin with. With VSA it is possible to enter trades at the point where the Mark-up phase is just about to begin or beginning. A trader can position himself to take advantage of the supply/demand imbalance and thus by pass that channel, sideways movement. In short, selectivity on signals coupled with being right and sitting tight. But if you find yourself in a go nowhere trade, get out. If it then starts to move, be nimble enough to jump back in. Again, jumping back in does not mean getting in just because. You should have clear rules for entry and re-entry. Maybe you have to look for a add on signal as your new entry point, that is a choice you would make. But the concept of getting out, then getting back in does suppose a nimble approach. Which is why the people who are writing about it most, tend to be floor traders. 4. Once a stop is in place it should never be removed. And it should not be moved except in the desired direction of the trade. Putting in a stop in the first place is for protection. There will be times when the market moves against you too fast for you to get out sooner. A stop can also help you define certain market conditions or where price is on the "playing field". But the idea that only at that price do you know you are wrong is felonious at best. Especially, since most people use stops not based on what the market is telling them but on account size. If you have a 20 tick stop, you can't realize you are on the wrong side of the trade after the market moves 15 ticks against you (5 pips short of your stop)? In truth, good stop placement usually means stops are further away than most people would want them to be. The market doesn't care how much a trader has in his or her account. The market will, however, tell a trader where the optimal place to place a stop is. But for most traders this place can be too far away. Now, why not place a stop at the level dictated by the market, but have a mental stop (much closer and more in accordance with risk parameters) as you real stop? Which is essentially what I have been suggesting.

If your stop is placed at a point where the conditions for the trade become invalid at your stop level that would be one thing. But you still should be able to see you are wrong on timing and Possibly right on direction. Most people, however, use money stops. They base stops on the size of their account or on some risk to reward matrix. If your stop is based on how much you are able to lose, why not exit sooner once you realize that you are on the wrong side. You don't have to lose all of what you risked to be wrong. This is one of the times that you can limit your losses. Sometimes the market will move against you and hit your stop. Other times the move towards it will be gradual and you can save capital by an early exit. CAPITAL PRESERVATION IS THE NAME OF THE GAME, AFTER ALL. As a trader I need movement. If the market is not moving then nothing is being done. If you believe that one of the edges an off the floor trader has, is trend, then why enter a trade when trend in not present? Yes, the assumption was that the direction is correct. What is not known is how long the distribution/accumulation phase will be. While you're sitting tight waiting for the market to be marked up or down, there may be another market being marked up or marked down. ***As for profit target exits: I am glad they work for you. I believe exiting at a target is speculating on the future when it is not necessary to do so. *****One more thing: I am very glad that we are able to have a civil debate on a topic without the name calling and boorish insults of the other sites. Thank you Soultrader for community such as this.

The question boils down to this: at what point do you know you are on the wrong side of the trade? Does you stop have to be hit for you to know that? Why not one tick before? How about 4 ticks before. At some point prior to the stop being hit, you know you are on the wrong track. Why not exit at that point? I guess I should of mentioned I also believe in UNDER TRADING IN BOTH SIZE AND FREQUENCY. Hence I talked about entering at the right time to avoid the need to exit during the sideways action. Also note that I did not say jump aboard the market in the opposite direction. Here we are talking as if you got the direction right, just not the timing. Get out and wait. but be nimble. And again, Pit traders are not worried about commissions. As I said, these two gentle men are pit traders.

And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experiences invariably matched mine-that is, they made know real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade (sit) than hundreds did in the days of his ignorance.--Edwin Lefevre Reminiscenses of a Stock Operator, p. 68-69. I believe in surrendering to the market. In being in tune with the market. I believe in sitting tight. In fact, I do not exit a trade with a profit. I move my stop until that time where the market hits it. Being early, however, is not the same thing as being right. Being early is the same as being wrong. So what are the ways to exit with a profit? 1. Being stopped out. 2. Exiting a position because the day session is about to end and you are a day trader. 3. Emergency situation that is going to take you away from the computer screen. And thus not allow you to watch the position. If price move against you, things are different. Do you really need to wait for your stop to be hit to know you are on the wrong side? If your initial stop is based on an area where if hit, all conditions (for your trade)would be changed, then waiting for the stop to be hit still makes little sense. Before it is hit, you know you may be right on direction but are wrong on timing. Why not get out, with the intention of re-entering when price starts moving in the direction of the initial trade? A market moving sideways would be the same thing. The non-directional movement means you are wrong on timing, but could be right on direction. Here a "price band" should be used. If price is such that your position is +8 pips to -8 pips after X amount of time, exit. If you enter the trade and price moves -10 pips/ticks against you from the start-get out. Even with your stop was placed 20 pips/ticks away. These numbers are pulled out of a hat, so don't focus on them rather the concept itself. Two bars later if price takes off, Jump back in. If the price you paid is the same that the 'herd' can get 32 minutes later, then you are probably not in a trade worth being in at the time. Good or Bad trades should mean whether or not you followed your rules, your trading plan. If you did, the trade is Good. If you did not. The trade is Bad. Here, good or bad trades (no caps) means a trade that is moving both in your direction and doing so with increasing momentum. That is, you want to take advantage of the Supply/Demand imbalance (order flow) as to be entering just prior to or at the start of the mark-up phase. From a VSA/Wyckoff perspective sideways channels are accumulation or distribution phases. As a trader there is little value in entering during these phases. They can last for some time and the longer they last the more dramatic the subsequent move is. Trader should seek to enter as the mark up phase begins and the order flow is on his side. It should be noted that the longer term investor should be looking to enter during these phases. Another thing to consider is this: Capital tied up in a trade has an opportunity cost. Most people do not trade multiple tradable (although they should), and if you have capital tied up in a trade that is going nowhere, that is money that can not be put into a market that is moving. Trend followers need trend. Some market somewhere is always trending. If a trend follower has capital tied up in a trade that is not trending, he is missing out on the very thing that gives him is edge-trend.

So many things to say. Let's start with this. Mark Fisher is/was one of the biggest oil traders on the floor of the NYMEX. The Phantom of the Pits, as his name implies, was a large Pit trader in the S&P's amongst others. As pit traders they have strategies that allow them to enter and exit positions on a very quick basis. It is not unheard of for any pit trader to enter a position long, go to neutral (sell the position) and then go long again in less than 5 minutes time. Commission cost are not of a concern to them. Nor are strategies that take time to develop (like a cross over-more later). Hence if you have a method that does not allow for multiple entries or quick re-entries, exiting quickly becomes a problem. BTW, just because it is in a book may not make it true, but I know that Mark has made more money trading than I have. I know he trades with size few people do. When he opens his mouth........ At the very least I want to listen. How else is Knowledge passed on? If you are not fortunate enough to have a mentor, don't you have to rely on screen time and books? No assertion that what I say is Gospel. It is more to spark ideas than define action. I don't use ACD anymore and would really not recommend it. However it is worth knowing how a real(pit) trader thinks. Take a position, don't get married to it, get out quickly and be ready to get back in just as quick. I have decided to break up the posts.

15 minutes is half the opening range of 30 mins. Nothing more special than that. Althought a trader could get more creative and pick a FIB or Music Math number. The point is that you want to be entering just as, or right before the influx of the dominant order flow. This causes price to rise or fall. If there is no new surge of order flow than price doesn't move much. Hence anybody that would want to get long, for example, can do so at about the price you did. In a good trade, each person that wants to get long, has to pay a higher price than you (the market is moving up). So you want to position yourself on the side of the dominate order flow before it begins, yet you do not want to be waiting too long for it to appear.

I am more concerned with the return of my capital, than the return on my capital. --Mark Twain I would add Mark Fisher's concept of time here as well. Time is the element most traders tend to neglect in trading. Mark recommends using both a money stop and a time stop. If price is around the same place you entered after 15 minutes....... It's time to get out. If everyone else can get in at the same price you did, then how good a trade can it be, says Mark. Timeframe traded obviously would be a factor. If you trade off of 3 min chart, then 15 minutes later your trade has gone nowhere, it is time to re-evaluate. On the other hand, if you trade off a 1 hour chart, 15 mins would not matter so the time is relational to the timeframe traded. ACD really has some Market Profile concepts embedded within it. The concept of time in Market Profile is how we define market acceptance. That is why he says wait 15 minutes before taking the A up or A down. You want to wait for the market to accept the new "breakout" price. However, the longer price stays there, the more likely that price becomes entrenched in this accepted area. Market Profilers know this as Value and the Value Area. The point, as a trader trying to take advantage of price movement, movement must be thought of in both price and time. Price movement is obvious. Time is less so. But if you go long at x time and x+15 price is still there, movement in terms of time is null. I think of a hobo in New York who wants to get to Seattle. What is the best way for him to do that? Get on a train heading east and slowing down, hoping it will turn around and head west. Or get on a train moving west and picking up speed. Getting on a train going east, clearly isn't the best. Nor would getting on a train that is pointed west, but still in the station 2 hours later. The hobo wants a train both pointing west and picking up speed (distance X time). Time in a trade represents risk. For the hobo sitting on a train that is going nowhere is added risk. If he gets caught, then he gets kicked off and taken to jail. Therefore, there is less risk associated with trains that are moving. The longer the train is stagnant, the more chance an employee will wonder onto the car he is hiding in.

I take the opposite view. The view shared by the Phantom of the Pits and many other successful traders.: When you enter a trade, don't wait for the market to prove you wrong, look for the market to prove you right. Why sit and wait as price moves against you and hits your stop? If you are on the wrong side, get out. Enter a trade looking for price to prove you correct by moving in your desired direction from the start. If it does not, does price really have to move all the way to your stop loss for you to know you are on the wrong side? Of course not. Place the stop, but get out prior to price hitting it. Losses are indeed an business expense in trading. But you can strive to cut your losses short. One good way to do that is to not wait to be proved wrong. Remember, trading is a losers game-he who loses best, wins.

Follow up post. Focus on the grey area. The bar with the two pronged arrow is the bar where we did see some Professional demand enter the market. I said the bar looked like a possible shake out. It was not. Two bars later, we get a narrow ranged bar that close higher than the previous bar, closes in the middle of its range, and has volume less than the previous two bars. This is a classic VSA No Demand bar. The Smart Money was not interested in higher prices at this time. The move down continued. We just had a narrow range bar that closed in the upper portion of its range on ultra High volume. This is a squat or volume churn bar. Moreover, it appears to be Stopping Volume. Again we see divergence between bearish order flow and price. We are close to the green line (S1).

In a word, yes. Check out the attached chart. Here is a great example of price/volume action at or just around support/resistance levels. The first arrow points to a 'test' bar. Professional money is testing for supply. Since the volume is low (less than the previous two bars), we know that no sellers were underneath the market. The yellow line is the POC. The second arrow is another 'test' bar. Notice that this test comes higher than the previous test. This one comes just below the Value Area High pivot line (upper purple line). Again test bar has volume less than previous two bars, closes on or near its highs, and makes a lower low than previous bar. Next we shoot up to the R1 level. Here we what do we see? As price rises to the resistance level, the effort to rise decreases. The tool above is showing effort to rise (green) and effort to fall (red). Another word for effort is activity and another word for activity is volume. In essence, buying volume is decreasing as price moves higher. VSA tells us that rising prices on decreasing volume is bearish. But our focus here is on where this is happening: where we would "expect" to see it. Lastly we again see divergence between bearish order flow (effort to fall) and falling prices. Now we are at the lower purple line, the Value Area Low pivot. The two pronged arrow points to a bar with ultra high volume that closes in the upper portion of its range and down from the previous bar. This is a bar that had Professional demand (buying) going on. In fact, the bar looks to be a shake-out. A maneuver used to shake out the early longs prior to an up-move. Time after time, support and resistance areas force Professional money to show itself. These elephants leave footprints that the retail trader can use to trade along side the big boys. IT'S ABOUT PRICE AND VOLUME AND IT IS READING THE TAPE.

They say it's not work if you love what you do.

Distribution during the low volume time prior to London open. At 0200-0205 we get an Upthrust. The bar trades higher than the previous bar but closes on its low. The Professional money is trying to suck in weak holders on the long side. Price then re-enters the Value Area (upper purple line to lower purple line). Now we have an 80% rule trade. 80% of the time that price exits the Value Area and then re-enters, it moves to the opposite side of the Value Area. Normally would want to see this close back inside value on the 30 with the next open also inside value, however here we have distribution in the background and a weakness in the form of an Upthrust. Price trades all the way down to the opposite side of value and then down to S1.