robertm

Good read. I've learned far more from sitting and watching charts over the years than I ever did clicking the buy and sell button.

"My stock is up 50%", "I made a 150% ROI in just 10 minutes", "I took 100 pips out of the market today", "I made $2000 yesterday, smokin' it". So what? Tell me what your Risk Multiple was and you will instantly paint me a picture of your trade result - regardless of market, instrument, time frame or margin requirements. I love all things associated with risk & risk management, if you can get a handle on this area you are well on your way to at least surviving long enough to work out what trading is all about. One of the most useful tools in my risk management arsenal is breaking every trade down to R multiples. So what is R? R = Risk. If we have $100K in our account, and we risk 1%, then we are willing to lose $1000 on our trade. If we are using a 1:1 risk reward, then we are limited to making $1000 on our trade, or 1xRisk (1R). If we trail our stop or use variable targets and we make $3500 on our trade, then we made 3.5R. Now how we interpret ROI (Return On Investment) is somewhat personal. In my opinion if we made $1000 on our $100K capital on this trade, then we made a 1% return on our trading capital. ROI had nothing to do with how much we were risking, or the fact we were trading E-mini's with one contract and put up a $500 margin. We did not make a 200% "ROI" on our $500 margin, this had nothing at all to do with our risk, or reward, and varies from broker to broker. Similarly let us look at the other all time favorite - pips. People love to be the "pipmaster", the "pipmonster" or the "pipster". Who cares. So you made 100 pips on your trade, tell me how many pips you would have lost if your trade went straight to your stop after entry. 25? 50? 150?. Let's use 150 for our example. Risk, 150 pips. Using volatility position sizing we are still risking our $1000, it will tell us how many contracts we can buy on this trade (or our pip value etc). Reward, 100 pips, or $666. 100/150 = 0.66R for our trade, or 1:0.66 Risk:Reward. Not looking so flash now are we. However, if you were risking 25 pips and pulled 100, then you have nice 4R winner, or 1:4 Risk:Reward, and are well on your way to trading profits. Another favorite is the Scale Out. I've seen trade results reported as "we made 200 pips on the last trade". Actually they scaled out some at 25, some more at 50, bit more at 100, more again at 150, and then decided at 200 it was time to close the trade and crack open the champagne. Providing (but unlikely) they tell us the initial entry, stop and number of contracts at each scale out point, then we can average the result and obtain a Risk multiple for their published trading results. Let's assume it was 50 pip risk & following scale out (typical and common in many trading rooms, and by no means a recommendation!!!!!). Risk : 50pips Contracts : 10 25 pips : Scale 1 50 pips : Scale 5 100 pips : Scale 2 150 pips : Scale 1 200 pips : Scale 1 So: ((25x1)+(50x5)+(100x2)+(1 50x1)+(200x1))/10 = 82.5 pips per contract. R Multiple = Win/Risk = 82.5/50 pips = 1.65R A trader using the same strategy with a 25 pip stop would have achieved a 3.3R Return. A trader taking the same signal, 50 pips risk, and a single profit exit at 200 pips had a nice 4R return. If any of you have wondered why you could never match all those spectacular published results and "make $xUSD per pip based on our results, just enter your pip value here", as promoted by many trading signal services, then the penny is probably starting to drop right about now (aside from the fact they tend to open their rooms after blistering market runs). Now R multiples alone do not tell us if a traders system is profitable or not, we also need to take probabilities into account to generate our expectancy per trade, but that's a story for another day. So the next time some trading wunderkind tells you how much he made, ask him what his profit is as a multiple of Risk, although you will probably need to point them to this article before they have any idea what you are talking about..... :rofl:

I would be hard pressed to get beyond 10 books on "trading" I'd actually recommend to people as worthwhile, so I'm intrigued what your top 50 would be ZDO?

I was thinking the filing may have been related to the trade, but maybe not. "Oops didn't we tell you about that massive block trade we just did? I'm sure we filed that paperwork..." I think it's fair enough to have controls when poor liquidity is leading to incorrect price discovery like the May plunge. I'm sure they will come up with half arsed solutions that will be worked around instantly though. There was something in the news the other day about a limit on price moves for S&P stocks (% move in given intraday time) to try and prevent another May 2010 occurrence.

DB banned yesterday from trading the KOSPI for 6 months for their manipulation that netted them a tidy profit. http://www.bloomberg.com/news/2011-02-23/deutsche-bank-gets-six-month-korean-proprietary-trade-ban-over-stock-rout.html

IB have good global coverage, or CFD providers if you can trade them. eSignal have a wide range of global data. I'm not sure about the open though, I think ceremonial bell ringing is mainly a US thing :rofl:

DT means it can't be coded at all?

As a non-programmer (education wise) with an IT background I would have to disagree. Even one of the big quant firms said recently "it's easier to teach a programmer to trade than a trader to program". they hire programmers with no trading background, then feed them logic trees. Very few programming structures are written "for dummies" to be able to get a handle on. Only those written by a complete novice in their own process of trying to learn come close to being a teaching guide. I agree that the logic is the key to success, but getting that into code can be a painful, if not impossible, task for some (which is when they come to Tams for help!)

Then you may as well just give them your money and have them be your fund manager. Doing it yourself is what makes it YOUR system, instead of theirs. Once you have your idea just steal some code and tweak it to fit your logic.

You define a range filter, this solves this issue. Volatility works better for this than % price or % retrace. Or you invent AI & just tell it your logic & let it write the code for you :missy:

But it's not real money, and it will never be real money. It's fine for working out rough things like how much slippage your system will encounter and other real world factors, but you need to put a number on it such as 20 trades, then at the end of that review, or if it looks good, go live for 20 trades, and at the end of that (without changing your system over the 20 trades) review, maybe sim another 20 trades with the modifications. Repeat until profitable. Note all observations along the way. It's highly imperfect anyway as you could hit all 20 sims in a blitzing trend then go live as it smacks into congestion. If you have your eyes open and are making notes you should see that though. You can easy risk only $50 a trade in FX, so you can stuff up around 100 times without a single win, that's 5 complete cycles even if you never have a winning trade (at which point you clearly need help if your account is now dead).

Appropriate quote for the moment : If you are not prepared to be wrong you will never come up with anything creative. :-)

Trade FX mini's, say 2 lots to give you flexibility in your strategy (I haven't found a good reason for more than 2 legs/exits in any system anyway). It will fulfill your desire to avoid paper trading (although still use it for learning the platform) and if you risk small your account will last longer giving you more feedback to learn from. You may not make any money but you may hang around long enough to start to learn a thing or two. If you were planning on making a living trading with 5k then you may want to postpone that thought for a year or two, or ten.

This scam is popping up more and more now. I've been solicited a few times by "FX Guns" showing off their trading results hoping to impress you and get your money either to teach you their magic, or invest in them. Some of those solicitations came from this forum, they take any lead or detail they can get and forums are easy pickings. The ploy is simple - open two accounts, take the other side of your trade. If you wipe out all you did was transfer wealth. Avoid tax while doing this of course. Next you build a winning streak from a clean account (if it blows up you start again). When you have the streak, you hit your database you skimmed from online forums looking for the big fish. Next you simply use 2 accounts to transfer the wealth. Run 2 sets of books, one set of investors loses 100%, another makes 100%, they take their cut (or keep it all). It's a no lose game for them, and why retail FX is the wild west of trading and getting banned/restricted in some countries because of this. Your friend is in good company though. Rob Booker tells in an interview how one of his early FX mentors he looked too was actually a big Ponzi scheme, and an "FX Superstar" that Kathy & Boris interviewed in one of their books (might have been the same I forget) also turned out to be a scam. If they can't pick them, what hope do the uneducated public have? In a market with no exchanges paper trails are hard to follow.

My mentors told me of his fate at the time they recommended the book. It's still the best read ever written about trading, I've drawn more from it than any other book. It's not just his story, it's his story of his insights into his step be step education as a trader, both from his own experience, and the stories he tells of others that gave him his insights along the way. It's not a book that will teach you how to trade, but it's a great guide to refer back to are re-read at regular intervals while you are on the journey. It's a bit of a "Do as I say not as I do" tale in some respects. Sometimes people bet big and get named trader of the century. If they lose, as most gamblers do, they just fade into the crowd. Reminiscences is merely one source to draw inspiration from, but it one of the best, and importantly it was written in a time long before computers and indicators clouded peoples views of the market.

The difference there is you are searching for a market to trade at a certain time of day, vs FX which requires interaction with the London session to get the most out of the moves each day. I found a simple solution to the insanely early mornings in the US - I moved to Asia :rofl:

And the plot thickens... Soaring Hong Kong Rents Prompt Financial Firms to Shift - Bloomberg

Great points Iris, totally agree with your observations.

I'm still debating if I should laugh or cry. I'll just watch on in amusement...

It is only illegal for US Residents & Citizens (and a few other minor misguide countries). Everybody else can legally trade US based CFD's etc. The tax free status of spread betting is only one consideration.

Be careful with 08 statistics, you may wait a long while before seeing volatility like that in the market again. The entire grouping could be classed an outlier and treated as a separate project study for when that event does cycle around again though (which I'm sure it will if we live/trade long enough).

mmmmm, ok there is a simple answer that I'm stealing from my long term mentors so I'm giving them a plug (which I consider simply a courtesy reference as any good book has) in return. Nothing is free after all, FYI I don't receive any kind of financial benefit from plugging them, only the self satisfaction that you may one day trade profitably. And they don't (directly) teach intraday which seems to be the "mainstay" of forums, but it's all just theory to apply anyway. They probably stole the idea somewhere else anyway :rofl:, it is how we all evolve. tradinggame.com.au - their next course is booked out until 2012 anyway so it's not much of a plug, it's a limited enrollment with a long waiting list (a novel concept in the realm of trading education revenue raising mega "pack-em-in spit-em-out send-em-home sell-em-next-course" seminars). "One" solution - put a number on how many trades you will make in between making any changes to your system. Trade the number. Review. Go again. Record EVERYTHING that happens in the market (news, trends on various timeframes, errors & reasons for them etc). Caveat - The shorter your timeframe the larger this number will have to be. This could be painful drawdown wise (so bet VERY small). Traders simply take too short a view on their trading horizon. I often see the "one-three month" rule for "being profitable in Sim". I don't care what your timeframe is you trade, trade it in various states of long term trend - up, down, sideways, through corrections. Three months isn't long in a trading career, it may be a single moment of trend.

Time is key in how we view price unless you are trading only the order flow/book. Time is what forms our view of S/R levels. Read any book on FX written by somebody who trades multiple timeframes and you will notice they are doing this in order to - Fiddle with volatility - Manipulate trend/S&R - Manipulate price into making their indicator trigger them into a trade or give them an "acceptable" trend to fiddle with their Fib/EW etc to conjure up stop/targets. If you trade order flow only (i don't), then you are simply identifying s/r areas by the grouping of orders, without a direct relationship to time (other than your perception on your trade window, or the effect of time in creating a market OHCL). There are all sorts of studies on time of day measured by volatility, size of market moves, liquidity/volume, etc. How you interpret these (which varies depending on what you are trying to do vs what the author was trying to do) will impact your trading. For example : One person states "Trade near the news, it moves the market, it's great" - they are a scalper, or "closet scalper". Another states "Trade the wave, let it push your trade to profit/loss" - they are position trading (in my view of the term). Another states "Macro trend doesn't matter as we trade intraday" - Scalper, yes, Position trader, no. As you reduce time you also effect the bias direction price will show in relation to overall trends. I could go on, Noise, Volatility, Psychological/Execution issues, etc. But you get the drift (I hope). If you really want to do your nut in consider that a 144 (or whatever you use) tick chart has 144 possible combinations of OHCL, so the smaller your view of time, the less relevant what you consider the OHCL and S/R areas to be to those in the broader market.

Points/Pips gained have nothing to do with the success or measure of a system. It all comes back to what you risked to make that gain.

Nick is there any support for automated trading in CFD's on the platform? It tends to be something most CFD providers are missing (I guess GFT do it with Dealbook but I don't really consider them a CFD player).