TimRacette

Yeah I picked up the -23% target from EminiAddict. I also pulled a lot from John Carter and Peter Reznicek over the years. Great stuff.

Good post Dharmik, I personally use the 50%, 61.8% and -23% Fib lines in my own trading. They work very well.

I manage my risk in 3 ways... 1. Stops (I use 6 ticks on the ES and 8 pips on the Euro) 2. Per Trade Loss Limit (I use 0.5% risk per trade) 3. Daily Loss Limits (I limit myself to 2 full stop outs per day) Each night I review the setups that occur each day to continue improving my trading and looking for more ways to fine tune my strategy.

Hi wskeal, in my charting platform I have the 50, 61.8 and -23 % lines enabled. The -23 is also the same as a 123% on some charts. Either way it's 23% past the highs or lows in the direction of your trade. As for the tick chart, I use a 512t to trade the ES and what that means as compared to a time based chart is 512 ticks will complete to form 1 bar. Today is a poor example of 50% retracements due to the wedge that we seem to be in on the larger 15-min time frame. Nonetheless with a structured set of rules, criteria for entry, and scale out methods I find them to be very profitable for my own trading.

There are really 4 outcomes to any trade, BIG Winner, small winner, small loser, BIG Loser. Eliminating that BIG Loser is over half the battle. Over time I've found too that taking profits on a bulk of my position and letting a small portion 'run' trailing my stop yields the highest returns.

The NYSE Tick Index gives us the relationship of stocks up ticking versus down ticking at their last traded price. The Tick is an extremely useful tool for intraday traders. For Example: If there are 3000 stocks trading on the NYSE and 1500 trade higher from their previous price and 500 trade lower than their last price the Tick will read +1000. But wait what about the other 1000 stocks? They could be unchanged from their last price. When using the Tick we are looking for extremes to enter or exit a trade. Tick readings of +1000 or -1000 are considered very strong as we typically trade between 1000 most of the time on the NYSE. On this day, a relative high tick would be a reading above 400. Allow the tick to establish itself for the day during the first 30-mins or so of the NYSE session. Ticks inside 400 are simply noise. Tips for Using the Tick: Tick readings within |400| indicate chop, ignore them On a range day you can look to fade tick extremes A 1 period moving average can make it easier to see the trend of the Tick Note the extreme tick readings for the day: When we get a high tick and a high in price at the exact same time, this could indicate the high of the day. When a high tick prints without a simultaneous high price we can continue to make new highs, until a new high tick is reached (the reverse is true for a low tick followed by new lows). Here are some trading examples of how I use the tick.

Ya Todds, and I agree with Negotiator, when I say mental preparation it's actually the process of going through and reviewing the trades each night after the markets are closed, determining your exact criteria for entry, and then close your eyes and visualize that setup so you have no doubts as to what you are looking for and what you will do when that trade sets up.

The two weren't meant to be correlated. And it's just my belief that trading, or sports, or business is 90% mental. Granted, you still need that other 10%, but if you look at any great sports figure they will tell you how they mentally rehearse and practice in their mind. As for guessing that 10% of traders make it past the first year. Just look at the "give up" rate on humans in general. How many times do people start something and quit right away, or start with a plan of doing big things and then fizzling out in the first year. So there wasn't much analytical research on the topic. Although the 3mo failure rate for traders I've heard mentioned by my broker and others multiple times.

Ya it was just a setup I've used in the past for days when the market gaps up by 10+ points and we have an A/D Line reading of 1500+ and strong breadth.

The average failure rate of a trader is 3 months. I'm just speculating here, but I would wager that for those who make it past the first 3 months, 50% fail in the next 3 months, 50% in the next 3, leaving 25% of the traders left (who made it past the first 3 months). As for the % of traders who make it past the 1 year mark, it's probably somewhere around 10%, the reason - trading is 90% psychological.

One strategy that can be effective on "Gap & Go" days is (in today's case bullish) buying over the high of the first 5-min candle and trailing each prior 5-min candle's low. Vice versa for gap down Mondays.

Yeah entering a long on a halfway back retracement (Fib 50% Line) with a corresponding low tick is a great entry. Flipped for shorts with a corresponding high tick. I have a ton of live data that I input into StockTickr from my trades that I use to continually fine tune and tweak when I discover new things.

You've probably heard the saying “the trend is your friend until the end.” In this post I outline techniques for identifying the trend, getting in, and staying in until it fails. How do we Define a Trend? An uptrend can be defined as higher highs and higher lows, while a downtrend can be defined as lower highs and lower lows. As an exercise, each night print out a 5 or 15-min chart of the market you are trading and identify the key highs and lows of the day. After a few weeks you will become better able to define the trend during the day. Methods for Identifying the Trend 1. Moving Averages Regardless of the time frame you’re trading, moving averages are a great way to quickly identify the general trend of the market. I place more weight on larger time frames such as the daily and weekly and then look to trade with that trend on the smaller intraday time frames. A 20-period Exponential Moving Average is a great tool for intraday trading. 2. Candlestick Patterns As talked about in the book Japanese Candlestick Charting Techniques, candlestick charting is a great way to identify market sentiment and trends. The candlestick pattern is made up of an open, close, high, and low price. These candlestick patterns have a lot more to say as compared to a bar chart. To get an even clearer picture of the trend try switching to a Heikin Ashi chart. Methods for Entering the Trend 1. Fibonacci Retracements Buying on a retracement as opposed to chasing the market is a great way to enter a trend. This reduces the likelihood that your stop will take you out. Once you have identified a new trend try drawing from lows to highs (in an uptrend) and waiting for a pullback to the 50% of a Fibonacci retracement before going long. I outline specific rules for using Fibonacci retracements in my trading rules. Entering a trade at a 50% Fibonacci retracement is a low risk method of getting into the trend. This allows you to enter on a pullback rather than chasing the market. 2. The NYSE Tick This is by far my favorite tool for intraday trading. To learn more I will refer you to my prior post on the NYSE Tick. 3. Reversal Patterns Buying over the high of a low bar (in an uptrend) or shorting the low of a high bar in a down trend is a great way to get in the new trend close to a reversal. These patterns accompanied with a moving average or other momentum indicator can be a sound strategy with very good risk/reward ratio. Whether you’re an intraday trader or use a weekly chart, being able to identify the trend, get in, and stay in will yield the greatest return over time. If you'd like to read about my setups and how I trade the ES & 6E you can do so here. Do you have other methods for identifying the trend?

Sounds great Rande, I will be at the Traders Expo in Las Vegas as well.

Rande you remind me a lot of Van Tharp, great content. Thanks for sharing.

I like this point. This is something I utilized that really helped me stay calm and objective while the trade was just starting out. I use a smaller first target on half of my position and since each trade has an initial stop loss once I get a fill I will either have a first target hit or a stop loss hit. There was no judgement needed in between. Sometimes I would decide to exit early before one of the two were hit and it always worked out against me. Leaving the two alone and letting the trade work was incredibly important because once I get that first target hit the trade typically would continue in my favor. Once I get in a trade, I use that time to get up an stretch or use the restroom. It may seem silly, but that trick really helped build my patience over the years.

nbalance, it sounds like a scalping exit strategy would best fit you if you're right 80-90% of the time. Although, the definition of right is quite subjective. I could say the Dow will make new highs and at some point in my lifetime I may be able to come back and say, ha I was right. Another strategy that may work is to scale out of your position once you're in. I take half off at a smaller target and then continue to scale out into strength (for longs). This keeps my win percentage higher and limits my risk. I know a lot of traders who use an all in all out method and that can work well too. You would just need to use the same method each and every time not changing methods as conditions change, else the results would become skewed.

One confirmation that you could use to get into the trend is say we're at support. Whichever time frame you are using, wait for a break of the high of the low bar before entering long. The same holds true for shorts, wait for a break of the low of the high bar. So if the ES is in a downtrend and rallies off lows, you can just wait for a break below the low of the highest bar on the way up. This also allows for a definitive stop to be placed above the high of that high bar. Just my two cents on a little added entry signal.

Those are 8 good points. I think to scale back even more we can break it down to price and volume. If we strip out the candlesticks and the studies can we are forced to make sense of the price action. From a holistic standpoint technical analysis is simply a visual representation of human emotion.

I just converted over to StockTickr for uploading all my trades and am really liking that functionality. I will get back to you when I have more data dumped from Infinity, so far I have September's trades and some of August.

Ya, my first targets on the ES (+2 ticks) has an 86.7% achievement rate at which point my stop moves to -4. This reduces my risk down from -6 to -2 per contract (I start with a 6 tick stop). From there my target is either +10 or in most cases, the 15-min target from where I entered. This keeps my reward/risk ratio greater than 1:1 with the bulk of my stop outs being limited risk. The real value of the strategy comes on the euro 6E futures where I use a -8 pip stop and at +4 move the stop to -4. Since the euro's range is much wider than the ES I can get to break even and then manage the trade for 30, 50 or sometimes even 100+ pips by trailing my stop.

If there are any calculations you think I left out go ahead and leave them below.

Once you’ve placed some trades with your strategy you can begin to analyze the data. A paper trade account is a great way to tweak and fine tune, but switching to a live trading account WILL change your results (this could be good or bad). The more data the better, as a rule of thumb place at least 100 trades with your specific setup before analyzing the data. Use these calculations to help analyze your data: Winning and Losing %: Winning % = # of Winners / Total # of Trades Losing % = 100 - Winning % Average $ of Your Winners and Losers: Avg. Winner $ Amount = Sum of Profitable Trades / Total # of Winning Trades Avg. Loser $ Amount = Sum of Losing Trades / Total # of Losing Trades Average Hold Time of Your Winners and Losers: How long do you stay in a winner versus a loser, are there noticeable differences? Find that sweet spot. Reward / Risk Ratio: How much do you winners beat your losers = Avg. W / Avg. L Profit / Loss Expectancy: This is the calculation that often gets overlooked, but is inevitably the most important. Expectancy forecasts your futures profits. It tells you the average $ amount you can expect to win (or loose) per trade. Expectancy = [(W % x Avg. W) – (L % x Avg. L)] – round turn commission Record Keeping Tips: Keep track of your profit loss, commission, daily winners and losers, weekly profits, and individual trade setups. This will help you spot trends in your trading and fine tune even more. In my post Ideas for Building Your Personal Trading Journal I outline some more ways to make this process easier. Tools to Help Fine Tune Your Trading Strategy Trading Journal Spreadsheets – The best trading spreadsheets around. StockTickr – A web based platform with a breadth of in-depth analysis tools and charts. FinViz – My favorite stock screening tool. Jing – Makes capturing screenshots a breeze. Both Trading Journal Spreadsheets and StockTickr are great tools to help with the analytical side of your trading and in essence do all these calculation for you. To become successful you must focus on trading effectively and not on the profit/loss. Do your research, and then act. Here is Part 1 of this article Developing a Profitable Trading Strategy Step by Step.

One glance through Market Wizards by Jack D Schwager will show just how unknown some of the greatest traders are.

Here are my top 5... Shadow Trader - Not necessarily a blog, but Peter Reznicek puts out a great weekly forecast video and has great market commentary. Option Addict - A great blog for options traders EminiMind - Step by step information on how to trade the futures markets. Trader Interviews - Interviews with Top Traders, a great way to pickup ideas from some of the industries best traders. Econ Talk - Conversations on the Economy, a fantastic weekly podcast.