fast

Yes, but in the broadest sense. When a decision to enter the market is carried out without consideration of (oh say) their account size, then what may have been a good decision had their account size been adequate would therefore have not been a good entry decision. Still, in retrospect, I shouldn't have been so vague, and I think you were right to say what you did.

Hey, what do you expect at one in the morning? (smile) Looking back at what I said, I didn't take the time to break down the various reasons that create a barrier to success, but it was my intention to use the phrase, "what they are doing" in a broad and encompassing way. For instance, trading while undercapitalized is something some traders do. Overtrading is something else traders do. Having unrealistic expectations isn't an action, but yes, they often lead to action, but it's still the underlying trade commitments that go to the heart of my point. Regardless of what a person thinks, says, or does prior to pulling the trigger and placing an order, ultimately, success or failure can be tracked back to their buy, hold, sell decisions--what a trader does (or even doesn't do). Certain trading methodologies necessitate a bank roll that’s more than mediocre, yet what do many traders do? They trade anyway, and that's not a good idea, even if their plan is. So, your point that traders have had great ideas is not (to me) in question, but there's a thorny counterpoint that mustn't go unnoticed. Little Johnny might have had a decent idea on where to take his family on vacation, and he may have even decided to act on that wonderful idea, but dragging your family all the way to Disney World with $200 dollars in your pocket isn't all that bright of an idea, even if it's still true that taking your family to Disney World happens to be a great vacation idea. It's still morning, and I'm a PM kind of person, so be wary about this post too. (smile)

With my trading methodology, whether it’s short or long makes no difference. Getting stopped out rarely makes any difference. What matters, or at least what matters to me, is that I take my next setup that triggers, and it matters that I do it without hesitation. I can’t let any anxiety inhibit me in any way. In fact, when I get stopped out and subsequently get another setup that triggers, I have a better chance of the next one working. Not only that, I sometimes skip my initial setup and patiently wait for those times when a subsequent setup comes along in-between cycle extremes. I’ll tell you why. If I’m taking a trend trade, and let’s say I’m going long, I’m trying to buy after what I believe to be the cycle low moves in my direction. If I’m stopped out, that means I missed my mark, but if I have another setup come along soon after, that usually means I’ve found myself caught up in a complex retrace, and I love trading those when all other elements of my trading methodology comes together, and the reason is because they are more often successful than simple retraces. As to your comment about trading range bound, that doesn’t happen to me when I have a setup for a trend trade, for my rules are such that stocks that are not trending do not even fit my setup parameters, let alone have a chance of triggering me into a trade. You asked about what people generally do. Keep in mind that people generally aren’t successful, and it’s most often a result of what they’re doing, so at best, knowing what most people do could help serve as a contrarian indicator.

As a means of managing money in an account, many traders will place a stop loss in the event trades turn against them. There are other things we can do as well. I’m sure you’ve heard of position sizing. But, that’s not all. You’ve actually touched on one when you talk about changing how many trades you’ll take. It can often prove beneficial to limit how many trades you’ll take. For one, you might wind up waiting for better set-ups instead of just pouncing on what looks pretty good at the time. Secondly, it’s nips overtrading in the bud. Third, it forces you to be more conscientious about the trades you take. Fourth, you’ll have time to document your trades—not just what you did and why but also how you felt. I highly recommend making note of what you thought the market was going to do and what it did. Eventually, you’ll start to notice something that amateurs never fully appreciate, and that’s the fact you will more often than not be wrong. Trust in yourself to execute your plans mistake free, but rely on the soundness of your trading rules to guide you through your trades, not your hunches or gut feeling—not the rules you listed in chronological order but actual trading rules that spell out what you’ll be acting upon. I would recommend limiting your number of trades to a specific number (e.g. three). However, just as you can place a stop loss in the event a trade turns against you, there’s also something else you can do instead of alternating how many trades you’ll take based on number of losses. What you can do is create a stop loss for different time periods. For example, have daily, weekly and monthly stop losses. If you have lost all the money your rules will allow for the day, then you stop trading for the day, and if you have lost all your rules will allow for the week, then you stop trading for the week. You don’t want to simply go back to one trade because you had a loss, for you need to get in as many trades as your rules will allow in order for the sample size to be statistically relevant, assuming you have a plan with rules that will yield positive results over a statistically significant number of trades. I’m not saying to trade the financials; you should trade the technical’s, but cutting your already limited number of trades even shorter based on number of losses is inferior (in my opinion) to limiting them based on dollar losses per time period.

I use a market order when getting a fill is more important than getting the price I want, and I use a limit order when getting the price I want is more important than getting a fill. What is more important isn’t a function of what I want, so we shouldn’t confuse what is more important to someone than what is more important. We should consider our trading methodology when determining which orders are more appropriate, but there are some general guidelines (or considerations) that aren’t plan specific. Will you be providing a summary of your key points here on this site?

Because you care! ..

I certainly don't mean to suggest that you have not made some good points in your opening post, and if you hold the belief that the decision to take no action is an option, I would most certainly be inclined to agree, but the quote above which is also a copy of the thread title is not only a contradiction but an obvious contradiction. Nonaction is the opposite of an action. If I decide to buy and act on that decision, or if I decide to sell and act on that decision, then either way, I have made a decision and acted on it; however, an action is not a consequence of a decision to neither buy nor sell, even though the choice to neither buy nor sell is an option. Doing nothing isn't something we do, as it's the same as not doing anything. Of course, none of that should be taken as if to dismiss your underlying point which is that taking no action is an option.

You're mostly correct. Using a single indicator won't yield favorable results for long, and yes, proper use of the right mix of indicators can prove fruitful, but the quest to find not merely good indicators but the so-called best indicators can unintuitively hinder your success, for repeatedly becoming acquainted with presumably better indicators puts you in the position of being a jack of all trades and master of none. It's okay to explore new opportunities, but I'm of the opinion that becoming adequately proficient with some of the well known indicators will enable you to make minor adjustments to offset their disadvantages. Also, a single handful of carefully selected indicators is usually more than enough. You don't need multiple indicators pulling double duty.

I hope my repetitive use of the two-worded term "good plan" wasn't too terribly distractive. My point was that traders often unwittingly disregard good plans without even knowing that they are, then subsequently head off in search of something else--be it another plan or perhaps a better indicator. However, you raise a couple very good questions: 1) What's a good plan (?) and 2) how do we discern good plans from those that are not (?). Wow, you ask tough questions. In my opinion, a good plan would usually be one with a comprehensive scope that not only addresses the many issues a trader will face in practice while implementing the plan, but it should also explain the role that underlying market forces play in the methodology. In other words, a plan that explains the what but not the why doesn't share the quality trait that I'd expect in a good solid workable plan. Seldom do traders prosper merely because they have a good plan. In fact, I don't know two successful traders that use identical plans. They prosper when they learn to only veer from good plans when they should, and if you don't know why you're doing what you're doing when you're told to do what you're told, then because you haven't learned the why but only the what, you're not going to be able to adequately adapt to the changes in the marketplace. The kind of market forces that come to mind are the basic market cycles. The market is very cyclical in nature. For instance, and to just name a few, there's the trending to non-trending (or consolidation) cycle. There's the high volatility to low volatility cycle. There's the cycle of time—e.g. how much time passes during a retrace is less than the time that passes during an impulse move in an uptrend. Also, there's a cycle (or common alternation) between retracements and complex retracements. There’s more, but the point is that there is a constantly changing rhythm to the core cycles in the market, and a plan that harnesses those cycles as the basis of a methodology would be (to me) a plan well worth our attention. There are other traits I'd expect to see in a good plan. One is simplicity. What all goes into a plan may have had very complex beginnings, but if a trade that takes twenty minutes to analyze isn't going to be very advantageous for a day trader viewing a 200 tick chart. There are several traits we could possibly list that would guide us in our endeavor to analyze a plan to see if possibly it’s good, but because of the vast number of potential plans, there will be many plans that are good overall but not quite up to par in every area, so it would probably be unwise to immediately eliminate a plan as a good plan without further analysis. For instance, a plan that fails to utilize filters to keep a good setup from triggering isn’t necessarily going to be a bad plan. The new trader isn't going to be able to recognize a good plan at first sight, for a new trader hasn't had enough of exposure to weed out the uninformed from the informed. They're going to have to do a lot of due diligence and walk around the block a few times. How does one tell a good philosophy professor from one that's not if one is oblivious to the subtle nuances in philosophy? It takes time. It takes experience. It takes wading through the field of the misguided.

You've touched upon an excellent issue that frequently leads traders astray. Not every trade, even in the best of plans, will result in a win. In fact, it's not uncommon for very good plans to yield a string of losses from time to time. The skilled trader will recognize this and remain disciplined and stick to his or her rules and manage his or her risk like a master. The amateur will quickly lose confidence in the plan and either start trading unwisely or start looking for additional indicators or plans in search of something better. Success is not solely a function of having a good plan. Of course, without a good plan, any significant long term success won't be attained, so having a good plan is a necessary condition for consistent profitability over the long haul. Still, most people, even with a good plan won't make it work, and the main reason for that is most often because traders don't actually trade their plan. They think they do sometimes, but more often than not, they're fudging (or bending) their very own rules when trading on the right hard edge of the screen. There are a variety of issues, mistakes, or shouldn't have's that pave the way for trading failure. Regardless of the reason, confidence wanes and soon after, they're back on the look out for something that'll help them find the very thing they have--a good plan that works. New traders will most often find themselves in a serious dilemma, and that is in not knowing whether or not the problem is their plan or them or perhaps both. That's why it's so very important to do two things: 1) they must gain strong confidence in their plan. One very common way to do this is to paper trade. Once it's been established that the plan is a good workable plan, then 2) they must learn the art of losing confidence in themselves. That didn't sound good did it? What I mean by that is although it's okay to have confidence in their ability to properly implement their plan, what they must lose confidence in is their ability to predict the market. Getting lucky or having a run of good luck in their educated guesses can seriously undermine their plan, and what's called for is a very high level of confidence not in themselves to predict the price action of the next few price bars but instead that their plan will work such it'll lead to consistent profitability. If anyone thinks I'm wrong, all they have to do is religiously record their thoughts about their trades before pulling the trigger. Putting together a great plan can be quite challenging, for it requires taking into account a lot of separate elements, and the truth is, and just like you say, there's quite an extensive number of possibilities. There's still quite a lot I don't know, but I'm well educated on what pertains to me, and what I've found to be most helpful in my trading isn't so much knowing what to do but what not to do. I'm a short-term trader, but I'm seldom in the market. I’m in and back out waiting on the sidelines quite often. I'm always on the look out for good reasons to stay out, for I only want to be in during those times when everything (or most everything) that pertains to my plan comes together at once.

QUOTE=BlueHorseshoe;152758]The more that a market exhibits sustained directional movement, the more wrong it becomes. The more overextended a trend becomes, the less chance there is that it will continue. An overextended trend has a lesser probability of continuing than an average trend. Of course, there are mega trends, but even still, with each successive wave, the odds continue to drop that the 'sustained directional movement' will continue. There are certainly less mega trends than there are average trends. To say that the market is wrong sounds as if it's being personified. There are those that hold the view that the market is the people, but the price bars we see on charts are not people but rather a function of the commitments people make. The movement you speak of isn't the movement of people but rather the movement of price, so even if the market is the people (as viewed by some), never is it the case that price can be wrong--or even the sustained directional movement of it), for that is what logicians call a category error--a bit like saying the color seven ate my thoughts. You mentioned that the market "couldn't have continued higher indefinitely - no market ever seems to do that." What can or cannot happen is a separate issue from what will or won't happen. You're right, it won't happen; hence, the market prices will not continue indefinitely, but that has no bearing on the issue of whether or not it can. If something will happen, then it can happen, but the inverse is not true, as can be inferred from the fact that not all things that could have happened did happen. Just because there are significantly greater odds that market prices will increase over the next three days than over the next two years does not imply that I must (or even will) take the bet. Are you talking about prices, or are you talking about price trends? Prices always (or at least most always) revert back to their moving averages, but prices do not always revert back to their original IPO price. Be careful with the word, "do." The teacher asked Little Johnny, "what did you do today?" He replied, "I fell down." There are things we do, but falling isn't one of them. It's not something we do. It's something that happens to us. Prices rise. Prices do rise. People fall. People do fall. All four propositions expressed by those declarative sentences are true, but just as falling isn't something we do, neither is rising something that prices do, for the price of a stock to do something requires intentionality. That cannot and will not happen. People can intentionally fall (like a stuntman performing a stunt), and when they perform their stunt, they do fall, and it's not something that is happening to them To say that the market should have or should not have done something presupposes the notion that it can do something at all. Recall, you mentioned markets earlier, but what you were really talking about are the prices of underlying securities, and in fact, you said, "sustained directional movement." Yes, prices do rise, but prices are without conscious and cannot act on intentions. There is another sense of the word, "should" as in, "the parking brake was off and out of gear, so on the steep incline, the car should have rolled." If you are saying that market prices should increase or decrease in that sense, you'd have a reasonable basis for saying that a stocks price should decrease following an announcement of bankruptcy, but then again, you said, "the market should never really do anything." At anyrate, I think I'm starting to ramble. I don't know if this even remotely comes close to helping, but for what it's worth ... .

For me, the key to placing an initial stop is for it to be a function of a derivative of repeatable chart patterns. For example, if I'm trading long, I'll determine what I believe is the cycle low. For instance, suppose that I determine that the cycle low on a given security is $7.50. If I'm correct, the stock will rise. If I'm incorrect, the stock will decline. I put a lot of effort into identifying cycle highs and lows, and sometimes I miss the mark, but when I do, the very last place I want to be is holding a position, even if it only dips a single tick, so I will be stopped out at exactly (if I'm lucky) $7.49--talk about not giving it much room! Actually, I do give it some room, but I don't do it by using a stop loss that is percentage based, and I don't do it by using a stop loss that is price based, and I don't do it by taking into account the volatility of the market. I do it by having a proper trigger mechanism that is higher, of course, than the cycle low (for longs)--that's what provides the wiggle room--not by lowering my stop loss point using arbitrary percentages etc, but by raising my entry point ... and that's better anyway, as it adds confirmation to my belief that I have accurately pegged the cycle extreme—the lowest low in price between the previous and following cycle high. Why do I only give it a single tick? Because that's the first point where it's crystal clear that I was wrong. There's a lot more to say, but I just wanted to share a little since I too have experienced close calls. In fact, being stopped out with such close stops isn't all bad, since it's sometimes followed by another trigger following a complex retrace ... just adding even more opportunity for a successful trade.

You’re right. I didn’t mean to suggest otherwise.

After reading what you wrote, and since this a thread for sharing tips for better trading, I thought I'd share a small bit about how I do it. You are using R/R to determine your first target, and my tip that I'm sharing with you and other readers is that you might try it the other way around. Instead of using R/R to determine your first target, use your target (along with your stop loss) to calculate your R/R. Base your target on S/R, not R/R. If the R/R is not at least close to a 1:1 ratio (assuming you're scaling out), then let the trade pass. Being triggered into what seems like a good trade with a good technical setup is insufficient reason to enter a trade. Not only do the technical’s need to be acceptable, but the financials need to be acceptable.

The 200 period simple moving average is an excellent long term trend indicator, and what it's indicating is the existence (or nonexistence) of a long term trend. The 200 period simple moving average (200 SMA) is not limited to mere trend identification. It can also be used to determine the direction of the long term trend (if there is a long term trend). For example, if the 200 SMA is angling upwards, then the underlying security is in a long term uptrend (even if the short-term trend or intermediate term trend isn't), and if it's angling downwards, then it's in a long term downtrend. If it's flat (or mostly flat), then no, it's not trending sideways over the long term; Simply put, if the 200 SMA is flat, then the underlying security has no long term trend (when the 200 SMA is used as the long term trend indicator). Keep in mind that stocks, for example, are not always trending over the long term, just as they're not always trending over the short term or intermediate term. Also, timeframes have no bearing on the long term trend. Yes, an underlying security may very well be in a long term uptrend on one timeframe while the very same security may be in a long term downtrend on another timeframe, but we must distinguish between the existence (or nonexistence) of a long term trend and the direction of any long term trend that may exist (be it in an uptrend or downtrend). The 200 SMA isn't merely a simple moving average. It's a period simple moving average, so regardless of the timeframe it's plotted on, the 200 SMA still identifies the existence (or nonexistence) of long term trends, so although knowing the timeframe in which one speaks goes to whether or not a security is in an uptrend or downtrend, if it's trending at all, the timeframe has no bearing on whether or not the 200 SMA is indicative of the existence (or nonexistence) and direction (if there's a trend) of the underlying security. I always have the 200 SMA on my charts, but I could care less whether or not a security is or isn't in a long term trend, since only the short term trend and intermediate term trend play an integral function in my trading methodology. The reason I even have it on my chart is because it provides another indication that I find particularly useful. It identifies strong support and resistance levels that many people and programs react to. If it didn't, I wouldn't even have it on my charts. Your first question was, “How do you determine the long-term trend on a daily price chart (?),” and my answer is the same as expressed in post number fifteen by Tams: the 200 SMA! –well, except that I don’t use lowercase letters for abbreviations.

There are advantages and disadvantages of placing a stop loss order, but in my strong opinion, the advantages of placing a stop loss order far (and let me say it again: far) exceed the occasional minor disadvantages. You should be more concerned (in my opinion) where you place it and where it resides after you do. Two posters have already said something that shouldn't go unnoticed. The key to placing your stop is to place it where your pattern is broken. For instance, if you're swing trading and plan on entering long shortly after a cycle low because you think price will climb, then you should place your stop one tick below the cycle low. In that instance, there is no better place to put it, if you adhere to the wisdom of placing it in a place that proves you were wrong. For example, if the cycle low is at $7.50, and if you enter at (oh say) $7.60, then the first point you are guaranteed to be wrong is $7.49 (assuming what you're trading has a tick value of one cent). Yes, there should be some wiggle room between your entry and your stop loss, but that should not extend below the cycle low (when trading long) if the cycle low happens to be a major component of the pattern you’re trading in your overall trading methodology. If it's not, then the same underlying principle still stands, and that is you should appropriately place it in the territory that reflects price action that didn't go as anticipated. On another note, you should be aware of where your stop loss orders reside. It's not a great deal that you should be overly concerned with, but if you ever become an active trader and start profitably trading on a consistent basis, then you should strive to make sure your stops reside at the most ideal location. For instance, one place a stop can reside is your very own computer. That is the least favorable place to have it. Another place they can reside is on your broker's mainframe. That's better, but it's still not the best location. If you ever find yourself daytrading on a consistent basis, and if it looks like you'll have a long-term outlook, then you should do what it takes to ensure that your stop loss orders reside at the exchange's server. The reason why is because of the time it takes for your orders to trigger. It won't make a meaningful difference for a single trade, and it won't make a meaningful difference over your next ten trades after that, but over the course of a long time frame, all those miniscule differences add up, and they can add up significantly if left unchecked.

Yes, we can access free end-of-day data with the built-in connection to Kinetick, but there are only 630 different stocks accessible, and some of them are repeats. For example, if the stock isn't apart of the DOW 30, the NASDAQ 100, or the S&P 500, you cannot access it. There are no ETF's accessible at all. Great looking charts though!

I'll comment. Keep in the mind the difference between general guidelines and strict rules. I don't particularly have much to say on this except that for beginning traders, you should trade only during market hours until enough experience has been gained to do otherwise. That's a good idea for beginners, especially daytraders, for news trumps technicals, meaning the market can behave wildly, unexpectedly, and fast surrounding those times. Makes sense, but keep in mind (as it can often be overlooked), the existence and direction of a trend (assuming there is a trend) is a whole nother discussion than whether or not any such trend is strong. Personally, I use moving averages to identify both the existence and direction of different trend types, but I use two different momentum indicators (but on the same subgraph) for identifying both short term and long term momentum shifts. That saying is a bit like telling half of a story. We know that a particular cycle in the market is a persistent transition between trending and not trending. For example, very often after a trend ends, a period of consolidation begins before a new trend develops. Some people often mistakenly refer to this by saying that the market is trending sideways, but a so-called sideways trend is not a trend at all. Because of this repeated cycle, we should not lose sight of the fact that although a trend can be your friend, it's not always your trend, for trends do not continue into perpetuity, and that brings rise to the saying that the trend is your friend until the end, but what kind of friend would you call that? I like the ratio you have between your time frames. I don't understand what you mean about identifying trends. Also, with such a fast time frame, you might consider using tick charts instead of time charts. As to the remainder of your post, my trading methodology is so different that I'm not even sure how to respond.