steve46

and here's our followup screen shot, as we get some breathing room on this trade (5-6 points) and now with a relatively risk free trade, our job is to manage residual risk and maximize profits..ultimately we are looking for a test of the next lower dist line...

Once again a picture perfect setup, as price tests the dist line, falls away and then retests (our entry target is at the line, on the retest) This one was good enough to provide an initial 3 point "favorable excursion" ...allowing us to "buy a stop"...and wait to see if we have continuation south...this is exactly what we are looking for.. So far, this first attempt at approximating the distribution seems to be working...its early days, and this is our first shot at it...so we'll let it play out and see where we stand at the end of the RTH session tomorrow...

Been looking for a way to "approximate" my distribution lines. Because they are so time consuming, this has become a big priority....also if I am going to try to show a retail trader how to do this I REALLY don't want to have to go through a lot of math...so here is my first try at "approximating" the lines...we'll see how it works on Monday... Anyway they look pretty, and I still have my daily worksheet numbers and time-based pivots to put in place for the Globex open so I have to get going... Good luck folks...

GOB You're doing fine, just keep on managing risk FIRST....profits will take care of themselves if you protect your account and select your entries carefully. GG I missed the last entry, and by chance that is an important issue you bring up....I have some experience to call on, so I should know that its possible to make money even at the very end of the day, I should have kept my head in the game there at the end....I got complacent and missed that one.... The distribution looks good in hindsight, but if you go back through the thread, you will see that it doesn't always work that way....basically there are a couple of scenarios that we see using this method....just common sense, but price CAN move from the outside toward the mid point (the blue rectangle) or in reverse...and then (and this is happening more often these days) price can stay inside two of the distribution lines bouncing from one to the other.... These are the three basic scenarios I keep in mind...and the rest is simply watching patiently for these test points....I try to keep my powder dry until I get one of these tests...keeps my expenses down which is very important for those paying retail commission on each trade.

I will give you a general example....my basic "setup" consists of approximately 5 to maybe 8 candles, depending on the time frame.....for my record keeping, each setup no matter how many candles it consists of, is considered as one "data point"..... Without going through all the math, in order to have confidence in the data I think you need at least 400 "examples" or "data points" to evaluate....

Well, clearly I am biased however I think ALL of the things I mentioned should be seriously considered... There are significant differences between my distribution lines and "classical" support/resistance....the simplest way to understand this is.....support & resistance lines are meant as "lines in the sand" creating (just what the label says) support against price moving south, or resistance against price moving north...classical S & R has no statistical basis. My distribution lines have a statistical basis and are meant to contain price action within certain boundaries on any given day.....sorry but I am not willing to go into great detail regarding how they are created.. What matters to me, is not the definition but how they (either tool) can be used to create a profit.... Regarding "sufficient funds"...all systems have an expected drawdown...usually that expectation is unrealistic and will be exceeded at some point in the future....skilled participants can estimate what the proper level of required capital is, and they try to stay above it...part of that is the responsibility to manage leverage as well......some of the businesses that you mentioned had sufficient capital but took excessive risk in relation to the capital they had on hand....there is a balance there that you have to manage and if take on too much risk in relation to the capital you have on hand, and things go against you (the previously mentioned drawdown), odds are you (your trading business) will fail....

A final comment I am just finishing a system that is aimed at retail traders who have been struggling along unsuccessfully.... it uses distribution lines as a frame work...so when price tests those lines, the trade is supposed to wait to see whether or not price is likely to fail or continue through in a sustained manner.... The system lends itself to several kinds of rules, but the one I like for amateurs is simple. You watch price test a distribution line. Price either "takes out" that line, in which case we wait for a retest (a retracement to that line followed by a failure), or price tests, takes out the line then reverses.....sometimes (of course) price goes into a horizontal range moving back and forth above and below that line....and the question (similar to Kuokam's point) is what do you do about that.....? and for me the answer is as simple as changing your time frame...for example if your data shows you that price tends to do this causing you to enter and get shaken out repeatedly....what about moving to the next longer time frame and applying the same entry rules.....many times this change alone will "fix" that problem...in other words its a system "design" problem...for my system...the issue you bring up shows itself on the 1 minute time frame, but not on the 3 or 10 minute time frame....so you adjust....you see what I mean...and of course this is just one of many issues that a trader faces...it could be (again just to provide one example) that even when you adjust your system as stated, it doesn't help...you then have to consider...do you really have an edge....do you have sufficient capital to trade at all? If we go back to that same example....when price moves above and below a boundary, it is in effect displaying temporary supply and demand boundaries....what some call support and resistance...what about simply re-defining your system so that whenever you see this behavior you "define" the lower boundary of that congestion as support (an area where you might get long) and the upper boundary as resistance (an area where you might get short), then you look at your system and decide whether you can determine trend on the longer time frame...if you can you now have a viable system....one where you simpy wait for these congestions or sideways ranges to occur.....then you enter based on your new logic (trend determined by the next time frame).... Finally, if one is having the problem Kuokam brings up....one way to minimize that problem is to use highly correllated market to help confirm entry decisions...in my system I use two markets (DAX and ES for example) because for me the DAX serves to confirm that my decsion is correct, or if the entry is not working, to provide sufficient data to motivate me to close the trade BEFORE I take a significant loss.....again it is a matter of intelligent design and ability to evaluate the data... These are things that a skilled system developer considers...then they obtain the data and evaluate the possibilities...as with all things, some are good at it, some are not...and perhaps should consider opportunities in other areas of business..

Depends on the result of your 3rd, 4th and 11th trades.....in other words, each system has an "expected" result that can be monitored over time. That data tells you whether your system is viable or not....based on (among other things) whether your profits overcome your expenses (including trades that are stopped out).....this is one of the data points that can be adjusted to determine A.) whether to use a stop at all B.) if you are going to use one, where to place your stop In other words the question has to be considered as part of a larger system design...if using a stop, not using a stop, placement of a stop at some point, produces a viable profitable system, then thats what you do...if it doesn't then thats what you do.... Most of the problem people face is "themselves"...specifically lack of basic design skills, followed by lack of capital to execute the system, followed by lack of disciplined execution of the system, followed by lack of data (poor data capture) followed by an inability to accurately evaluate the data (you don't know what it means).....kind of a circular thing most amateurs have going on there.....in the end its no wonder so many wind up losing the account.... From my point of view the real issue is do you know what you are talking about? If you don't, and you want to be involved in this business, it might make sense to get sufficient education to enable you to evaluate the question productively.... Seems to me that some smart person (professor, teacher, whatever) if this were presented to them, would see a profit opportunity and put together a nice online course aimed at helping amateur traders to get on the right side of this issue....for now..I would contact the guys over at the Khan Academy and see if they would be willing to do this....otherwise most of you will never get past the questions you are asking because you haven't improved your skill set... Best of luck

Got a minute here before I leave my desk...this is the chart for today (10 minute candles) and it shows how nicely this system works provided you understand the context and have the ability to work in a disciplined manner of course

I think I can expand my comment to include quite a few folks here, who show up and "suggest" or more often "proclaim" concepts central to a trader's success. The "problem" is that more often than not, the concept is correct, but has to be applied in the proper context in order to be of value For the first post, the gentleman is mostly correct...for example I know several good professionals who scale in and out of positions (just one example of position sizing) to great advantage....however they do it in the context of a confirmed trend only....and it is this ability to determine trend that gives them the confidence to do it....also they are adequately capitalized which is a problem for many retail traders, who by the time they have learned this lesson have little or no money to put at risk... Unfortunately I don't have time to review the second post...because of prior obligations I have to leave my screen....I will get back to it later if you don't mind.. best of luck

I look closely at the behavior of my fellow man....to the extent that I can learn why people do what they do, I believe it gives me an advantage in terms of decision making.... for example, in these intercorrellated markets, there are folks in several locations making decisions to put capital to work (or not)....to the extent that we can understand how they think, we can 1) anticipate what they might do, and 2) if it is in our interest, make our own decisions to buy or sell in these markets. Here on this site, it is mainly "practice" and continued observation...simply put I like to understand how other traders think about trading decisions...

Yes, I haven't quite figured it out yet... Surely your list is longer than that...I look in on quite a few threads every day.... I'll be going over to Negotiator's thread next..... You seem quite interested in my activities.... are you having a bad day?

Today's Trading Opportunities all occurred at the boundaries of the distribution If you simply stayed out except for these tests you had a good day..

Here is my Globex Trading screen for the London Open.. As you can see we chose to use the DAX (primarily because of their ban on HFT) and the NQ, because we like the way it trades. 1 min charts with our distributions on the screen....most of the real work is the prep which includes review pending economic reports (any solid econ calendar will do) and of course we use our Bloomberg for latest news and to monitor both Asia and Euro news.. Most nights we "observe the DAX open" first (at 2300 hours) then trade London an hour later. The "preferred" entries are usually the counter moves off the open about 15 to 20 minutes past midnights....because we are still gathering data we trade small and our profit target varies but is generally about 5 NQ points.... Tonight we actually saw two entries based on the DAX...the first as the market formed a double touch bottom and then the next as it tested a distribution line, taking it out and then retesting for a valid second entry (or a place to recharge it the trade had taken profits prior to the retest)....as mentioned, this seems to us to be similar to picking up $20 bills off the floor...your not going to get rich doing it (because you can't put size on in this market) but the risks are relatively easy to manage... As an aside, we have been noticing Predictor (and others) coming in to take notes on our thread....hehehe...one can only smile at this and hope it helps....if not, the guy can always go back to selling used cars or insurance......

From the 130 min charts I move to the 10 min, then the three min, and finally depending on volume and volatility, I may look to the 1 min chart for entries and exits. As seen in the prior charts, the 10 displays the initial test of the distribution boundary....from that point it helps to see the additional granularity displayed by the 3 and/or 1 min charts...

and my 130 min screen....from which I develop (and place) my distributions for the next day

This is my daily screen....I start my pre-market review by looking at (and characterizing) these three markets.... In this case you can see that all the charts display the same behavior.....trend, then sideways (horizontal development) then what could be interpreted as the start of a "rolling over" or reversal...

Excellent day....nice to see big players come in to mark it up instead of taking it down.... We hope this lasts another day or so before we hit that infamous Oct period Anyway the final trade of the day was on my mind....because I had a guest in my office watching and trying to get sorted out...I learned some interesting things about how people think under pressure First, there are time constraints to the market...opportunities are time constrained meaning that things happen at a certain time and if you can ANTICIPATE.....then recognize the opportunity as it forms on the screen, all you have to do is pull the trigger and manage your money....seems simply in hindsight but to make it happen is where the magic is.... I have some simple rules for amateurs First, find a framework that takes discretion out of the game....find a set of rules for you behavior...test them to prove to yourself that they work....over at least 400 data points Then as stated above, learn to ANTICIPATE the opportunity to trade (ask yourself, when is my setup likely to occur....off the open, on the turn (at about 7am PST)....after lunch or in the last hour...these are MY prime times...if you are new to the game....DO NOT freelance...why because it costs money every time you pull the trigger...and if you don't have high expectation of success, you are going to find that at best you float around break even....and even then the commissions will sink your ship....sorry but thats the way it breaks down.... Once you have that discipline in place.....and you are able to "ANTICIPATE" where you entry is likely to occur, you still have to RECOGNIZE it as it develops....be clear on what your setup looks like before its fully formed....be able to recognize all the variations...be clear on what is tradable and what is "not quite right" and stay off the borderline stuff....be selective at first and keep records of what worked and what didn't....learn from that data, and not by having to recharge your account.... Learn to ACT PROMPTLY, don't enter trades late....especially if you are new to trading....it will come back to bite you....respect your stops, and manage your money smartly...those who follow my comments know that I recommend trading at least 2, and better yet 5 contracts....scale out at first until you get comfortable with how your target market acts....theres a trade off because of this but, if you trade in a disciplined way, this will help smooth out market volatility... KEEP GOOD RECORDS...of every trade...this is the only way you will have of confirming that your system is working well, and it will provide a early warning if your system goes belly up... The attached chart shows my last trade....the rules are simple...buy the bottom of a channel, sell the top, preferring entry on the retest of the channel boundary line (distribution line). This one is pretty classic, as price tries unsuccessfully to take out the upper boundary line, then pulls back, and eventually retests....setting up a high probability short entry. Best of luck Steve

Attitude and how you approach people is important (in my view)...so yes it is just fine to post charts Regarding your trade...its what we call a "big concept" and in this market it is a smart trade because odds are that the big players see it too and are motivated come off the sidelines and put money on this one, making it easier for you to win.... As with all things the devil is in the details, its all about how and where you decide to enter and whether you have enough experience and savvy to hold through the ups and downs...Institutional guys who put this one on, enter and set their numbers and walk away..while the amateurs "tick watch".. I was trained in NY and Chicago....don't know many folks in Philly...however it is nice to have your comments Steve

and here is the London open, with the DAX on the left and the NQ on the right....as can be seen, the setup for the NQ was absolutely perfect....price tested and then launched up allowing us to take a couple of quick points (we call it "buying a stop"...then it becomes a risk free entry...if it continues, great if it retraces we have a choice to make....or we can simply get out with our couple of points....

Here is what the ES was doing when the DAX opened this evening (with our new distribution in place) again as you can see, the ES market reacts to the line....since we drew up this distribution hours ago, how is it that the market "knows" that a line is there, and why does the market react when it tests that price? I have an idea of how & why this happens but I am keeping it to myself for the moment...until I get more data to confirm what I think is happening...

Here's tonight's DAX open....the chart on the left is obviously the DAX....when I see it open right at the median's upper boundary, then react down, it encourages me to think that the distribution is doing what it is supposed to do (frame the action)...more importantly it gives me pause to think that there are other traders out there using either this or a similar framework to trade off of....(could be almost anything of course)....whatever the case, one of the goals of using a systematic approach like this is get on the same page as other participants....

Interesting how many folks are showing up (at the bottom of my screen) to lurk and presumably read the thread.....also I notice that there are a lot of "guests" reading the thread as well...leads me to believe that people outside TL are visiting to take a look at this system... Mark (MMS) has been very patient letting me post here, so I am hoping this thread brings in new folks interested in becoming members here.

As I mentioned I would love to have a community type room for serious traders. The problem is that I actually make living trading, and every time I try to post and trade, it takes my focus away from what I am supposed to be doing and I end up missing trades...As of now I intend to complete (as much as I can) posting the general concept of how I trade using this distribution, and then I will consider what to do....along the way I hope to post some additional ideas (like the end of session equalization trade) that folks can use at some point in the future...no matter what system they use to trade... Now this will probably piss a few people off, but I won't sell the distribution, instead as soon as I find a way to approximate how I create it, I will give it away to folks that are struggling along and really trying to make it work....(as in contrast to the psychos who post the crap you read in the first few pages)....Ironically as TradeRunner posted, unless you have some skills it probably won't make an incompetent person into a profitable trader (you'll still have to learn the basics)... Good luck in the markets Steve

This is a trade that shows itself periodically and when it does, offers an extremely high probability of significant profit...I call it an "equalization trade" because if often signals a balancing process on the part of traders who were on the right side of the market near the close but may not have had the chance to get fully flat on their positions (typically it is the institutional trader who uses the Globex to finish or "equalize" a position taken in RTH). As you look at the attached chart notice at the close of RTH a pattern where price displays a red candle, then immediately following a green up that is taller (wider). Following these two candles you have what we characterize as "excursion" up, then a return and retest of that same low point, usually this occurs right at the close...(the thick blue line marks the pattern). Notice also that the RTH settlement is equal to or higher than the close... As the Globex opens, price starts out below the distribution line...long entry and favorable position is available as soon as price "takes out" the distribution line (as soon as price takes it out)...stop loss can be as small as 1 point...it should trend strongly from the start, providing an immediate profit...depending on local volatility, this should provide 5 points minimum.