Jonbig04's Log

[jonbig04 10]

I had planned on simming until I was consistently profitable. Then easing into real money one contract at time.

[Hlm 10]

I don't have time to go into a lot of detail but I would like to make a few comments...

 

This is where I think auction theory and understanding what the market is trying to do can come in very handy. I personally use Market Profile (TPO and Volume) but Db does a great job at drawing areas manually (and I hear he has a very good reasonably priced book ). If you don't already, I would like you to throw 1932, 1943, and 1955 up on your chart. This is the VAL, POC, and VAH created from the previous days price action. As you can see, price spent most of the day trying to find "interest" outside the value area. Around 11:30 ET it made an excellent attempt but still found no interest. There was nothing wrong with how you found you support area. However, that was the smaller time frame. Any longs I would have taken between the POC and the VAH would have resulted in partial profit at the VAH. You actually did a great job at collecting inventory for the test outside the value area. Remember, the market will usually rotate from the VAH to the VAL looking for interest to put it into a trend away from the value area in search of the new value area. I wasn't trading the NQ on that day but I believe that you were in the room (I might be mistaken) when I stated I was going short (1299.50) and was looking for a strong rotation to the downside. Of course on the ES we were trying to ENTER the value area (1299.75 1304.75 1310.75). Back to the NQ...on the rotation down (after failing to find interest outside) we only made it to 1935.75 even though the VAL was at 1932.00. However, if you throw up a volume by price histogram you can clearly see that the next highly active area down was around 1938.00. This is why having a histogram up along with your value areas is important. Of course if you draw your areas manually like Db this isn't a problem.

 

Okay, enough rambling for now. Hopefully there is some logic within that run on paragraph. :o

[OAC 10]

This is my advice to the newbies, please keep an open mind. Don't fall in love with Market Profile or VSA, although they are the most popular on this forum. Most of us trade the index futures market and this market has taken drastic changes in the past few years, and what used to work don't work any more. It is my opinion that a lot of these examples only look good in hindsight. I am going to stick my neck out and say this: you can't make money in this market being a Market Profile or VSA purist. The reason is that they may be effective trading tools but way too vague if just used by themselves. You need much more precision to survive in today's fast market that is dominated by computers.

And one thing that has not changed is the price action. It is still the undisputed king and discretionary trader's best friend.

[Hlm 10]

OAC, don't take any of the following comments as being rude (I type it with a smile). I am just trying to clarify....

 

Most of us trade the index futures market and this market has taken drastic changes in the past few years, and what used to work don't work any more.

It depends on how you trade. If you trade a system that has fractal significance then most likely the time frames have only shifted slightly over the years. From the back testing I have done, things haven't changed as much as some will have you believe.

 

It is my opinion that a lot of these examples only look good in hindsight.

I can't speak for VSA (I am not a fan of bar by bar volume), but Market Profile is no more hindsight than trading straight "PA". The levels are there...the bias created by value area formations are there...imo it's not as gray as some claim it to be. Anyone who has spent any time in the TL room with me knows I am anti hindsight and will hesitate at explaining things that happened in the past.

 

I am going to stick my neck out and say this: you can't make money in this market being a Market Profile or VSA purist. The reason is that they may be effective trading tools but way too vague if just used by themselves. You need much more precision to survive in today's fast market that is dominated by computers.

I would tend to agree with this statement for retail day traders. In my experience, the pure MP traders tend to have deeper pockets and trade a higher time frame. Both my discretionary and auto styles are hybrids of the Market Profile (both TPO and Volume) concepts. The daily MP areas are great for bias, potential high action areas, and targets. Entering at a good spot around those areas are best done with smaller time frame entry techniques. There are also detailed MP hybrids out there for the reading. Just take a look at jperl's threads on trading with market statistics.

 

And one thing that has not changed is the price action. It is still the undisputed king and discretionary trader's best friend.

This is what I don't understand about you pure PA guys. Do those that claim to use only pure PA (no MP, etc) look at a chart with ONLY vertical movement up and down (no horizontal importance)? I mean...if you think MP is bogus than you can't use candle formations on a time chart. You also can't use congestion areas or large quick runs to determine your trade. If you do, I don't see how that is any more pure than finding the VAH, POC, and VAL of a period of time be it daily, monthly, from high, from low, congestion area, etc. I guess I must be missing something. If one doesn't want to have a computer draw the lines for you (eg daily MP) then draw them manually like Db does. But in my opinion defining statistically significant value areas IS reading PA.

 

Maybe we are talking about two different kinds of MP.

[BlowFish 10]

Not at all, criticism is encouraged on all fronts. As far as I'm concerned enthusiasm is not strong enough a word. When I think of enthusiasm I think of people who ski on the weekends or play soft ball twice a week. I think something as challenging as learning to trade requires all of your attention, pretty much all the time. Thats what Im trying to do anyways.

 

 

That's interesting what you say about the Sim slowing me down. Why do you say this?

 

thanks

 

What are you trying to achieve by simming? Thats the big question.

 

What exactly are you simming if you don't have an adequate plan? How can this help your consistency and discipline if you don't have something to judge your performance against? The fact you are asking 'why did this not work' rather than 'did I follow my plan' rings alarm bells. Performance is all about how well you stuck to your plan. If you are unsure whether it was a valid trade or not you need to re examine your plan. A simulator is a reasonable tool to see if you can trade your plan without deviation. If you haven't got the plan down cold how will you know if you are deviating?

 

A simulator is not a good tool to determine if a method works. In fact its a distinctly bad one. Looking at charts (both live and historical or with a replay) is likely to be much better proposition. There are two main reasons. Firstly you can judge the method without your judgements being clouded by actually 'trading'. By all means watch live charts to see if things 'work' but don't add the presure of the simulator.

 

Secondly you can get more work done by review of charts to see if things 'work'. You don't have to sit in the live market to wait for things to occur. This is the time for iterative refinement to your rules. That's not to say that once you start trading your plan (live or with the simulator) that you might not see some room for improvement.

 

You might be using the simulator to improve your 'market reading' skills, again sim is not really suited for that either. Do you think you are likely to read what is going on better with a position on or without a position? Again watch the live market or replays by all means but adding the 'fun' (your word) of the simulator is unlikely to help. Far better to scribble in a note book or talk yourself through the price action than trying to trade it.

 

There is no doubt that becoming proficient at trading can be a lot of work but the journey can be cut down by doing useful work with a purpose in mind. (I know, I have wasted probably 10's of thousands of hours in my time and you know what, I am still prone too)

 

So what are you trying to achieve by using the simulator? tbh I might be completely wrong (I often am) as I don't recall you having stated that yet.

 

The other thing to do would be outline your plan (a few sentences would do) then people will be better able to comment on where (if at all) you are going wrong.

 

Cheers!

[jonbig04 10]

What are you trying to achieve by simming? Thats the big question.

 

What exactly are you simming if you don't have an adequate plan? How can this help your consistency and discipline if you don't have something to judge your performance against? The fact you are asking 'why did this not work' rather than 'did I follow my plan' rings alarm bells. Performance is all about how well you stuck to your plan. If you are unsure whether it was a valid trade or not you need to re examine your plan. A simulator is a reasonable tool to see if you can trade your plan without deviation. If you haven't got the plan down cold how will you know if you are deviating?

 

A simulator is not a good tool to determine if a method works. In fact its a distinctly bad one. Looking at charts (both live and historical or with a replay) is likely to be much better proposition. There are two main reasons. Firstly you can judge the method without your judgements being clouded by actually 'trading'. By all means watch live charts to see if things 'work' but don't add the presure of the simulator.

 

Secondly you can get more work done by review of charts to see if things 'work'. You don't have to sit in the live market to wait for things to occur. This is the time for iterative refinement to your rules. That's not to say that once you start trading your plan (live or with the simulator) that you might not see some room for improvement.

 

You might be using the simulator to improve your 'market reading' skills, again sim is not really suited for that either. Do you think you are likely to read what is going on better with a position on or without a position? Again watch the live market or replays by all means but adding the 'fun' (your word) of the simulator is unlikely to help. Far better to scribble in a note book or talk yourself through the price action than trying to trade it.

 

There is no doubt that becoming proficient at trading can be a lot of work but the journey can be cut down by doing useful work with a purpose in mind. (I know, I have wasted probably 10's of thousands of hours in my time and you know what, I am still prone too)

 

So what are you trying to achieve by using the simulator? tbh I might be completely wrong (I often am) as I don't recall you having stated that yet.

 

The other thing to do would be outline your plan (a few sentences would do) then people will be better able to comment on where (if at all) you are going wrong.

 

Cheers!

 

 

 

You are right. I realized some of what you were saying a couple days ago when I sort of stopped trading b/c I had no plan (yet). There are some areas where I like the sim. Example: its hard for me to see on a chart how tough it would be to hold a certain position. Sometimes when I look at a chart I just see that price when up 5 points in 10 min, I dont see all the small retracements that are in the same candles, if that makes sense. So it kind of helps me figure out how much I can endure as far as risk is concerned, and I've learned a lot of other lessons not relating to method, but I think at this stage you are absolutely right. All the information I need is in typical not-live charts. Thanks for your advice.

 

As for my plan, I'm getting there. I hope to have something posted here by the end of the day.

[jonbig04 10]

I would like to start off trading retracements.

 

These are what I'm working on now. This is basically an outline of what I want to determine. All the real work still has to be filled in, but this way I know what I'm looking for. Each step is contingent upon the completion of the previous one. I still have some steps to add, but i hope you can get the general idea.

 

 

1. Identify the daily trend.

 

Using some way of general trend determination i.e. trend lines, linear regression etc. The trend will have to meet certain requirements (which I have yet to figure out). If it meets those requirements I will be comfortable saying the trend today is X.

 

2.Asses the strength and probability of continuation of said trend.

 

Using a certain amount of support zones and watching how price reacts when it nears them. For me to consider the trend strong it will have to break though X amount of support areas with X amount of volume.

 

3. Identify smaller retracements of the daily trend.

 

I will have various criterion (yet to be determined) that the retracement will have to meet.Including a percentage it will have to retrace from the current trend ( I havent yet figured out how to do that). It will have a lot to do with declining volume, and other factors that will indicate buyers or sellers are simply taking a break from continuing i the current trend as opposed to buyers or sellers actively pushing the price away from the primary trend.

 

4.After the criteria for a retracement have been met I will cross examine the potential retracement with what I've learned about reversals (yet to be determined). This will depend on how many characteristics I can find on reversals. It will be something like: off all the reversals I've looked at I can identify 5 things that price did before it reversed. Each reversal had at least 2 (or 3 or so) of these characteristics so my retracement won't be allowed to have more than 1 or 2, whatever the case may be. This will change in time. If I find that the reversal vs retracment ratio is to high when the retracement has 2 of those characteristics, then I will knock it down to 1 and so on and so forth.

[MidKnight 12]

Might I add that you will also want to consider various trade management things such as position size determination, stop management, profit target determination, rules for scaling out/in if interested, non-confirming factors after you are in the trade. Also asses your unique psychological capital requirements.

 

What you have outlined above is a very general description for recognizing opportunity, once it is recognized though, it needs to be managed both technically and psychologically.

 

With kind regards,

MK

[jonbig04 10]

Yes you are right. I haven't gotten to the actual trade management side yet, but I will. I will determine my hard stop loss as well as my trailing stops with 3 different stages. Also as you mentioned I will figure out my entries and exits.

 

As far as psychological homework goes, I can't really show you but I AM doing it. What's going on in my head is the equivalent of completely gutting a house before all the new stuff is added. Psychological demolition or cleansing I guess you could call it. Anyways I've beaten that horse a lot around here and decided to start working on my method as thats an easier thing to quantify over the internet

[MidKnight 12]

Psychological capital, I mean other things besides gutting your house. For example, how many losers in a row can you tolerate? What is the max draw per day, week, month? What do you do when you have reached a max draw - how do you cope and move forward? Do you have a daily (or weekly or monthly) percent or dollar target? If so, what changes when that is reached?

 

Just a few ideas....this is an enormous area in itself and goes towards ones success I believe.

[jonbig04 10]

You are right, I haven't factored those in yet. Thanks for the advice. I will address those issues as well!

[jonbig04 10]

I would like to start off trading retracements.

 

These are what I'm working on now. This is basically an outline of what I want to determine. All the real work still has to be filled in, but this way I know what I'm looking for. Each step is contingent upon the completion of the previous one. I still have some steps to add, but i hope you can get the general idea.

 

 

1. Identify the daily trend.

 

Using some way of general trend determination i.e. trend lines, linear regression etc. The trend will have to meet certain requirements (which I have yet to figure out). If it meets those requirements I will be comfortable saying the trend today is X.

 

2.Asses the strength and probability of continuation of said trend.

 

Using a certain amount of support zones and watching how price reacts when it nears them. For me to consider the trend strong it will have to break though X amount of support areas with X amount of volume.

 

3. Identify smaller retracements of the daily trend.

 

I will have various criterion (yet to be determined) that the retracement will have to meet.Including a percentage it will have to retrace from the current trend ( I havent yet figured out how to do that). It will have a lot to do with declining volume, and other factors that will indicate buyers or sellers are simply taking a break from continuing i the current trend as opposed to buyers or sellers actively pushing the price away from the primary trend.

 

4.After the criteria for a retracement have been met I will cross examine the potential retracement with what I've learned about reversals (yet to be determined). This will depend on how many characteristics I can find on reversals. It will be something like: off all the reversals I've looked at I can identify 5 things that price did before it reversed. Each reversal had at least 2 (or 3 or so) of these characteristics so my retracement won't be allowed to have more than 1 or 2, whatever the case may be. This will change in time. If I find that the reversal vs retracment ratio is to high when the retracement has 2 of those characteristics, then I will knock it down to 1 and so on and so forth.

 

 

This was a lot easier to write than it is to do. :missy: :crap: :missy: :crap: :missy: :crap:

[atto 20]

Personally, I think you would be more successful and have an easier time identifying your "rules" by trading the extremes, and leave trading the middle chop alone. What you listed sounds good, but as you know, you have a lot to add to it before you can even think about execution.

[jonbig04 10]

There is just so much to do it helps to have some sort of organization of what to learn/study. The above was just breaking down what I need to concentrate on.

 

I'm thinking of what you said about extremes. I think that will come into play when I decide the minimum percentage of retracement from the prevailing trend. This way I don't get whipped around so much my ultra-small retracements, if that makes sense.

 

At any rate, I'm on number 1 right now

[jonbig04 10]

Since it SEEMS the steeper the angle the stronger the trend, would be it be ridiculous you measure the anlge using a protractor or something?

 

I'm googling now since it seems like i wouldn't be there first human being to contemplate this. I also posted it around other forums to see if anyone else does it.

 

Example, if you were going to trade the trend (in some fashion) you may want to say the angle of the trend must be greater than X for me to get in with the trend.

 

Just an example/idea...

[brownsfan019 17]

It's an idea to work with. You are basically saying that you want to trade w/ the current strong momentum, which sounds great in theory. In other words, you want to be trading when it's moving, which should produce a steeper incline vs. chopping around.

 

So the first step would be to identify the degree to which you want to classify as a strong momentum move and then how to play it - try to jump on the wave or try to time it's end.

 

There are some momentum indicators as well, so take a look to see if anything looks good.

[jonbig04 10]

It's an idea to work with. You are basically saying that you want to trade w/ the current strong momentum, which sounds great in theory. In other words, you want to be trading when it's moving, which should produce a steeper incline vs. chopping around.

 

So the first step would be to identify the degree to which you want to classify as a strong momentum move and then how to play it - try to jump on the wave or try to time it's end.

 

There are some momentum indicators as well, so take a look to see if anything looks good.

 

 

I will check them out. I'm being careful not to get indicator dependent. But momentum is important because I am looking for retracements which of course turn out to be reversals quite often. My logic is the stronger the trend/momentum the lesser the chances of a reversal.

[brownsfan019 17]

I will check them out. I'm being careful not to get indicator dependent. But momentum is important because I am looking for retracements which of course turn out to be reversals quite often. My logic is the stronger the trend/momentum the lesser the chances of a reversal.

 

And the logic is solid.

 

The question becomes - how do you measure the strength of momentum?

 

As you've seen, putting good ideas into real-time trading is not the easiest work to be done.

[jonbig04 10]

And the logic is solid.

 

The question becomes - how do you measure the strength of momentum?

 

As you've seen, putting good ideas into real-time trading is not the easiest work to be done.

 

 

Thanks. It is pretty tough, but I'm taking it one small step at a time.:missy:

[brownsfan019 17]

I have one suggestion while you begin your trading study - document everything you look at with screenshots, annotations, remarks (good/bad), dates, etc. etc.

 

Just get it all into a Word doc so you have it b/c I guarantee one day you'll say something like - I remember looking at something like XYZ before, but can't remember exactly...

 

And that's a monster time waster if you've already done it.

 

So come up with a way to document and save all your work, regardless of how big or small.

 

If you plan to be around for awhile, this little step can save you so much time later.

[jonbig04 10]

Thanks I will make sure I do that.

 

There seems to be 456,000 momentum indicators haha. Geeze.

[MidKnight 12]

Thanks I will make sure I do that.

 

There seems to be 456,000 momentum indicators haha. Geeze.

 

What does that tell ya about how hard it is to measure... :\

 

All my best,

MK

[Head2k 10]

An angle can be measured by its tangent. Price change / time. But I would guess one should be carefull with very steep trends, as they may exhaust fast.

[BlowFish 10]

Since it SEEMS the steeper the angle the stronger the trend, would be it be ridiculous you measure the anlge using a protractor or something?

 

.

 

Chart time will give you an idea of 'pace'. It is easier to spot real time. You might want to try fixing your price scale on your charts. Much easier to judge if your charts are not constantly adjusting themselves to fit the bars on the screen all the time. So for example on a 5 minute chart you might fix the scale so it shows roughly 20 ES points. This has a remarkable effect on ones perception.

 

A simple tool to measure what you are talking about is the Gann fan. I'm kind of surprised it is not more popular. I am not recommending it, but it is basically a protractor and will immediately tell you the angle price is following. You might find it unnecessary if you scale your charts appropriately.

[brownsfan019 17]

One other idea I had this morning - you'll also want to test your ideas over a variety of markets unless you are trying to custom fit to the NQ.

 

For example, the CL (oil) can really move and is very different than an index. Yes, it's 'expensive' to trade there and a few mistakes will wipe you out, but I think it's worth at least looking at.

 

If you are looking for some trending markets, at times the 6E (Euro futures contract) can trend as well.