Ideas for Struggling Traders

[OAC 10]

 

One, it might help others if you had some comment of your own as the value of "creeks"....how for instance do YOU use this concept in your trading (just in general terms).

 

 

I use the concept of market symmetry. If the current counter-trend wave is greater than all previous corrective waves, to me, is equivalent to "Jumping the Creek". The big irony is that i am using a horizontal S/R in this particular case which is preached by the crowd over there at the Wyckoff's forum. And yet I am extremely surprised to find that Wyckoff himself used a squiggly line that can be arbitrarily drawn to some degree. If he was a master technician as BB claimed in another thread, couldn't Wyckoff at least came up with a mathematical formula for the Creek similar to a variable linear regression line? As far as I know, they had slide rules back then.

[firewalker 10]

I use the concept of market symmetry. If the current counter-trend wave is greater than all previous corrective waves, to me, is equivalent to "Jumping the Creek". The big irony is that i am using a horizontal S/R in this particular case which is preached by the crowd over there at the Wyckoff's forum. And yet I am extremely surprised to find that Wyckoff himself used a squiggly line that can be arbitrarily drawn to some degree.

 

I'm as much surprised as you, perhaps you can show me some references where Wyckoff himself used "a squiggly line". I'm positive that there will be at least someone in this thread that will point me towards the correct literature PS: as far as I know, Hank and Max were born after R.D.W. died.

 

If he was a master technician as BB claimed in another thread, couldn't Wyckoff at least came up with a mathematical formula for the Creek similar to a variable linear regression line? As far as I know, they had slide rules back then.

 

Do you need a tachometer to switch gears or have you learnt to rely on your car's engine sound to determine the optimum moment to shift?

[firewalker 10]

There's 2 ways to look at event trading:

1) Construct a plan for event trading only.

 

2) Take trades that you normally would as they appear and if an event helps it, great.

 

I must have missed this, because it should be clear - especially for struggling traders which is after all who this thread supposedly is aimed at - that there is at least a third option:

 

3) Avoid taking trades prior to an event

 

And a 4th:

4) Move your stop closer in case you're in a profitable position

[erierambler 10]

I'm as much surprised as you, perhaps you can show me some references where Wyckoff himself used "a squiggly line". I'm positive that there will be at least someone in this thread that will point me towards the correct literature PS: as far as I know, Hank and Max were born after R.D.W. died.

 

The lingo, jump the creek, which can be shown by a squiggly line comes from SMI, not the original Wyckoff course. SMI originated from Wyckoff, but then added some flavour to it. One must be careful to distinguish the two. Hope that helps .

erie

[minoo 11]

Hi Steve

 

I am on holidays for the month of Dec, and would like to prepare my 2009 plan while I am relax & have time on hand.

In the fourth quarter of this year my plan / exercise was to simplify my system and cut down on trading time. I came accross your thread in Aug 08 when I was struggling with trading in quantity.

 

Since I have tested the Vol bars and presently use ES 1100 share bars (for globex-only sessions) and 2700 at RTH. And am quite new in their use but they do work very well with my system

 

I want to relegate this success in writing for 2009 and have started to realise that I donot know much of the reason, for Why do share bars work so well. Could you please enlighten me on Vol Bars.

 

Many Thanks Minoo

[firewalker 10]

With due respect, there is enough info. about big and small players , I have Tom Williams book and it is there also. I use VSA and was interested in finding out if I could recognise or not any entry point of those who positioned themselves with prior knowledge of news or reports by using what I know of VSA method. All I was looking for was a recent example , I presented analysis based on that and asked for comments but was told to read another book.

 

I'm sure it would enlighten all of us if we could get a glimpse of the inside knowledge today, so that we can take the right position before FOMC.

 

In the spirit of x-mas, I encourage all those who possess outside information to kindly share it with the rest of us humble, ignorant traders.

 

Thank you.

[HAKUNA 10]

I'm sure it would enlighten all of us if we could get a glimpse of the inside knowledge today, so that we can take the right position before FOMC.

 

In the spirit of x-mas, I encourage all those who possess outside information to kindly share it with the rest of us humble, ignorant traders.

 

Thank you.

 

This is what I was looking for, today would be a perfect example, I for one had no idea what was going to be in the FOMC announcement, however , from a 1min chart of ESmini, I had an entry 2.30-2.31 around 891, now those perhaps with inside knowledge could have positioned around say 860 or early this morning at 880.

It would certainly be educational if somebody in here can put a trade taken with that prior knowledge indicating entry etc. after all the theoritical debate we have had on all kinds of different players in the game.

[steve46 12]

Minoo

 

Thanks for your questions

 

I think that constant volume bars or candles offer a couple of benefits. First, when you look at those, you are not focused on time, but on the movement of price. After all, they move when a certain number of events (trades) take place, not before. This can take seconds, minutes or hours. So what you really see it price independent of time (at least in my opinion). Then depending on the volume number that you choose, they seem to reduce the amount of "noise" that is present in index trading. Finally, when you look at the movement, you see a more "wavelike" action, that reflects the way price really moves. To me it is sort of like the ocean with tides moving in and out.

 

This is why I like to use them and frame that wavelike action with a couple of moving averages. Using the 200 and 80 period EMAs, I think that I trader is better able to identify the origins of tradeable trends up and down.

 

Traders should keep in mind that the main idea or concept is to learn to read price accurately. Whatever decision you make about your display, you should ask yourself, "does this help me to read the direction of price more accurately"? If it does not, then you are going in the wrong direction. Also I believe that if a trader is new, or if they are struggling, they should try to keep the screen very simple. As they learn and develop confidence, then they can add things.

 

I hope this helps.

 

Steve

[steve46 12]

I'm sure it would enlighten all of us if we could get a glimpse of the inside knowledge today, so that we can take the right position before FOMC.

 

In the spirit of x-mas, I encourage all those who possess outside information to kindly share it with the rest of us humble, ignorant traders.

 

Thank you.

 

I do appreciate it whenever I hear a person admit to ignorance and request help...So here is what I know....

 

Event trading is for people who have or can develop the ability to think independently. People interested in "Event Trading" usually enjoy collecting the information and making a plan to take advantage of the outcome of an event.

 

If you were that kind of person....a while ago you would have taken a look at the economic calender and said to yourself...Gee...it looks as though we have a Fed Announcement coming on Tuesday December 16th...I am pretty sure the economy isn't going to get much better between now and then...so I am willing to bet that the odds favor a rate decrease.....Now if I look back at what usually happens when the fed decreases short term interest rates, I can see that the S&P usually heads north...also this is the time of year when we have a bullish bias anyway.....So I will try to find a strategy that allows me to position myself long before the announcement and hope to sell into the move up.....

 

Now this is an example of the way an adult professional would think about this before the fact....Then the question would be....what are my choices?...Do I put on an options position?.....Do I put on an outright long position before the move?.....Do I wait for the day of the move and try to trade it by getting long early, trying to get some breathing room and holding until the announcement?....Finally a person interested in doing this would ask, "what is the risk reward associated with each strategy, and how capable am I of managing the risks and making it happen?....

 

My own preference is to put on an options position a week or two before the event, and trade around it on the day of the event. In the example given, a good trader might look for places to get long in order to maximize his profits. If I were wrong, I might look for places to get short to hedge my options trade. The advantage is that by doing this a trader reduces the volatility of the event making it more manageable. The downside is you have to have more capital and knowledge of options to pull it off.

 

I hope this helps, and I apologize for the late post. I didn't read your question until late in the day.

 

Best Regards

Steve

Edited December 16, 2008 by steve46

[steve46 12]

Lets talk a little bit more about the nature of "inside knowledge"

 

As regards the financial markets, and events that take place, there are people who "know things" before everyone else. If they disseminate that knowledge to outsiders for the purpose of realizing monetary gain, they are acting illegally...they are breaking the law....and of course it is very unlikely that any of us will know these particular folks.

 

After that there are professionals who make it their business to develop an opinion about economic events, including earnings report and other information that might be important. These people usually disseminate their opinions for a fee, or they provide their opinion to clients of their employers (like brokerages, economic advisors or consultants)...and their are people who offer their opinions free of charge..They are news commentators, and interested amateurs and professionals alike who often are trying to develop a business of their own.

 

Finally there are professionals like myself who have their own opinion based on simple observation and the knowledge they can obtain from other associates (people like themselves).

 

You can see that what you call "inside knowledge" is often the opinion of a variety of folks, some of whom are knowledgable, and some who are not...and this is why we have what I call a "noisy" market and a divergent opinion as to the outcome of most events.

 

There are exceptions of course and this Fed Announcement is (in my opinion) one of them...Every professional I know, figured that today the fed would ease rates.....no exceptions in my world.....We did not know how much...but everyone of us would bet big that this would be the outcome...so in terms of "inside knowledge" there was not much to be had this time....

 

And this gets back to Brownsfan's recent comment. It may be that "Event Trading" isn't appropriate for newbies or struggling traders. It may depend on how much experience they have, and whether or not they are willing to take the time to learn how to do it.

 

If one DID want to learn, I would suggest reading the literature, and developing a method of getting information. One resource that traders use to develop information about events is the blog, and another is the RSS news feed. Here are some examples of good news feeds that will allow the interested trader to integrate several sources of information.

 

http://www.theinternationalforecaster.com/

 

http://www.marketnewsflow.com/MarketNewsFlow/market_news_flow.html

 

I hope this adds some value to those who want to pursue the concept of event trading.

 

Best Regards

Steve

[Guest MRC & Co]

You can see that what you call "inside knowledge" is often the opinion of a variety of folks, some of whom are knowledgable, and some who are not...and this is why we have what I call a "noisy" market and a divergent opinion as to the outcome of most events.

 

There are exceptions of course and this Fed Announcement is (in my opinion) one of them...Every professional I know, figured that today the fed would ease rates.....no exceptions in my world.....We did not know how much...but everyone of us would bet big that this would be the outcome...so in terms of "inside knowledge" there was not much to be had this time....

 

And this gets back to Brownsfan's recent comment. It may be that "Event Trading" isn't appropriate for newbies or struggling traders. It may depend on how much experience they have, and whether or not they are willing to take the time to learn how to do it.

 

 

A lot of talk here about 'professionals' and referring to 'us', like you are one. Not to mention, I've never met a forum with so many people with profitable 'systems'. Especially in this time, where most 'systems traders' are being punished. Trading is a HARD gig, not many make it, especially to be able to do it for a living.

 

As for the bold parts, ever heard of the bond markets? You check what is factored in and then you trade off it.

 

Whoever has the fastests news feed and fastest execution, wins the race, IF the news is better or worse than expected. "Experience" will only help to determine the likely outcome, but not help you get your finger on the trigger first which is where the cash is at. And this is why you get HUGE 'squeezes' after news events. Mainly legit prop traders (not the 99% of junk shops), getting in first and then covering within seconds-minutes.

 

People need to stop talking like they know, when you can see right through them. Not saying there aren't a few legit professionals (i.e. do it for a living) here. I bet there are, but it's easy to spot the difference. And the junk talkers could confuse the new traders, not to mention, shouldn't be confusing themselves.

Edited December 17, 2008 by MRC & Co

[Kiwi 16]

Sorry, I'm a little slow today. Lets check if I understand you.

 

You're saying:

 

"Steve, you're not a pro - you're a pretender."

"It's easy, just use the bond markets to resolve those uncertainties."

"I can see right through you, I'm so cool."

 

Is that a good summary?

 

 

 

Edit: There are so many BS's in the post two down from this that I can't understand him. I am pretty sure he's saying that the way I make my money every day doesn't work. Well, heck.

Edited December 17, 2008 by Kiwi

[Soultrader 12]

There are systems that automate entries based on economic numbers in which the retail trader does not have a slightest chance against it. For example, check http://www.needtoknownews.com/. Some systems incorporate the numbers as it comes and then executes instantly. On a wide range up bar... the prop traders with access to such systems are the ones entering at the lower end of the bar. The retail traders are most likely entering the the upper range of the bar. The difference? Execution speed and the speed of information that gets passed to these prop or institutional traders.

 

Also, there are reasons why institutions spend a ton of money on connectivity, server locations, etc... in order to improve latency. A retail trader trading via internet connection is always slower than an institution trading through a dedicated line next to the CME for example.

 

Regarding inside knowledge, institutions use this all the time. It would be naive to believe that this is illegal so they must not practice it. Trust me.. front running, market manipulation exists all the time. Did you know the CME charges a hefty fee if one modifies orders hundreds of times a day? You can see this on the DOM... bots flashing bids/offers and then disappearing... appearing... disappearing. Pure manipulation.

 

I stopped trying to figure out the markets a while ago. A good understanding of technicals, price action, and fundamentals... and all you need is basic knowledge of risk management and then a VALID strategy that produces results. A strategy can be a pattern that you can exploit over and over again. Some strategies are geared for insitutions, some for retail traders. There is enough room to make money in the markets... all one needs is to take a tiny piece of the pie to trade for a living.

 

Through time and experience, one will gain enough wisdom and understanding to develop further strategies. A profitable strategy provides a trader with confidence to wait patiently and execute systematically. I know that once I stopped caring about all the extra moves and focused only on what I was looking for... trading became alot easier and made more sense. Bottom line is make money... no one is going to reward you because you caught the perfect technical setup.

 

For new traders, I think one of the biggest challenge is to gain enough experience to understand what strategy development is all about. Forget all the textbook setups.... strategies must be developed on your own. However, there is room to gain insights from an unprofitable strategy (or even a strategy that works in a market different from yours). One does not need 10 different strategies as a retail trader. You can trade 1 profitable pattern across several markets, setup alerts to recognize when this pattern is developing, and then execute based on your feel or understanding of market strength/weakness. Fear of execution comes because of the lack of confidence in your strategy. And for those who are too caught up in the tick by tick, bar by bar action.... look at the bigger picture. Look at the overal market formation.... if you dont have a sense of whether the markets are strong or weak today you should be educating yourself and not trading. Like bootstrap mentioned somewhere... it takes tons of screen time.

 

Stop caring about missing moves. Stop caring about trying to figure out the markets. The markets is what it is... your profits come from the probabilities your strategy gives you. Take the trade, take the profit or loss, and move on.

 

A profitable strategy will allow one to not care about the losses. Because you know the strategy is valid and you will come out a net winner. (as long you have a solid risk plan!) Now the tricky part is knowing when the strategy stops working all together... this imo comes only from experience.

[Guest MRC & Co]

Sorry, I'm a little slow today. Lets check if I understand you.

 

You're saying:

 

"Steve, you're not a pro - you're a pretender."

"It's easy, just use the bond markets to resolve those uncertainties."

"I can see right through you, I'm so cool."

 

Is that a good summary?

 

IR news is already priced in, YOU DON'T NEED TO PREDICT IT, AND THERE IS NO POINT LOOKING AT WHAT HAPPENS IN THE PAST, IT ALL COMES DOWN TO EXPECTATIONS AND THE ACTUAL FIGURE. Steve makes completely invalid points and tries to pass them off in the light of being a 'professional'.

 

The complete and utter BS I see on forums non-stop has jaded me. These people couldn't trade their way out of a paper bag!

 

Anybody who points out the BS is passed off as 'trying to be cool'.

 

Soultrader makes some good points (the ones I am referring too about execution speed, either through prop traders hitting their buttons or algo traders). BS technical textbook patterns, or those that relate to your given market(s).

Edited December 17, 2008 by MRC & Co

[BlowFish 10]

You don't need execution speed with a break out bracket order resting at the exchange. You don't even need any directional bias. A simple way to exploit the volatility caused by news. You still have to be nimble of course. A quick and easy idea for struggling traders.

[steve46 12]

To my eye, it looks as if you (some of you) have it all together....I say good for you... and please continue as you were....

 

Periodically one hears comments like MRC's.....as mentioned I have no problem with contrary opinion. I do suggest however that this thread, and particularly this subject (Event Trading) isn't about automated bots, or computerized analysis of news, or about automated order entry for that matter. What we are trying to do is to introduce new and struggling traders to concepts that they can learn about and then study further on their own...

 

As regards the study of Events and how to profit, I have seen it done in a specific way for years. I can make it work, and I know other professionals and retail alike profit from it based on quite a few variations on that theme. I suggested one method that works quite well actually (putting on an option position prior to the event, and trading around it on the date). I offered a comment about it, and talked about its benefits in terms of reducing volatility. Interestingly no comments about THAT....

 

Soultrader as you certainly know, there are significant differences in order entry between retail and professionals. One is that retail orders are processed for compliance with margin and other rules before being sent to the exchange. The latency though small is significant and it is one reason why retail is slower. The process I suggest for trading events doesn't require that edge.

 

Finally I am a little less patient with the comment that IR news is already priced in....

 

Price moves after the release of information because not everyone knows what the release will be....If news is "priced in" why then does price spike up or down AFTER an FOMC announcement. If MRC's comment were true price would not move this way...This movement AFTER THE FACT is the basis for "event trading" and apparently the concept is too difficult for MRC to grasp.

 

Seems to me that this is pretty simple stuff, that (almost) anyone could learn about and profit from, it they worked at it just a little bit.

 

 

 

All the best

Steve

Edited December 17, 2008 by steve46

[steve46 12]

Tomorrow we have three reports out and they are "Initial Claims" (unemployment report) at 8:30 EST, "Leading Indicators" and "Philly Fed" both released at 10:00am EST. Of these the Philly Fed has enough juice to move the market. I suggest interested folks go to Briefing.com and read the free information on that report.

 

My guess is that the report will be on the negative side. Consensus based on the folks whose opinion I respect, is the same. Therefore I would be looking to get short before this report. What are my choices then? Well I could have got short today by selling premium (options). If I wanted to do that I should have done it early in the day when prem is usually more expensive. Also I could have gotten short the market at some point during regular trading hours using an outright position (selling contracts). Alternatively I could wait and get short in the overnight market. Also one could simply wait for the market to open tomorrow and if presented with a opportunity, get short at or after the open. Finally as mentioned previously, a trader could have established an option position today and traded around that during the regular session tomorrow. Based on the expected volatility of this report, I would not be doing that this time.

 

The S&P settlement today was 903. If I have an opportunity in the overnight market tonight I will be looking to get short above that price. If possible I would like to be short 10 pts or more above settlement when markets open tomorrow.

 

Good night folks

 

Steve

[steve46 12]

On my MP chart I show the Value Area High to be 912.50. Currently 8:50am EST we are at 910. Looking for a setup I would like to have made entry in the overnight market some 10 pts above yesterday's settlement at 903. I didn't get it. Unless things change significantly before the open, my next option is to get short after the open.

[steve46 12]

I am having some technical difficulties as can be seen in the chart.

 

Esignal freezing up and other probs. Short as seen in the attachement

 

looking for more breathing room until the 10:00am Philly Fed

 

Edit at 10:07am ESt

 

Took some scales out during the run down. Briefing.com shows

shows the report came out a little worse than expected at -32.9

Market did not move significantly as of this edit. Will scratch the

trade if it goes back up to 907

 

Edit at 10:17am EST

 

Okay so the market is not moving south on this news. Also the

seasonal bias is up, and as can be seen in the second chart volume popped

at the release of the Phily then dropped. The squawk tells me that its locals

and institutions kicking the can around today. As I type the market looks like

it might be starting to roll over. My best scale-out thus far is 899

 

Edit at 10:31am EST

 

Out at B/E on the remainder. Best Scale out 899. Also traders should be aware

that the brokerages are coming in to buy. Goldy long from 883.50 so they are long

from below and waiting for expiration tomorrow. Looks like it will be a rally later

in the day.

Edited December 18, 2008 by steve46

[firewalker 10]

Briefing.com shows

shows the report came out a little worse than expected at -32.9

Market did not move significantly as of this edit.

 

Ehm... I think you'll see that a number which is less negative than expected means better news, not worse. The forecast was -40 so this is actually better than analysts thought.

 

I'm wondering if people like you interpret the numbers incorrectly, how on earth can simple beings like myself even remotely attempt to figure out what these news reports mean let alone how they are going to effect prices?!

[steve46 12]

I have no idea what "people like you" will or won't do sir. What may surprise you is that I don't regard us as very different.

 

I was trying to post while doing a number of other things, and frankly I am not good at that.

 

I was trying to give people a glimpse at how a trader sets up a trade. Since I am not infallible I am sometimes wrong....that is the fact of life for all of us. I hope you will find a way to deal with that in this thread and in your own life.

 

Good luck to you Sir

 

Steve

 

Edit

 

By the way, and it is just an afterthought. I did manage to make a few dollars on that trade, in spite of the fact that my initial take on the release was wrong.

Edited December 18, 2008 by steve46

[steve46 12]

Another "footnote"

 

Refer back to my previous posts where I suggest that during this last year, President Bush acted as my personal ATM (my poor attempt at a joke) as I shorted every time I knew he was speaking.

 

Just now CNBC posted "breaking news" saying that President Bush was speaking and suggested that he "had not made up his mind (lol) whether to provide funds to the big three automakers"......and look at how the market dropped.....

 

I missed it as (again) I was posting here...apparently I have still not learned my lesson about posting during market hours. Oh well, undoubtedly I would have spent the money poorly......

 

Good luck everyone.

Steve

Edited December 18, 2008 by steve46

[firewalker 10]

Okay so the market is not moving south on this news. Also the

seasonal bias is up, and as can be seen in the second chart volume popped

at the release of the Phily then dropped. The squawk tells me that its locals

and institutions kicking the can around today.

 

Also traders should be aware

that the brokerages are coming in to buy. Goldy long from 883.50 so they are long from below and waiting for expiration tomorrow. Looks like it will be a rally later in the day.

 

So if locals, institutions and brokerages have all been buying this early in the day, then why is this market only going downwards? And when does the rally start? Only 45 minutes till the close. Could the pro's be wrong? :shrug:

[steve46 12]

Well first of all there are many market participants each with their own agenda. For instance I watch how Goldman acts and I know they were long from 885. I also watch a few others (like Merrill for instance), and I watch individual locals who I know on the floor. This helps me to know who is liable to act (to buy or sell) and from that I get an idea of whether the market is going to be moving (especially when we have low volume days).

 

So in my opinion its not a question of "pros being wrong" at all. On a given day, some are going to be wrong. I think I have pointed this out before (lol). Oh yeah, earlier today for instance when I was wrong...

 

Hope that puts it in perspective

 

Steve

[atto 20]

Even if you had a reliable source for who's long and who isn't (I assume a good squawk service), wouldn't you be relying on the fact that the big institutions mentioned are trading directionally? Since they clear for clients and hedge funds, there could be any number of reasons for them to be selling SP futures, with many having no bias to the equities short side.

 

I'm not saying you can't make money by following the institutions (I'm sure you do quite well), but it seems that a) entry barriers to gain sufficient information are higher than most "struggling traders" can afford, b) even then, you're working with not all the information. GS selling SP futures before a news announcement could mean they are positioning themselves to be short for the news, or they're simply lightening up long positions (or neither, as mentioned earlier).

 

From this, and going back to event trading, it seems that using logic to determine market reactions (such as: "the economy sucks, it's not getting better yet, so the numbers will be bad") wouldn't be great for struggling traders who don't completely understand what's going on (like you). For instance, today, unemployment came in at 554K, while the market forecasted 558k, so "sucky news" beat expectations. We also beat expectations (fairly significantly) on the Philly Fed MI (who would have known?). Even still, we end the day red.

 

My misunderstandings of how this works (and how to profit from it) may stem from the fact that I don't follow news at all. Any thoughts Steve?