Ideas for Struggling Traders

[steve46 12]

Got back in just in time to see the news. "Dow drops 500 points"....ooooh....

 

Well there is just too much opportunity in these volatile markets. I should have stayed on instead of going out, but there's always tomorrow.

 

Here is a chart showing a nice move down from the confluence of two data items, the first is the daily S2 at 1226, the second is the 200 period EMA. As they cross, price re-tests, and fails and boom the first stop down is 1213.50. The next stop on this tour is 1201.25 for a nice profit of approximately 25 ES points, then if you left some units in to run, it ran right on down to 1190

 

A total of 36 ES points.....

 

Nice day..

[brownsfan019 17]

 

A total of 36 ES points.....

 

 

Let's be fair Steve - the odds of ANY trader taking the trade and making those 36 pts in next to nothing. Why? B/c most days you will never see a 36 pt move in your favor.

 

I find it helps to keep the projections realistic b/c there are plenty of new traders floating around here.

[steve46 12]

Yes, I understand your view....it is common for retail traders to think in these terms..(because you rarely "see" a big move it is unrealistic to think I can catch one)....So I direct you back through this thread to the place where I suggest that you trade a minimum number of units. Why? Precisely so that when volatility changes and a move does happen, you have those extra cars in place. Of course I can't make you hold the position out to the last point, and no one knows where that "last point" is, but I can demonstrate how it works, and I can assure you that professionals do in fact catch these moves....and it is because they plan for them......

 

As I have said in previous posts, you have to find a way to catch the occasional big move or you won't make serious money....

 

Once again and for the record. Don't trade the ES contract with small chips. I suggest putting on enough units to scale out at 2 (or 1.5 in certain circumstances) 3, 5, 7, 10 and leaving at least one unit in case the trade runs. I would suggest trading a minimum of 10-12 units, or stand aside and practice until you have a suitable account size. Further I am saying that if you can't get to this point, chances are quite good you will never beat expenses. I am suggesting that this is true for the ES contract. I make no comment about other markets.

[steve46 12]

Absent further dialogue on the subject I want to proceed with my comments about using trendlines.

 

I have developed a way to do this that works pretty well. What you do is look for what I call a "local high or low" prior to the open. The way you find the local high or low is to simply eyeball a chart (on whatever time scale you wish). It should be clear where the previous local high or low is prior to the open. Once the market opens wait a minimum of 5 minutes and draw a trendline that connects at least two (2) data points. One of those points should be the open. I prefer to do this on a chart with either 1 min or 3 min candles.

 

Take a look at the attached chart. We see a chart with 3 minute candles. The local low is clear. The trendline gets drawn and 9 minutes later price tests the trendline. Possible long entries include that "test" or the open of the next candle. The stoploss is 2 points.

 

On this trade the low of the "test" candle is 1213. So we would have taken 1.5 pts heat on the trade.

 

As you can see, the trade takes off and gives some breathing room right away as good trades should.

 

If we assume the trader puts on 12 units, then the profit net of commission is about $2600 on the basic 10 pt win. If we assume the trader leaves 2 units to run, and he holds to the next *10 point target, then you have a profit of about $3600.

 

The risk/reward ratio for this trade is about 3:1 (we assume that the trade would be stopped out for a loss of about $1260)

 

*In general I am always thinking in terms of 10 pts at a time. If I get a 10 point win, I am looking ahead to the next 10 points.

 

The protocol for this (scaling out, risk management, etc) is found on page 5 of this thread.

[steve46 12]

First of all, my apologies. The preceding post contains an error describing how to create a trendline. I will correct it here as follows

 

First as mentioned before, I like to use this method to obtain early entry off the open. The way I do this is to look for what I call a "local high or low" occurring before the open. Although it is usually pretty clear what constitutes a local high or low, I use common sense (AKA discretion).

 

Next, I choose a bar just prior to the open to serve as the starting point for my trendline. The market opens and I wait at least 5 minutes to choose a second bar. I draw a trendline connecting the two points and trade tests and retests of that line. As can be seen in the example, this method works best if the open lies between the point of origin and the 2nd bar or candle.

 

I have attached today's 1 minute chart showing a successful trade off the open using a test of that line as my entry signal.

[steve46 12]

Here is another chart showing how a trader might handle the open

 

First I think it is helpful to have a concept or bias in mind. One doesn't have to do this, but it may help to think in terms of the market's likely trend.

 

Second, one needs to understand that this is just one technique (one of many) that a trader might use to orient to the market open and provide a way to obtain favorable trade position. The reason this is important is because in my view, the earlier you get on the right side of the market, the bigger your potential profit (especially if you scale out like I do).

 

As mentioned before, the first challenge is to find a local high or low. Obviously this is a starting place or "origin" for your trend line. Then you watch the open and after waiting approximately 5 minutes you choose a second point to "anchor" your trendline. Once you do this you are committed to a course of action and that committment is to take a position long or short based on tests and/or re-tests of that trendline.

 

Attached is today's chart (1 minute candles).

[daedalus 10]

Heres a thread I was referred to by a trader friend of mine who trades HUGE size in FX (100 Lots)...

 

http://www.forexfactory.com/showthread.php?t=2331

 

There is SO much good info in this thread its rediculous. Lots of charts, graphs, explaining entry's and exits. A lot of it based on pure price action, not indicator nonesense.

 

I've attached one of the screenshots from my trader buddy... He just trades pinbars into bollinger bands... and makes 8 figures a year. lol. It really IS that simple folks.

 

This method meshes together so well with what/how I currently trade i've decided to just start trading this live next week. I'll let you guys know how it goes.

 

Cheers!

[brownsfan019 17]

Heres a thread I was referred to by a trader friend of mine who trades HUGE size in FX (100 Lots)...

 

http://www.forexfactory.com/showthread.php?t=2331

 

There is SO much good info in this thread its rediculous. Lots of charts, graphs, explaining entry's and exits. A lot of it based on pure price action, not indicator nonesense.

 

I've attached one of the screenshots from my trader buddy... He just trades pinbars into bollinger bands... and makes 8 figures a year. lol. It really IS that simple folks.

 

This method meshes together so well with what/how I currently trade i've decided to just start trading this live next week. I'll let you guys know how it goes.

 

Cheers!

 

Interesting there daedulus.

 

You say:

not indicator nonesense.

 

And then go on to say:

I've attached one of the screenshots from my trader buddy... He just trades pinbars into bollinger bands... and makes 8 figures a year. lol. It really IS that simple folks.

 

And the attached screenshot shows bollinger bands and RSI being used, which I believe are indicators.

 

 

So are indicators "nonsense" or is it really that "easy" to make 8 figures and use them? Kinda confused there.

[Kiwi 16]

Interestingly, despite the chart with all the countertrend trades and the use of the RSI and the bollinger bands in an attempt to shore up the traders ability to determine where the candlestick patten is likely to be meaningful in the above example, the James16 thread is pretty good.

 

James went on to form a paid private community though.

 

 

I suspect the candlestick threads here would give similar information without the risk of being polluted by forexfactory indicatoritis.

 

Also Trader_Dante set up a very good forex pin bar thread last year.

 

Dante uses support and resistance rather than indicators to determine "good" points to look at the price action (pinbars) and is somewhat longer timeframe than the chart shown above so I think a newbie would get a lot more value from it.

[steve46 12]

I think its amazing that people continue to be so gullible.

 

But then that is human nature isn't it?

 

If we can get back to the subject of helping struggling traders, I would suggest that simplicity is the key. Clearly if you give a set of simple tools to a woodworking expert, he or she will usually produce a beautiful product, conversely if you give the same tools to a person with few skills, they are likely to produce a pile of rubble.

 

I did the basic research long ago. The only "indicators" that seem to add value to this problem (how to trade) are moving averages, selected pivots and trendlines and frankly, pivots & trendlines are problematic (because they are static in nature and lose effectiveness after a short time).

 

This is my good deed for the week (done early as early as usual). Some will agree, some will not, and as usual the winners will be those who take a moment to think before pounding on the keyboard.

 

Good luck folks

 

Steve

Edited September 27, 2008 by steve46

[smwinc 20]

Wow... I came over to this forum to escape the jaded "holy-than-thou" bullshit from elite trader only to seem to have found it all over again.

 

Ok enough is enough, excuse the french, but what the f*** are you on about?

 

You jump into a thread, bragging about your friends ability to trade "huge" size. 100 lots in FX might be 'massive' in wannabe-trading land but it's piss all in the real world.

 

Looking over your past posts you've already told us you trade ONE lot in the NQ.

 

Personally, I like Steve's thread. I don't give a toss about your friend, or his ability to trade.

 

It looks like a good thread, but you don't just jump in a random thread on a different forum and advertise it like you've just discovered Angelina Jolie was born a Man.

 

I'm sorry if you didn't get the reaction you were after from the community here. Forgive us if we don't crack a hard-on over someone else trading freakin' bollinger bands.

 

Back to Steve's thread.

[daedalus 10]

Ok enough is enough, excuse the french, but what the f*** are you on about?

 

You jump into a thread, bragging about your friends ability to trade "huge" size. 100 lots in FX might be 'massive' in wannabe-trading land but it's piss all in the real world.

 

Looking over your past posts you've already told us you trade ONE lot in the NQ.

 

Personally, I like Steve's thread. I don't give a toss about your friend, or his ability to trade.

 

It looks like a good thread, but you don't just jump in a random thread on a different forum and advertise it like you've just discovered Angelina Jolie was born a Man.

 

I'm sorry if you didn't get the reaction you were after from the community here. Forgive us if we don't crack a hard-on over someone else trading freakin' bollinger bands.

 

Back to Steve's thread.

 

I thought this thread title was Ideas for Stuggling Traders? Or did I mis-read that? Where did it say STEVE's ideas for struggling traders only?

 

100 lots is small in the real world? If so, i'd be perfectly happy trading for 1k a pip and being "piss all in the real world".

 

Yea i trade 1 lot in the NQ... and what does that have to do with the price of tea in china?

 

The thread was about ideas for struggling traders, I posted up a resource that has LOTS of good ideas in it based on PRICE action, not indicators. The setups they look at simply use indicators as a way to focus in on price setups... but whether its a BB or pivots, or fib retracements, its focused on PRICE action setups, NOT indicators.

Edited September 28, 2008 by stanlyd

[dandxg 10]

I think its amazing that people continue to be so gullible.

 

But then that is human nature isn't it?

 

If we can get back to the subject of helping struggling traders, I would suggest that simplicity is the key. Clearly if you give a set of simple tools to a woodworking expert, he or she will usually produce a beautiful product, conversely if you give the same tools to a person with few skills, they are likely to produce a pile of rubble.

 

I did the basic research long ago. The only "indicators" that seem to add value to this problem (how to trade) are moving averages, selected pivots and trendlines and frankly, pivots & trendlines are problematic (because they are static in nature and lose effectiveness after a short time).

 

This is my good deed for the week (done early as early as usual). Some will agree, some will not, and as usual the winners will be those who take a moment to think before pounding on the keyboard.

 

Good luck folks

 

Steve

 

I am confused. Why then suggest using pivots and trendlines on this thread if they are problematic?

[daedalus 10]

The truth is the pinbar setups occur in his last post using trendlines to identify long signals in post #81... but heaven forbid I would link to a different source that could be cross applied to whats already being discussed!

[steve46 12]

Yes I identify pivots and trendlines as problematic. I do so because I did my own research on them and found that they offer limited utility. I'm not the only person to come to this conclusion. A gentleman named Ben Warwick also did some research on signals and came to a similar conclusion. As I recall he wrote a book whose title is "Event Trading"...For anyone interested in that approach (trading earnings, economic reports, bond auctions, etc.)

 

Now to go further with my comment, even though pivots (particularly daily pivots) and trendlines are "problematic" they do work pretty well IF you use them early in the session. That is why I suggest struggling traders take a look and see if they can make it work for them ON THE OPEN. There's a lot more I can say about the subject, so I started there. I am glad to entertain comments of all kinds. Critical comments are just as welcome as any..have at it...

 

Good luck to all

 

Steve

[dandxg 10]

I will respond more in depth later had a few cocktails. It is not by questioning and challenging the status quo that we achieve a higher learner would you not agree? I was just looking for clarification because it seemed contradictory to what you had previously said. Adios Amigos

[dandxg 10]

Interesting there daedulus.

 

You say:

 

 

And then go on to say:

 

 

And the attached screenshot shows bollinger bands and RSI being used, which I believe are indicators.

 

 

So are indicators "nonsense" or is it really that "easy" to make 8 figures and use them? Kinda confused there.

 

I hestitate to step into this debate but here goes. I recently had the pleasure of hear Jim Paul " What I learned losing a million dollars " speak on INOTV. He stated you could take a mediocre system with proper money management with consistency and make money. The method is a very small part of it, it works as long as it fits you and you can execute consistently.

[steve46 12]

I don't happen to know Mr. Paul.. But I have a source of my own that I like to quote periodically. From the "Encyclopedia of Trading Strategies" by Katz & McCormick page 308

 

".....but the results support the contention that a really good exit strategy is, more than anything else, the key to successful trading......"

 

and here is another quote from the same page...

 

".....an experienced trader, skilled in money management, can make a profit even with a bad system, while a novice trader, unskilled in money management, can lose everything, trading a great system ("system" in this context usually referring to an entry model)."

 

So from my point of view what has been said is basically true. The method by itself isn't as important as the trader's ability to execute in a disciplined way, to use good risk management rules, and to exit correctly. When I say exit correctly, what I am talking about is holding a trade and scaling out over an extended period of time, instead of cashing in for a couple of ticks or a couple of points as retail traders often do.....

 

I've already commented about this a while back...

 

Steve

[smwinc 20]

".....but the results support the contention that a really good exit strategy is, more than anything else, the key to successful trading......"

 

........

 

So from my point of view what has been said is basically true. The method by itself isn't as important as the trader's ability to execute in a disciplined way, to use good risk management rules, and to exit correctly.

 

 

Very true, couldn't agree more.

 

At the firm I trade for, we have a Risk Screen which monitors the positions of literally thousands of traders (it's a big firm). A Risk Screen basically has every traders name, and a live view of their current positions & profit / loss.

 

I've spent (a brief) amount of time training new traders in the past & working with risk. What you often find watching the screen is that many, many traders take similar entries.

 

For a few seconds, 70% of the firm's DAX traders are long. Some are a little late, some get the best entry. However, after that initial "entry" everything will change. Some are aggressively pyramiding, some are scaling out selling into those 'pyramiding' orders of those same traders, some have already gotten out for a scalp, etc.

 

Over time, that is the primary difference between a "good trade" and a "great trade", which becomes the difference between a trader's day, a trader's month, year, eventually entire career.

 

The importance of a entry will be often be greater for an independent trader vs a trader at a firm, but the reality is most of this business is about managing & exiting your trades - knowing when to hold 'em and when to fold 'em as they say.

[jcavalieri 10]

if your able to enter at the right place and the right time you have a good chance of being profitable regardless of your strategy or exit. what do all of you think of that? i would like to hear some opinions.

[minoo 11]

Steve

 

Reference to your post 81

 

The $VOLD and $ADD both were negative right from the opening. If you dissect them further than the picture was even more negative, as Down Vol was much greater than Up Vol and also Declining Issues were much higher than Increasing Issues and this difference kept rising in the morning hour

 

So my BIAS or preference was to the downside at the opening with 200MA sloping down, My trade preferences were shorts from 200MA

 

Questions

How did you derive your BIAS from & when ?

Do you draw horizontal line at the regular hrs opening, (this is helping me)

 

I eventually noted from my Big-Picture routine, after the opening hour

Though Globex market had traded down much (ie Gap above to be filled), S&P Premium ($ESINX) was mostly above Fair Value

 

A request to Smwinc could you please consider to start a dedicated thread on TL, it would be much appreciated

 

Many Thanks

Minoo

[daedalus 10]

Very good points made. I think one of the biggest/hardest things for traders to master is the management and exit part of trading. There are 1 million different methods for entering a market but who wins and loses in the long run is determined by how they execute trades, manage them, and optimized the efficiency of the exits.

 

As stated before, any system, no matter how rudimentary and basic can be successful as long as the person trading it can achieve that efficient management and exit.

 

I think as traders our personalities are set up to try and make a "no-lose" system or try and continually search for better entries, exits, etc, when in fact if we would all just get a simple method and execute on it without changing the status quo week after week we would be profitable!

[sevensa 10]

".....an experienced trader, skilled in money management, can make a profit even with a bad system, while a novice trader, unskilled in money management, can lose everything, trading a great system ("system" in this context usually referring to an entry model)."

 

I'd like to see anyone take a negative expectancy system and make it profitable with money management. This is like during the internet bubble where companies' business plans pretty much were saying "yes, we are losing money per unit and are not profitable, but we will make it up by selling a lot of it".

[steve46 12]

Steve

 

Reference to your post 81

 

The $VOLD and $ADD both were negative right from the opening. If you dissect them further than the picture was even more negative, as Down Vol was much greater than Up Vol and also Declining Issues were much higher than Increasing Issues and this difference kept rising in the morning hour

 

So my BIAS or preference was to the downside at the opening with 200MA sloping down, My trade preferences were shorts from 200MA

 

Questions

How did you derive your BIAS from & when ?

Do you draw horizontal line at the regular hrs opening, (this is helping me)

 

I eventually noted from my Big-Picture routine, after the opening hour

Though Globex market had traded down much (ie Gap above to be filled), S&P Premium ($ESINX) was mostly above Fair Value

 

A request to Smwinc could you please consider to start a dedicated thread on TL, it would be much appreciated

 

Many Thanks

Minoo

 

Sure, in answer to your first question "How do I derive my bias?"

 

First please remember that I am not a new or struggling trader, so I am going to use resources you may not have access to. Those resources include people you don't know, my ability to read the tape, my evaluation of recent news, etc. I say this because it all has impact on my decision. So...

 

1.) I look at a Market Profile worksheet that I developed. My worksheet indicated that I might find a "local low" in the area from 1185.50 to 1191.

 

2.) I talk to colleagues in the market who suggested that size players might be coming in to lift bids on the open. I correlate this with the recent news about restrictions on shorting and other issues that I am aware of.

 

3.) On my chart you see a candle at 8:35am EST. That candle hit a low of 1184.75 and then buying came in. That low corresponds to my idea that price might be moving up from that point. Also that price point is an important one on my Market Profile chart (it is a weekly number that often signals turning point).

 

4.) The wide range candle at 9:00am EST indicated significant pre-market buying again confirming my idea that some participants are interested in obtaining early position long

 

5.) On my squawk, I can hear the participants coming in to lift bids during the open process, confirming my bias is correct.

 

6.) I read the tape

 

7.) I pick a point after the open and draw a trendline. The "origin" is my estimated local low, the "anchor" point is where I believe a limit might be located. Sometimes I am right, sometimes wrong. If for example you would have chosen the low of 8:39am EST, you would have a similar slope to your trendline.

 

After I draw that trendline I am looking for evidence that price is respecting that line. For me, "evidence" is two hits. That second hit would be my signal to get on board.

 

I hope this helps a little.

 

Steve

[minoo 11]

Steve, this is amazing, your reply helps a lot, learning quite a bit here my friend. The more I practise the trades your style and read your replies the more it sinks in. More importantly the belief in the system is building stronger.

 

In the end of reply you suggest quite a bit of information to comprehend

 

“anchor point is where limit might be located”

 

Does this mean large limit order /s to be filled, so the floor traders bring the market to that level

Do you pick this up via Squawk-box (what would Ben_L normally Squawk-speak here ?) Could you please further throw some light on this

 

The trendline you draw between local low and anchor if its opposite to the 200MA slope you would still take trade in its direction if it shows evidence (3rd touch or 2nd touch ?).

Many times this could be the first mean reversion trade to 200MA, if it has the momentum then they go on to reach an area (ie previous Hi/Lo or Globex Hi/Lo confluence with midpoint of daily pivot) adjacent above/below the 200MA. Please comment.

 

I have sighed away from market profile charts and just use the POC as S&R & Virgin-POC same as historical unfilled gaps; Could you please show your weekly / daily profile-chart with the weekly figure / pivot ? you mention

 

Many thanks man, for making this a quite enjoyable learning experience

 

Regards Minoo