Thoughts from a Professional Trader

[edabreu 10]

Hi all. The best thing I can do in this forum is answer questions (if I can) or just tell you about some of my experiences in the last 6 years as a professional trader.

 

I have had moderating gigs for different organizations, and I have traded for a private hedge fund, and a few private accounts. I do not make millions, but I do make a decent steady living.

 

Now I spend my time helping people 1:1, and trading with a few friends.

So, if anyone in this forum would like some help with getting started, then maybe I can save you some heartache, frustration and maybe even some money.

 

But first off, I have to tell all new traders - there is no way around the dues you will pay to become successful at this. I wish it were going to be painless, but it is not. You are going to have to wade through the muck, the junk, the con's, the hype and the bs of this business, and 'endeavor to persevere' to come out the other side.

Best 2 cents worth is to not take anyone else's word for anything about whether a system is good or not. What's important is what works for you. There is no easy answer.

Most important is to concentrate on validating the trading claims made from any system or method. This means research, and actually looking up the trades. Look for TOE, PRICE, STOP, TARGET and Final exit and see if the fill was possible. If the trade is marked sim, don't be bummed out about it. As long as the trade was placed in real market time, cash or not, look to see if it was accurate and successful.

Second cents worth is do not trade any of your cash until you have successfully traded the method you are reviewing on sim in real market time. I have found this to be one of the hardest things for new traders to do, myself included.

 

So whatever I may say here in response to anything, keep in mind that I have gone through it also ...and (here is the sad part) someone also told me everything I may tell you, and I too had a hard time listening. So, I learned things the hard way, and it cost me lots of money, and lots of frustration and heartache. So, it will probably be the same for you... but I sincerely hope not.

Edited January 18, 2009 by edabreu
another thought

[Eiger 10]

Interesting and useful post. At some point, I wonder if you could talk about what you think helped make the difference in turning the corner to consistency for you, and how you knew it was happening? I know the last part of the question may sound a little weird, but I think that self-observation and self-awareness are important keys to learning to trade well. To me, it is always helpful to learn how someone knew they were doing something they had been striving for, whether it's becoming consistent, being able to step up size, or whatever the challenge.

 

Eiger

[dealmein 10]

It's encouraging to see someone who has made it through the fire. What kind of trader are you? Day trader, swing or longer term? What markets do you trade? I'd like to know what you consider the topmost critical factors to "getting it right". Thanks and best of luck going forward.

[edabreu 10]

I don't think there was one single event that I can point to as being the turning point. I think it was a gradual realization that I was having more consistency and the bank account was looking pretty good. Recovering losses became easier, and I was experiencing much less stress since I knew recovery was just the next trade.

I trade with a few friends who noticed it sooner than I did, and started asking me why I took this or that trade, and questions like did this price point look good for a trade entry and things like that.

I began to send my results to the fellow whose indicators and methods I was using and started recording some of my trading sessions and sending them to him asking his opinion and commentary. Eventually he started asking me to beta test a new indicator now and then. Then one day he asked me if I would be interested in moderating.

So I did my first official public moderating gig and did very well. The rest just fell into place. Friends turned into clients, a few block accounts happened and I continued to trade. I still have ups and down,..only not severe and my trade rules are etched on my forehead in blood and scar tissue.

That is probably one of the most crucial events of all. When I finally knew that I was not trading the price action, but trading my trade setups and rules. I look for the setup and the rules that must be met, when it happens, then it is a go. I fulfilled my responsibility. What happens in the market afterward is not within my power to control. I also learned that +1 tic was better than a stop out, and even if the trade did go to target, I did not miss anything. I trade very defensively. Capitol preservation is my number 1 concern.

 

A few of my favorite axioms are:

There is always another trade.

Don't be a dick for a tic.

Trade less make more.

Become the 1 point king.

 

I also came up with something I call the acid test. It is a sim study of your trading with specific goals and a time period. I use it to help traders who are looking for a way to accurately measure their performance level as a trader and to pin point the weak spots. I also run through it myself on a regular basis. The acid test along with a detailed journal (the best one I have ever come across is here tradingjournal@live.com) can really help. Its funny, but I have noticed that no matter how many times we are told to trade sim as real, the reality is that we all tend to fluff (cheat) the sim. So when we go to cash, we choke. So, if you are sim trading, keep a very detailed journal. If you find yourself cheating (moving your stop, doubling up, or some other nonsense) write it down, read it and remember that when you go to cash...you will loose!

 

I day trade the ES(mS&P) and the FESX(EuroStoxx). I have traded the 6E(Euro), YM(mDow), and the ER2 (old exchange) and have recently started to trade the ZB(30yT). I use Ninja.

 

I am not a sophisticated trader. I keep it simple. My charts are pretty simple. The most complicated market theory I use for S/R and targets is Market Profile. I have found this to be of enormous value in my bigger understanding of price volume and time.

 

I would say to the newest traders to stick to one instrument in the beginning, 1 big time frame chart, 1 trade setup chart (no more than 3 trade setups), 1 shorter time frame entry chart. Pay very close attention to what price is doing. Don't think so much about why price is moving. Just trade what you see. There is so much 'stuff' that is going to come into play, that the least of your concerns should be your tools, trade setups and rules.

[Mindset 10]

Become the 1 point king.

 

Can you expand on the above please?

[edabreu 10]

What I mean is to not be afraid to take small bites out of the market - 1 ES point - at a time. Often I have seen traders insist on getting 3, 4 or whatever points out of each trade, and turn more than 50% of their winners into losers. I will take a BE over a stop out any day.

 

I think this attitude that the trade HAS to work because the indicators say so comes from indicator vendors who fool new traders into believing that the market is willing to give you that much. IMHO I have found that the market will give you nothing. You must take what is available and know when, once in a trade, you loose your advantage. So, for me, each trade begins as a scalp to first target. Once I get to first base, then if I have acquired some of the markets money, I start to hold out for the runners. Another excellent strategy for money management is the free trade.

 

So, become the 1 point King means if you must take 20 trades with 1 point each that is 20 points and an excellent day. 1 point times x amount of cars...you do the math.

 

The acid test will help you measure your performance level, and help you gain the confidence to KNOW that your batting average to first target is good enough to allow you to just take the 1st point and get to a BE or scratch stop asap.

[BennyHey 10]

Can you go into your individual methodology a little more??

 

I would specifically like to know:

 

What R/R Ratio u use?

If you are a strict daytrader or do u hold overnight?

What indicators do u use and what patterns are you looking for?

What are some things to avoid (other then what you've mentioned)?

[Eiger 10]

What I mean is to not be afraid to take small bites out of the market - 1 ES point - at a time. Often I have seen traders insist on getting 3, 4 or whatever points out of each trade, and turn more than 50% of their winners into losers. I will take a BE over a stop out any day.

 

I think this attitude that the trade HAS to work because the indicators say so comes from indicator vendors ...

 

I agree with you about the vendors - way too much snake oil out there. I also think it has a lot to do with the trader's ego getting hooked, which is never a good thing. "I've put the trade on, so it HAS to work." For some reason, the ego doesn't like to see the risk in a trade or be told it could be wrong.

 

Also, taking ONLY one point is not a very grand trade from the eyes of the ego. It's always the ego looking for more. Funny, though, when getting more points doesn't work out and we end up with a loss -- then the ego is telling us, "You idiot, you should have taken the point!"

 

A lot of reaching 'success' in trading is less about the indicators and more about self-awareness and making changes in your behavior, which sometimes aren't intuitive -- at least this has been my experience.

 

Your posts ae very good. Thanks for the contributions.

 

Eiger

[edabreu 10]

Yes...we tend to beat ourselves up a lot in the beginning.

 

Our responsibility is to take every valid signal according to our trade rules, money management, and risk/reward ratio. We are not responsible for what happens in the market after that. We are responsible only to make money, and if it needs to be 1 point at a time, so what?

Friend of mine says its like eating an elephant...

[Eiger 10]

The elephant is a good image. I agree with you about the different types of responsibilities we have as traders. I used to trade Wolfe Waves in a chat room with a trader who lived in the Midwest. Great guy and an excellent trader. After putting on a trade, he always said, "OK, I've done my part, now it's up to the market to decide." He saw the trade, assessed risk/reward, made the entry, placed his stop, etc - all the things we as traders can control. That was his part. Once he put on the trade, he let go of control. The market either paid him or didn't, and it didn't matter. The outcome was unimportant because he had a good edge and knew over time he would make a good profit. He didn't live or die on every single trade.

 

Many traders aren't at this stage, though. This is some of the behavior change I was referring to. Letting go of trying to control the things we can't control anyway (what the market does vis a vis our trade). You must have an edge, of course. However, whatever the edge is or the style of trading you do is less important than your behavior, in my judgment.

 

Eiger

[edabreu 10]

Can you go into your individual methodology a little more??

 

I would specifically like to know:

 

What R/R Ratio u use?

If you are a strict daytrader or do u hold overnight?

What indicators do u use and what patterns are you looking for?

What are some things to avoid (other then what you've mentioned)?

 

First, my response is why? There is not enough space in this forum to properly answer that question with enough substance to really mean anything to anyone. My answer may be interesting, but that's about it.

 

Second - The indicators I use may not fit your trading personality, as it is now. So what I tell you below may be interesting, but won't really mean much in comparison to what ever you use or how you trade. Spend some 1 on 1 time with someone who has what you have now, and who taught you to trade and is making it work. If there is no such person, and if you are not able to make what you have work, then you may need to get some help.

If you have nothing right now and are just starting out, then the below may help point you in the right direction.

 

I use a few big picture charts. I use a 550min big picture for market imbalance points; a 30m MP value zone and intermediate range & big trend; a 5m with standard market details like pivots, OHLC, dynamic S/R and session trend and range. I have these arranged left to right.

 

My trade setup chart is a 5 Range candle chart with BWT indicators. 1 oscillator filter on the bottom.

My entry/re-entry chart is a 233tick or a 610 vol depending on either the FESX or ES, and dependent on either the cash session or the overnight session.

When trading 1c or 2c, I try to keep my R/R at 1:1 immediately after first target. Initial stop is based on the BWT stop/rev marker but never more than 2%. As price moves in my direction, I get to BE stop and stay behind price about 2.5 points (ES) or 5 tics FESX.

When trading 3c or more, I go for the free trade principle.

 

I rarely hold anything overnight. Only if a significant S/R was respected big time. Which lately seems like gone with the wind.

 

I look for my trade signals as per the trade entry rules of the indicators I use.

 

The key issue is whether your stuff works for you. If you keep a detailed trade journal, and I mean detailed - plan, rules, results, crap and all - then you have a very good chance at discovering what is not working and what is. Your journal should have your setups clearly defined - your risk.reward clearly defined, case scenarios that tell you how to react in each trade situation that got you a win, and most importantly, what caused the loss. You need to know whether it was you, or the market.

 

If it was the market...welcome to the club. It is a merciless hungry beast out to devour you and take all your money. Accept it, ... then let it go. You have no control over it.

 

If it was you, then your journal will help you discover the problem, and either fix it yourself or get someone who can help you fix it.

 

Hope this helps.

[edabreu 10]

You are absolutely right.

 

We have to do our part, then let it go. Sometimes I just close my eyes and snooze until I hear the Ninja lady sing...one way or the other. But most times...it's a pee break opportunity!

[monad 10]

Great posts ed...... keep it up

regarding Eurostoxx which trading platform you employ and how do you find liquidity on that market, what about the fills, slippage etc. and have you looked at other european markets in comparison.

[edabreu 10]

I use Ninja charts and dom.

I trade the EU session, so its fine. And the US session is good also. Not much slippage, and mostly trades i place are at limit or ask/bid.

 

I have also traded the FDAX ... and its fine also.

[BlowFish 10]

 

I have also traded the FDAX ... and its fine also.

 

Though can be a heart stopper when it spikes up 25 points down 25 points and then right back to where it was :shocked:

[edabreu 10]

oh yes..its the russell on steroids for sure. So, its crucial to have your atm dom strategy on autopilot cause you cannot trade it with any kind of emotional content whatsoever. That is true of all trading, but the FDAX will bring that concept to home with a sledge hammer.

[taq 10]

great post

thanks for sharing

[CandleWhisperer 10]

....If it was the market...welcome to the club. It is a merciless hungry beast out to devour you and take all your money. Accept it, ... then let it go. You have no control over it....

 

Thanks for this valuable thread, but with all due respect, wouldn't a better prism to view the market from be:

 

The market is a free for all buffet- All I have to do is collect my money. The market is a friendly place; the market will provide.

 

Call it the "Law of Attraction" or whatever. But do most of the successful traders you know, view the market as friend or foe? I am trying to work on my mental program (read demons) and nothing I have seen would suggest to see the market as anything other than a place where money can be made easily.

[BennyHey 10]

First, my response is why? There is not enough space in this forum to properly answer that question with enough substance to really mean anything to anyone. My answer may be interesting, but that's about it.

 

Second - The indicators I use may not fit your trading personality, as it is now. So what I tell you below may be interesting, but won't really mean much in comparison to what ever you use or how you trade. Spend some 1 on 1 time with someone who has what you have now, and who taught you to trade and is making it work. If there is no such person, and if you are not able to make what you have work, then you may need to get some help.

If you have nothing right now and are just starting out, then the below may help point you in the right direction.

 

I use a few big picture charts. I use a 550min big picture for market imbalance points; a 30m MP value zone and intermediate range & big trend; a 5m with standard market details like pivots, OHLC, dynamic S/R and session trend and range. I have these arranged left to right.

 

My trade setup chart is a 5 Range candle chart with BWT indicators. 1 oscillator filter on the bottom.

My entry/re-entry chart is a 233tick or a 610 vol depending on either the FESX or ES, and dependent on either the cash session or the overnight session.

When trading 1c or 2c, I try to keep my R/R at 1:1 immediately after first target. Initial stop is based on the BWT stop/rev marker but never more than 2%. As price moves in my direction, I get to BE stop and stay behind price about 2.5 points (ES) or 5 tics FESX.

When trading 3c or more, I go for the free trade principle.

 

I rarely hold anything overnight. Only if a significant S/R was respected big time. Which lately seems like gone with the wind.

 

I look for my trade signals as per the trade entry rules of the indicators I use.

 

The key issue is whether your stuff works for you. If you keep a detailed trade journal, and I mean detailed - plan, rules, results, crap and all - then you have a very good chance at discovering what is not working and what is. Your journal should have your setups clearly defined - your risk.reward clearly defined, case scenarios that tell you how to react in each trade situation that got you a win, and most importantly, what caused the loss. You need to know whether it was you, or the market.

 

If it was the market...welcome to the club. It is a merciless hungry beast out to devour you and take all your money. Accept it, ... then let it go. You have no control over it.

 

If it was you, then your journal will help you discover the problem, and either fix it yourself or get someone who can help you fix it.

 

Hope this helps.

 

Thank You,

I did not ask to try and copy you. I have been trading futures for a while and have a system that I already use. I am just curious to learn about other traders and what they do. My "system" is just an amalgam of other peoples ideas and I am always looking to improve upon them.:missy:

[edabreu 10]

Thanks for this valuable thread, but with all due respect, wouldn't a better prism to view the market from be:

 

The market is a free for all buffet- All I have to do is collect my money. The market is a friendly place; the market will provide.

 

Call it the "Law of Attraction" or whatever. But do most of the successful traders you know, view the market as friend or foe? I am trying to work on my mental program (read demons) and nothing I have seen would suggest to see the market as anything other than a place where money can be made easily.

 

Yes..you can do that after you let that demons go. First is recognizing it, then forgiving yourself for making mistakes, then accepting it as your friend as it is and loving it. Its a good way too.

 

All depends on who you are. Candy works for some, the belt and the stick works for others.

I know traders who are excellent, and they treat the market as a wild beast, and are not shy about what they are doing to traders when they 'take their money'. It works for them. If they adopt the 'law of attraction' then they may not do as well..and who knows...maybe they already tried that.

 

Know thy self, and do not force your 'should' rules on anyone else. In your beginning the search is to find what works for you. It is a waste of time to try to convince anyone to see it any other way than the way that is going to help them survive the beginning years, and eventually make some money.

 

In my personal view, the market is a place where the big take advantage of the small, and the small need to find a way to see where the money is going and follow them. You need to trade like a local. You need to be very diciplined, patient, practical, and cautious. In my trading I have little room for wish fulfillment or emotional considerations about the cosmos for my trading. In my prayers I do wish for it to be easy.

 

Yes, it is a candy store....eventually. But misjudging it in the beginning can cause you a lot or pain. It is a place where money can be made...easily??? Maybe one day if you get your act together. Pretending it is so after a few winning weeks will come back and bite your head off. The traders with lots of successful experience can either help you see the reality clearly, or they can paint it with starry eyed wonder and wish fulfillment and charge you plenty for their help. I doubt that if you sat down with any successful trader who has no personal financial interest in you, that they are going to tell you the market is anything other than a place to be very careful, a place where the sheep will get slaughtered, where the un-diciplined will get ripped to pieces, where most people go broke because they fail to see it clearly, or understand why they are in it.

 

I am so sick and tired of brokers, tool vendors, trade coaches, moderators, and pundants who paint the market as a place to make money easily. It is a place where 90% of trader fail miserably...period. That is a cold hard fact.

[MAH 10]

Hi - Thanks so much for the posts, a friend forwarded them. The trade journal you referenced is an email address, is this correct? MAH

[edabreu 10]

yes- just send an email there and ask about the journal.

Edited January 27, 2009 by edabreu
spelling fix