A Few Questions from a Beginner ES Trader

[scg84 10]

Hi,

 

I have a few questions that would be great to get some input on. I'm not sure if they are more suited for the beginners forum, but it would be great if the answers are oriented more towards emini futues. I appologise if this is the wrong area for posting this.

 

Anyways, on to the questions!

 

The way I see trading is that you need to have a good system that works out when the market conditions are in your favour. I dont think many would disagree, although the coin toss method has been proven to work, providing that you have a solid exit strategy. Onto that later...

 

Firstly, what raw data is available to the individual futures trader that provides you with the edge that you use for trading? I imagine that volume, DOM, Time/Sales data make up most of the info that people use, but it would be really interesting to see understand how people combine this data to come to a trading decision.

 

If you use resistance/support levels, what do you think makes up that resistance/support.

 

Basic trends are used by a lot of people. can this be quantified into resistance over time for use in an algo to help work out bias? Obviously a basic trend line will tell us this visually. If we ranked this, could we work out when it was enough of a market bias given other market conditions were acceptable for entry and exit?

 

When we trade, discretion must play a part at the time we make the decision to pull the trigger, unless using a fully automated system. Do you experience confidence when entering a trade? Can we measure this to see whether or not this is our brains way of measuring bias in a trade? If we can, should position sizing be adjusted accordingly.

 

How can we distinguish between confidence and hopefullness? It may sound like a silly thing to say, but personally I when trading a live, I find this difficult. When paper trading, it feels obvious. Is this just my greed taking over? (probably, I think!)

 

Should stops also be adjusted depending on confidence in a trend? I'm sure the more weathered traders would do this automatically, But it would be nice to know whether a fixed stop strategy is actually better, or if you should use discretion alteast when entering. From what I have read, once in a trade it is difficult to use good judgement place stops because of the nature of taking a profit! (a nice way of calling us traders greedy! I appologise to those with good judgement.)

 

How do market orders contribute to bias, and is the squawk effective at measuring this to add to market bias?

 

Last of all, and I do appologise for the length of this post -

 

If it is statistically improbable to make money trading in the long term, what sample size of trades would give a good idea of whether or not one would be likely to be successful at trading?

 

 

Thank you for reading my scribbles. I'm not so good at posting on forums. I would appreciate any answers, whether opinion or fact. And I do appologise if I bored you senseless. I would also like to thank you all for your contributions on this forum, it has been riviting reading.

 

Cheers,

 

Steve

[zdo 20]

Steve, stop apologizing Those are excellent questions – not necessarily the right questions – but you’re on the way. (Note the answers below are not ‘good’ answers – they are from the fringe…)

 

re: “you need to have a good system that works out when the market conditions are in your favour.” I personally have developed my whole trading career around understanding (and quanitfying) market conditions. If you can type market conditions real time, really simple even stupid systems work just fine – ie the quality of the system becomes far far less relevant .. . use market conditions to give sizing weights to a portfolio of sytems… etc.

 

re “but it would be really interesting to see understand how people combine this data to come to a trading decision.” seek the grail until it’s time to stop seeking the grail… explore explore explore… make your 'mistakes' faster and faster… but give equal time to seeing what fits your own true aptitudes and interests… finding ‘a’ way is not important in the long run and is ultimately a (decreasingly) fun waste of your time – finding your own way is crucial and more arduous…

 

re: “If you use resistance/support levels, what do you think makes up that resistance/support?”

:haha: Why did Why coff come to this planet?

 

re “Basic trends are used by a lot of people. can this be quantified into resistance over time for use in an algo to help work out bias? Obviously a basic trend line will tell us this visually. If we ranked this, could we work out when it was enough of a market bias given other market conditions were acceptable for entry and exit?”

Answer #1 omg

Answer #2 the best trading questions never get answered

Answer #3 Are you a trend trader? Are you sort of a trend trader? Are you a trend trader - not?

Answer #4ish atlas shrugged

 

re: “Do you experience confidence when entering a trade? Can we measure this to see whether or not this is our brains way of measuring bias in a trade? If we can, should position sizing be adjusted accordingly” etc. What we experience isn’t important. What you experience is. Condition yourself to have no expectations of this trade period. Takes practice to prevent a profitable run or a stupid loss or… or… from shaping expectations. re: bias – one trick I inadvertently found was to trade sufficient number of instruments to simply not have time to be biased. Don’t weed them out. Crowd them out. Biases are always there. The projective is part and parcel of our very makeup. Find ways to prevent their energy from growing / mushrooming out of balance…

 

re sizing. All sizing should be mathematically based period. Scale back from that only if a loss or string of losses bothers you in the least. Consider focusing on avoiding making any trading mistakes, sizing so that the worst outlier sample of losing trades wouldn’t bother you and stupendous windfalls wouldn’t move your expectations for the future one bit…result = ‘confidence’…

 

re: “distinguish between confidence and hopefullness” Have you considered not trying to distinguish between them? Instead maybe see them as both active at the same time. Each on its own variable gradient… mindfulness… noting…

 

re “ stops also be adjusted depending on confidence in a trend” Stops should be ‘adjusted’ optimal to the system being traded… sorta like fishing line strength should be optimized to the type of fishing being done. This is one of those areas where you see multitudes of generalization postings when it’s ultimately one of the most particular, specific, fine tuning areas for trading success. Some systems are best with no stops at all, some with tight trailing stops. See the variablilty? It’s highly system dependent – not just type of system dependent. It’s one of those areas where you want to have your statistics research current and to the highest standards…

 

re: “How do market orders contribute to bias?” Under certain conditions, market orders are a very valuable tell / confirmation.

 

re : “and is the squawk effective” Again, painfully pay the price of asking the best person these questions – yourself! If your brain has an affinity for the squawk then yes. If it has a certain‘deafness’ or ‘disinterest’ then no…

 

re: “If it is statistically improbable to make money trading in the long term, what sample size of trades would give a good idea of whether or not one would be likely to be successful at trading?”

Sample size of one… all in.

 

hth

[TheDude 10]

Steve - in short, there are no right or wrong answers. It's simply a matter of ignoring 'popular' theory and finding what works for you and your personality. ZDO shows this in his answers.

 

e.g. you could find a thread on this site that covers several pages about whether it's best to hold a position until the end of the move, or to set a fixed target. One chap comes up with an Excel sheet of back tested results that show targets are better, another shows some sim account as proof holding is best.

 

The truth is that for one person they feel uneasy with a target as they sometimes feel they are leaving money on the table if the move goes into a trend. The target orientated person kicks himself when a trend reverses and he wishes he used his old target based method.

 

Either way, if they trade a method they are not at 'one' with, they are unlikely to be successful.

[tmsmith319 10]

Subject: Sample size

Everything I read says you should define your trading plan and back test it. That means going back at least one business cycle (quarter) and recording the results of your plan. The problem with this is that it is mechanical and void of emotion. You will never follow your plan exactly when trading live, (and you probably shouldn't unless your plan accounts for every possible scenario!).

 

This goes against conventional wisdom, but for me, I think the only true way to test a system is real time with real money because your emotions become part of your system. This is also the most dangerous way! I've been at this for a year and I'm still looking for a profit. I've made every mistake in the book which means I've learned a lot.

 

Still, I think there is value in looking at past chart history to see how your plan would fair. Then test it in a sim account for a few weeks. Just remember, every system has its loosing streaks. Make sure your plan has trade management built into it!

[Phil-n-Texas 10]

i'm a seasoned musician and early on in my development in the art i made a discovery...

 

i.e., that self examination (listening to recorded performances) while sometimes painful was key to finding my own voice and style. every now and then i would hear something of a pleasant surprise that would register in my mind and eventually become part of my own artistic identity... figuring this out at an early age was truly a gift.

 

the practice and discipline of self examination and review still rewards me years later.

 

when somone can tell it's your playing on a recording or performance w/o visually seeing you do it, then you know you have your own "style".

 

i believe the same can be applied to trading...

 

i know some people that are very successful traders that have given me some good advice over the years but my style of trading isn't like any of theirs. and i know from talking with them on skype or whatever, that i see things in the charts that they don't and vice versa.

 

re: systems and testing... JMO but it doesn't take a lot of fancy gizmos to make beautiful music and again i think the same goes for trading. but fwiw, i have done plenty of systems creation / experimentation and testing and if you're going to do that i would just say to back AND forward sample.... but one can really spend a lot of time energy trying to do that when maybe keeping an honest diary of your trades would reveal more about yourself as a trader.

 

good luck,

 

-phil

[scg84 10]

Thanks for all the great advice. I had read a lot of stuff while I was trading on a demo and coming up with new strategies, but you can never really understand what people are talking about until its your money you trade with. Now its making more sense.

 

I wrote out a trading plan regarding how I would trade, a lot of which seems to be up to my discretion. And thats the way I believe it should be. Some things are set in stone, like picking high probability trades that let you place small stops etc. But all in all, the most helpful thing I have done is keep a trading journal.

 

Its not the fact that you can review your trading and make judgements on it (because realistically you cant recall exactly what was going through your mind on every trade and why you took it), but it makes you take good trades, because its recorded and you must justify each trade you take and be able to explain why it is a good trade.

 

So far in the last two weeks (since using a journal and a trading plan) I have had 1 break even day, and the rest profitable. Not hugely profitable, but consistancy is the key. Not big wins and losses.

 

Today I wont be trading; I found out today that if you have an open position at the end of the day, it means that you use a bigger margin and you have to wait to the end of the day to reset that back to the day trading margin! haha. Oh well, it is a learning process, but it was scarey when I looked at my account to see a 'dr' next to my account balance. I even checked the exchange rate in a panic! Now I feel a bit stupid! haha.... atleast that trade at the end of the day was worth a couple of points!

 

 

Thanks again for all the great advice. It is invaluable learning things from others. So many things can be learnt the easy way!

[Ants88 10]

Hey Steve;

 

I can respond to "How do market orders contribute to bias, and is the squawk effective at measuring this to add to market bias?"

 

Market orders are the market. All other order types are just waiting to become market orders. If you are referring to a squawk service, they add market clarity. Markets move because of traders - computers are traders also.

 

Been listening to a squawk service for 5 years, and now comment live for free Trading Broadcast - I do this for people like yourself who have questions though out the trading day in real time.

 

There is a lot of waiting and waiting in trading, so I do this to break the boredom.

 

Anthony...

[scg84 10]

Ants88,

 

I'm really keen to have a listen to some squawk, but I cant seem to load the WMP from the link provided. Any ideas?

[TheDude 10]

 

1/ Its not the fact that you can review your trading and make judgements on it (because realistically you cant recall exactly what was going through your mind on every trade and why you took it), but it makes you take good trades, because its recorded and you must justify each trade you take and be able to explain why it is a good trade.

 

So far in the last two weeks (since using a journal and a trading plan) I have had 1 break even day, and the rest profitable. Not hugely profitable, but consistancy is the key. Not big wins and losses.

 

2/ Today I wont be trading; I found out today that if you have an open position at the end of the day, it means that you use a bigger margin and you have to wait to the end of the day to reset that back to the day trading margin! haha. Oh well, it is a learning process, but it was scarey when I looked at my account to see a 'dr' next to my account balance. I even checked the exchange rate in a panic! Now I feel a bit stupid! haha.... atleast that trade at the end of the day was worth a couple of points!

 

 

Thanks again for all the great advice. It is invaluable learning things from others. So many things can be learnt the easy way!

 

 

1/ Read the excellent post by Phill In Texas. Self examination will allow you to make huge progress. Some trading software will let you 'pause' the chart when in playback mode/sim. This will allow you to stop the chart, jot down your thoughts and how you feel about the trade, then start the chart again and see how it progresses. Ensign Software offers this facility.

 

When you go over your journal after a series of trades you'll soon notice thought patterns that occur for winning and bad trades. e.g. you may notice you have a tendency to rush into a trade and develop a bias rather than being objective to support your reasoning after a losing trade, causing another losing trade. i.e. emotional trades. Likewise, winners may occur with a strong sense of confidence, but also difficulty as the trade seems to fly in the face of common sense. Learning to focus in on these thoughts and 'trade your feelings' may sound a bit zen like, but it's simply forcing conscious awareness in a shorter time frame that would otherwise take much longer.

 

2/ Sweet! Try and learn something every day! We only learn by screwing up, so dont be scared!

[Ants88 10]

Ants88,

 

I'm really keen to have a listen to some squawk, but I cant seem to load the WMP from the link provided. Any ideas?

 

Fixed it we are on Skype now - anthony4558

[scg84 10]

Looking at my original post, it seems like I was over thinking everything. I spent a couple of days on Ant88's traders broadcast ( and what I found is that its not how much you know, its how well you implement your trading plan.

 

I love the way that someone put it in another TL thread - bad use of a bad plan will fail, good use of a bad plan will fail, bad use of a good plan will fail, but good use of a good plan will succeed. (Not exactly quoting that to the word, but you get the picture).

 

So the most important thing to have is discipline to follow a trading plan. The only way to know if it is good system is if we try the follow the bad ones properly and improve it or scrap it and start again.

 

Seems so simple, but I imagine that is what people (speaking from experience) have a problem doing.

 

So I've written up a plan formally - not like the quick one in my journal and now i'm following it to the letter. If it fails, it needs refinement or I need to work on another system. The only thing I want is to follow my plan. If it looses money, so be it. I will have learnt the discipline, and when I do work out a system that does work (which may take years), it will be well worth it.

 

If anyone is interested in the result, I don't mind sharing in posts to follow.

[Ants88 10]

Thanks for conversing with us scg84. As you know we moved to skype, and the conference has four regular day traders. You can view our past charts and links here Traders Conference

 

All traders are welcome in on the conference. Your questions and answers scg84, helped all of us, thanks.

[cuttshot 11]

Steve,

 

I caught your post a little late but this is a topic that I deal with all the time. First, you have to have a detailed trade plan in place for each market that you trade. Ideally you are using a system that gives you clear entry and exit points. This will give you a road map to follow. You also need to backtest this sytem in order to build confidence in the system. Now I know the emotional aspect does not come into play in testing/demo trading but these are necessary steps to take before putting live funds on the line. If you have tested your system to see the odds are in your favor then you can trade with confidence instead of wishing and hoping.

 

Once you have your system and trade plan in place then you need to make sure you keep a trading journal each day recapping your performance. This becomes very valuable as you review a series of trading days. As some of the other traders mentioned, you will start to see patterns develop in your trading. You will see the areas that need improvement. This step will help you hold yourself accountable to your trade plan.

 

Your system really needs to give you exact entry and exit points. I have never been a big fan of trailing in my active trading. I find it is difficult to make the quick discretionary decisions that are required. I would rather go for a fixed target (or series of targets) and lock in my profit at those levels. I also want to have an initial stop in place the minute I get into a position. I will cut risk and move this stop as I head into profit according to my trade plan. This will give you an exact plan to follow before you even get into a trade. I have found this really limits the effect of the emotional aspect of trading. This allows me to focus on executing my trade plan correctly.

 

I know I repeated a lot of what the other guys said but it is a very important topic so I thought I would throw my 2 cents in.