How "complex" is Your Trading System?

[2trade 10]

What is your trading plan currently?

What are your objectives and targets for performance

and how much risk(draw down) is acceptable?

 

2trade

 

 

 

So I've had the dream of day-trading for over 10 years and have casually been researching it in that time frame. Several months ago I found myself with more than the needed 25k (~75k) to be a day trader and have begun the process of actively working toward that goal. I set up an account with TOS, loved the system, not the comissions so I switched to MB trading. Their commissions were better but fill price and customer service was a joke so I am switching to a lightspeed/Esignal solution and probably keep MB as a secondary broker. I also obtained a powerful PC w/ 3 large monitors so I'm set for tools. I've studied the psychology of trading and am confident I know what is needed mentally to win, I'm also confident I know general trading principles that are needed to win. I userstand excecuting on this knowledge is a different story.

 

I trade qqq exclusively since I like it's price, liquidity, and speed/level of volatility. I may add another stock later but am undecided... Something like appl which is similar to qqq but seems to be more volatile.

 

So my question is specific to the trading SYSTEM you use - that is buy, sell, hold signals. How complex is it? How often do you see these signals? When I was starting I tried trading simple MACD crosses (modified) but found that taking each opportunity was guaranteeing faliure... So adding in a pieces to the system such as only trading with prevailing trend and only trading after the price has broken out of a range lowered those opportunities but they were still too numerous to be successful without a very good system of exit.

 

How simple or complex is your system? I am still honing in on a system for me that would work well day trading qqq. Any system-related insights are very appreciated and would be very helpful.

 

Not sure how green this post makes me look, I am definitely new to this but have treated trading like a FT job with the ammount of time I have given it recently so in spite of my newness I know I have the intelligence, drive, determination and passion for trading to be successful at it - I may need some help along the way, so if anyone is willing to provide insights beyond what they would post here - feel free to pm me. I saw a post a while ago about the 38 steps to becoming a day trader or something like that and I've been through most all of those steps so I know I'm not far off and am lightyears ahead most wide eyed newbs.

 

Thanks all!

 

Firm

[BigAl 10]

Thanks BigAl,

 

So if this were not a reversal but instead a continuation move, would you look for less volume here, more volume, or it depends on the follow through for the move? Basically, I'm looking at how to interpret volume here at these edges (like the low/high of the day,e tc.).

 

What I look for is a spike in volume at or near my time zones. Then look for lower volume on the next few bars. I place my entry just above the high of the larger volume bar to buy and just below the low to sell. Spikes create better entry signal, but they don't always precede at reversal. If long (at 10:00) I look for volume spikes at or near (10:30) the next time zone to exit. Of course there are the market internals, candlestick and Market Profile formations and patterns that guide my entries and exits.

 

Oops! The market's open. Trade Well!

 

BigAl

[Phil-n-Texas 10]

fwiw, here's a video clip i put together that shows the progression of drawings on the 3200 tick chart for the ES today... the very last one is just the A-forks to show how well they worked today for SR & targets...

 

i left all my fibs off though as you wouldn't be able to read the chart if all of them were on there... but they change constantly.

 

i also have trendlines and fibs levels that are completely out of view that are on larger time frames going back weeks, months, years...

 

2011-04-07_1420 - BBQ-pHiL's library

[joshdance 10]

Thanks BigAl and Phil!

[BigAl 10]

Good Morning joshdance.

 

Click on the image below to see how I used volume to trade the YM yesterday (4/07).

 

The thick gold line in the upper chart is the Volume Flow Indicator. The lower chart is the Volume Avg.

 

Look how the volume spiked higher, over the volume average on a few bars before each reversal. Even after the markets dropped on the news of another earthquake in Japan, the volume indicated the reaction to the news was over or at least lost some momentum.

 

Traded Well!

 

BigAl

[Phil-n-Texas 10]

ES 3200 tick doodling...

 

the large ascending triangle was the basis for today's patterns...

 

when it broke the lower TL it was then time to wait for a messured pullback which in this case was a perfect 38.2% fib level that was confluent with the lower TL of the triangle which became resistance.

 

notice how the white a-fork lays out near perfect support at the mid-line and bottom bounce... and again the midlne at the end of day (turned resistance). i drew the fork at the same time as the triangle since it had some very clear anchors.... when price moved to the lower triangle and fork midline, there was a slight bounce... so i knew it was for real at that point and it then proved itself several times thereafter....

 

there's another fib missing from the drawing (too cluttered) but it's for the last swing down and the retrace at the a-fork midline is near perfect 50% retrace. lots of great opportunities today.

 

have a great weekend.

 

Edited April 8, 2011 by Phil-n-Texas

[joshdance 10]

Very nice Phil.. Which other tick charts do you use in your analysis? Do you time entries from a smaller one?

 

Also, do you rely much on volume to make decisions?

Edited April 8, 2011 by joshdance

[Phil-n-Texas 10]

i will often use a 1600 or 400 tick chart to help time entries... as for volume, yes i have volume bars on a 5 min. chart. i still have time based charts so i can keep tabs on what those guys are looking at. the tick charts are always globex (extended hours) and i usually keep the time based charts on normal trading hours.

[joshdance 10]

Thanks so much Phil, have a great weekend, and happy trading!

[estate1997 10]

I have about 6000 hours watching the ES mini and these are my conclusions.

The market parameters (high/low) are set by by someone or a group of people prior to open.

At open the market makers are set loose to take the easy money. Price moves to take out the most stops.

Remember that they know what you see on your indicators and will bait you to take a trade just to take out the stops. They manipulate the indicators to have other players move the market in their favor only to punish them. It's all about taking your money.

If you want to forecast the day, set up three Kase charts with 4/8 and 13 or 16 lengths with linear regression channels set to 15 length and 1.1 on the ATR.

I used to put out a news letter every AM that was 92% correct with a single contract for 60 to 90 points per month. Basically an ABC play with a maximum draw down of four points. That's how far they will push the market if to many people are right.

If you want to see if it will be a trending or range day, set up three P&F charts set to 4,8 and 9 or 12 with the same linear regression channels. Same settings. If you don't see the pattern wait, watch, and learn.

I used a modified stochastic run through JTHMA to increase the range to confirm the above charts and see bottoms and tops. FastK1= jthma( oFastK ,FastKHull1 ) ;

I have worked with some very good programmers and they can't program it. If you don't see it please don't ask.

If your patient which I am not, there is a simple/complex way to skin the market.

Some of you may ask why I would give away such knowledge? Do I feel better? No.

I just know that it is a struggle to find a system without a mentor that works for some people and this one is not for me. I know the market can give so much more if you are they to Take it.

Best of luck

[dpcjsr 10]

So, how do you like your answers? Personnally I think they stink. You need an edge or it is not worth trading, right? Show me one answer above or on any other site that shows you how to get an edge. Not one of them does. Why? Because it is not possible. You will get generalities, opinions, psychology, money management, stories, etc. No where will you find an edge. At last you will find the snake oil salesman who tell you to trade from your gut, trading is an art, you have to gain a feel for trading. Don't bite. If trading is an art then they cannot teach you their art. There may be more out there that I do not know about but one thing I can tell you for sure. Longer term trend trading will make you money. It is boring and requires stricked long lasting discipline but it works. I challenge anyone reading this to point out one single system that can be backtested and makes money day trading. Just one. Sorry. Venting. However, I am fed up with the BS. If you force the vendors and other gabbers to put up or shut up you will hear the sound of silence.

[zdo 20]

re "Show me one answer above or on any other site that shows you how to get an edge. Not one of them does. Why? Because it is not possible. You will get generalities, opinions, psychology, money management, stories, etc. No where will you find an edge."

 

I see posts like “no edges are disclosed anywhere” or “it’s very hard without a mentor”

There is a largely ignored reason the ‘industry’ has hooked up with the holy grail myth.

Grail seekers are looking out there, to the other, whatever, for answers.

The myth is about looking in all the wrong places.

At any point, you can search ‘inside’ for the answers. “Find your own way.” That means realize that even if you were handed a highly profitable edge on a freakin silver platter, you would not make it work for you - unless by some small chance it was very compatible with your own nature. Kudos for being fed up with the BS. “Find your own way.”

[steve46 12]

re "Show me one answer above or on any other site that shows you how to get an edge. Not one of them does. Why? Because it is not possible. You will get generalities, opinions, psychology, money management, stories, etc. No where will you find an edge."

 

I see posts like “no edges are disclosed anywhere” or “it’s very hard without a mentor”

There is a largely ignored reason the ‘industry’ has hooked up with the holy grail myth.

Grail seekers are looking out there, to the other, whatever, for answers.

The myth is about looking in all the wrong places.

At any point, you can search ‘inside’ for the answers. “Find your own way.” That means realize that even if you were handed a highly profitable edge on a freakin silver platter, you would not make it work for you - unless by some small chance it was very compatible with your own nature. Kudos for being fed up with the BS. “Find your own way.”

 

Hello

 

I have already shown how to obtain an edge...its just not that hard...what is difficult (it seems) is to communicate the information to amateurs who may not understand what an edge is...and if I can go ONE STEP FURTHER...even when one does have an edge, you still have to know what to DO WITH IT....!

As I have pointed out...(or tried to) once you have a concept that has an edge, you still have to have your ducks in line in order to profit...that includes a risk management plan, a way of executing and sufficient capital to stay in the market long enough for your edge to "kick in"...

 

The way I see it, most folk start with no clue and simply look to "buy their way in" with indicators, mentors and trade rooms....Sorry it doesn't work that way...you actually have to educate yourself (what a surprise) and do the homework necessary to build a business...

 

If you look at the thread "An institutional look at the S&P Futures", that is ONE WAY of obtaining an edge...there are plenty of others...and as for the issue of "compatibility" well at this point with our economy in shambles and people out of work, I suggest people quite whining about whether or not a systematic approach fits their temperment....and try to focus on fitting themselves to the job at hand...

 

One last thing...the issue of backtesting and then throwing money at a system because it tested well in any time frame is naive...most of you don't have nearly the education required to adequately evaluate a system...again its an example of trying to buy your way into the market...and clearly it doesn't work....just my opinion, but the only workable edge is understanding human behavior...it never fails...

Edited April 11, 2011 by steve46

[SIUYA 11]

an edge - one of the most over rated/ over used/ miss used comments in the whole industry.

No one will sell you an edge - you have to create it.

As an (ex) options market maker we used to have a built in edge, around a theoretical fair value - and even that was theoretical and only relevant to me at that point of time of trading, assuming I could then offset the risk and hedge against another option that also theoretically had some edge, and even then it was just a hedge. Then the next day the theoretical fair value may have been different again.....thats the market.

 

Often as pointed out by others - its an edge that suits your personality and can involve such things as patience, consistency, context, risk management. Equally so dont think the edge is all mental....that just another element.

[MightyMouse 12]

an edge - one of the most over rated/ over used/ miss used comments in the whole industry.

No one will sell you an edge - you have to create it.

As an (ex) options market maker we used to have a built in edge, around a theoretical fair value - and even that was theoretical and only relevant to me at that point of time of trading, assuming I could then offset the risk and hedge against another option that also theoretically had some edge, and even then it was just a hedge. Then the next day the theoretical fair value may have been different again.....thats the market.

 

Often as pointed out by others - its an edge that suits your personality and can involve such things as patience, consistency, context, risk management. Equally so dont think the edge is all mental....that just another element.

 

An edge is one's ability to take money from the market. It's not a magic chart pattern or some mathematical calculation that you and only you seem to know. That is nonsense even though popular trading literature makes it sound like an edge is some sort of repeatable pattern..

 

Ultimately, you need to be able to properly identify when there are traders present in the market who will are willing to leave some money behind in the market and you have to be good enough to have some of it land in your account. If they are not present and/or you are not good enough, you will not take and, worse, you will end up leaving money.

 

 

MM

[zdo 20]

The way I see it, most folk start with no clue and simply look to "buy their way in" with indicators, mentors and trade rooms....Sorry it doesn't work that way...you actually have to educate yourself (what a surprise) and do the homework necessary to build a business...

 

...

 

steve46,

 

This is precisely what I mean by "find your own way" zdo.

 

You’re sharing an edge and that’s great. But - if you were to ‘edgucate’ a thousand ‘traders’, I would bet only 1 or 2 of them stick precisely to that edge… ultimately the person and the edge must resonate. I’m going to keep telling traders to find their own edge that is true to their own nature.

 

“people quite whining” and “fitting themselves to the job at hand” is to be controlled by circumstances and that will not work to sustain one into the higher percentiles of traders – ever! Trading is performance work not production work… This could be posted over to the why 90% are either loosers or losers thread…

 

re backtesting – good points.

However, re “most … don't have nearly the education required” - in testing (especially for automation), experience is more important than education.

 

zdo

[steve46 12]

You know folks, the mistake is mine. I see now that you have it under control... Please continue as you were...

 

Best of luck

[Tams 20]

The 4-step hierarchical learning model that formed the basic building blocks of every skill

 

-- unconscious incompetence (the focus of some of the discussion in this thread)

-- conscious incompetence (where you'd all like those underskilled, unaware traders to be)

-- conscious comptence (the person has to 'work' at building and maintaining the competency)

-- unconscious competence (the competence just 'happens', the skill sets are ingrained, which allows the person to move on to higher order conscious incompetencies)

 

When you arrived at level 4, everything seems simple, orderly, and uncomplicated... and you wonder why people cannot see through the simple things the same way you do.

[dragon987 10]

Looking back to the time I started to find the edge in daytrading, I was similar optimistic as you are now. I could not image then how difficult it would be to find a system which would fit my psychological profile and my willing to accept risk. I tested what I could get my hands on, always when it came to real money I dumped it in the end because it did not suit me. What I mean by that is that I could not stand either the draw down (in fully automated systems) or the execution when I traded manually, meaning I made mistakes by waiting too long for confirmation etc. Finding out the own needs was one major step. I ended up with cci trading according to woodies principles and patterns. Now, after about 8 years of very intense research I use a modiefied system with following characteristics:

1. very early entries in trends

2. early stops if it goes against me

3. let profits run if the trend is established by using a trailing stop

That system gives me a win/loss ratio of about 2.5-3, a winning rate of better than 60% and is very robust, meaning that it works with futures, stocks etc. I am trading range bars, that is an decisive advantage because a lot of noise is filtered out. And yes, I back tested the system manually on as much data I could get backward. In my opinion the robustness comes from woodies patterns on the cci. It is amazing how exact they are. But you need definitely to practise.

I developed an indicator on the cci to help me spot the entries better, because that is the edge I have. I do not need the price bars, only looking st the cci. The rest is managing the trade when I am in the trade. By the way, my initial stop is no more than 3 points per contract, typically 2 points. A good strategy only comes with controlled risk. I only trade the first 90 minutes after the opening in the morning because of the movement. You can see that in the attached screenshot.

good luck

 

d

[zdo 20]

You know folks, the mistake is mine. I see now that you have it under control... Please continue as you were...

 

If we folks gave you the impression that it is more "under control" than a very human series of temporary, tenuous 'under controls', the mistake is ours.

Don't let our 'rantics' dissuade you from making your valuable contributions.

 

... and now continuing 'as you were'...

Normal is terribly deterministic...

what is helpful at one stage ( mantras, etc. such as 'treat trading as a business' , or 'keep it simple' ) will need to be dropped to get to the top...

"... how to be aware in a situation that requires your unawareness, how to be conscious in a situation that happens only in unconsiousness..."

[Mean&trendy 10]

 

There is a largely ignored reason the ‘industry’ has hooked up with the holy grail myth.

Grail seekers are looking out there, to the other, whatever, for answers.

The myth is about looking in all the wrong places.

At any point, you can search ‘inside’ for the answers. “Find your own way.” That means realize that even if you were handed a highly profitable edge on a freakin silver platter, you would not make it work for you - unless by some small chance it was very compatible with your own nature. Kudos for being fed up with the BS. “Find your own way.”

 

Completely agree. There are many real holy grails out there.

 

The trouble is they are all tailor made by and for the individual trader.

[thearabsmith 10]

steve46,

 

This is precisely what I mean by "find your own way" zdo.

 

You’re sharing an edge and that’s great. But - if you were to ‘edgucate’ a thousand ‘traders’, I would bet only 1 or 2 of them stick precisely to that edge… ultimately the person and the edge must resonate. I’m going to keep telling traders to find their own edge that is true to their own nature.

 

“people quite whining” and “fitting themselves to the job at hand” is to be controlled by circumstances and that will not work to sustain one into the higher percentiles of traders – ever! Trading is performance work not production work… This could be posted over to the why 90% are either loosers or losers thread…

 

re backtesting – good points.

However, re “most … don't have nearly the education required” - in testing (especially for automation), experience is more important than education.

 

zdo

 

This seems good advice. I've been trying to find my own way for a couple of years now and think I'm on a sound platform... Although my flowchart keeps on getting tweaked - which I suppose is a good thing:doh:

 

 

ATradersNotepad blog

[thearabsmith 10]

Forgot to attach my flow chart to the previous post :crap:

 

ATradersNotepad blog