How Do I Maximize Profits from Being Right 80%+ of the Time?

[nbalance 10]

Hello All,

I am new to Traders Lab. I believe in the law of reciprocity, so to those who provide the most helpful answers I will be more than happy to share my calls/trades with them for awhile. That way we can both profit!

 

I have been able to consistently predict stock and currency movements with an 80% - 90%+ accuracy for several years now. However because I have no background in trading I have just now have worked up the confidence to start trading with real money. Things are going very well, but being inexperienced at all of the tricks of the trade so to speak, I am certain, considering how accurate I am, that I am leaving money on the table.

 

I am able to predict both intraday and multi-day price movements for any high volume stock (i.e. goog, aapl, c, etc) or currency simply by looking at the chart and visualizing where the chart is going to move in my head. I don't use any technical indicators or studies as I find that just creates more noise in my head and distracts me from seeing what is next.

 

Lately I have been focusing on forex trading because of the 50:1 leverage (I'm in the US). I am consistently making 7 to 25 pips per trade on the EUR/USD. I typically hold a position anywhere from a few minutes to several hours.

 

So my question is this: If you were able to be as accurate I am at reading charts how would you best capitalize on it? Would you trade stock options? Would you trade forex? What kind of cash management methods would you use? Are there tricks of the trade, etc that you would use?

 

One thing to mention is that my goal is to maximize profit while spending as little time as possible in front of the computer trading as possible. I work for myself from home so I am able to trade full time, but I had rather spend most of my time doing other things.

 

Thanks so much!

 

-nbalance

[wrbtrader 10]

...However because I have no background in trading I have just now have worked up the confidence to start trading with real money. Things are going very well, but being inexperienced at all of the tricks of the trade so to speak, I am certain, considering how accurate I am, that I am leaving money on the table...

 

One thing to mention is that my goal is to maximize profit while spending as little time as possible in front of the computer trading as possible. I work for myself from home so I am able to trade full time, but I had rather spend most of my time doing other things.

 

Thanks so much!

 

-nbalance

 

You should begin with determining the stats of the following questions to help adapt/modify your trade management after entry considering you seem to have a question about if you're leaving too much money on the table...if so...how to fix it.

 

• What's the % of your trades you've reached a profit target ?
   
  
• What's the % of your trades that have continue going in the direction of your trade after you've exited the position ?
   
  
• What's the % of your trades that resulted in your profitable trailing stop being hit...if using trailing stops ?
   
  
• What's the average ticks/pips per winner versus ticks/pips per loser ?
  

 

My point is that if you want to leave LESS money on the table...you obviously need to improve your trade management after entry and it starts via knowing as much info as possible about how you're managing your trades after entry and the results of such trade management.

Edited September 27, 2011 by wrbtrader

[bh_trade 10]

Go to a prop trading firm and use opm to make your fortune. I do suspect the results will be entirely different once using real $$ and emotions get in the way but regardless, good luck

[TimRacette 11]

nbalance, it sounds like a scalping exit strategy would best fit you if you're right 80-90% of the time. Although, the definition of right is quite subjective. I could say the Dow will make new highs and at some point in my lifetime I may be able to come back and say, ha I was right.

 

Another strategy that may work is to scale out of your position once you're in. I take half off at a smaller target and then continue to scale out into strength (for longs). This keeps my win percentage higher and limits my risk. I know a lot of traders who use an all in all out method and that can work well too. You would just need to use the same method each and every time not changing methods as conditions change, else the results would become skewed.

[steveh2009 10]

High winning pct systems tend at best to lose $2 for every $1 at risk. And a lot of them lose $3-$4 for every $1 at risk. They break down severely when the winning pct drops below a certain threshold (usually around 67% for the better ones)

 

The number of winners alone is not important.

 

If you want to reach a really stable middleground in your trading then winning a net $1.50 for every net $1 at risk is where the majority of long- term successful traders are to be found. You'll be around 50-55% winners long-term to achieve that ratio.

 

If you want to go to the low side where you win 20-30% of the time, then that's where you get the good win/loss ratios and survivability becomes a little easier. Few choose this way of trading because their egos cannot stand to lose many times in a row to get to the winners, even though the loss per trade is fixed and tremendously smaller in relation to the those winners. To give an extreme example, if your winners are composed of add-ons as the trade goes your way, it's possible for one winning trade sequence to take back up to 40 fixed cost losers.

 

If you desire to be right an overwhelming majority of the time, it's important for you to understand from the very beginning of your adventure that it is THE most difficult way to succeed in trading.

[zdo 20]

nbalance

 

I personally found futures (ndx’s, CL, and longer treasuries, etc) to be the best instruments for me in my very shortest time frames and high hit rate systems. If you’re using price only patterns, FX instruments will also do just fine. You can always find a major pair that is moving etc.

 

re “spending as little time as possible”

Look around for it – there is most likely an early morning ~2 hour session that will optimize your ‘time’ returns that can be routine 4 out of 5 days a week

 

Let your own real time experience be the single most important factor in decreasing how much you are “leaving on the table” . ‘Tricks of the trade’ are extremely system dependent! So don’t be looking to others for them. Like wrbtrader said – Know the stats of your outcomes and go with your odds. Understand though, those odds will always give you ranges not exactitudes – build real time experience in self knowing and when you’re hot push to the middle of the range for matching your exits to MFE's and when you’re turning cold back off to the low end of your range. Experience… ditto a thousand times!

 

I would suggest you put serious energy into position sizing. You’ll never get it exact but you can avoid being too small (re your OP ? – this is the best way to “capitalize” ) and you can avoid being too large (the ‘best’ way to blow up ). With high hit rate systems I use a verging on conservative variation of optimal-f that keeps me in the sweet spot.

 

re “If you desire to be right an overwhelming majority of the time, it's important for you to understand from the very beginning of your adventure that it is THE most difficult way to succeed in trading” Steveh2009

The really most difficult way to succeed in trading is to try to trade a system (and it’s concomitant W/L ratios, etc) that is not in alignment with your true self. If the 80% type systems are true to your nature they will be easier than any of the other types. Your way is the easiest way for you. Someone else’s way is the easiest way for them…

 

Sim will mostly just teach you how to be right. Real trading will teach you how to be right and win, lose, and be wrong – and get you in touch with some other stuff too .

:spam: :doh::crap: :helloooo: =

There’s a lesson about learning to lose well in Steveh2009’s post. The internal dynamics behind “…several years… and no background in trading I have just now have worked up the confidence to start trading with real money.” will most likely continue to be an issue for you for some time… PM me if you get ‘stuck’

 

All the best,

 

zdo

Edited September 28, 2011 by zdo
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