Mr. Charts
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I have already discussed position sizing and adjusting for risk in relation to ATR in recent posts.
Best Thread How To Make Money Trading The Markets.
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timsk
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Hi Sam,
As you're new, I'll follow your earlier request and go easy on you.
In a thread like this, it's fine to post charts if they're relevant to the ideas, concepts and methodology being discussed. If you believe GOLD exhibits the characteristics of a trending stock, then I suggest you might like to look closely at what trend is and how to define it. If GOLD does fit with your definition of trend, well, I respectfully submit that yours is very different to Richard's and, indeed, that of most other traders too.
Here's a suggestion; go through the entire thread and save every single chart that Richard's posted. Then, either print them out or view as many as you can on your screen(s) and note all the common characteristics - especially those pertaining to trend. I think you'll spot one or two differences when compared to your GOLD chart!
Tim.
PS - Sam - just to start the ball rolling for you - you'll notice that all of Richard's charts automatically plot the previous day's high and low - which is really important when trying to follow his methodology.
As you're new, I'll follow your earlier request and go easy on you.
In a thread like this, it's fine to post charts if they're relevant to the ideas, concepts and methodology being discussed. If you believe GOLD exhibits the characteristics of a trending stock, then I suggest you might like to look closely at what trend is and how to define it. If GOLD does fit with your definition of trend, well, I respectfully submit that yours is very different to Richard's and, indeed, that of most other traders too.
Here's a suggestion; go through the entire thread and save every single chart that Richard's posted. Then, either print them out or view as many as you can on your screen(s) and note all the common characteristics - especially those pertaining to trend. I think you'll spot one or two differences when compared to your GOLD chart!
Tim.
PS - Sam - just to start the ball rolling for you - you'll notice that all of Richard's charts automatically plot the previous day's high and low - which is really important when trying to follow his methodology.
Mr. Charts
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Good advice, Tim (imvho)
I actually get emails from people who ask questions which I've already answered but who say they've only read the first few pages of the thread and expect me to answer and save them the time and trouble of reading the whole thread....!
I have also spent time and effort answering some people's questions and they haven't even the courtesy to reply with a one word email to say "thanks".
I actually get emails from people who ask questions which I've already answered but who say they've only read the first few pages of the thread and expect me to answer and save them the time and trouble of reading the whole thread....!
I have also spent time and effort answering some people's questions and they haven't even the courtesy to reply with a one word email to say "thanks".
Mr. Charts
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All (esp. Mr. Charts),
Comments and advice very much appreciated - I will read and reread this thread before commenting again. You folks have a vast amount of valuable experience and information and the more I learn, the more I realise how little I know!
Thanks again.
Comments and advice very much appreciated - I will read and reread this thread before commenting again. You folks have a vast amount of valuable experience and information and the more I learn, the more I realise how little I know!
Thanks again.
hasanalali
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Mr. Charts
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Yes, that entry is ok. though I generally prefer a clearer trend beforehand myself.
The exit would have been when the candle with your vertical red line above it had its low taken out on the following candle.
Richard
The exit would have been when the candle with your vertical red line above it had its low taken out on the following candle.
Richard
Mr. Charts
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Mr. Charts
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My exit candle proved to be the pivot high and the stock has now fallen back to 29.55
Richard
Richard
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Thanks, bfirth.
Yes, it certainly is choppy, almost a mid August feel to the market.
That exit candle proved to be the high of the day.
I'm not going to go into how I use level 2, but it's not in the old, out-dated way, but the sense I got from the data flow was that the move was becoming unstable and that often happens at or near the highs - or lows in a down trending stock.
Richard
Yes, it certainly is choppy, almost a mid August feel to the market.
That exit candle proved to be the high of the day.
I'm not going to go into how I use level 2, but it's not in the old, out-dated way, but the sense I got from the data flow was that the move was becoming unstable and that often happens at or near the highs - or lows in a down trending stock.
Richard
Mr. Charts
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I said I'd elaborate on risk on the CTXS trade when time allowed.
ATR 7
Bottom of candle 4c away
So maximum risk 7c
Let's say the maximum dollar risk you are prepared to take is $100.
$100 divided by .07 (that's 7 cents) = approx. 1400
So position size 1400 means maximum risk $98
Move proved to be $1.06
$1.06 x 1400 = $1484 profit
This is a risk to reward ratio of 1:15
But that is looking at the result of the trade.
I had no idea how far the price would move when I went long, so how could I even make an intelligent guess at reward?
Personally I don't look to reward, I concentrate on risk; reward takes care of itself.
Why? Risk you can control, reward you are only guessing at. The exceptions are not going long into nearby resistance or short into nearby support, in which case don't take the trade unless you are very experienced.
Remember unless price movement is completely random, (in which case you shouldn't be trading that particular instrument), you simply cannot guess, much less calculate, the probability of whether the stop loss or the so-called reward is touched first. Most people seem to think it is 50/50 when they fool themselves into thinking they have worked out R:R
Usually a tight stop is far more likely to be hit before a target two or three times further away in the "right" direction, UNLESS the stock is strongly trending in which case the probabilities suddenly swing heavily in your favour.
Richard
ATR 7
Bottom of candle 4c away
So maximum risk 7c
Let's say the maximum dollar risk you are prepared to take is $100.
$100 divided by .07 (that's 7 cents) = approx. 1400
So position size 1400 means maximum risk $98
Move proved to be $1.06
$1.06 x 1400 = $1484 profit
This is a risk to reward ratio of 1:15
But that is looking at the result of the trade.
I had no idea how far the price would move when I went long, so how could I even make an intelligent guess at reward?
Personally I don't look to reward, I concentrate on risk; reward takes care of itself.
Why? Risk you can control, reward you are only guessing at. The exceptions are not going long into nearby resistance or short into nearby support, in which case don't take the trade unless you are very experienced.
Remember unless price movement is completely random, (in which case you shouldn't be trading that particular instrument), you simply cannot guess, much less calculate, the probability of whether the stop loss or the so-called reward is touched first. Most people seem to think it is 50/50 when they fool themselves into thinking they have worked out R:R
Usually a tight stop is far more likely to be hit before a target two or three times further away in the "right" direction, UNLESS the stock is strongly trending in which case the probabilities suddenly swing heavily in your favour.
Richard
timsk
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Another great post Richard.
The section quoted particularly chimes with me and should be required reading for all, IMO!
Tim.
on the same note,
jack schwagger said in the 3rd market wizards book, that of all the traders he had interviewed none of them agreed on anything, fundamental ,technical, hold for 2 min, 2 days, 2 years, bonds, stocks, futures, options, the ONLY thing that they all agreed on was, RISK . Watch it, and limit it, and the winners take care of them self.
Sadly this is missed by most beginners, probably because it sound dull, like paying into a pension when you are eighteen, in both cases people focus on how much money they are going to make and not what you stand to lose.
keep up the good work richard,this is still my favorite thread.
Bry.
jack schwagger said in the 3rd market wizards book, that of all the traders he had interviewed none of them agreed on anything, fundamental ,technical, hold for 2 min, 2 days, 2 years, bonds, stocks, futures, options, the ONLY thing that they all agreed on was, RISK . Watch it, and limit it, and the winners take care of them self.
Sadly this is missed by most beginners, probably because it sound dull, like paying into a pension when you are eighteen, in both cases people focus on how much money they are going to make and not what you stand to lose.
keep up the good work richard,this is still my favorite thread.
Bry.
Mr. Charts
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Thanks for the kind words, Pedro, Tim & Bry. Glad you find the thread useful.
At some point I'll talk about ATR and its use and abuse.
Richard
At some point I'll talk about ATR and its use and abuse.
Richard
