Best Thread How To Make Money Trading The Markets.

[medic]

Hi Medic,

I've been trying to trade for three years (on top of a day time job) so I can identify with your frustration/confusion. What strikes me about your post are the large losses, it is vital to keep losses small, the classic advice given is never risk more than 2% of your trading capital on any trade. Personally I use the 14 period average true range, I won't trade anything with an ATR>20 cents, ideally about 8-12, I set my initial stop about the ATR. I record every trade and in the last year my average loss is about 10 cents.
I have now come to the conclusion that trading is all about patience, discipline and self control. I read recently that if you can sit all day and not take a trade because there is nothing to trade then you are well on the way to trading successfully, not easy, the temptation to take a trade if you have not traded for a couple of hours is very high.
Hope this helps

Nearlythere

Hi Nearlythere,

Every day I learn so much more and my account is large enough to take my mistakes (even if my stomach is not).
In my 3 month trading experiment I have had 46 winning trades vs. 34 losing trades. To be fair probably half of the winning trades went against me upto my stop loss before turning positive. Any you're right, had I regiliously applied my stop loss strategy my losses would be smaller. I failed at this for three reasons:

1. My trading plan (until recently) was exclusively reversals at R/S. So I would enter against the trend at R/S levels looking for a >5c scalping. This meant commiting to large share sizes to make money of small moves. If the price broke through instead I'd use a market order to ensure I got out and suffered slippage.

2. My broker Scottrade Elite - Only allows a stop order 10c from current price so usually I am not able to place a stop loss order when I place my buy limit order. So I manage the trade manually and stay in longer than I planned (as other indicators and L2 show the reversal that I am looking for). I now use much smaller position sizes to ensure I can place the stop loss when I place the trade. That removes any emotional procastrination when the stop is approaching.

3. I trade large share sizes to reduce the burden of commissions. At 14 bucks RT I need to make $28 + spread to scratch every time I win one/lose one. So I set my stops tight and go for large profits from small moves. The probablity of return on these trades is good as the market does not have to move far and I'm out with $100-200 profit less than a minute later. I have thought about switching to TradeStation or eSignal but am not decided if I will continue yet and dont want to sign up for monthly or dormant fees (none with ST).

The most interesting thing about my experience is the vast range of styles and techniques used to achieve the same aim. For any trade entered you can only be right or wrong and I'm facinated how all the knowleadge and leasons I've learnt can determine which side you end up.

Hope this information helps someone else. Thanks for a great forum.

Mark.

 

[Mr. Charts]

Thanks for the comments. guys
Richard

 

[TickJob]

After long long years of searching in the internet, I finally found someone using the similar setup that I have been looking at since 20 years ago. However, I am not active trader because I am still trying to convince myself will such simple method that really work when I really trade it.

Richard,
do you think this will also work by using the respective stock options?

 

[pedro01]

All

I found this method requires fast fingers if you have a few positions on at a time, so here's an ELD.

Idea is that you put this strategy on a chart window but disable it. When you are ready to buy, just enable the strategy and it will instantly buy as well as put a stop order at the low of the last bar.

Make sure you test, test, test & make any adjustments you need before running it on your live account please !!

[IntrabarOrderGeneration = True];
Inputs : QtyOverride(0), AccountSize(25000), RiskPercent(.25), MaxTradeValue(0) ; ;
Vars : intrabarpersist Done(false), intrabarpersist RiskCents(0), intrabarpersist NumShares(0);
if marketposition = 1 or GetPositionQuantity(GetSymbolName, GetAccountID) <> 0 then done = true;
if GetAppInfo( aiRealTimeCalc ) = 1 then begin 
    if done = false then begin
  RiskCents = (Close - Low[1]) + .01;
  NumShares = ((AccountSize / 100) * RiskPercent) / Highest(RiskCents,AvgTrueRange(14)) ;
  if MaxTradeValue <> 0 then NumShares = minlist(NumShares,intportion(MaxTradeValue / Close));
  if QtyOverride <> 0 then NumShares = QtyOverride;
  buy NumShares contract next bar market ; 
 end;
 if NumShares = 0 then NumShares = GetPositionQuantity(GetSymbolName, GetAccountID);
    Sell NumShares contract next bar Low[1] Stop ; 
end ;

Qty Override - number of shares to buy if you don't want the system to calculate
AccountSize -
RiskPercent - Risk per trade (%)
MaxTradeValue - max number of dollars to commit to a trade (total, not risk total)

Enjoy

 

[wh92stang]

After long long years of searching in the internet, I finally found someone using the similar setup that I have been looking at since 20 years ago. However, I am not active trader because I am still trying to convince myself will such simple method that really work when I really trade it.

Richard,
do you think this will also work by using the respective stock options?

Tick,

I've tried the method using respective stock options and it does work, but at a greater risk and without defined boundaries. For example, if stock XYZ triggers and you want to go long so you buy XYZ options, you have to correlate the failure point of the stock with the failure point of the option (using delta and the price) in order to calculate your maximum possible loss. The other key is the options are obviously much less liquid than the stock so an option with a very narrow spread works best.

So yes, it can be profitable, however, since price movements of the derivative do not correspond 1:1 with price movements of the underlying security you have to be careful.

 

[Mr. Charts]

Great contribution pedro01
If you ever did one for eSignal I'd be interested, very interested
Richard

 

[Mr. Charts]

Thanks for your imput wh92stang.

Tickjob,
To be honest, if you've spent 20 years (unless I've misunderstood) trying to convince yourself this (or something very similar) works and still haven't traded it, then that indecision is going to make trading very difficult for you.
What you need to trade is the ability to make cool and calm decisions - once you have extensively tested something live and in different market situations - and then to execute that decision immediately; otherwise this sounds a classic over-analysis leading to paralysis.
You really have no chance of trading successfully without actual knowledge of works in real life and the confidence that brings to your trading.
Richard

 

[TickJob]

wh92stang,

I observed SPY front month ATM options is very liquid and seem to follow the underlying very closely. Maybe I can paper trade this for the start.

Richard,

You are right on the point. So far I just print out the charts to learn, and did not spend time in front of screen to do any realtime practice.

 

[Mr. Charts]

TickJob,
That's fine if you do it out of interest/enjoyment but as time goes by it gets much more difficult to translate that into actual live trading.
Without a plan to progress to watching the market live, then paper trading with strict criteria to achieve before trading with real money most people end up in a permanent back water and become becalmed and rarely progress.
In a sense, the longer indecision lasts about any aspect of trading, the less chance of success.

 

[Mr. Charts]

Today's been a choppy day so far, but even on such days there are usually great moves like this using just this one technique alone.
I also scalped it earlier for +14c using the same set up, but this was the second time for
+62c.
I'll post about risk on this trade when time permits.
That's $310 for 500 shares, $620 for 1000 shares etc.
Richard

 

[Mr. Charts]

As usual the red X hairs were on the time of the long and the exit at the time of the screenshot.
I've had two emails asking why did I get out when I did. I didn't wait for the low of the previous candle to be taken out before closing the trade because level 2 T&S strongly suggested the move might be over.
The high proved to be 22.99.
Richard

 

[Mr. Charts]

And another bread and butter trade, one of many today
+35c per share
With such a low ATR and the bottom of the candle being so close, you can take a larger position size accordingly. Again I'll elaborate on the risk parameters of this one and the one I posted yesterday when I get time.
This is not rocket science.
Richard

 

[Mr. Charts]

What happened afterwards...........

 

[N Rothschild]

nice trading

 

[byeung7]

Hi all,

I had a question on a couple of losing trades I made today that I thought fit in with this method. The following trades were made on 3 min charts:

1. ABT - the overall trend for the day was down, although it had popped up, it made a lower high and broke the low of the day on 11:13am. I got filled at 44.69, and got taken out at 44.75 on the next bar.

2. YUM - this shot down in the first 20 minutes of the day, then went sideways for over an hour before breaking the LOD at 11:28am. I got in a bit late at 33.36, and 4 minutes later got stopped out at 34.43.

This seems to happen a lot to me where I determine the main trend of the stock for the day, wait for some consolidation, and then buy/short the high/low, and it will continue on for a few ticks and then reverse. Did the above trades meet the critera for this method, and are just considered losing trades, or am I missing something?

Appreciate any comments/discussion!

 

[Trader333]

When trading stocks I always considered the following:

The overall direction of INDU for the day whether up, down or rangebound.
Adequate volume of the stock being considered
The relative strength of the stock to INDU, ie is it stronger or weaker.

If INDU is trending up for the day I would not take Short trades on stocks and vice versa.
If INDU was trending up then I would only trade stocks that are trending up more strongly than INDU and then only when INDU had retraced and then started heading up again on three different timeframes.

There are various ways in which this can be done but good volume is also very important on the stock being considered.


Paul

 

[pedro01]

Great contribution pedro01
If you ever did one for eSignal I'd be interested, very interested
Richard

Lol - not right now - I am still attached to TS at the hip !

 

[Mr. Charts]

Genics,
Thanks, but it's just routine methodology.
I actually exited at what proved to be the high of the day so the timing was good.

Pedro01,
Shame

Trader333,
I also see what the relevant market is doing at the time of a possible trade, but personally focus on QQQQ, SPY, DIA, whichever is appropriate to the stock. The relevant index futures are the same.
Occasionally I will look at a sector chart if one particular sector is out of kilter with the rest of the market, for example if the semi-conductors are leading the market.
For my way of trading the volume was more than adequate in those stocks at the time of the trades.
Thanks for the contribution.

byeung7,
In view of my trading and other commitments I'm afraid I don't have the time to analyse people's trades on this bulletin board, but as a one off I've had a quick look at those stocks and they were not clearly trending prior to your entries. Compare the charts with the last several charts I've posted on this thread and you will see the difference. Basically you've gone for break outs from consolidations in a choppy environment thus increasing the probability of being chopped out from your trade. There are ways I use of doing this, but I'm not discussing them here.
One very positive thing is that you have exited your losing trades promptly and efficiently; that bodes well.
Hope that helps.

Richard

 

[oildaytrader]

The technique I've described in this thread has just worked extremely well on the USD:CHF
Richard

If it worked well on usd/chf , it will work better on euro usd

Great thread.Keep it up.

 

[byeung7]

Trader333, thanks. I do watch SPY and QQQQ. It's so tempting to take trades that look good, but are going in the opposite direction of the market, I definitely need to cut down on the iffy trades I take.

Richard, appreciate the response. Now that I've compared those trades with the ones you have posted, I can clearly see the ones I took were chopping around. It seems almost easy in hindsight.