Making Money Trading

[trader_dante]

Just a quick note - the mods are going to tidy the forum so a few of the early posts will no doubt go.

I have added some more text and an image to the posts I made very early this morning. I'd had no sleep and not sure how much sense I was making. You may want to skim over it again - it's the section on the EUR/USD that starts on page 13.

Thanks,
Tom

 

[trader_dante]

As promised, if Indices win the poll, I will make calls and trades in that market to show that price action works regardless of the market.

However, sometimes when I look at some markets I am not surprised that they say 95% of traders fail to make money.

The majority of you want to trade indices and yet only 9% of the return on equity in my account has come from them. I have made only 4 trades in total, ALL of them in the DAX and all of them winners.

What I am trying to say is that a trader should look carefully for opportunities. It is my opinion that you should keep your eye on several different markets.

I understand there is an opposing school of thought here which suggests you should concentrate on one market and get to know it inside out.

I believe in this in principle. I have certainly had experience of watching one market and getting to know its little nuances. How does it move? What is its ATR? Are there any patterns that regularly occur such as opening moves being faded etc? This is a good way to make money. But I also want to say that price action works across all markets and if you look at one you are selling yourself short.

I'll be honest with you - when I look at the Dow Jones Industrial, it doesn't talk to me like some of the other markets I have posted charts of here.

I look for S/R levels on the daily TF and I find myself thinking "should this go here - is this a level that other traders will be looking at".

Anotherwords - analysing it takes work.

When I look at Crude Oil or the EUR/USD I see them instantly. Even if I pull up a chart of December Oats, I can tell you all the areas I expect the market to react too, in less than twenty seconds. Why this is, I don't know.

My view is this: Follow the money. If there is a market that it is easier to make money on, trade it. Our aim is to make money. Not to conquer the Dow.

 

[lurkerlurker]

FWIW, in my view you should leave the YM, et al alone. In my experience, indices behave differently to other markets, and they don't represent "pure" price action in the same way as FX and commodities do.

I see we are getting more votes for FX as well. Hopefully that will be the winner. I've had enough of trying to conquer the Dow.

Also, if you are intending this for new traders, I think some FX pairs are more accessible (smaller spread, less volatility, lower margin) than the indices, especially the ES and YM. They also seem to trend better.

 

[trader_dante]

I want to stop for a second and talk to those new to trading or new to price action. If you don't come into either category you can skip this post.

Price action is taking trading to perhaps its most BASIC level. A good grounding in it will help you NO MATTER HOW YOU WANT TO TRADE. It works on its own and equally it will compliment any system you can build.

I learnt what I know from the J16 thread over at Forex Factory. It is simply one source of good information that I have found on the topic and should be read.

Have a read and then come back and look at my take on it. It will make everything I say so much clearer you will not believe it.

 

[firewalker99]

FWIW, in my view you should leave the YM, et al alone. In my experience, indices behave differently to other markets, and they don't represent "pure" price action in the same way as FX and commodities do.

Sorry lurker, but this one really screams for a reply. We all know you have tried out several things and systems for the YM but failed to acquire the level of success you aimed at. Concluding that indices don't behave in a "pure" way just because you haven't mastered them seems a bit far fetched to say the least.

I don't want to derail this thread, but it's obvious you have a bias towards forex and are rather reluctant to go down the path of indices once more. Fair enough, you are entitled to your own opinion - and after all this a what the poll is meant for - but if you think that trading FX or commodities is easier than YM or ES, I think you still haven't quite understood that whatever one finds one is going to have to work for it.

Also, if you are intending this for new traders, I think some FX pairs are more accessible (smaller spread, less volatility, lower margin) than the indices, especially the ES and YM. They also seem to trend better.

For the record, whichever instrument or market t_d will discuss first, the principles of price are valid on anything you pick.

But your arguments don't hold up. Smaller spread? I pay 1 point spread on the YM which is the smallest tick increment one can get. Less volatility? I've seen huge swings in forex: they might not occur over 5 minutes time, but 1 hour instead but if you are trading from that timeframe the net result and risk is the same. Besides, if you are trading an instrument that you feel is too volatile, it means you haven't assessed your risk correctly. As for lower margin, I've seen brokers that offer YM access for as low as 300 USD. You can easily trade several lots with less than 5k. If you don't have that money available, then perhaps you shouldn't be trading.

Finally: I'm not saying this in defense of indices, as for me, I couldn't care less because trading on price alone works in nomatter which environment. And there are obvious advantages of trading fx (24 hours), but there are also disadvantages (for instance for me: lack of volume readings).

 

[trader_dante]

I am going to show you now how I approach the hourly TF.

Have a look at the AUD/CAD chart (I also posted this up earlier)

Back in late September when it broker the previous S/R level it looked like a good trade and it did, indeed, go higher.

Would we have known in advance where it was going to stall?

It was very likely we would if we had looked left on the chart before we entered and had drawn our S/R pivots and planned the trade.

As it was apparent to traders who were in this (including me) we were caught in a messy chop between two key S/R areas.

Have a look at the circled area. This was a clear area of consolidation even while it was happening and as it goes on there is also a clear as day indication (lower highs) that things are going to get nasty for longs if that previous resistance doesn't hold as support.

 

[lurkerlurker]

Subverting the Democratic Process

I'm quite aware that my last few posts could have come across as this, and I do apologise.

Sorry lurker, but this one really screams for a reply. We all know you have tried out several things and systems for the YM but failed to acquire the level of success you aimed at. Concluding that indices don't behave in a "pure" way just because you haven't mastered them seems a bit far fetched to say the least.

My comment about being "pure" referred to the different factors involved in supply and demand for indices against other instruments. The fact that indices reflect supply and demand for more than one distinct commodity makes them slightly less reliable for technical analysis in my view. This view is possibly ill informed, naiive, and wrong, but I've always found index trading to have that twist - and it is difficult to be as comfortable with the supply and demand for 30/100/500 stocks as it is to be comfortable with the factors affecting an FX pair or a commodity.

I don't want to derail this thread, but it's obvious you have a bias towards forex and are rather reluctant to go down the path of indices once more. Fair enough, you are entitled to your own opinion - and after all this a what the poll is meant for - but if you think that trading FX or commodities is easier than YM or ES, I think you still haven't quite understood that whatever one finds one is going to have to work for it.

It is not a case of easier. Regarding derailing the thread - I seem to be doing that without trying!

For the record, whichever instrument or market t_d will discuss first, the principles of price are valid on anything you pick.

But your arguments don't hold up. Smaller spread? I pay 1 point spread on the YM which is the smallest tick increment one can get. Less volatility? I've seen huge swings in forex: they might not occur over 5 minutes time, but 1 hour instead but if you are trading from that timeframe the net result and risk is the same. Besides, if you are trading an instrument that you feel is too volatile, it means you haven't assessed your risk correctly. As for lower margin, I've seen brokers that offer YM access for as low as 300 USD. You can easily trade several lots with less than 5k. If you don't have that money available, then perhaps you shouldn't be trading.

Yes, perhaps my arguments don't hold up terribly well.

Finally: I'm not saying this in defense of indices, as for me, I couldn't care less because trading on price alone works in nomatter which environment. And there are obvious advantages of trading fx (24 hours), but there are also disadvantages (for instance for me: lack of volume readings).

I'm going to attempt to bow out of this as gracefully as possible now. The truth is I'm quite excited at the prospect of learning to position trade FX - I have been making mutterings about moving to EOD trading and the FX markets for several months now. I just don't think that the techniques described above would work as well on the indices - they just seem to behave a little differently.

Once again, I'm waffling and offtopic, but I thought your post deserved a reply.

 

[trader_dante]

This is somewhat hard to illustrate because the closer I zoom in so you can see the actual candle setups, the harder it is to see the overall consolidation zone but you should be able to get a good idea of how an area of chop on the daily can lead to good opportunities on the hourly with price action.

EDIT: Lurker Lurker - you're really on form today! That sharp gap in the price was caused by news. I was long at the time and well in profit but suffice to say I didn't feel very happy when I saw this. I had just seen the possibility of a break higher through the next S/R level, firmly rejected. It happens

 

[trader_dante]

I was long throughout this whole choppy period because I believe in basing your exit decisions on the same timeframe as your entry position.

At the time I made my decision based on the daily TF (not a PA setup we have covered yet) and I didn't want to be shaken out until I had seen how each session closed.

However, in hindsight, hourly trading this particular occurence would have been far more profitable.

 

[trader_dante]

FWIW, in my view you should leave the YM, et al alone.

I am not going to stop or change what I have been doing in the markets up until now Lurker.

I look at around 80 different markets each night and trade any of them if the price action gives me a high probability setup.

But in here I will make live calls, if I see them, in the Indices if that is what wins the poll. If people want to hear other market live calls I will do that too. But hopefully everyone realises that the aim is to not to follow me, just look to see what I do and then use it combined with what you already know!

 

[trader_dante]

My portfolio

A quick note:

I like to be prepared each day as I am sure you will realise by now. PREPERATION and a PLAN is another key to success.

Once a night I go through every single market (with the exception of shares and some of the interest rates) that my broker lets me trade.

In my portfolio I have a select few that I look at on the hour, every hour, every day. The figure is close to 20 but varies. There are some that I always keep in there including the: DJI, DAX, FTSE, Gold, Oil, US T-Bond and Bund and EUR/USD.

Then I add anything else to my portfolio that I am interested in, based on its daily TF price action.

Trading is warfare. These charts are my arsenal when the trading day starts. I will look at these throughout the day and these only.

If I don't get a setup, I don't trade.

Many days I don't trade. I sit and wait. When I started out I wanted to be in the market every day, the big momentum moves do this to you. But for me, now, the key is patience.

Often it is the amateur traders that jump on momentum moves.

So what does a pin bar tell us?

A pin bar tells us that this momentum turned rapidly and caught many traders offside.

So now I don't worry like I used too when I read the forums and see everyone jumping in and out of the FX and making hundreds of pips. I sit there and wait. Because I know that sooner or later I am going to come in and take their money.

 

[black bear]

Good Luck, I see you have made a start

You have no idea how much that story relates to mine .

Much R-E-S-P-E-C-T to you trader_dante, not only for trying to educate the masses, but also and more importantly for putting yourself in the middle with nothing to gain, but a lot to lose.

To the sceptics out there: it's fair and normal to question somebody who claims to offer xxxx % in xxxx amount of time, as I would too - absolutely. But after reading some of dantes posts he seems like an honest person. I have no reason to doubt his intentions nor his credibility as a trader.

The only thing I would suggest dante, if you permit, is that you remove that line from your signature. It's absolutely not needed to support your claims, it only makes you look like you are trying to sell something. It's already very clear to me that you know what you are talking about and I very much understand your reasoning to share some of your knowledge.

Hi Trader & FW

I would also like to say good luck, and echo the above. its sure going to test you that's for sure.

A suggestion and observation from earlier,

Demo accounts don"t work because the trader who uses them have not reached enough proficiency to understand there value and what can be gained by using them.

which is IMO (one benefit at least) ~ to make the taking of a trade and execution of your plan/method automatic and instinctive and remove emotion from your trading all together. Wants a failed or semi failed trader feels the difference a lot becomes very clear

I think you will have to cast your mind back to when you were in the darkness and struggling, consider your mistakes and high light them so others can see and identify their own errors.

Big job , but you have come this far

Good Luck

Andy AKA

 

[lurkerlurker]

I am not going to stop or change what I have been doing in the markets up until now Lurker.

I look at around 80 different markets each night and trade any of them if the price action gives me a high probability setup.

But in here I will make live calls if I see them in the Indices is that is what wins the poll.

Quite right - I wouldn't suggest you change a winning strategy, least of all on my account. I'm quite intrigued by your references to only working on the market around half an hour a day or so in the evenings. I'm looking for a strategy which would allow me to take positions (or place orders) in the evenings and only monitor positions twice daily. I've been burned too much finding reasons to exit a trade on the M15 chart or below - while the bucket shops must like the extra spread they make from people like me, it isn't doing my bottom line much good.

 

[trader_dante]

I think you will have to cast your mind back to when you were in the darkness and struggling, consider your mistakes and high light them so others can see and identify their own errors.

Another very good post.

I am certainly looking forward to doing this. I make many mistakes still. We are always learning. You will soon hear some of them.

 

[trader_dante]

I'm quite intrigued by your references to only working on the market around half an hour a day or so in the evenings. I'm looking for a strategy which would allow me to take positions (or place orders) in the evenings and only monitor positions twice daily.

A word of warning if I may: If you take positions on EOD setups, I would advise not to monitor it in the day, if you are even remotely trigger happy in your exits.

Trading daily requires enormous discipline in exits - in my opinion, based on my experience, it is even harder than trading hourly setups for this very reason.

If you enter on a daily, set your stop, walk away and check at the end of the day. This is just what works for me.

The only exception to this rule is if there are nearby target levels you need to react too. And even then, BE CAREFUL - I have found it far better to set a stop which, if hit, will tell me that I was wrong on the expected direction of the trade and just walk away and see what hand the market shows me.

I have been shaken out of amazing daily TF trades in their very early stages because a trade stalled at an S/R level for a few hours.

 

[rathcoole_exile]

Many days I don't trade. I sit and wait. When I started out I wanted to be in the market every day, the big momentum moves do this to you. But for me, now, the key is patience.

Tom, more sound common sense !
If I see more than 3 signals per month on the same vehicle I get worried that I'm overtrading it Patience is the key. Took me years to figure out this one simple fact that can often make the difference between winning and losing.

in Elder's book, he says something like "private traders have one advantage over professionals - the ability to stay OUT of the market, yet they squander this advantage time and time again by trading when they shouldn't" (crap paraphrasing but it's too late to go digging out the actual quote)

 

[lurkerlurker]

Tom, more sound common sense !
If I see more than 3 signals per month on the same vehicle I get worried that I'm overtrading it Patience is the key. Took me years to figure out this one simple fact that can often make the difference between winning and losing.

in Elder's book, he says something like "private traders have one advantage over professionals - the ability to stay OUT of the market, yet they squander this advantage time and time again by trading when they shouldn't" (crap paraphrasing but it's too late to go digging out the actual quote)

The quote you want is in Trading for a Living, and the relevant section can be found here in google books. (luckily I remembered enough of the phrase that google turned it up) That was something which stuck in my mind when I read that book for the first time - we have a great advantage in not needing to trade.

Good post mate. How did your options position in August turn out (the one you were worrying about being stung for $10k on - writing 14000 calls I think)?

 

[lurkerlurker]

A word of warning if I may: If you take positions on EOD setups, I would advise not to monitor it in the day, if you are even remotely trigger happy in your exits.

Trading daily requires enormous discipline in exits - in my opinion, based on my experience, it is even harder than trading hourly setups for this very reason.

If you enter on a daily, set your stop, walk away and check at the end of the day. This is just what works for me.

The only exception to this rule is if there are nearby target levels you need to react too. And even then, BE CAREFUL - I have found it far better to set a stop which, if hit, will tell me that I was wrong on the expected direction of the trade and just walk away and see what hand the market shows me.

I have been shaken out of amazing daily TF trades in their very early stages because a trade stalled at an S/R level for a few hours.

Thanks for that - I am trigger happy with my exits. I think I'm going to choose a time (probably between 10pm and 11pm) each day to examine the markets, place orders, and if necessary make decisions regarding stops and targets for open positions.

 

[rathcoole_exile]

How did your options position in August turn out (the one you were worrying about being stung for $10k on - writing 14000 calls I think)?

Good memory Tom ! yep, got stung on that one. Another highly valuable donation to the market to pay for that particular piece of education LOL

 

[trader_dante]

The quote you want is in Trading for a Living...

There is a very similar quote in one of the interviews in Market Wizards - no doubt regurgitated from Elder's book.

How did your options position in August turn out (the one you were worrying about being stung for $10k on - writing 14000 calls I think)?

Hey rathcoole - careful of Tom: He never forgets anything