Making Money Trading
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trader_dante
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I just posted this on another thread - some of you might find it useful:
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From my time at a prop firm I have some general observations. I am not saying this is the same for ALL professionals at ALL prop firms but it is what I have learnt from where I am.
1. The professionals keep it simple. I have said this before and I will say it again: almost all of the pros I know and work with are using candlestick charts with simple technical analysis - support and resistance, trendlines and basic pattern recognition (most notably flags and trend channels). They have their chosen market on a few different timeframes - daily, 1hr, 30m and 15m are popular and they have the order book. A select few use market profile. That is it. For the most part they aren't using any indicators, moving averages or any of the other things that are waiting in the wings to clutter your charts.
2. The professionals do not know where the market is going. Everytime a professional trades they are SPECULATING. They don't know whether the market is going to move in their favour. They have an idea based on their experience and observations and they play it. They win; they lose. If they are good then they make more from their wins than they make from their losses. Before I became a professional I remember making awful trades and feeling so stupid but now I realise that even those who do this for a living have bad days - I have seen good traders sell the lows and buy the highs many times in a short space of time. The difference is this: most amateurs do not have good risk management in place. At a prop firm even the best traders have limits to their size and many of us have daily loss limits. That means when you reach it, you do not trade anymore. This stops you revenge trading. If you lose a fixed amount you have time to stop and get it out of your system before you get back in the market.
3. The biggest and best traders do not spend time talking they spend time trading. There are some traders that feel the need to tell others where they are long from, why they are long and where they think the market is going. Often they call this out across the office. If they lose they curse and shout and bang their mouse. They hang around after the European markets close and talk to their fellow traders - they tell each other how their day went. They shrug their shoulders or they laugh and smile. Then there are the select few traders who everyone talks about. We respect them and hold them in awe because they are the serious earners. The money they make is unbelievable. The biggest and best trader at our firm sits on his own away from all the other traders. He wears ear plugs most of the time so he cannot hear anyone. He is not interested in their opinions and wants no distraction from his work which is to make money in the market. You do not see him on the internet, writing email or browsing bulletin boards. He never makes a sound when he wins or when he loses. He comes and goes and rarely speaks unless spoken too.
4. Professionals, for the most part, trade one market. They do this because they get to know everything about their market and how it acts; they build a profile. What affects it fundamentally? How does it react to news? Is it correlated with other markets? How does it move through key levels? Does it fake traders out? Knowing a market can help you build an edge. Does the index you are looking at always have a counter-trend rally in the last 5 minutes before the close as long or shorts cover? Is it easy to hold positions or is the action too choppy? I came to my firm having traded 80 markets and they have now got me trading one - the Euro/Usd. It is incredible how you can start to get a feel for a market if you watch just that and nothing else day in, day out.
5. Professionals are human. Almost all of them have a low tolerance for the pain of losing. They certainly do not like to give up profits when their trade is winning. That makes them susceptible to the human emotions of fear and greed. If you can understand this and get adept at seeing it on the charts, you can use human nature to your advantage.
These are just a few of the things I have realised.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
From my time at a prop firm I have some general observations. I am not saying this is the same for ALL professionals at ALL prop firms but it is what I have learnt from where I am.
1. The professionals keep it simple. I have said this before and I will say it again: almost all of the pros I know and work with are using candlestick charts with simple technical analysis - support and resistance, trendlines and basic pattern recognition (most notably flags and trend channels). They have their chosen market on a few different timeframes - daily, 1hr, 30m and 15m are popular and they have the order book. A select few use market profile. That is it. For the most part they aren't using any indicators, moving averages or any of the other things that are waiting in the wings to clutter your charts.
2. The professionals do not know where the market is going. Everytime a professional trades they are SPECULATING. They don't know whether the market is going to move in their favour. They have an idea based on their experience and observations and they play it. They win; they lose. If they are good then they make more from their wins than they make from their losses. Before I became a professional I remember making awful trades and feeling so stupid but now I realise that even those who do this for a living have bad days - I have seen good traders sell the lows and buy the highs many times in a short space of time. The difference is this: most amateurs do not have good risk management in place. At a prop firm even the best traders have limits to their size and many of us have daily loss limits. That means when you reach it, you do not trade anymore. This stops you revenge trading. If you lose a fixed amount you have time to stop and get it out of your system before you get back in the market.
3. The biggest and best traders do not spend time talking they spend time trading. There are some traders that feel the need to tell others where they are long from, why they are long and where they think the market is going. Often they call this out across the office. If they lose they curse and shout and bang their mouse. They hang around after the European markets close and talk to their fellow traders - they tell each other how their day went. They shrug their shoulders or they laugh and smile. Then there are the select few traders who everyone talks about. We respect them and hold them in awe because they are the serious earners. The money they make is unbelievable. The biggest and best trader at our firm sits on his own away from all the other traders. He wears ear plugs most of the time so he cannot hear anyone. He is not interested in their opinions and wants no distraction from his work which is to make money in the market. You do not see him on the internet, writing email or browsing bulletin boards. He never makes a sound when he wins or when he loses. He comes and goes and rarely speaks unless spoken too.
4. Professionals, for the most part, trade one market. They do this because they get to know everything about their market and how it acts; they build a profile. What affects it fundamentally? How does it react to news? Is it correlated with other markets? How does it move through key levels? Does it fake traders out? Knowing a market can help you build an edge. Does the index you are looking at always have a counter-trend rally in the last 5 minutes before the close as long or shorts cover? Is it easy to hold positions or is the action too choppy? I came to my firm having traded 80 markets and they have now got me trading one - the Euro/Usd. It is incredible how you can start to get a feel for a market if you watch just that and nothing else day in, day out.
5. Professionals are human. Almost all of them have a low tolerance for the pain of losing. They certainly do not like to give up profits when their trade is winning. That makes them susceptible to the human emotions of fear and greed. If you can understand this and get adept at seeing it on the charts, you can use human nature to your advantage.
These are just a few of the things I have realised.
barjon
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Interesting you should say that, Tom. The most successful trader I know (well, active investor is probably a better description) trades just one share. Used to be called Nat West now RBS. He knows it so well that give him the first note and he'll hum the tune.
cheers - glad you're enjoying your professional apprenticeship.
jon
grimweasel
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Atrim,
2 Notes from me for what it's worth!
The Pin you mention is not substantiated by key S/R and Fib levels on your chart and therefore could be meaningless?
There is emotion in your post. You almost give the impression that you are emotionally involved with that market by you 'wishing' you were in the trade.
One thing I have learnt (thanks to Vince Stan') and his recommendation of the book 'Trading in the Zone' by Mark Douglas is that you must accept that the chart only shows you a graphical representation of price at a given time. You can almost ignore what has happened before as each trade differs from the last by un -quantifiable means, in that like clouds in the sky, the same market conditions (to the last person involved) could and never will be repeated.
In short, one uses his Tech Analysis to stack the odds in his favour (his edge) of an unpredictable event panning out to his favour. You either win or you lose. The market owes you nothing. It is merely a reflection of supply and demand at that time in that place and nothing else.
It would seem that many traders try and 'believe' that they 'know' what is going to happen next, when in fact that couldn't be further from the truth! Nobody could possibly know what every other trader involved or waiting on the sidelines of that market could/will do next. The sooner that one grasps that fact and admits defeat on trades that go against them as soon as possible, seems to be the key to successful long term money management and trading.
The 5 keys are:
1. Anything can happen
2. You don't need to know what happens next to make money.
3. Any edge will have a random distribution between wins and losses.
4. An Edge is nothing more than an INDICATION of a probable outcome of an event.
5. Every moment in the market is unique.
It has taken me a long time to grasp these facts and I still do not fully understand the concept other than I am my own worst enemy. The market does not decide for you to enter or leave a trade as it is even and only represents a graphical display of data. Only the trader can decide when and how to act on that data. The market is never to blame, only the trader!!
Like the flip of a coin one could never guarentee the outcome of the toss. You accept that before the flip and therfore if your prediction is proved wrong you don't care, as you have no emotional involvement with the coin's result. In a trade you must learn to see each trade as a new event based on the date available at THAT TIME and disregard your past experiences with results in that market. You understand the risk of the coin flip at the start, so you can be detached from the result. In a trade, if you accept and plan for the risk at the start of the trade (Risk/reward ratio, S/R, possible outcomes etc) then you can remain 'detached' from the trade knowing that you are prepared to find out if you are wrong/right for the risk of your initial stake or exposure. If you are proved worng and the trade moves against you, so what? You knew that risk at the start. Accept the loss and move on. Don't, however, fall into the trap of trying to recover that loss from the previous trade , as each new time in the market is UNIQUE. The charts can only help you to arrive at the conclusion that market events may repeat themselves exactly (unlikley) and your edge may give you an indication as such, but you must not expect it.. Expectation is just not possible!
"We have to be rigid in our rules and flexible in our expectations, NOT flexible in our rules (your market edge and your entry/exit criteria) and rigid in our expectations" Mark Douglas. Never a truer word spoken and a phrase which I'm sure many traders could identify with?
T-D.. thanks for another great post that allies the Pro's thoughts with Mark Douglas'
Grim
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hi there atrim,just wanted to point out that that is NOT a pin bar,the body of the candle is not inside the previous candle.what you have there is shooting star.it can also signal a reversal after a trend.
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yeah,its got a big body though,dont know if this makes a big difference??
would you trade this setup??
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A Worthwhile Slog - he hopes!
Just finished the thread.
First of all thanks to TD for taking the time and patience to produce "Dante's Method and to all of the other contributors who have also helped"
I have now culled well over 100 basic items of methodology, notes /snippets/references and most of all - encouragement from the thread. I intend (hopeto/meanto!) go through these next and try and produce a readable and concise extract of the numerous posts that will be essential for my reference and maybe useful to others. Having said that, there is no substitute for reading, absorbing and implementing the whole thread.
I note that TD has almost gone full circle in his basic approach to trading now that he is a Prof. It will be interesting to see if he can cope with the restrictions of his new employer.
We are two hours in front of GMT which means I can start work at 0845 and catch London opening at a civilised hour! Today I was presented with two very nice PBs at 0500GMT which of course I was to late for but some of you night birds might have caught. EUR/USD and USD/JPY. Both are performing as per Dantes method to date!
Good luck with everything Dante
John
Just finished the thread.
First of all thanks to TD for taking the time and patience to produce "Dante's Method and to all of the other contributors who have also helped"
I have now culled well over 100 basic items of methodology, notes /snippets/references and most of all - encouragement from the thread. I intend (hopeto/meanto!) go through these next and try and produce a readable and concise extract of the numerous posts that will be essential for my reference and maybe useful to others. Having said that, there is no substitute for reading, absorbing and implementing the whole thread.
I note that TD has almost gone full circle in his basic approach to trading now that he is a Prof. It will be interesting to see if he can cope with the restrictions of his new employer.
We are two hours in front of GMT which means I can start work at 0845 and catch London opening at a civilised hour! Today I was presented with two very nice PBs at 0500GMT which of course I was to late for but some of you night birds might have caught. EUR/USD and USD/JPY. Both are performing as per Dantes method to date!
Good luck with everything Dante
John
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combotrader
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Euro
Good looking pin bar on euro/usd at 14:00 on 14/03, Friday. has declined since then and now recovering slightly. I am not short, but have liquidated my long of the last 10 days.
Not short as I think the smart money will just use a downturn in euro to build up long positions. Having said that, watching it closely - the problem is there`s no resistance in sight for reference.
Sorry not able to post chart.
Good looking pin bar on euro/usd at 14:00 on 14/03, Friday. has declined since then and now recovering slightly. I am not short, but have liquidated my long of the last 10 days.
Not short as I think the smart money will just use a downturn in euro to build up long positions. Having said that, watching it closely - the problem is there`s no resistance in sight for reference.
Sorry not able to post chart.
1Pipped
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A quick chart and some thoughts.
Ive marked:
Two possible stop loss levels: one atop pin as normal, and one atop some recent highs.
Two targets / 'problem areas': one at some recent lows, and one at a round number close to an S/R line.
The pin has already triggered and retreated back up a bit letting us get in again. Price didnt really swing into the pin though, it was a bit of a grind upwards. MA's are stacked up and fanning out also.
I havent done many of these trades yet but in my short experience they either seem to 'work' straight away or they grind around and you dont really know where you are anymore. This pin has retreated and not 'worked' so far, but its only had 2 bars to try...
I will keep my troops away from this, or if I do trade I will send in a small platoon of 1% and use the small 60pip stop so the risk:reward is better if the trade works out.
Would love to know what you think about my plans if youve got time TD.
Ive marked:
Two possible stop loss levels: one atop pin as normal, and one atop some recent highs.
Two targets / 'problem areas': one at some recent lows, and one at a round number close to an S/R line.
The pin has already triggered and retreated back up a bit letting us get in again. Price didnt really swing into the pin though, it was a bit of a grind upwards. MA's are stacked up and fanning out also.
I havent done many of these trades yet but in my short experience they either seem to 'work' straight away or they grind around and you dont really know where you are anymore. This pin has retreated and not 'worked' so far, but its only had 2 bars to try...
I will keep my troops away from this, or if I do trade I will send in a small platoon of 1% and use the small 60pip stop so the risk:reward is better if the trade works out.
Would love to know what you think about my plans if youve got time TD.
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nunrgguy
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Huge daily pin forming on USDCHF. Is this the bottom? Stop's too big for my tastes and the body is outside of the left eye, tracking the hourly and waiting for the formation of the right eye to see how this one plays as the setup isn't perfect IMO.
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trader_dante
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As I said to Lurker when both our Gold shorts originally lost, pin bars at all time highs/lows DO work and can be traded profitably.
We both lost approximately 200 ticks on our previous shorts.
This trade is so far up approximately 575 ticks.
I hope this illustrates my point.
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rider5
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Hi atrim,
That was a great pin, fib confluence, the works. I really hope you got this one. I'm not familiar with indexes but it seems to be about +284 pips right now. Good spot.
I've been reading the james16 chart thread, quite a lengthy read, over 600 pages, but definitely worthwhile. Price action setups is great!!
Thanks again TD, what would we have done without you?
:clap:
Take care
That was a great pin, fib confluence, the works. I really hope you got this one. I'm not familiar with indexes but it seems to be about +284 pips right now. Good spot.
I've been reading the james16 chart thread, quite a lengthy read, over 600 pages, but definitely worthwhile. Price action setups is great!!
Thanks again TD, what would we have done without you?
:clap:Take care
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