Market Conditions and trading

[swissy]

Do traders use an "armoury" of styles to trade? What I am asking is if you day trade and see a choppy market for that day - you may decide to scalp, but if you see a trend for the day you might decide to swing trade on the day.

Of course you should adapt to market conditions - but do successful traders tend to do this by changing their strategy or stick to one and either decide to trade or not depending on conditions.

Maybe an obvious question...but I have noticed that traders usually stick to the one fundamental strategy and with market conditions so changeable at present are they changing, is this likely to lose money? Should you just stick to the one?

Thanks in anticipation.

Swiss

 

[tomorton]

Hi Swiss - I have built up a small range of signals (8) that I use but the nice thing is if you can devleop a set of signals that tell you the market style prevailing, rather than you having to decide. I hear from traders all the time on here who have difficulty deciding whether we're in an uptrend or a downtrend or no trend, and I am happy to admit, even that basic question is not always easy to answer with enough objective certainty to identify a profitable trade.

Some of the signals I use trigger when markets are trending and have 1-day pullbacks, others need 3-day pullbacks, two are intra-day only. They do not all appear in equal proportions over time, as the market conditions fluctuate.

Its also illuminating to see which signals fail or are false entries: for example, many 3-day pullbacks are failng to appear at the moment: those that do carry a higher risk as the stop that pattern suggests is further away from entry than normal, becasue daily ranges are higher than normal. Ideally, the less profitable signals tend to dry up of their own accord in unprofitable times.

 

[swissy]

Hi Swiss - I have built up a small range of signals (8) that I use but the nice thing is if you can devleop a set of signals that tell you the market style prevailing, rather than you having to decide. I hear from traders all the time on here who have difficulty deciding whether we're in an uptrend or a downtrend or no trend, and I am happy to admit, even that basic question is not always easy to answer with enough objective certainty to identify a profitable trade.

Some of the signals I use trigger when markets are trending and have 1-day pullbacks, others need 3-day pullbacks, two are intra-day only. They do not all appear in equal proportions over time, as the market conditions fluctuate.

Its also illuminating to see which signals fail or are false entries: for example, many 3-day pullbacks are failng to appear at the moment: those that do carry a higher risk as the stop that pattern suggests is further away from entry than normal, becasue daily ranges are higher than normal. Ideally, the less profitable signals tend to dry up of their own accord in unprofitable times.

Tomorton,

Thank you for your reply - do your signals change your trading style from say swing to scalp or do you just adjust your swing trading to different timeframes (assuming you swingtrade). I know that changing trading styles is radical but is it viable (given current market conditions) or should I wait until a preferred (swing or scalp) trading day (is there such a thing? )emerges (I usually trade the FTSE).

Thank you,

Swiss

 

[luckyd1976]

Tomorton,

Thank you for your reply - do your signals change your trading style from say swing to scalp or do you just adjust your swing trading to different timeframes (assuming you swingtrade). I know that changing trading styles is radical but is it viable (given current market conditions) or should I wait until a preferred (swing or scalp) trading day (is there such a thing? )emerges (I usually trade the FTSE).

Thank you,

Swiss

1) Tough to know as the bars come out bar by bar whether its going to be best Choppy Day (scalp) or a LongTrending day (swing) In your examples. Thats why you'll find traders stick to their guns (profitable, time tested, historical strategies) They are either Swing(ers) or Scalp(ers)

2) Im not a big fan of tweaking or changing what I know has worked for long periods of time.

Yes markets change. And I (honestly) have been getting crushed on my Automated DT strategy that has worked for well over 4+ years (til this years Volitility).

When you see these changes in the Market (mainly the VIX and stops are killing me) Instead of abandoning this strategy all together by either throwing it away or just tweaking to something else. Sideline it for a while! Bench it. It'll be there for you later. And start all over with a new strategy for the current market.

Im working on a Higher VIX model that I might be able to implement when the VIX crosses 40 (as an example)

 

[tomorton]

Hello Swiss -

I don't consciously change my style, as that would demand a conscious assessment of the market day by day, and decisions as to what sort of market we are in and what sort we will be in tomorrow - too much scope for subjectivity. I just let the signals come up and try to catch them all - of course, if I am almost fully committed through signal A, I can't put as much in using signal B and if all signals trigger, the last to come up will have to be ignored.

It is useful to note though which signals are triggering then failing, as happens in choppy markets with some - those signals can still work and be highly profitable even with a success rate below 50:50 but I would not go so deep on them if their success rate short-term is down.

The triggers I use do have a range of styles but its narrow - only from a position to be opened in the am to a longer-term swing hold over 3-10 days. Each signal can only fire once per day. Never involved in scalping. I do not rule out opening a short-term position for this day only in the opposite direction to a longer-term position in the same instrument. But I hesitate to open say 5 long positions in the same instrument, just because 5 signals had triggered on the same day. Money management rules must always be observed.

 

[swissy]

Thank you for your replies,

The reason I asked the question in the first place was that although I had previously placed intraday swing trades (with some success), I thought I saw an opportunity to scalp on the FTSE... this was because I saw a pattern of retracement from lower highs (downtrend) and I thought I would capitalise on this by shorting the highs in the channel I drew...it was not a success.

It didn't feel right (not least because I had never done it before) but like a kid that has to touch an oven even though told not to because its hot...I had to give it a go!

I was a slow sorting the order tickets and I was using IG and the fill was also a bit slow.. not good for scalping...lesson 1.

My sprogs kept interrupting me (aged 2 and 5)...you need complete concentration to scalp...lesson 2.

Stick to what you know...lesson 3.

Having said all that I believe it is possible to mix your styles to fit the price action...maybe I am too inexperienced for it for the moment and tomorton and luckyd1976 have not unequivocally said it was not feasible....Is it worth me working on or am I spreading my limited expertise too thin....any thoughts?

Thank you,

Swiss

 

[tomorton]

My own limitations suggest that if you are successful as a swing trader you shouldn't scalp, and if you're a scalper, you shouldn't swing trade. It would be a remarkable person who is good at both. And especially if both styles are in use simultanously.

Of course, I'm biased against scalping anyway.