Questions for the pros

[Phoenix01]

Pavlec - consider that what you are looking for cannot be found. If you are looking for a mechanical set of rules with a positive expectency, then your search will be long and fruitless.

Note that my presumption here is you are day trading - adjust as necessary if not.

What you never get with searching is experience and this is the holy grail. You are in a catch 22 situation. You can't have a journal because you don't have a strategy but you wont get a strategy if you don't have a journal.

The journal builds experience, it doesn't have to be here but it does have to be somewhere.

If you want something to start on - pick a US index futures market and fade the overnight highs and lows. If you do this every day, you will learn a lot about that market and how it moves. With experience you will begin to get a feel for when those highs and lows will hold and when they wont.

If you want to trade Europe hours - pick a market on the Eurex and trade breakouts. Same deal with the journal.

Do this with no indicators on your screen - just the price. Add in a DOM/Time and Sales if it's not too distracting. Don't bother with any market internals like TRIN, TICK, PREM etc. etc.

At the end of the day, the market you choose will tell you what to concentrate on more. How does that market behave ? Don't focus in individual candles - look at how the whole day develops. The more days you watch, the more you get a feel for it. This is what you are missing, not some entry technique.

I think this is very good advice and should be followed. My question is how does the DOM/Time and Sales help? What should you be looking? Do you know anywhere i can find some information on how to use it in my trading.

Thanks

 

[DionysusToast]

For now - I would leave the DOM/Time & Sales alone.

People like the OP need less stuff to look at in my opinion. Don't worry about missing out on the magic bullet - there isn't one.

I think if you got to the point you were comfortable trading a market, were no longer buying highs and selling lows, then DOM, Time & Sales would help.

If you are new to a market, it's too much of a distraction and would probably lead you to NOT learning the personality of the market itself.

 

[timsk]

Hi Pavlec,
DT's advice is - as ever - right on the money. However, it is a purist's view and just watching price without any kind of other reference points can be a very tough gig - especially if you're not sure what you're looking for or expecting to see. If you can do it - and are comfortable doing it - good on you. However, not many traders are.

For some traders it can be akin to driving in the dark without any lights, with no road markings or curbs/hedges to give them some idea as to where they are or where they're going. If you feel this way then, IMO, there's no harm in adding a moving average or - dare I say it - an indicator or two. The danger here - and I guess this is why DT recommends naked charts - is the tendency to look for the holy grail. Certainly, thinking along the lines of 'the indicator is overbought/sold - ergo price will reverse' is unhelpful and to be avoided at all costs. However, if used as a tool to prompt questions about price, then indicator(s) can help you gain insight into market sentiment and help you to learn more about your instrument(s) of choice faster than you might manage to do without them. For example, if you notice a technically overbought/sold condition and ask yourself 'how is the [ES] behaving now and why', or 'is it behaving differently now to X mins/bars ago and, if so, why?' - then this may help you develop a feel for your instrument faster than just studying price alone.

The bottom line is try the naked charts first and, if you're really struggling, select say one MA and maybe one other indicator and think of them like stabilizers on a child's bike while you're finding your feet.
Tim.

 

[DionysusToast]

I like Tim - but his advice is a great example of exactly what you need to aviod.

It is of course exactly the advice you get on sites like this and in most trading books. Of course, if you want what everyone else gets - do what everyone else does.

You need to learn about markets, not about indicators. You will only do this by watching markets.

Just watch your chosen market - how does it behave ? If you look at the ES and the BUND, you can see 2 markets behave very differently intraday and that need different approaches.

 

[timsk]

DT,
You're being a tad unfair in your comments, IMO.

1. For starters, I went out of my way to agree with your comments, lol! Looking at naked price action is definitely the way forward for those that can hack it. However, not everyone can - especially if they're new to the game.
2. I suggested recourse to indicators only if the OP (or whoever) is struggling and failing to make any progress looking at naked charts.
3. My suggested use of indicators is in a very specific way and not typical of the advice normally found on forums and in books. I stressed the need to avoid grail hunting. 'RSI reading above 80 is overbought - ergo it's time to sell etc.' which is the conventional use of indicators.

The fact that you personally have no use for indicators is absolutely fine. However, surely you must accept that traders can and do use indicators to great effect. Think of Mr. Charts - a trader whom we both respect - he's had a 10EMA and ATR on his charts for as long as I can remember. Therefore, I maintain that if used appropriately, some indicators can shine a light on price action and help the trader to see more clearly what is going on. I accept fully and agree that many traders use them inappropriately and look to them as a short cut to avoid having to study the markets in the way you describe. To be crystal clear, I am most definitely not advocating that for one minute!
Tim.

 

[HowardCohodas]

I like Tim - but his advice is a great example of exactly what you need to aviod.

It is of course exactly the advice you get on sites like this and in most trading books. Of course, if you want what everyone else gets - do what everyone else does.

You need to learn about markets, not about indicators. You will only do this by watching markets.

Just watch your chosen market - how does it behave ? If you look at the ES and the BUND, you can see 2 markets behave very differently intraday and that need different approaches.

I also like you, but ...

A man is flying in a hot air balloon and realizes he is lost. He reduces height and spots a man down below. He lowers the balloon further and shouts: "Excuse me, can you help me? I promised my friend I would meet him half an hour ago, but I don't know where I am."

The man below says: "Yes. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees N. latitude, and between 58 and 60 degrees W. longitude."

"You must be an engineer," says the balloonist.

"I am," replies the man. "How did you know?"

"Well," says the balloonist, "everything you have told me is technically correct, but I have no idea what to make of your information, and the fact is I am still lost.

"The man below says, "You must be a manager."

"I am," replies the balloonist, "but how did you know?"

"Well," says the man, "you don't know where you are, or where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were in before we met, but now it is somehow my fault."

You are frequently technically correct, but I am not smart enough to put what you say to practical use. This post is a perfect illustration. "You need to learn about markets, not about indicators. You will only do this by watching markets." What do I do with such sage advice? What is step 1? What is step 2? ...

Is tick data over time your definition of a market? If it isn't, then you may be referring to tick data consolidated over fixed time segments. If that is the case then you have quickly stepped into the realm you rail against, because consolidating data is an attempt to distill information out of raw data that is more easily assimilated by the brain for decision making purposes. Oh, but wait, isn't that exactly what indicators do? Of course, some methods of consolidating can go too far and mask useful decision-making information, but that is a subtle digression and not the main point.

My views are informed by my study of the hierarchy of knowledge. One nice short article can be found here. A quick overview.

According to Russell Ackoff, a systems theorist and professor of organizational change, the content of the human mind can be classified into five categories:

1. Data: symbols
   
2. Information: data that are processed to be useful; provides answers to "who", "what", "where", and "when" questions
   
3. Knowledge: application of data and information; answers "how" questions
   
4. Understanding: appreciation of "why"
   
5. Wisdom: evaluated understanding.

 

[DionysusToast]

Tim - if you are struggling with just the price - indicators are not the answer. It's a bit like struggling with swimming and being told to hold onto a couple of house bricks. It's a bit like struggling with target practice and being told to shoot whilst looking at your feet.

For Mr C - he doesn't enter trades based on EMA or the ATR. My understanding is he left EMA on the charts because some of his students people like to have an indicator on there to lean on and he uses ATR because he teaches people to avoid trading a stock who's ATR is too high or low.

Pavlecs problem is he doesn't know where to enter or exit.

Let's say you followed a stock like LVS. It is a very nice stock to day trade, it has a set of behaviours that it repeats again and again and again. It doesn't behave the same way every day - but it is predictable if you watch it over many days or review a lot of intraday charts.

The ES is the same - it behaves in a certain way. The ES has a few different types of day and you trade according to your judgement of the type of day in progress. The ES often has grind up days, with very little in the way of pullbacks and so to some extent you grit your teeth and enter at the high of day. The ES also has days where there's a wide range established and it bounces nicely between the extremes which you fade. Any attempts to define a standard way to use an oscillator on the ES will fail. Looking at the oscillator for behaviour you will miss the overall behaviour. The best thing to watch to identify how the ES will behave is the way it opens.

None of this has anything to do with indicators, it has to do with the way days develop in that instrument. This is what you miss when you look at indicators.

Indicators are a level of abstraction from reality and are not the crutch that they are made out to be.

 

[timsk]

Indicators are a level of abstraction from reality and are not the crutch that they are made out to be.

DT,
As I said in my last post - I agree with you! I don't think anything in my two previous posts negates or contradicts your comments in any way. Indicators are tools which, unfortunately, many traders use inappropriately - as in your example of oscillators.

Your swimming and target practice examples are good as they illustrate my point equally well. In both cases, the swimmer and shooter respectively have a clear objective. The swimmer wants to get to the other side of the pool without drowning and the shooter wants to hit the bullseye. If they're beginners, the instructors may give armbands to the swimmer and a sand bag or other support for the shooter to rest their riffle on. These aids (indicators) can help them to learn and speed up their development.

New traders are often bewildered when looking at naked charts and literally don't know where to start. I speak from experience when - years ago - dbphoenix asked me to do exactly what you're advocating here. Many newbies (I'm not talking about the OP specifically) need some sort of reference point and clear direction as to what to look for and where to find it. If used appropriately, I maintain that indicators can help in this regard - just as buoyancy aids can help fledgling swimmers.
Tim.

 

[DionysusToast]

Is tick data over time your definition of a market? If it isn't, then you may be referring to tick data consolidated over fixed time segments. If that is the case then you have quickly stepped into the realm you rail against, because consolidating data is an attempt to distill information out of raw data that is more easily assimilated by the brain for decision making purposes. Oh, but wait, isn't that exactly what indicators do? Of course, some methods of consolidating can go too far and mask useful decision-making information, but that is a subtle digression and not the main point.

My views are informed by my study of the hierarchy of knowledge. One nice short article can be found here. A quick overview.

Howard - you sure do like to over-analyze things dont you?

To see intraday moves, you can look at a chart that shows the intraday action.

This can be a line chart, bar chart, candlestick chart - doesn't really matter.

I will explain in detail now but I will also say that anyone not smart enough to work this out OR too smart to be paralyzed with questions is doomed to fail at it. :whistling

"look at a chart in which you can actually see the days action"

Stunning isn't it ?

A weekly chart won't cut it.
A 1 tick chart on the ES will be useless unless your screen is a mile wide and you have a wide field of vision.

Other than that - it doesn't matter which timeframe you use as long as you can see where it went, where it reversed, how big the pullbacks were etc. etc. etc

Now - anyone that has learnt something from this post - just stop now - cash in your account and buy a persian rug.

You don't need a hierarchy of knowledge - you just need a bit of common sense. :-0

 

[DionysusToast]

New traders are often bewildered when looking at naked charts and literally don't know where to start. I speak from experience when - years ago - dbphoenix asked me to do exactly what you're advocating here. Many newbies (I'm not talking about the OP specifically) need some sort of reference point and clear direction as to what to look for and where to find it. If used appropriately, I maintain that indicators can help in this regard - just as buoyancy aids can help fledgling swimmers.
Tim.

The reference points you refer to are total nonsense though. MACD? Stochastics? Like I say - they cannot be your focus point. If you are bewildered looking at charts, then you should be a scalper.

Can you hand on heart say that you have profited financially from indicators in the time you have been trading?

Unless you are scalping, you need to zoom out and watch how days develop. Indicators do not help in this regards. Most people don't look at an instrument and get to know it. Most people focus on method and not market.

Of course, if you are already zoomed in and looking at individual bars without the context of the day itself, then you will need a crutch which will do you no good at all.

 

[timsk]

DT,
I think we're going round in circles here and each of us has made his points - so I'll let you have the last word on the topic - if you want to.

My point about indicators is one of principle - it's not about me, my style of trading and what indicators I do / don't use etc. However, just so as I'm not accused of copping out and not answering your question - yes, I have used indicators in the past to great effect. It's on record here on T2W that I day traded U.S. equities throughout most of 2008. True enough, I didn't make any money after commissions but, more importantly, my losses were small. So, 'hand on heart' I can certainly say that had I not used ATR as a means of gauging position size and stop placement - almost certainly I would have lost a lot more money. The fact that neither I or Mr. Charts used / uses it as a tool to enter trades is neither here nor there. Right tools for the right job. ATR is an indicator and, thanks to it, I live to fight another day.

Over to you . . .
Tim.

 

[DionysusToast]

I think we're going round in circles here and each of us has made his points - so I'll let you have the last word on the topic - if you want to.

mudflaps

 

[HowardCohodas]

Howard - you sure do like to over-analyze things dont you?

I go with my strengths. It has fed my family well for a lot of years. Don't have much reason to change.

Besides, poking holes in other's logic is a fun sport. I even get pleasure when people find holes in mine. I consider it an intellectual exercise where the combatants and the audience learn something in the process.

I keep score, not by points won, but by knowledge gained.

 

[HowardCohodas]

It's a bit like struggling with target practice and being told to shoot whilst looking at your feet.

Oh the temptation. I'm a shooting instructor and this would be such a fun, but way off topic discussion.

Oh well, I'll resist.

 

[DionysusToast]

I go with my strengths. It has fed my family well for a lot of years. Don't have much reason to change.

Besides, poking holes in other's logic is a fun sport. I even get pleasure when people find holes in mine. I consider it an intellectual exercise where the combatants and the audience learn something in the process.

I keep score, not by points won, but by knowledge gained.

The interesting thing about trading - it doesn't give 2 hoots for your strengths.

 

[HowardCohodas]

The interesting thing about trading - it doesn't give 2 hoots for your strengths.

The interesting thing is that posting about trading is quite similar. However, one puts money in my pocket, and the other puts knowledge in my head. Works well for me.

Why would you persist in some of the nonsense that you post if you did not think Socratic dialog was worth your time?

 

[DionysusToast]

The interesting thing is that posting about trading is quite similar. However, one puts money in my pocket, and the other puts knowledge in my head. Works well for me.

Why would you persist in some of the nonsense that you post if you did not think Socratic dialog was worth your time?

The only reason I have persisted in this thread was to help the OP.

The fact that you have used it to blow your own trumpet again is not a great suprise.

 

[robster970]

As a non-professional, I'm going to suggest something associated with the journalling. Whilst my journal contained everything, I found it difficult to separate problem areas. So I decided to separate my journalling into 3 things:

1) Trade performance - this is basically an xls which contains loads of other stuff and calculations such as time of day, type of trade, whether it was contra or pro a trend with an H4 frame of reference, vix for the day, duration, trade execution performance, profit/loss performance. It allows me to empirically evaluate my trading and see patterns without any dispute or conjecture. It only works because I trade a single market using a single method and unequivocally helps me form trading ideas, reject areas that add no value and focus on areas that do add value.

2) Book of Questions - this is my trade ideas. They do not work into the method easily but I have found that logging them and monitoring them empirically from the xls stops me from blowing money trying stuff out unless I have conciously decided based upon numbers to do this.

3) The Journal - this is more about my emotional state of mind during the day when executing and other circumstantial stuff (am ill, tired, have had a row with mrs). Over time I have found this invaluable for improving trade execution.

As problems are likely to be a combination of head, a drifting method that never gets to prove itself and an uncontrolled way of implementing trade ideas then I would suggest that this may work for you.

 

[HowardCohodas]

The only reason I have persisted in this thread was to help the OP.

The fact that you have used it to blow your own trumpet again is not a great suprise.

OK, we've got me nailed. However, some of your nonsense will confuse the newbee, so your motives are suspect.

Again... Why would you persist in some of the nonsense that you post if you did not think Socratic dialog was worth your time?

 

[DionysusToast]

OK, we've got me nailed. However, some of your nonsense will confuse the newbee, so your motives are suspect.

Again... Why would you persist in some of the nonsense that you post if you did not think Socratic dialog was worth your time?

Care to point out which parts are nonsense Howard?

Or would you prefer to just proceed with the terribly unsophisticated ad hominem attacks whilst simultaneously claiming to be here to learn something through the process of debate?