Best Thread Trading Naked

[tenbobtrader]

Good morning Second Income Trader and thanks for dropping in. I started trading cable M15 in May and graduated to this way of seeing / doing things in early August.

In terms of risk / reward it is very hard to answer as I think, in part, it is determined by one's initial attitude to risk. What I did was just started trading it and let the risk / reward bit develop over time. Even just with cable M5 there are so many ways of managing trades IMO, and I am constanly evaluating different methods:

1) Shoot for fixed targets?
2) Scale out positions?
3) Add to positions after scaling some out?
4) Have fixed stops or 'logical' stops?
5) Use M5 entries to get lower risk entries into higher tf moves
etc. etc.

Sorry it's not a very helpful answer but, wilst I know what I am achieving, it will be vastly different for someone else. Remember, it's not a 'system' per se - simply a way of looking at price, with some simple ways of getting in and out of trades - that's the way I see it anyway..

morning Rob

well it is if you read it - good honest post imvho - all must build their own method

the detail that makes it theirs

thanks for your continued input and thoughts Rob - hope you have a good week to :clover:



"In many situations we face in daily life, we recognize that action must be guided by reason. Thinking is a powerful antidote to impulsive behavior. A perfect example is the breaking of habits. We learn to overcome compulsive eating or drinking by making ourselves first think about the consequences, then consciously choose an alternate course of action. Without clear thinking about priorities, it is far too easy to fall into patterns of behavior that offer short-term rewards but longer-term consequences.

So it is for traders. Having worked with dozens of traders over the past year, I can vouch for the fact that, among active market participants, overtrading is the single most common problem they face. Overtrading in this context means putting trades on where there is no explicit edge—and even no valid rationale—for the trade. Generally, the reasoning behind the excessive trade is nothing more than, “I felt like it was going up.” What the impulsive trader fails to realize is that this is no different from the dieter’s excuse, “I felt like eating the chocolate cake.”

A common occurrence for me is that I will go into a trader’s room and observe him/her trade. Although the trader may be struggling and losing money every day, generally they make money while I am watching them. This is not because I am offering such grand market insights; usually I do not impose my market views on a trader. Rather, I require the trader to verbalize the reasons behind his or her trade. This has the natural effect of slowing down their trading and making them distinguish between genuine trade ideas and mere trading impulses.

From my vantage point, all trading ideas boil down to variations on two themes:

1. The market is trending, and we want to buy pullbacks in an upward trend; sell bounces in a downward trend;
2. The market is range bound, and we want to sell moves toward the top of the range once buying dies out; buy moves to the lower end of the range once selling dries up.

If I am employing solid reasoning in my trading, I want to assess the status of those themes in both the time frame that I am trading and in the larger time frame. A trend in a shorter-time frame may be part of a range in a longer frame; a range in the short time frame may be a consolidation within a larger trend. Not infrequently, your ideas regarding targets for a trade will come from the assessment of the larger time frame.

A sure-fire way to identify impulsive trades is by their absence of a well-conceived exit. Ninety percent of the effort is going into getting into the trade—the entry—because the purpose of the trade is to be in the market, not to make a profit. The impulsive trader seeks action, not results. Because exits are associated with the cessation of action, they get short shrift.

Conversely, the reasoned trade contains several components:

1. An assessment of current price behavior: Is buying pressure expanding or contracting; is selling pressure expanding or contracting; is price volatility expanding or contracting?
2. An assessment of market conditions at shorter and longer time frames: trending or bracketing?
3. A target for the trade: A move to new highs/lows for a trend trade; a move toward a price mean for a bracketing trade.
4. Criteria for stopping the trade: Conditions that will convince you that your trade idea is no longer valid
5. A decision of resource allocation to the trade: How much of your capital you are willing to put at risk on the trade idea.

If talking these five components out loud before each trade would lead you to trade less often and would lead you to trade far differently from how you’re currently trading, there is a likelihood that you are overtrading. There is definitely something to be said for having a feel for trading. That doesn’t mean, however, that feelings substitute for market knowledge and awareness."

by Brett

later

Andy

 

[Bloodhound]

Hi Andy,

Another great article and, again, sits very well in here. I'm sure you know that what is written there has struck a chord with me, and for all the right reasons. I would be lying if I wasn't already aware of my failings in this regard but it is the first time I have had it explained to me.

That said, I'm pleased I may be ticking a couple of Brett's boxes in other areas.

Thank you!!

Bye for now

Rob

 

[Vaco]

been following the thread from the start but I just cant see (or dont want to see) the set ups and profit potential on the 5 min chart.

Was flicking through the TF's and it jumped out at me on the 1 min. So i tracked for the last hour and below is what i saw.

POsting a 5 min as well so its comparable to what others are posting but it was all done on the 1 min.

 

[Bloodhound]

Hi Elefteros,

Thanks for posting those. I must admit I scoot down to M1 sometimes - the picture isn't that much different. Here's a quick M5 chart of cable that I knocked up- pretty much the same as yours. She's spiky today so hard work but the trend is there, although for how much longer - who knows??!! One thing to bear in mind is that we're into mid-morning chop chop now so it's quite possible for some consolidation in my experience. To that end I tend to take a lot of what is going on with a pinch of salt. All that said, cable will now print a LrL and tank 300 points so what do I know!!!!????

If you're unsure re the set-ups profit potential would it help if I posted a walk-through of a day at some point? As I said at the start of the thread, I'm not really the right person to offer anything up other than what I do myself (and a lot of it may be open to criticism) but if it would help I'll try.

All the best

Rob

 

[Vaco]

Rob,

The last hour was a bit of an experiment for me as I it went pretty much the same on the 1 min on the way down this morning and i wanted to see if i could spot it without the benefit of hindsight.

Thats why some of the text has ? next to it. this is where i wrote the text before it was confirmed by the next hrh/hrl.

With regard to the set ups and profit potential its clear when you have a strong trend and you stack up, I will and have been looking into how i can incorparate that into my own style.

I dont think i could bring myself to place orders at high/low spikes with like you do. I have a tendency like trendie to want to get in on pullbacks to reduce risk although its probably more to do with my deep rooted desire to buy at the bottom and feel clever about how i predicted the turning point.

It is becoming clear to me that i should be doing something between the two and putting the text on the charts and expressing my thoughts has been very helpfall and I will continue to do it when ever i look at the charts.

The way i am looking to play the set ups then would be to wait for a hrl after a hrh has been made then buy with a profit target just past the last hrh.

Still not sure how I would determine the entry point or how to manage the trade if it didnt look like it was going to make a new hrh but will post charts when i do. (if thats ok with you Rob)

Vinnie

 

[Bloodhound]

Hi Vinnie,

Looking forward to seeing your charts as and when you get a moment. I fully understand where you are coming from with buying the pullbacks and wanting to do it as near the bottom as possible. Just a thought but I tend to look at any pullback over half the range of the previous swing low to high as a sign for possible reversal - I know others who would probably be more comfortable with a 61.8 retrace. Anyway, the point is that I have been looking at this as another possible entry - not for my M5 stuff but for higher tf stuff. Then i can just shoot for (as you mention) the previous HrH. Hope what I am saying makes sense - feel free to ask if it doesn't.
All the best
Rob

 

[HawkTrader]

1) Shoot for fixed targets? I think if you're a short term trader, and your motto is "Get your money and get out" then this is better. IMO this will make you more money over a short time period because you're giving back winners less, but in the longer term, letting positions run will be more likely to make money according to some reports.

2) Scale out positions? IMO scaling out of positions is something that really confuses me. Sometimes I'm doing calculations and think I've found something quite good, but then I realise if B instead of A happened, it would be worse off... again, I think it all depends on how long we're going to be using the method, and what your Phycology tells you, and maybe even your financial status. If you need to pay your bills off quickly, it's not much fun waiting for that home run!

3) Add to positions after scaling some out? Again, what happens if you scale in and then it moves back on you? What are you going to do? What is your risk tolerance? And more importantly, WHERE do you scale in? After hitting PT1? Half way to PT?

4) Have fixed stops or 'logical' stops? Logical stops are more erm, logical to me, LOL. Then again, if you don't like having trades with stops over say 30 points, only take setups with less.

5) Use M5 entries to get lower risk entries into higher tf moves
etc. etc. This is something I've really wondered about, and is kind of what I do normaly. I aim at the 1H targets and jump in on the 5M. If you're aiming at daily targets, you would have to put up with a lot of breakevens. See? Everything in trading is phycology, everything else is risk management.

Hope you don't mind Rob, my opinions in bold.

 

[Vaco]

Hi Vinnie,

Looking forward to seeing your charts as and when you get a moment. I fully understand where you are coming from with buying the pullbacks and wanting to do it as near the bottom as possible. Just a thought but I tend to look at any pullback over half the range of the previous swing low to high as a sign for possible reversal - I know others who would probably be more comfortable with a 61.8 retrace. Anyway, the point is that I have been looking at this as another possible entry - not for my M5 stuff but for higher tf stuff. Then i can just shoot for (as you mention) the previous HrH. Hope what I am saying makes sense - feel free to ask if it doesn't.
All the best
Rob

makes perfect sense, as for fib/pivot lvls i've come to the conclusion that if you draw enough random lines on a chart sooner or later you will get a bounce off of/near one of them.

Your approach is quite the opposite, something almost rumpled about it, if you draw a line on a chart sooner or later price will go through it and then you have to manage the trade- protect capital, secure a small profit, let the rest run.

 

[Bloodhound]

makes perfect sense, as for fib/pivot lvls i've come to the conclusion that if you draw enough random lines on a chart sooner or later you will get a bounce off of/near one of them.

Your approach is quite the opposite, something almost rumpled about it, if you draw a line on a chart sooner or later price will go through it and then you have to manage the trade- protect capital, secure a small profit, let the rest run.

Rumpled - haha - I can see what you're saying though. There is a subtle difference in that, in the same way you are relying on the momentum of, let's say, an uptrend to propel from the pullback level to further up, I am just expecting the same but from a different starting point and for it to push price even further. In simple terms, just buying when price is going up and selling when it's going down

Re. fibs, I don't use them at all as I don't see the need. I tend to be able to gauge this mid point between a high and a low by looking - if worse comes to worse a little bit of mental arithmetic goes a long way!! I can only vouch for cable M5 but that halfway to 60/70% point between lows and highs seems to be pretty well adhered to.

 

[tenbobtrader]

whatever we decide ~

"If we value the map more than the reality, we must not be surprised to find that the reality doesn't always fit the map.
In such a case, the reasonable man will change his map, not try to explain away the facts"

John Magee

 

[Vaco]

I think you may have grabbed at the wrong end of my comparison, generally speaking if price goes through a line and you trade in the same direction you are with the 'current trend' my comparison is more to do with trade management after entry, you just do a better job of explaining and teaching then rumpled does but the ideology is simmiler, never let a winning trade become a loser.

 

[Vaco]

whatever we decide ~

"If we value the map more than the reality, we must not be surprised to find that the reality doesn't always fit the map.
In such a case, the reasonable man will change his map, not try to explain away the facts"

John Magee

I have no idea how to apply this for profit

 

[HawkTrader]

never let a winning trade become a loser.

No offence but that's a bit like those sayings "cut your losses, let your profits run", "buy high and sell higher". It's so easy to say.

How do you define when a trade is actually a winner? If you moved your stop to breakeven as soon as you were 1 pip in profit, you'd end up with a lot of breakevens! In my opinion, on longer term trades, when price reaches 50% of my risk on that trade, I won't let it ever become a loser. On shorter term though, I sometimes even use 25% of my risk.

E.g. buy GBP/USD, stop loss 20 points away. When it rises 5 points, I move my stop loss to be a 15 point loss. When I'm 10 points in profit, I move my stop loss to breakeven and wait for it to hit profit target.

 

[Vaco]

No offence but that's a bit like those sayings "cut your losses, let your profits run", "buy high and sell higher". It's so easy to say.

How do you define when a trade is actually a winner? If you moved your stop to breakeven as soon as you were 1 pip in profit, you'd end up with a lot of breakevens! In my opinion, on longer term trades, when price reaches 50% of my risk on that trade, I won't let it ever become a loser. On shorter term though, I sometimes even use 25% of my risk.

E.g. buy GBP/USD, stop loss 20 points away. When it rises 5 points, I move my stop loss to be a 15 point loss, When I'm 10 points in profit, I move my stop loss to breakeven and wait for it to hit profit target.

Your right thats why rumpled gets loads of flak, because he only mentions the first part and you wont because you have broken it down into a method.

 

[tenbobtrader]

whatever we decide ~

"If we value the map more than the reality, we must not be surprised to find that the reality doesn't always fit the map.
In such a case, the reasonable man will change his map, not try to explain away the facts"

John Magee

I have no idea how to apply this for profit

something for you to look forward to then Elefteros

later

Andy

 

[tenbobtrader]

M5 ftse today

ftse today - this can't be right !

must have read the thread and is suckering everyone in for the drop later

 

[Bloodhound]

as for fib/pivot lvls i've come to the conclusion that if you draw enough random lines on a chart sooner or later you will get a bounce off of/near one of them.

This is an extremely perceptive and important point in my opinion, and forms a significant baseline for the way I look at price...

 

[Bloodhound]

Tough day at the office....

Blimey - cable is not fun this week at all. After getting eaten alive yesterday I thought I would rein in on the risk front a bit and see how things would play out.

Here's today's chart anyway....

 

[tenbobtrader]

M5 ftse today

day of 2 ....... 1/2's

I make it - 4 on the day inluding spread if rules 100% applied

3rd add on up swing - could be justified to move stop to lows of 13:10 bar

3rd add on down swing went bad straight away at re-test of day lows from 9am ish and see no reason why you would let add 2 go behind you twice !

adds could be 4:2:1 ratio ....... mmmmm :idea: any thoughts anybody - maths not my best subject

some justified discretion and quick fingers & BE result or infront very possible on the day

hope everyone had a good day

Andy

ps: only a papertiger buyer seller of M5 high or lows

 

[Bloodhound]

day of 2 ....... 1/2's

I make it - 4 on the day inluding spread if rules 100% applied

3rd add on up swing - could be justified to move stop to lows of 13:10 bar

3rd add on down swing went bad straight away at re-test of day lows from 9am ish and see no reason why you would let add 2 go behind you twice !

adds could be 4:2:1 ratio ....... mmmmm :idea: any thoughts anybody - maths not my best subject

some justified discretion and quick fingers & BE result or infront very possible on the day

hope everyone had a good day

Andy

ps: only a papertiger buyer seller of M5 high or lows

Looks very interesting to me. Due to the somewhat bizarre IT set up I have I can't pull seem to pull up a FTSE chart from any of my brokers so can't help with the maths I'm afraid.

I like the stance on loading up!!