Magna: âWithout giving away any proprietary secrets, would you please discuss your style a bit more.â
I think candletraderâs statement below comes about as close as possible to idea behind my style of trading, except that Iâm looking for what I'd call âdaily base hitsâ.
candletrader: âI am playing for home runs, but I manage my trades to at least eke out scalp profits, if the home runs don't work out.â
As long as I feel the environment is appropriate, I manage a position so that I have the opportunity to profit from a large daily extension. This type of management will often end up leaving a fair amount of my âin tradeâ profits on the table when a significant move fails to materialize. The results are a series of trades that are often characterized by small advances coupled with less regular large gains. Although the core idea behind this style of trade management is well known, I believe the particular tools and methods with which I have chosen to manage my positions are unique and effective for me.
I attempt to refine my entry to the degree that I risk very little initially, but as the trade progresses I use a system that allows the stop to widen in proportion to the extent of the move and other considerations. As the trade approaches historical extremes, the same trailing stop will tighten itâs parameters in relation to the probability of further extension.
What I get is a trailing stop that initially is quite tight and then begins to widen shortly after the move extends, reaches its maximum risk or âgive-backâ at the mid-point of the trade, and finally begins to shorten the distance as the trade nears itâs suspected probable end. I will, at times, override a specific value in favor of placing the stop behind a nearby area of S/R if I feel that that is prudent.
Sound familiar?
I qualified my initial statement above with a reference to my determination of the market environment and bias. I have a set of tools and rules based on these tools that allow me to characterize the market at any given time. The result of my determination allows me to alter the type of trade management I use. For example, I will favor conservative targets or I may simply choose to unload more of my position than normal at a target during a suspected consolidating market. I believe that having a concrete method of fairly accurately determining the environment and bias goes along way toward survival and success.
For those of you who are reading this and thinking âno shit, but how?â, well, I am intentionally not discussing my particular method. Thatâs probably a good thing because itâs the concept that is most important. How a trader implements this idea is the most difficult and most rewarding, IMHO.
Maybe if I stepped through yesterdayâs trades then everyone can see the where and the when. I wonât discuss much of the how but itâll give other traders some idea of what I do. Iâm not sure how useful itâll be for the vets out there, though.
1) Good indication of a sell off. Iâm always ready in the morning and especially when weâve gapped. Looking to ride the drop to unchanged.
2) Breaks support and I add to my position.
3) Yesterdayâs close was my first target and I unloaded half of my position.
4) Historically overextended move and I covered a 1/4 of my position on a break above the previous barâs high. Left the remainder on âjust in caseâ.
5) And Iâm stopped out on whatâs left.
6) What can I say? I really wanted to go for it but my system wasnât confirming it. Just had to sit this one out. Hindsight being what it is, it would have been opportune to greatly reduce my size and âtest the watersâ if you will. Later, I might have added to the position when it moved solidly into my favor.
7) Iâm not proud of this trade. I had a reason to believe we were approaching a bottom but I was jumping in a bit too early. I also allowed a little too much room for risk on this one. Upon reflection, I should have let it go.
8) Closed half of the position just before the market reached the morning low that we had just broken. I figured that the low might act as resistance.
9) Wasnât taking any chances so I scaled out when we dropped below support.
10) Took another stab at the bottom. I was still jumping the gun as I technically was looking to go long once we passed 1084.50. The NQ was limit down at this point.
11) Can you say: âpissedâ? My software hiccupped and few seconds later I got filled well below my stop.
12) I can spot a quick Wash and Rinse. I was in position and everything lined up.
13) Closed a quarter of the position just before the market reached the morning low again.
14) What the hell was that? I later heard one of the dealers was offering too much by mistake.
15) Got a signal to short.
16) Notice the low and then a higher low and then it breaks resistance. I closed out half of the position.
17) SEBL makes an announcement and the boys in the pit decided to collect me in classic fake out fashion before taking it lower. Happy guys? Decided not to re-enter.
Not some of my proudest moments, as I feel I over-traded a bit and I failed to properly handle an initially conflicting but ultimately rewarding setup. I think, though, that it gives everyone some idea of how I see things.
For the record, I donât generally initiate longs during such an obvious down day unless certain criteria are met. In circumstances such as those on 10/17, I will reduce my size on counter-trend trades and my trade management will alter in accordance with my reduced expectations.
I think candletraderâs statement below comes about as close as possible to idea behind my style of trading, except that Iâm looking for what I'd call âdaily base hitsâ.
candletrader: âI am playing for home runs, but I manage my trades to at least eke out scalp profits, if the home runs don't work out.â
As long as I feel the environment is appropriate, I manage a position so that I have the opportunity to profit from a large daily extension. This type of management will often end up leaving a fair amount of my âin tradeâ profits on the table when a significant move fails to materialize. The results are a series of trades that are often characterized by small advances coupled with less regular large gains. Although the core idea behind this style of trade management is well known, I believe the particular tools and methods with which I have chosen to manage my positions are unique and effective for me.
I attempt to refine my entry to the degree that I risk very little initially, but as the trade progresses I use a system that allows the stop to widen in proportion to the extent of the move and other considerations. As the trade approaches historical extremes, the same trailing stop will tighten itâs parameters in relation to the probability of further extension.
What I get is a trailing stop that initially is quite tight and then begins to widen shortly after the move extends, reaches its maximum risk or âgive-backâ at the mid-point of the trade, and finally begins to shorten the distance as the trade nears itâs suspected probable end. I will, at times, override a specific value in favor of placing the stop behind a nearby area of S/R if I feel that that is prudent.
Sound familiar?
I qualified my initial statement above with a reference to my determination of the market environment and bias. I have a set of tools and rules based on these tools that allow me to characterize the market at any given time. The result of my determination allows me to alter the type of trade management I use. For example, I will favor conservative targets or I may simply choose to unload more of my position than normal at a target during a suspected consolidating market. I believe that having a concrete method of fairly accurately determining the environment and bias goes along way toward survival and success.
For those of you who are reading this and thinking âno shit, but how?â, well, I am intentionally not discussing my particular method. Thatâs probably a good thing because itâs the concept that is most important. How a trader implements this idea is the most difficult and most rewarding, IMHO.
Maybe if I stepped through yesterdayâs trades then everyone can see the where and the when. I wonât discuss much of the how but itâll give other traders some idea of what I do. Iâm not sure how useful itâll be for the vets out there, though.
1) Good indication of a sell off. Iâm always ready in the morning and especially when weâve gapped. Looking to ride the drop to unchanged.
2) Breaks support and I add to my position.
3) Yesterdayâs close was my first target and I unloaded half of my position.
4) Historically overextended move and I covered a 1/4 of my position on a break above the previous barâs high. Left the remainder on âjust in caseâ.
5) And Iâm stopped out on whatâs left.
6) What can I say? I really wanted to go for it but my system wasnât confirming it. Just had to sit this one out. Hindsight being what it is, it would have been opportune to greatly reduce my size and âtest the watersâ if you will. Later, I might have added to the position when it moved solidly into my favor.
7) Iâm not proud of this trade. I had a reason to believe we were approaching a bottom but I was jumping in a bit too early. I also allowed a little too much room for risk on this one. Upon reflection, I should have let it go.
8) Closed half of the position just before the market reached the morning low that we had just broken. I figured that the low might act as resistance.
9) Wasnât taking any chances so I scaled out when we dropped below support.
10) Took another stab at the bottom. I was still jumping the gun as I technically was looking to go long once we passed 1084.50. The NQ was limit down at this point.
11) Can you say: âpissedâ? My software hiccupped and few seconds later I got filled well below my stop.
12) I can spot a quick Wash and Rinse. I was in position and everything lined up.
13) Closed a quarter of the position just before the market reached the morning low again.
14) What the hell was that? I later heard one of the dealers was offering too much by mistake.
15) Got a signal to short.
16) Notice the low and then a higher low and then it breaks resistance. I closed out half of the position.
17) SEBL makes an announcement and the boys in the pit decided to collect me in classic fake out fashion before taking it lower. Happy guys? Decided not to re-enter.
Not some of my proudest moments, as I feel I over-traded a bit and I failed to properly handle an initially conflicting but ultimately rewarding setup. I think, though, that it gives everyone some idea of how I see things.
For the record, I donât generally initiate longs during such an obvious down day unless certain criteria are met. In circumstances such as those on 10/17, I will reduce my size on counter-trend trades and my trade management will alter in accordance with my reduced expectations.
