Brent's Journey to success Journal

my system primer continued

Reversal Setup Continued

Targets
Targets are determined based on the key zones that will likely be at the least a counter from the opposing side. When trading multiple contracts taking partial profit at these spots is always sensible. Rather than a hard dollar or # of ticks I want to focus on price action targets because this makes more trading sense.
When trading a single lot it is always sensible to take profit at the target unless there is obvious momentum. In particular I pay attention to the slope of the moving average at this point. If the moving average is beginning to become flat at the target an exit is the most sensible play.

Stop Adjustments
Stops need to be adjusted along the way to protect gains or to prevent a loser when using this style of trading. I look for prominent pullbacks or rallys to place my stop below, and above respectively. These pullbacks or rallies often will act as a minor support or resistance zone and help secure profits. Whenever a trade is up 30 ticks or more it is always sensible to adjust the stop to break even or a tiny profit just to reward yourself at this point. As a rule I will not allow more than a 50% retrace from the peak/low when giving back profit when up more than 40 ticks. This rule is designed to compliment price action stops, there are certain special scenarios.
 
Quote from bigbrent701:

haha bandit you of all people are commenting on that pic, you have BY FAR the sickest trading setup I have ever seen. I have been on Goldman and Citi's trading floor and your montage blows away anything i saw there.
More...

Thanks buddy. Ironically, due to a number of factors like traveling, I'm doing most of my trading off a 14" thinkpad...
 
Quote from bigbrent701:

I took some time to run some statistics on my account, see the attached file.

In summary

73 Trades

23 Winners (31.5%)
50 Losers (68.5%)

Average Winner $135.22
Average Loser ($ 76.80)

Expectancy -.1306

Average Risk $76.80

Trades per day 5.6

Daily Gain/Loss -56.16

Gross PNL ($730)
Commission $430

Net PNL ($1160)


When i omit my disaster day my statistically are roughly the same however my PNL is positive.

My goal is to increase my winning % and aim for a reward to risk ratio of 2:1. The attached files shows a hypothetic situation based on my current trading.
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Which broker are you using? Tradestation will run all of these stats for you in their Trademanager Analysis. Platform is free w/ 10 roundtrips a month, which you've already hit. ES data cost extra due to CME, but I think YM is free.
 
I decided not to trade today but to spend more time on the simulator and tweaking my system some more. It appears an issue I have is being able to balance letting a winner ride but also protecting profits. This is probably one of the hardest aspects of trading and is just going to come with time i believe.

I am starting to think that for now maybe i should focus on just 1 of the 3 setups that I use. I feel that each strategy has its own benefits and drawbacks that i will outline below.

The reversal

Pros- Able to catch the biggest moves the most often. The stop is the middle of the 3 strategies

Cons- Have to wait very long periods for things to develop, rarely instant gratification, must be willing to give back large portions of profits.

The pullback

Pros- Catch the meat of the move with the tightest stop, getting in at a discount price.

Cons- Sometimes the most difficult to identify how the bottom is occuring, waiting too long for it to develop will lead to a missed trade. Sometimes pullbacks are the end of the move.

The Breakout

Pros- Instant gratification, the feel good trade you are making money right away, this appears the most obvious once the trade is going well. Works well for quick trades

Cons- True breakouts are rare, the stop must be widest of all 3 setups. This strategy has the worst probability.
 
a primer on my system Continued

Set ups Continued

The Breakout
The second setup that I use is the breakout. The idea behind this setup is to get on board before the quick explosive area where the market will break out from. What i have noticed is the market tends to break out when it breaks a day high or day low, or significant high/low. I believe this occurs because of a combination of stops being triggered, and the feel good trade.

Entry
For my specific entry on a break out I look for the following criteria. For longs I look first for the price to break out of a range or base above a key high. Next I look at the price in relationship with the bollinger band, I look for the price "pushing" the upper bollinger band. I also pay close attention to the 20 simple moving average making sure that it is sloping flat or positive but not negative. When all these factors align I look to go long. For short trades everything is the opposite.

Initial Stop
The initial stop on a breakout is what trips me up the most, the sensible place to put the stop is below the support for longs, and above resistance for shorts. However the current price may be far from these levels. Because of this the breakout has the widest stop of all my setups. An alternative spot to place the stop is at a minor support for long or resistance for shorts, however this is more prone to being stopped out from noise.

Time Stops
Since breakouts are designed to take advantage of the sudden explosion in the market it is important to consider a time stop when using this strategy. I believe the appropriate time interval matters on how how long your typical trades last. For my purposes I believe 30 minutes is probably appropriate.

Limitations
The limitations of trading breakouts is that most breakouts tend to be false. This will lead to a low winning %, stops also are the widest for this method and because of this the reward to risk ratio for short term trading is the worst. Also it is important to note that very often after the break out a counter move back to where the original break out occured is an event that happens quite frequently, because of this you must keep the original stop in place longer or take profit on the way up.
 
Started to really refine the pullback strategy this week. Didnt make a lot but I did alright. A little frustrating because last week i had the perception that we were about to explode to the upside again and lo and behold the rate cuts made that happen. Because of my account equity and risk tolerance however i was unable to capitalize on this perception.
 
Today I got smacked around quite a bit. After the seemingly bearish economic reports came out and the market broke i felt this time it would break through the support. I went short and quickly ate a 33 point loss in the YM. That trade sent me on edge for a while so i just closed the charts and broker until around 2pm when i felt I was ok to trade again.

In the afternoon i attempted 2 trades, both ended up losers. What i was able to learn from these trades were that there are going to be times when you are just going to be able to get out for even or even a few tick profit and thats going to be all you can hope for when the market goes into a chop.

I think of the of the issues I am having is just being overly aggressive with my profit targets. On my last trade of the day I had a limit order in to sell but i cancelled it expected the market to run through the resistance. I guess its the natural human tendency to think this time its going to be different. This time the market is going to break the resistance. In the end if i just would have let myself get stopped out I would have ended up taking a nice profit at the end of the day. I ended up closing the trade for a loser within 2 ticks of the low swing. Thats frustrating.

I also learned a little bit about what happens after an economic report comes out. While there is no way i could have avoided this loser during the trade lifetime i could have made the loss smaller and switches sides if I were able to understand what was occuring.

There really is so many things that someone has to learn when trading. I try to take someone away from trading each day.
 
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