CL Redux

I have read enough of your posts to know that type of scalping is not your style. I also have confidence that if you say it's and advanced tactic that you understand and is solid that it is just that. I just can't get my head around needing to be right at least 70% of the time to break even! And, having spoken to a few very solid traders, they can't either. BTW ... I, unlike some, believe Al is probably a great trader.

Thanks, for commenting Donna. It is my understanding you are no longer a regular on ET. Our loss to be sure!

Quote from NoDoji:

I have problems with that, too, and I don't trade that way. I don't scale in or out, nor do I scalp anything less than .20 unless a stop-and-reverse sets up or S/R is tested more than once and fails.

I completely understand the methodology behind small scalps/large stops, and I know exactly how it's done. It's a very advanced tactic and it's a solid profitable tactic, but it's not my cup of tea.
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Quote from Swan Noir:

I just can't get my head around needing to be right at least 70% of the time to break even! And, having spoken to a few very solid traders, they can't either.

Thanks, for commenting Donna. It is my understanding you are no longer a regular on ET. Our loss to be sure!
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On average, I'm "right" (meaning my trades hit my minimum profit target) about half the time.

Geez, who worked a regular job while trading and day traded equities using only a laptop, returned well over 100% the year I observed him trading (all calls in advance, so no fudging was possible) and he was right about 48% of the time.

A scalper who uses wide stops and small targets had better be right well over 70% of the time. In fact, those who trade that way successfully generally have a 85-90% win rate.
 
Quote from NoDoji:

A scalper who uses wide stops and small targets had better be right well over 70% of the time. In fact, those who trade that way successfully generally have a 85-90% win rate.
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Only my wife can be right 85-90% of the time and even she can only do it when arguing with me. And, in her mind, it is 100% of the time!!!
 
EON Kid suggested I read the posts of SteveH (as well as Donna's posts). I'm about 60% through Steve's posts and have seen this gem. I'm a big believer that narrative can be the key to understanding the numbers in ways that make those numbers more salient.

I don't think I have ever seen a post that illustrates the reality of a simple equation that most do not EVER seem to absorb in a way that is useful. While this particular issue was never a problem for me I have seen an astonishing number of people (traders and people in business) who never seem to grasp that an overlay is an overlay and if you are sure of your numbers money will be made over time.

I can easily see why Steve and Donna get on so well. No space between them conceptually. Thanks again Kid. Your bibliography skills are AAA ... lol.

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SteveH
Registered: Mar 2004
Posts: 131

01-04-11 01:48 AM
You can get pretty darn good at only needing 7 tick stop losses on the CL (with pullback limit orders) to get 15+ tick returns with a 50/50 chance. But there's the rub. The avg at-homer can't emotionally handle those kinds of odds in trading. They tend to constantly doubt the stability of the system they're trying to trade.

Now, if you offered up the same game in the form of a fair coin flip to the same at-homer, I'd bet anything that he/she would have no problems playing that game. Why? Because it is so ingrained in everyone's psyche that a fair coin flip *is* 50/50 that he/she will no longer concentrate on the individual wins/losses but more on the positive expectancy aspect of the game itself (where expectancy = (avg win * prob win) - (avg loss * prob loss) is positive and that means you will win over many many trials).
 
Quote from Swan Noir:

I'm about 60% through Steve's posts and have seen this gem.
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SteveH
Registered: Mar 2004
Posts: 131

01-04-11 01:48 AM
You can get pretty darn good at only needing 7 tick stop losses on the CL (with pullback limit orders) to get 15+ tick returns with a 50/50 chance. But there's the rub. The avg at-homer can't emotionally handle those kinds of odds in trading. They tend to constantly doubt the stability of the system they're trying to trade.

Now, if you offered up the same game in the form of a fair coin flip to the same at-homer, I'd bet anything that he/she would have no problems playing that game. Why? Because it is so ingrained in everyone's psyche that a fair coin flip *is* 50/50 that he/she will no longer concentrate on the individual wins/losses but more on the positive expectancy aspect of the game itself (where expectancy = (avg win * prob win) - (avg loss * prob loss) is positive and that means you will win over many many trials).
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That is truly a gem. There, now anyone surfing ET for a gem can do a search for the word "gem" and read Steve's commentary. This is what it's all about, the core concept behind profitable trading, it's the Holy Grail.

BTW, I'm now using pullback limit orders more often than stop entries. I remember the first time I ever did a trade that way, taking Bighog's advice for how he would position long during range consolidation in a trend. It felt like the most wrong thing in the world to do. Not only did it work, but the stop loss was significantly smaller than my usual stop on ES. And I realized that the vast majority of inexperienced traders were piling in short where I was bidding long and to them it felt like the most comfortable and "right" thing in the world to do.
 
http://www.bloomberg.com/news/2012-10-12/oil-heads-for-weekly-gain-on-middle-east-tension.html

Overall supply is greater than demand for global oil according to this report. So overall my bias is to short CL. I also decided to trade on Sunday since I felt that the affects of this report on not fully priced into the market. I watched the market on open for a trade setup based on how I trade. I was able to get in short on CL. CL went a little against me, then started to go in my favor. However, today I wanted to make extra money and not just get out on a scalp when it went in my favor, so I was able to psychologically accept that I would take a loss or get a full profit today.

After I made sure everything was setup correctly with stop and target, I stopped watching the market, and played Star Craft II, which I am rated # 1 Gold level for random 4v4. While playing the game I heard my favorite sound, target filled. I also won the game. :-)
 
Quote from oraclewizard77:

I was able to get in short on CL. CL went a little against me, then started to go in my favor.
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Can I ask what price you got short at? I was watching but didn't like the spread I was seeing.
 
The spread was huge which is why I normally don't trade on Sundays and/or low volume times. I think I was instantly down like 7 ticks just getting short. However, my stop was not violated. The problem with the spread is sometimes when your stop is hit, you lose on the stop and the spread.

I am not going to tell you what price I got short, I hope you understand that it took me years to develop this strategy, plus lots of real money.

Quote from Tonkadad:

Can I ask what price you got short at? I was watching but didn't like the spread I was seeing.
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Quote from oraclewizard77:

The spread was huge which is why I normally don't trade on Sundays and/or low volume times. I think I was instantly down like 7 ticks just getting short. However, my stop was not violated. The problem with the spread is sometimes when your stop is hit, you lose on the stop and the spread.

I am not going to tell you what price I got short, I hope you understand that it took me years to develop this strategy, plus lots of real money.
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I was seeing 3-5 tick spreads on the current month, I was expecting it to tighten up a bit. It's been awhile since I have logged in on Sunday don't remember the spread being wide for that long.

Can someone really reverse engineer a strategy by entry price alone? Better safe than sorry.

Actually all you have to do is say that it was a TA based trade, since the majority is hating on anything to do with TA you should be o.k. Everyone knows TA trades are just random occurrences. Just don't mention price drivers, shhhh.
 
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