point taken.....
Michael B.
Michael B.
Damir's Trading Journal
- Thread starter damir00
- Start date
I don't know where the hell traders find a consistent system with a 1:3 risk/reward ratio, I mean I tried a lot of sys, but never found one consistent in the long run with such R/R.
At the beginning of my journey as a trader, I desperately wanted to trade that way" This trade have to be on the money immediately or I'm out" . Well,it was so stressing I eventually gave up and thought I was not good at this game, to me seemed the only sensible way to trade, if I was not able to trade that way ," the easy way" , sure there was something wrong with me.
Imho that's the reason why the majority of traders fail in the long run.
Theoretically and Psychologically it's much easier to aim a 1:3, yeah , what's wrong with that, one shot and you are done.
But wait.. I have only one shot, no time to reload, no room for thinking, no second guess,what if I'm wrong? you have to be a bloody sniper and a good one too.
The very day I realized I'm not and I don't have to be a champion to be profitable, I was shocked.
The answer was there and it's been there for a long time, but I was so focused to be right, i couldn't see it.
No more "one shot" for me, I'm allowed to be wrong sometimes and I can revaluate and adjust my positions in the market accordingly ,to minimize the damage or conquer a better position.
You don't have to be right 100% at the first shot, keep your powder dry for a second a third or whatever your POSITION MANAGEMENT RULES say.
Yes it's painful to be on the wrong side of a trade and you have to forget all the wrong feeling your culture tries to push on you.
The best retailer future traders I know work that way, the well hidden "easy way"
.ps I hope i'm not going broke :eek:
I don't know where the hell traders find a consistent system with a 1:3 risk/reward ratio, I mean I tried a lot of sys, but never found one consistent in the long run with such R/R.
well I suppose that would be an entry based system that could achieve this....examinine a need of only a 30% winrate when using this risk:reward ratio of one-to-three. Perhaps entering at the right time in the direction of a strong trend could net a profitable example....if you do not see a 1:3 ratio then don't enter and trade less. look at S/R and evaluate your entry. Always ask yourself the question, "will support and resistance allow me this ratio and does this trade make sense"?
At the beginning of my journey as a trader, I desperately wanted to trade that way" This trade have to be on the money immediately or I'm out" . Well, it was so stressing I eventually gave up and thought I was not good at this game, to me seemed the only sensible way to trade, if I was not able to trade that way ," the easy way" , sure there was something wrong with me.
I appreciate your experience and respect it. But other Pro Traders have realized that a one to three expectation actually does not mean in the money immediatly. Perhaps trading timeframe and type of setup could be the question here.
Imho that's the reason why the majority of traders fail in the long run. Theoretically and Psychologically it's much easier to aim a 1:3, yeah , what's wrong with that, one shot and you are done.
But wait.. I have only one shot, no time to reload, no room for thinking, no second guess,what if I'm wrong? you have to be a bloody sniper and a good one too.
no time to reload.....I think this is not stated......the 1:3 is on each trade.....
The very day I realized I'm not and I don't have to be a champion to be profitable, I was shocked.
The answer was there and it's been there for a long time, but I was so focused to be right, i couldn't see it.
agreed many novice traders look to the winrate to measure success. Until one learns to cut their losses short and lose more number of times than win they will struggle to be profitable. Now, it is understood and proven that in general "longer time-frame" traders are more successful than scalpers....not buy and hold either.
No more "one shot" for me, I'm allowed to be wrong sometimes and I can revaluate and adjust my positions in the market accordingly ,to minimize the damage or conquer a better position.
I understand, but to evaluate the possibilities of an entry is what I meant to discuss....You do not need to enter!
You don't have to be right 100% at the first shot, keep your powder dry for a second a third or whatever your POSITION MANAGEMENT RULES say.
I agree......
Yes it's painful to be on the wrong side of a trade and you have to forget all the wrong feeling your culture tries to push on you.
Well, thats up to many other factors than emotional issues. does it need to be painful? couldn't one reach the objective without pain? I say yes....
The best retailer future traders I know work that way, the well hidden "easy way"
Please share more about this "hidden easy way".
Michael B.
well I suppose that would be an entry based system that could achieve this....examinine a need of only a 30% winrate when using this risk:reward ratio of one-to-three. Perhaps entering at the right time in the direction of a strong trend could net a profitable example....if you do not see a 1:3 ratio then don't enter and trade less. look at S/R and evaluate your entry. Always ask yourself the question, "will support and resistance allow me this ratio and does this trade make sense"?
At the beginning of my journey as a trader, I desperately wanted to trade that way" This trade have to be on the money immediately or I'm out" . Well, it was so stressing I eventually gave up and thought I was not good at this game, to me seemed the only sensible way to trade, if I was not able to trade that way ," the easy way" , sure there was something wrong with me.
I appreciate your experience and respect it. But other Pro Traders have realized that a one to three expectation actually does not mean in the money immediatly. Perhaps trading timeframe and type of setup could be the question here.
Imho that's the reason why the majority of traders fail in the long run. Theoretically and Psychologically it's much easier to aim a 1:3, yeah , what's wrong with that, one shot and you are done.
But wait.. I have only one shot, no time to reload, no room for thinking, no second guess,what if I'm wrong? you have to be a bloody sniper and a good one too.
no time to reload.....I think this is not stated......the 1:3 is on each trade.....
The very day I realized I'm not and I don't have to be a champion to be profitable, I was shocked.
The answer was there and it's been there for a long time, but I was so focused to be right, i couldn't see it.
agreed many novice traders look to the winrate to measure success. Until one learns to cut their losses short and lose more number of times than win they will struggle to be profitable. Now, it is understood and proven that in general "longer time-frame" traders are more successful than scalpers....not buy and hold either.
No more "one shot" for me, I'm allowed to be wrong sometimes and I can revaluate and adjust my positions in the market accordingly ,to minimize the damage or conquer a better position.
I understand, but to evaluate the possibilities of an entry is what I meant to discuss....You do not need to enter!
You don't have to be right 100% at the first shot, keep your powder dry for a second a third or whatever your POSITION MANAGEMENT RULES say.
I agree......
Yes it's painful to be on the wrong side of a trade and you have to forget all the wrong feeling your culture tries to push on you.
Well, thats up to many other factors than emotional issues. does it need to be painful? couldn't one reach the objective without pain? I say yes....
The best retailer future traders I know work that way, the well hidden "easy way"
Please share more about this "hidden easy way".
Michael B.
The time frame of the trade and the periodicity traded will also be a factor in determining the #'s for this one-to-three ratio.....
Generally, Longer time-frames use larger #'s. But I know of a trader who scalps off of longer periodicity bars...but I am not willing to discuss this as it is a work in progress for me.
Michael B.
Generally, Longer time-frames use larger #'s. But I know of a trader who scalps off of longer periodicity bars...but I am not willing to discuss this as it is a work in progress for me.
Michael B.
Hi Electric
Thanks for your reply.
Certainly i was not clear.
I'm not saying 1:3 is wrong or it's not achievable.
Simply it's not for me and probably it doesn't fit my playground (time frame) or maybe it's just me and my current perception of what works or not.
I'm not good at trading trends, I prefer to trade countertrend, even though I'm not a rocket scientist at picking tops and bottoms, but with appropriate Position Management, I'm able to gain decent money.
My style is very similar to Damiri's, (that's why I'm interested in this thread) but my bread and butter is nasdaq stocks.
I never thought of applying my style to futures, well it's all Damiri's fault
I was trying to trade futures the same way I failed at the beginning with stocks , stupid enough uh !
The easy way you ask me, well you have to keep reading this thread and the old posts.
Easy, isn't it ?
p.s. Seriously! Lots of good traders trade this way, but they are not good enough to let you know
Thanks for your reply.
Certainly i was not clear.
I'm not saying 1:3 is wrong or it's not achievable.
Simply it's not for me and probably it doesn't fit my playground (time frame) or maybe it's just me and my current perception of what works or not.
I'm not good at trading trends, I prefer to trade countertrend, even though I'm not a rocket scientist at picking tops and bottoms, but with appropriate Position Management, I'm able to gain decent money.
My style is very similar to Damiri's, (that's why I'm interested in this thread) but my bread and butter is nasdaq stocks.
I never thought of applying my style to futures, well it's all Damiri's fault
I was trying to trade futures the same way I failed at the beginning with stocks , stupid enough uh !
The easy way you ask me, well you have to keep reading this thread and the old posts.
Easy, isn't it ?
p.s. Seriously! Lots of good traders trade this way, but they are not good enough to let you know
All this is interesting and some over my head. It sounds like some people do calculate mathematical formulae to determine risk/reward. I'm no good at algebra or arithmetic and I'd be puzzling over it for a month, losing my entry. Yet, I find it useful to do two things, each in different situations.
I can follow a mathematical strategy that's been set for me. In certain of my stock situations, I use a software program which was written to automatically set buys and sells. It's a contrarian strategy formulated by Robert Lichello, and you decide the amount of risk you'll maintain in one stock or vehicle in advance, investing part and holding back part. Then you add shares, from that cash as stock drops, and sell as stock rises, putting the cash generated into the fund for that stock. A lot of elements can be tweaked but basically, if the stock goes up and down, you do really well, and if it just goes up, you don't do as well as buyandhold, and if it just goes down, you run out of cash and have to stop buying. Even though you can tweak a lot of elements, you're basically limiting your risk, and usually do better with profits than giving up and selling when a stock goes against you. This is a long term program, however.
Still there are aspects that are applicable to trading. You assume from the first that your vehicle will go against you some of the time, and that you can take advantage of that by buying from the weak (the people who are panicking and selling) and selling to the greedy (the people who will buy a stock that has already risen a lot).
With this program your next trades are established in advance, so you can leave GTC orders to buy and to sell, all the time, and just change them when one of the two is filled. You can adjust your numbers, but the concept is a planned concept.
I think a lot of this is applicable to the trading of these futures. With Lichello's program if I need cash I'll adjust down the degree of profit I'll be taking on my next SELL. In futures trading and in stock trading, too, if I want to cash out sooner than later, I'll adjust down the degree of profit I'll be taking on the sell, too.
I operate in trading with a goal in mind and I will sometimes move it out, if things look very strong, pull it in, if things look weak. But some don't start with a set goal, I think -- just watch their indicators and follow those. So if their indicators turn against them, they sell right away.
How do the rest of you handle this question of when to take the profits? And how do you determine the degree of risk and degree of reward on entry?
Also, when does IB usually come back online? Do they take one day for Sabbath observances or two? lol
I can follow a mathematical strategy that's been set for me. In certain of my stock situations, I use a software program which was written to automatically set buys and sells. It's a contrarian strategy formulated by Robert Lichello, and you decide the amount of risk you'll maintain in one stock or vehicle in advance, investing part and holding back part. Then you add shares, from that cash as stock drops, and sell as stock rises, putting the cash generated into the fund for that stock. A lot of elements can be tweaked but basically, if the stock goes up and down, you do really well, and if it just goes up, you don't do as well as buyandhold, and if it just goes down, you run out of cash and have to stop buying. Even though you can tweak a lot of elements, you're basically limiting your risk, and usually do better with profits than giving up and selling when a stock goes against you. This is a long term program, however.
Still there are aspects that are applicable to trading. You assume from the first that your vehicle will go against you some of the time, and that you can take advantage of that by buying from the weak (the people who are panicking and selling) and selling to the greedy (the people who will buy a stock that has already risen a lot).
With this program your next trades are established in advance, so you can leave GTC orders to buy and to sell, all the time, and just change them when one of the two is filled. You can adjust your numbers, but the concept is a planned concept.
I think a lot of this is applicable to the trading of these futures. With Lichello's program if I need cash I'll adjust down the degree of profit I'll be taking on my next SELL. In futures trading and in stock trading, too, if I want to cash out sooner than later, I'll adjust down the degree of profit I'll be taking on the sell, too.
I operate in trading with a goal in mind and I will sometimes move it out, if things look very strong, pull it in, if things look weak. But some don't start with a set goal, I think -- just watch their indicators and follow those. So if their indicators turn against them, they sell right away.
How do the rest of you handle this question of when to take the profits? And how do you determine the degree of risk and degree of reward on entry?
Also, when does IB usually come back online? Do they take one day for Sabbath observances or two? lol
Quote from mark1:
it's all Damir's fault
i aim to please.
well i'd like to talk to some of them. i wake up every morning wondering if that day will be the day the market shows me the systemic flaw i've overlooked, it would be comforting to hear from someone with longer-term success.
from what i know of it, Lichello's system isn't at heart any different than the 1-800-Channelling-Stocks method. 1-800 is all-in all-out while Lichello scales, but both depend on cyclicality and are highly dependant on getting the initial position correct.
since there is no way of predicting which stocks are going to cycle, which cycling stocks will keep cycling, which stocks are going to Zero etc you have to pick a big enough basket to diversify, which means you're closet-indexing anyway, so i'm wondering why not just work with an index directly? at least that is less likely to go to zero.
since there is no way of predicting which stocks are going to cycle, which cycling stocks will keep cycling, which stocks are going to Zero etc you have to pick a big enough basket to diversify, which means you're closet-indexing anyway, so i'm wondering why not just work with an index directly? at least that is less likely to go to zero.
I don't know the 1-800-channeling-stocks method, but from what you say, it's different from AIM (Lichello's system) both if it's confined to stocks and also if it gets you entirely in and out of a vehicle. A flaw in AIM is that AIM never gets you all-out. You have to decide that independently of AIM.
I use AIM for many long term positions, not just stocks -- it can be used for indexes, funds, almost anything, not just stocks. There's no reason to use it just for stocks.
You're right that it affords no protection there against an investment failing and not recovering. AIMing on WCOM would still give you an investment worth nothing.
The parts of AIM that I find most useful is that it helps you set defined criteria for buying more and selling some, so you take profits and also buy as it drops in price. It assumes a volatility, not a single direction and it doesn't let you passively hold during bad times. But with a failed investment if you blindly follow it, you end up with all the money for that vehicle in that vehicle and lost, and with an investment that grows to the sky if you follow it blindly, you end up with most of your money out, not having advantage of all the profits you could have.
My use for AIM during the past year or so, has been as a vehicle to salvage bad trades. This has worked mostly very well -- 90% or so successfully.
One of my own flaws, as you remember, is not getting out, so I'd pick a stockI thought was a good stock for a quick trade and sometimes would end up with a big loss in it. Rather than sell it off, putting it into AIM turned it into a profitable situation and then I'd either sell it off for the profit or hold it in AIM for a bigger profit. Most stocks don't go to zero, but I certainly do own some that did.
I've only recently been coming to the conclusion that you seem to have arrived at, that you have a better chance in an index than an individual stock -- and most of my money is still in stocks. My portfolio might look very different in six months. On the other hand, didn't the indexes mostly go down for three years, so even though they don't go to zero, you can lose a bundle if you're BuyAndHold in the indexes. You still have to define beneficial entry and exit criteria.
I use AIM for many long term positions, not just stocks -- it can be used for indexes, funds, almost anything, not just stocks. There's no reason to use it just for stocks.
You're right that it affords no protection there against an investment failing and not recovering. AIMing on WCOM would still give you an investment worth nothing.
The parts of AIM that I find most useful is that it helps you set defined criteria for buying more and selling some, so you take profits and also buy as it drops in price. It assumes a volatility, not a single direction and it doesn't let you passively hold during bad times. But with a failed investment if you blindly follow it, you end up with all the money for that vehicle in that vehicle and lost, and with an investment that grows to the sky if you follow it blindly, you end up with most of your money out, not having advantage of all the profits you could have.
My use for AIM during the past year or so, has been as a vehicle to salvage bad trades. This has worked mostly very well -- 90% or so successfully.
One of my own flaws, as you remember, is not getting out, so I'd pick a stockI thought was a good stock for a quick trade and sometimes would end up with a big loss in it. Rather than sell it off, putting it into AIM turned it into a profitable situation and then I'd either sell it off for the profit or hold it in AIM for a bigger profit. Most stocks don't go to zero, but I certainly do own some that did.
I've only recently been coming to the conclusion that you seem to have arrived at, that you have a better chance in an index than an individual stock -- and most of my money is still in stocks. My portfolio might look very different in six months. On the other hand, didn't the indexes mostly go down for three years, so even though they don't go to zero, you can lose a bundle if you're BuyAndHold in the indexes. You still have to define beneficial entry and exit criteria.