Day-Trading 2.0 for small traders

[pkchilly]

Hey jjrvat, here are some trades along with those I posted last night, does this type of major scalping pan out in the long run? I've traded with the jpy like this for about 3 months and post consistent profits, but just wondering if you have insight--of course, commissions eat into profits when you have 3-5 tick wins, a couple b/e's and a couple 3-5 tick losses. But at ~$6/lot of total costs and with jpy at $12.50, the win ratio becomes manageable. I'm usually at about 8 wins, 1 b/e, and 1 loss out of 10 trades. In any case, just wondering your thoughts--these are mini trades...lol

Oh, I should note this is a 2 tick chart, I traded these on a 1 tick chart, but couldn't get it sized right so you could see the whole move.

pk

 

[jjrvat]

Pk,

Does this type of major scalping pan out in the long run? I've traded with the jpy like this for about 3 months and post consistent profits… the win ratio becomes manageable. I'm usually at about 8 wins, 1 b/e, and 1 loss out of 10 trades.

It’s difficult to say something about your analysis if you have been posting consistent profits for 3 months, your win ratio seems outstanding and your last post shows a flawlessly price analysis with the natural complexities and distortions of entries and exits in a very “advanced” chart with a no so easy timeframe.

I know you have been trading very fast charts for a while and also it seems that you move on and build upon from the rainbow setup (…finally … lol…not just joking) why u still using V lines with ticks charts (It doesn’t change anything if use them or not it just an idea to have cleaner charts).

There are undeniable advantages of trading really fast charts: tight stops, quick profits, millions of potential trades, price in the purest form, what u see in a 1 tick chart is what is happening and where market is going regardless of any S/R line, Pivot, Fibonacci retrace, etc. Moreover, you reduce anxiety to exit early and if you have a bad trade it just hit your stop in secs before you even have time or the temptation to move it up or down.

However, the perfection and concentration required to trade charts like that can be exhausting and confusing if you aren’t 150% focus. But the only serious concern on your 1 tick charts is regarding manual execution. You are moving from forex to futures and planning to move from the sim to live trading (your data has 15 min delay …you are demo trading right?) so you should be extremely aware that you may not get the fills you are getting on the sim. In the sim you get filled as soon as your order is hit (if you use limit order for entries or exits) in real live is not always like that.

I like a lot the 6Jxx (is “slow” but smooth most of the time)and in my opinion it’s an excellent option for your 1 or 2 tick charts because each bar is relatively slow (+/-from 1 sec to 1 min) to allow you to read, analyze and pull the trigger. However, when you have a trading range of only 5 ticks not only your analysis must be flawless but your execution has to be perfect. In reality let’s assume you entry with markets orders, if you entry with a perfect click you may (usually) have a fill 1 tick above (not because of the market or your broker but because the time required for the information to pass), the same for an exit. You end up with +/- 3 tick range in a perfect trade… you should count at least -2 ticks when you go live. If you use limit orders in such fast conditions (price stay at your entry only a few secs) you may not get filled at all. And all that assuming only 1 contract …

The long term problem of this (a part of losing money in the short term) is that you may start with the vicious circle of looking for very big rides in small charts (read the endless posts of 90% of struggling LT rainbow traders … not the very few that “made it” )

My only recommendation is to consider this issue before you go live.

As to wma's as triggers, I have used them b4, but I find the consistency to be limited to time frame and analysis of price action.. Crazy consistent, but what about tomorrow?

“Long run is a misleading guide to current affairs. In the long run we are all dead” John Maynard Keynes

Finally an economist quotation that make sense in trading !!!

I was more referring to how you figure which one is going to be a better guide for direction changeovers. I look forward to your expanded conversation on developing triggers consistent with price action--that's where the money lies.

I’ll develop on this in the next posts

jjrvat

 

[pkchilly]

Hey jjrvat,

Yes, I am still trading on a demo account with Mirus and that's part of the reason for my question--thanks for your candid answer. Trading short positions can be very fulfilling because of the tempting idea of profits, short stops, etc. but as you so aptly put it, live fills really count in the analysis of it all. There is a part of me that hopes that in the end it will work, but I am also trying to get better at longer trade frames. I am not currently trading with market orders, i've been using stop limit orders with a 1 tick margin and I've been happy with them, but again, it's not a real environment. We'll see what my longer term (30sec, etc) trades turn up. In the mean time, I took the liberty of removing the v lines just for you...lol. Thanks a lot, I like it a whole lot more (never did quite get the meaning for them although LT seemed to thing they were the bees knees!), and I've been spending an awful lot of time changing things around to find a chart I'm comfortable with. I'll share some of these later today.

 

[pkchilly]

Oh, one more thing, I should 2nd your comment jjrvat about the jpy, it seems to sit at places for a while, so I think scalping fills may possibly be possible to be absolutely redundant...lol. I'll see when I get the live account up and running. I haven't done that yet, because I really don't like losing money--b4 I got into real estate I spend skads of time learning about it and talking to other people who were doing it--and, well, it paid off when I went to flip my first house--and then again when I went to landlord my first house...Anyway, I've got tons of time to learn and get things right b4 jumping in--I really don't want to be a part of the 95%...lol Oh, well, enough of my rambling. pkchilly

 

[amitman]

Hi jjvrat
thank you very much for your answers, I think i'm slowly starting to get it. today i traded the spy now waiting both for a change of slope and a low below last low and... 6 winners out of 6 in the first hour an a half of trading, of course charts look much clearer now. and you were also right, my stops and targets didn't match the ATR so I tweaked them today to get much better resulst.
have a few questions tough:
1) I started today looking at 3 different charts of the spy (0.1 range bar charts, 500,000 vol charts and 30 seconds chart) until i found the time chart to be the most clearer and most profitable so i traded with them. but as we seen just yesterday it can all change, my question is, do you suggest looking at three different charts every day to see which chart have the clearer waves and trade with this chart? or, if you think i should stick with just one of them then if the waves are not too clear then just now trade?

2) I have a problem in my charting software (QT) that the slope is changing with the price right now, so i might have a problem that a new bar has strated and the slope changed and i enter a trade but then immidielty the bar goes against my direction and by the time it closes the slope has changed back.
this is a real problem becuase when you'll look at the end of the day on the chart you won't see this failng trade becuase at the end of the day you won't see this change of slope that happened in real time and then immidielty reversed.
I don't know how your softaware calculate the change of slope but what do you suggest doing in that case? would you exit immidielty since you see you have a false signal? would you wait for you stop to be hit?
would you not enter at all until you are shure the HMA changed it slope and not going to reverse all of a sudden? because that might be too late...

3) and a last question, sort of the same as the last one. when i have a very long bar that crosses the HMA as you yourself said i don't have to wait for the close becuase in some point of the long bar i already know a new wave has started.
my problem here is that i won't see the change of the slope until the bar has closed but as you said it's might be to late... do you suggest entering long bars before they close even if the slope hadn't chage yet? and how should i detemine when to enter?
thank you again.

anyways here is the chart of the spy today, the white arrows mark where the slope changed.

 

[rdhtci]

Quote from jjrvat:

“Long run is a misleading guide to current affairs. In the long run we are all dead” John Maynard Keynes

Finally an economist quotation that make sense in trading !!!
jjrvat

-- there's actually another good quote from JMK:

"The market can remain irrational longer than you can remain solvent." - J.M. Keynes

Tell me about it

Rob

 

[jjrvat]

Developing a price based trading plan (PBP) #2

Indicators

Price action is definitively the key for successful trading. You can hear from “unbeaten” investors, pro traders and scalpers that price (and/or fundamentals) is the only thing you need. You read that indicators are bad, lagging, distort trading, blur analysis, etc ,etc ,etc. There is in general a “satanization” for the use of indicators, nevertheless it’s almost impossible to find a trader that don’t use them in one way or another and just spending a few minutes online and you can see hundreds of thousands web pages, forums, fortune tellers and software developers offering you the last and most advanced unique indicator for beating the markets.

I do agree that price analysis is essential but indicators can be useful to facilitate trading if used properly. The negative remarks on indicators are usually true but the crucial issue is not in the indicators themselves but in how and why do you use them. There is an expression in Latin that can be used to reveal the full potential of indicators in the context of a PBP: cui bono? , commonly used as what is the good of it? *** (Merriam-Webster Dictionary. Latin: to whose advantage? D: usefulness or utility as a principle in estimating the value of an act or policy)

Moving down to a more practical level, the first important aspect when analyzing the cui bono of indicators is establishing the different kind of indicators in a PBP:

1. Direction Indicators (Macro direction):PRICE, Pivot points, macro S/R lines, daily HLC, multiple MAs, etc.
2. Price Analysis Indicators (Wave analysis and current direction): PRICE, MAs, MACD, Candlesticks, CCI, Ichimoku Cloud, Zig Zag, etc.
3. Indicators for triggers, exits and failures (Timing): PRICE, MAs, Stochastics, A/O Histogram, Williams %R, RSI, DMI/ADX, CCI, Ichi Kinko Hyo, Horizontal lines, etc.

Again the order of analysis is very relevant. Why? If so far you have a consistent timeframe, you accurately know macro direction and wave analysis the indicators for the 3rd category will be easier to find and tweak (for quick examples see the SPY charts above).

The next step is testing the best options for your trading plan but without forgetting that every time you introduce an indicator you have to ask: what is the good of it? (cui bono?). It sounds like a dull obvious theoretical question but behind the answer is, in my opinion, the key to keep your chart and indicators simpler, cleaner and easier to trade.

I’ll continue later with real charts…

jjrvat

PS:
Rob, Brilliant quote!!! + plus very relevant …ask the guys in BEAR STEARNS…
Amitman, I’ll reply to you later.

 

[timokrates]

Hi jjrvat,

I would like to post this screenshot with 3 scalps auf US news today.

I adjusted the target according to my analysis of price action, so I had two 5 point wins and one 3 point win.

I have to say that I like to have just a MA as a trigger. For me it's also a tool that keeps me disciplined - and shows me, if I violate my rules.

Working on the parameters any comments regarding trigger, timeframe and reward are highly appreciated.

Do you have fixed setups for all contracts you trade? Or do you have a base setup that you adjust, like 25 Hull MA on a special timeframe?

<img src="http://www.250kb.de/u/080327/p/1dce90d6.png">

 

[jjrvat]

Developing a price based trading plan (PBP) #3

Indicators #3
I just read a post about shorting the EUR/USD because is topping… so why not use it as an example for the discussion on indicators.
The first chart should be always based on pure price and only after if necessary (a chart is difficult to read, lack of screen time, etc, etc) introducing indicators as visual aids, triggers or/and for potential failures on timing.

1st Chart:

Direction Indicators (Macro direction):
1. Price
How to use it? Common sense. Plot a good range of bars. Take the first bars on the right of the screen and compared the last bars on the left. Bars on the right lower/macro direction up, higher/down, not sure/stay aside.
2. S/R lines and Channels based on “clear” highs or lows
What is the good of it? To visualize if the market is going to keep moving in one direction or its going to change and also predefining maximum profit targets.
How? Basic charting tools. Lines connecting price.

Price Analysis Indicators (Wave analysis and current direction):
1. PRICE
How to use it? Common sense. For example 3 consecutive higher/lower bars close for defining high/lows (Green dots/Red dots in the chart)

Indicators for triggers, exits and failures (Timing)
1. Random line
What is the good of it? To have a clear and predefined trigger and stop loss
How to use it? plot an horizontal line wherever you want in the range of the chart of course. If PRICE closing above/below trigger. To make it a little “more technical” I’ll plot horizontal lines every 0.050 as a trigger

None of the indicators help us managing a winning trade (that’s another topic for discussion…) so for the sake of the example, half of the position can be close at 100 ticks PT and the other at R lines with a trailing stop of 50 ticks (this # is random).

Summary

Green arrows = perfect entries. The tick profit ranges for each winner were >300 / >500 and > 400
Red arrows = some examples of valid HH/LL with potential triggers but in the wrong macro direction
? marks = entry points according to the trigger but not with price analysis (HH/LL)
(X) = failed trade (whipsaw). Only one long on 1.3033 next day stop hit at the H line 1.2999 (-34 ticks)

The system seems to be working fine. Obviously you can argue that this an ex post chart so it’s easy to plot lines and mark good trades but look at the same chart today updated until few minutes ago (same explanation for arrows and marks). 1 missed trade and 2 winners including the current (>300 ticks and so far >1000 ticks the last one!!!)

Can we trade live just with this system (why not?) so far there are HH and HL …

But the important issue here is do you need to introduce indicators? What will be the cui bono?

Apparently, the weakest issue is not trading some valid trigger signals ‘cause lack of price analysis (so what?). Entries are very clear and apparently very effective, stop losses are at the minimum (low risk), P/L ratio seems more than perfect and we even have time to read the potential news and fundamentals that can affect price… SO?

I’ll continue later …

jjrvat

PS: Timokrates before I go in detail I understand the 3 trades in the middle but are the 1st and the last one longs?

 

[timokrates]

Yes these are all longs, but the first for exmaple was not an entry according to my plan and so I killed it - as mentioned, I try to build up discipline...

The last one is also a long, which would have been an additional winner, but I exited this one before, because there was no real action in the market.

Do you have a rule when you exit a trade in regards to time or market development?

Please consider that I'm experimenting a lot at the moment, but the fast (T)MA on a fast tick chart is my favorite setup at the moment. In terms of pivots, I have them on my charts, but I would trade against them if I see strength or weakness at a certain level.

PS: Timokrates before I go in detail I understand the 3 trades in the middle but are the 1st and the last one longs?