Day-Trading 2.0 for small traders
- Thread starter jjrvat
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I believe you are calculating R/R with known data.
Doesn't R/R have to be calculated before you enter the trade so you know where to put your stop?
My point is that looks like very good R/R in that image, but you had no idea of knowing how much the trade would go in your favor before you took it and therefore cannot say that it had good R/R.
R/R is "I am entering this trade at 100 and my stop loss is 98 and my profit target is 104. My R/R for this trade is 1:2 (2 ticks loss, 4 ticks gain)."
R/R isn't "looking at this historical data, I see that if I had called the bottom while I had a short position on, I would've had a favorable R/R."
Please correct me if my definition of R/R is wrong.
Given the # of questions/doubts/ideas in the last posts Iâll make a pause in the QM PBP to address some of these comments.
â⦠markets are set up to naturally take advantage of and prey upon human nature, moving sharply only when enough people get trapped on the wrong side of a trade. This sweeps a burst of fear, frustration and rage into the markets...â
âI went through three very distinct phases in my trading career. Iâve found that most of the traders go through these same phases in one fashion or anotherâ¦.
Phase I: Destined to Lose â Six months to a year â¦......
Phase II: Fear-Based Trading â Everything I touch turns to crap - two to six months:
When traders decide they donât want to lose any more money, they unwittingly turn themselves into the late entry champions of the trading world⦠In this scenario, the markets start to rally, and by the time the trader is absolutely convinced that is for real he or she is jumping near the dead highs of the move â¦
Once traders figure out that they can stick to their stops, but that their entries are suffering, they reach what alcoholics refer to as a âmoment of clarityâ. If the tradersâ entries are bad, then obviously their indicators are bad. So they go looking for some better ones. And thus begins the search for the Holy Grail. .....
Phase III: Search for the Holy Grail â Holding your breath is not advised - Six months to death:
The search for that fail-safe indicator thatâs going to work nearly every time takes a trader down a path littered with corpses, broken dreams, and stuttering fools. Many traders stay on this search for the rest of their lives. The irony is that individuals in this phase think they are developing as traders, when in reality their development as traders is dead in the water⦠Traders in Phase III are stuck in quicksand, entrenched in a losing game that last years, decades, or longer. The end result is a trader who spends this time repeating the same mistakes over and over again or happily discovering new onesâ¦
In a typical scenario, this means diving headlong into a couple of different trading programs or ideas and endlessly tweaking them until they reveal their magic⦠This type of trader typically dies with a one-page summary of how well the trade works, and a a stack of 68 pages that explain when not to take the trade. Other traders stick in Phase III ⦠learn about trends, and learn the importance of never fighting the trend. They discover the magic of moving average and how they cross over when the trend changes. OH, the power! When the market is trending, they work beautifully. Eventually, though, they get discouraged when they figured out that 75 percent of the time markets are trading sideways, as professionals chop the Holy Grail seekers into mincemeatâ¦......
Phase IV: represents the time that a trader has become consistently profitable â¦â..... John F Carter âMASTERING THE TRADEâ Chapter 2 pp. 17 -33
Ironfist,
I really donât know where to start, your last posts say a lot about your PBP and contain a lot of doubts and fears, in my opinion, some appear to be valid some others appear to be product of anxiety to have a profitable trading plan. In any case, if you havenât done it yet, I would recommend reading John F Carter book âMASTERING THE TRADEâ especially the chapter quoted above.
Second, triplepack, womblevader , Jeffizcool, Mr_Black, nkhoi and shasha have posted some good advices in their last posts.
Shasha post and chart â⦠I think there is one piece of PBP missing in these trades. That's to trade with macro direction â¦â and Jeffizcool â Thats all and good but you need to realize the reason for a steep slope of the WMA (HMA or whatever). it is a moving average and it will always lag the price so a steep slope for the moving average means price has moved significantly already and a pull back may be due. this lowers the probablity .. But you need to undertand how they function with price which is the ultimate leaderâ contain key concepts that could help you to answers most of your doubts in your previous posts.
Third, I will give you my opinion in the next postâ¦
jjrvat
â⦠markets are set up to naturally take advantage of and prey upon human nature, moving sharply only when enough people get trapped on the wrong side of a trade. This sweeps a burst of fear, frustration and rage into the markets...â
âI went through three very distinct phases in my trading career. Iâve found that most of the traders go through these same phases in one fashion or anotherâ¦.
Phase I: Destined to Lose â Six months to a year â¦......
Phase II: Fear-Based Trading â Everything I touch turns to crap - two to six months:
When traders decide they donât want to lose any more money, they unwittingly turn themselves into the late entry champions of the trading world⦠In this scenario, the markets start to rally, and by the time the trader is absolutely convinced that is for real he or she is jumping near the dead highs of the move â¦
Once traders figure out that they can stick to their stops, but that their entries are suffering, they reach what alcoholics refer to as a âmoment of clarityâ. If the tradersâ entries are bad, then obviously their indicators are bad. So they go looking for some better ones. And thus begins the search for the Holy Grail. .....
Phase III: Search for the Holy Grail â Holding your breath is not advised - Six months to death:
The search for that fail-safe indicator thatâs going to work nearly every time takes a trader down a path littered with corpses, broken dreams, and stuttering fools. Many traders stay on this search for the rest of their lives. The irony is that individuals in this phase think they are developing as traders, when in reality their development as traders is dead in the water⦠Traders in Phase III are stuck in quicksand, entrenched in a losing game that last years, decades, or longer. The end result is a trader who spends this time repeating the same mistakes over and over again or happily discovering new onesâ¦
In a typical scenario, this means diving headlong into a couple of different trading programs or ideas and endlessly tweaking them until they reveal their magic⦠This type of trader typically dies with a one-page summary of how well the trade works, and a a stack of 68 pages that explain when not to take the trade. Other traders stick in Phase III ⦠learn about trends, and learn the importance of never fighting the trend. They discover the magic of moving average and how they cross over when the trend changes. OH, the power! When the market is trending, they work beautifully. Eventually, though, they get discouraged when they figured out that 75 percent of the time markets are trading sideways, as professionals chop the Holy Grail seekers into mincemeatâ¦......
Phase IV: represents the time that a trader has become consistently profitable â¦â..... John F Carter âMASTERING THE TRADEâ Chapter 2 pp. 17 -33
Ironfist,
I really donât know where to start, your last posts say a lot about your PBP and contain a lot of doubts and fears, in my opinion, some appear to be valid some others appear to be product of anxiety to have a profitable trading plan. In any case, if you havenât done it yet, I would recommend reading John F Carter book âMASTERING THE TRADEâ especially the chapter quoted above.
Second, triplepack, womblevader , Jeffizcool, Mr_Black, nkhoi and shasha have posted some good advices in their last posts.
Shasha post and chart â⦠I think there is one piece of PBP missing in these trades. That's to trade with macro direction â¦â and Jeffizcool â Thats all and good but you need to realize the reason for a steep slope of the WMA (HMA or whatever). it is a moving average and it will always lag the price so a steep slope for the moving average means price has moved significantly already and a pull back may be due. this lowers the probablity .. But you need to undertand how they function with price which is the ultimate leaderâ contain key concepts that could help you to answers most of your doubts in your previous posts.
Third, I will give you my opinion in the next postâ¦
jjrvat
Ironfist,
I am not going to micro details in your post because I think 90% of the problems you mentioned in your posts are related to the macro picture. IMHO, either you are diminishing the importance of the basic premises (minimizing risk, order or analysis, delimiting your Trading Field and price analysis) or you are overseeing these factors in favor of the technicalities of your PBP (indicators, triggers, stops, drawdowns, etc). In any case, some very concise comments:
1. On Thursday 29th May you post âI've been more profitable over the past 2 weeks of paper trading than ever beforeâ so I am going to assume that your last posts referred only to the âproblemsâ of your PBP and not how to squeeze more profits from your good trades (âgreedâ)
2. Timeframe: It appears to me that you donât fully comprehend the dimension of the 500 VOL YM chart. You complained that there are some trades that donât respect HH/LL and they move a lot and there are other âperfect setupsâ that miserably fail without even 1 tick in your favor. What is the average true range of the waves in a 500 VOL YM chart? What about in a âperfect setupâ WAVE? In what % of these ranges are your targets? Stops?. What are the probabilities (in your experience) of having a good trade when you respect your PBP? And when you donât? what about drawdowns?
3. Time: âI have not found a certain time of day to be more profitable than others, so I try to take every trading opportunity that presents itselfâ In my opinion this is a big mistake at the beginning. If you try to trade every single move during a day you are only increasing the risk of losing money and perspective, you will be doom in the long run if you donât master every move in every circumstance which is almost impossible to achieve if you havenât been trading and consistently profitable for a long, very long time.
4. In other words, you are not delimiting you trading field properly and you are looking for âreasonsâ to explain why this or any other trading plan doesnât work in every single scenario. For example (see chart below) you post that on Wednesday 28th you took 20 trades with a loss of -28 ticks (-48 including commissions) and when I check this chart I was surprise to find there were only 14 round waves (H and L) during the whole day meaning that you not only trade every single wave but you took 6 trades over that simple limit (overtrading).
5. Moreover, from the 14 waves available there were ONLY 8 trades that respected price analysis. 6 blue arrow winners with few ticks drawdown and 2 bad brown arrow trades with 12 ticks loss (each). The first brown arrow was a real failure because it broke the ânatural stopâ and the second was a whipsaw because it never broke the last swing low and it was confirmed a few bars after. Discussing how to âavoidâ (or how to accept the cost of doing business) itâs not the main issue here, the point is that you took 12 trades above this second basic limit.
6. In my opinion, the obvious result of failing to comprehend the basic premises in a PBP (minimizing risk, order or analysis, delimiting your Trading Field and price analysis) is having thousand of doubts and poor consistency and efficiency. Since the 9th of May until the 30th you took +/- 245 trades with 113 tick profit meaning: 1. Your broker made more money than you!!! 2. You average a +/- 2 tick per trade which is inefficient and totally inconsistent with a 500 VOL Chart. 3. You get overconfident in trending days (thatâs easy) but lose a lot of money in non trading days 16th 28th and 30th of May which is a dangerous symptom and show how bad is not respecting or overseeing these basic premises in your PBP when only following an amateurish and basic 1 to 1 R/R of 10 ticks will have put you in profits every single day (+25 ticks on the 28th) (I havenât double check the exact numbers for the other days ...) with at least less than a third of trades.
7. My only advice is that before you go crazy tweaking, changing and inventing better triggers and indicators, just try to analysis these macro issues first, only when you fully understand these premises in your PBP you will be able to âimproveâ the real problems, otherwise you are only delaying the failure of your PBP.
I hope it helps
jjrvat
I am not going to micro details in your post because I think 90% of the problems you mentioned in your posts are related to the macro picture. IMHO, either you are diminishing the importance of the basic premises (minimizing risk, order or analysis, delimiting your Trading Field and price analysis) or you are overseeing these factors in favor of the technicalities of your PBP (indicators, triggers, stops, drawdowns, etc). In any case, some very concise comments:
1. On Thursday 29th May you post âI've been more profitable over the past 2 weeks of paper trading than ever beforeâ so I am going to assume that your last posts referred only to the âproblemsâ of your PBP and not how to squeeze more profits from your good trades (âgreedâ)
2. Timeframe: It appears to me that you donât fully comprehend the dimension of the 500 VOL YM chart. You complained that there are some trades that donât respect HH/LL and they move a lot and there are other âperfect setupsâ that miserably fail without even 1 tick in your favor. What is the average true range of the waves in a 500 VOL YM chart? What about in a âperfect setupâ WAVE? In what % of these ranges are your targets? Stops?. What are the probabilities (in your experience) of having a good trade when you respect your PBP? And when you donât? what about drawdowns?
3. Time: âI have not found a certain time of day to be more profitable than others, so I try to take every trading opportunity that presents itselfâ In my opinion this is a big mistake at the beginning. If you try to trade every single move during a day you are only increasing the risk of losing money and perspective, you will be doom in the long run if you donât master every move in every circumstance which is almost impossible to achieve if you havenât been trading and consistently profitable for a long, very long time.
4. In other words, you are not delimiting you trading field properly and you are looking for âreasonsâ to explain why this or any other trading plan doesnât work in every single scenario. For example (see chart below) you post that on Wednesday 28th you took 20 trades with a loss of -28 ticks (-48 including commissions) and when I check this chart I was surprise to find there were only 14 round waves (H and L) during the whole day meaning that you not only trade every single wave but you took 6 trades over that simple limit (overtrading).
5. Moreover, from the 14 waves available there were ONLY 8 trades that respected price analysis. 6 blue arrow winners with few ticks drawdown and 2 bad brown arrow trades with 12 ticks loss (each). The first brown arrow was a real failure because it broke the ânatural stopâ and the second was a whipsaw because it never broke the last swing low and it was confirmed a few bars after. Discussing how to âavoidâ (or how to accept the cost of doing business) itâs not the main issue here, the point is that you took 12 trades above this second basic limit.
6. In my opinion, the obvious result of failing to comprehend the basic premises in a PBP (minimizing risk, order or analysis, delimiting your Trading Field and price analysis) is having thousand of doubts and poor consistency and efficiency. Since the 9th of May until the 30th you took +/- 245 trades with 113 tick profit meaning: 1. Your broker made more money than you!!! 2. You average a +/- 2 tick per trade which is inefficient and totally inconsistent with a 500 VOL Chart. 3. You get overconfident in trending days (thatâs easy) but lose a lot of money in non trading days 16th 28th and 30th of May which is a dangerous symptom and show how bad is not respecting or overseeing these basic premises in your PBP when only following an amateurish and basic 1 to 1 R/R of 10 ticks will have put you in profits every single day (+25 ticks on the 28th) (I havenât double check the exact numbers for the other days ...) with at least less than a third of trades.
7. My only advice is that before you go crazy tweaking, changing and inventing better triggers and indicators, just try to analysis these macro issues first, only when you fully understand these premises in your PBP you will be able to âimproveâ the real problems, otherwise you are only delaying the failure of your PBP.
I hope it helps
jjrvat
Hi All,
I have been following this thread on and off for a while and have recently come across range bars. At present I only trade the fdax and use ninja trader 6.5 as my charts. I started with 35 tick charts to show waves and have recently used range bars set to 2. I have discovered that range bars are based purely on price and momentum and give much better wave or entry signals. I use 15 hma, range bars, a 60 and 80 hma lines to show the trend and only trade in the direction of the predominant trend. The range bars clearly are superior to other types of charts for this purpose.
Please offer suggestions to this proposal.
thanks,
Trader
I have been following this thread on and off for a while and have recently come across range bars. At present I only trade the fdax and use ninja trader 6.5 as my charts. I started with 35 tick charts to show waves and have recently used range bars set to 2. I have discovered that range bars are based purely on price and momentum and give much better wave or entry signals. I use 15 hma, range bars, a 60 and 80 hma lines to show the trend and only trade in the direction of the predominant trend. The range bars clearly are superior to other types of charts for this purpose.
Please offer suggestions to this proposal.
thanks,
Trader
I used to think the same about range bars and I've traded the ES with them (1 PT range bars) but I think they have their problems like anything else and you need to know how to use them. Using them unsmartly can lead to terrible resulst.
Overall I think every kind of chart has it's ups and downs but overall nothing but Vol/Tick charts as they are truly represnt proce action in terms of offer and demand, although a bit slower Tick charts produce a very clear waves to trade, I'll post an example later.
Hey All,
Long time since I've posted, but trading's been good--and again, I must say thanks jjrvat for your guidance in this thread! As I take a look at those psychological waypoints, I'm happy, having gone through some of them--hopefully I'm nearly done with the bad ones...lol.
As to some of the posters on this thread, I just want to offer a small piece of advice--you can take it or leave it...trading as I've found it is an ever evolving beast. Some post charts on here with entry after entry and wonder why their pnl doesn't seem to add up to much if any at all.
I don't think jjrvat posted this method to have us make it into an auto-trading script--in fact, I don't know of any auto-trading scripts that actually work! (Ok, I take that back, only one comes to mind.) If we set parameters (hh/hl or ll/lh, price above/below pp, hma/wma at certain angle, etc) with certain triggers (on close of 1st pull back candle/bar, 2nd, stoch crossover, etc) we will still have losing trades--and--we will need to make judgment calls as the market is moving. For example, when I jump into a trade, I have certain things I look for before, during, and on close of trade--and those are only things I have noticed after watching that chart for a large amount of time...in fact, it's almost as if one can get a "feel" for proper entry points based on watching current market movements (I'm not talking about after the fact charts--I'm talking about within candle ticks up, down, hold, etc.) That "feel" can also prompt me to close a trade within the very next candle--because it doesn't react the way I wanted or had observed hundreds of times in the past.
I guess I'm writing this because I've also looked for the holy grail in the past--a system where I can say, if it does a, b, c, d, then I enter and close if it does a, b, c, or d. While those parameters and triggers are important to my pbp, they are still only mechanical factors--I think great traders go beyond mechanical factors and add a sense of "feel."
It's only armed with that sense of "feel" that I think we can evolve with the market--knowing when to get in and when to stay out.
Oh, and a brief note on staying out--a wise trader once noted I'd rather miss a good trade than be in a bad one! When the market is in consolidation I try not to even think about trading until it breaks the edge of it's consolidation--then I start to look for good entries...
Jjrvat, thanks also for mentioning what you did about time frame to trade--I think this is crucial--I find the market acts differently in different time frames and when I trade all day long, I'm not so ready to change how I trade than when I come into a 2 hour session fresh--look at the last 1 hour of trading, and decide on my strategy for the next 2 hours...
welcome to my abstract thinking...lol
Here's a chart for fun...
1st entry point I did not take because I don't like trading 1st entries--too many false breaks.
2nd entry I didn't take because 1st green candle closed too high--threw r:r off.
3rd entry I took--set a 6 tick tp and let it hit. I like trades like these because I like having my tp within the previous move--high prob. to at least make last high (you can also bank some lots within the last high and let other lots go pulling stop to b/e)
4th entry I did not take as it's open was at bottom of green candle.
5th entry was great, but I was watering the garden for my wife--funny how that happened at just the right time...lol. Perfect chart setup though--except for the green candle size, I like it to close above last red candle, but not too far above...
6th entry closed level with the last 2 candles signifying resistance, plus it was farther than I would like when compared with the last high...
Cyan square denotes a whole lot of range trading--welcome to the weekend.
Long time since I've posted, but trading's been good--and again, I must say thanks jjrvat for your guidance in this thread! As I take a look at those psychological waypoints, I'm happy, having gone through some of them--hopefully I'm nearly done with the bad ones...lol.
As to some of the posters on this thread, I just want to offer a small piece of advice--you can take it or leave it...trading as I've found it is an ever evolving beast. Some post charts on here with entry after entry and wonder why their pnl doesn't seem to add up to much if any at all.
I don't think jjrvat posted this method to have us make it into an auto-trading script--in fact, I don't know of any auto-trading scripts that actually work! (Ok, I take that back, only one comes to mind.) If we set parameters (hh/hl or ll/lh, price above/below pp, hma/wma at certain angle, etc) with certain triggers (on close of 1st pull back candle/bar, 2nd, stoch crossover, etc) we will still have losing trades--and--we will need to make judgment calls as the market is moving. For example, when I jump into a trade, I have certain things I look for before, during, and on close of trade--and those are only things I have noticed after watching that chart for a large amount of time...in fact, it's almost as if one can get a "feel" for proper entry points based on watching current market movements (I'm not talking about after the fact charts--I'm talking about within candle ticks up, down, hold, etc.) That "feel" can also prompt me to close a trade within the very next candle--because it doesn't react the way I wanted or had observed hundreds of times in the past.
I guess I'm writing this because I've also looked for the holy grail in the past--a system where I can say, if it does a, b, c, d, then I enter and close if it does a, b, c, or d. While those parameters and triggers are important to my pbp, they are still only mechanical factors--I think great traders go beyond mechanical factors and add a sense of "feel."
It's only armed with that sense of "feel" that I think we can evolve with the market--knowing when to get in and when to stay out.
Oh, and a brief note on staying out--a wise trader once noted I'd rather miss a good trade than be in a bad one! When the market is in consolidation I try not to even think about trading until it breaks the edge of it's consolidation--then I start to look for good entries...
Jjrvat, thanks also for mentioning what you did about time frame to trade--I think this is crucial--I find the market acts differently in different time frames and when I trade all day long, I'm not so ready to change how I trade than when I come into a 2 hour session fresh--look at the last 1 hour of trading, and decide on my strategy for the next 2 hours...
welcome to my abstract thinking...lol
Here's a chart for fun...
1st entry point I did not take because I don't like trading 1st entries--too many false breaks.
2nd entry I didn't take because 1st green candle closed too high--threw r:r off.
3rd entry I took--set a 6 tick tp and let it hit. I like trades like these because I like having my tp within the previous move--high prob. to at least make last high (you can also bank some lots within the last high and let other lots go pulling stop to b/e)
4th entry I did not take as it's open was at bottom of green candle.
5th entry was great, but I was watering the garden for my wife--funny how that happened at just the right time...lol. Perfect chart setup though--except for the green candle size, I like it to close above last red candle, but not too far above...
6th entry closed level with the last 2 candles signifying resistance, plus it was farther than I would like when compared with the last high...
Cyan square denotes a whole lot of range trading--welcome to the weekend.
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