ES Journal Archive (2006 - 2008)

[JSSPMK]

It's all about finding The Way to sustain profitability, a technique I am using trading DAX did not work in ES, as ES proves to be impotent on many occasions to sustain momentum, it can easily break through your stops before reaching targets. I don't class it as a true scalping future anymore.

But that is because I have not found The Way, if Saxon has, good on him. I am not familiar with his method, but in my case, DAX quite often offers 1000 daily total range, I only need to capture 5-10% of it, when Buy1Sell2 would be looking to get 50-99% perhaps by using wide stops and swing trading. To him my method could be a "put on".

Reading ET it's quite obvious who doesn't have an ability of being consistently profitable, they are the ones that have losses equal to their gains, win loss near 50/50. If Saxon is one of them, then conclusions can be made, otherwise if his win loss is more adequate then you can not say it's a put on.

 

[JimmyJam]

Quote from hulkgogan:

So you think taking 8 or 9 one point losses in order to make one big gain is a preferable strategy? How big a gain?

Not quite .

I think trading with the trend and, in the worst case scenario, taking minor losses on days when the market doesn't trend, with the expectation of being able to reap substantial rewards on any given day that the market has anything even remotely resembling persistent movement of price action in the direction of the dominant trend to be optimal.

As you have seen from his posts, Saxon22 takes the opposite tact and JSSPMK has stated previously that he would rather trade the DAX than the ES because the former is much more trendier and has a much bigger bang for the buck ... if you have a system which is at least 80%, that indicie might be worth a look.

Addendum: For me, managing risk and judicious use of leverage and position sizing has proven to be the key to success in trading leveraged indicies, so I would just as soon move down to the YM rather than move up to a more high powered contract like the DAX ...

... just goes to show there really are as many ways to make money in this game as there are traders (and trading personalities) that do it.

Good trading,

JJ

 

[austinp]

<i>"... just goes to show there really are as many ways to make money in this game as there are traders (and trading personalities) that do it."</i>

That is absolutely true. Every one of those consistently profitable approaches have one thing in common: greater reward than risk ratio over the course of time. That fact is irrefutable, and the key words are <b>over the course of time</b>.

The core difference between successful trading and gambling is long-term edge. A successful trader mimics "the house" by creating a statistical edge that endures all storms. A gambler tries to beat the house thru a sequence or series of wins before the inevitable streak of losses wipes out all previous gains.

See the difference? There is a slight but profound difference between trading and mere gambling. How we structure our trading approach makes that difference.

*

A mechanical system or trend-following method may only have a 40%, 30% or 20% win ratio. The rest of time it endures controlled losses, but the winning trades far eclipse all losses. That approach is still has a "house edge" because over the course of time, big wins exceed all small losses.

Compare that to selling options, be it credit spreads or naked contracts. A trader can win 80% or even 90% of those trades, accumulating large strings of small to modest gains. However, eventually one or two large losses occur that wipe out all prior gains, and sometimes more than that.

Said trader has been lulled into a false sense of security by weeks, months, maybe even a couple of years' worth of steady gains in this approach. But sooner or later, "the house" comes knocking to collect its dues. Every time, no exceptions if you stay and play the game. That approach is mere gambling, regardless how it feels thru the temporary win streak.

*

"You Can't Lose Trading Commodities" is an old book written by Robert West. That approach is exactly what Saxon is dabbling with, unbeknownst or not. Not much different than the approach Franz Schoar plied with IT and now presumably on his own.

For all those who attempt trading this way, it is nothing more than pure gambling. The edge is inverted = upside down against the trader. Periods of profitability lull traders into a false sense of security. A bunch of now inactive traders just learned that fact while building long trade scales in grains. A couple of limit-down moves always creates margin calls and devestated accounts.

Lesson learned, the hard way once again.

Try scaling down into long trades on the plunge in late Jan 2006 or Feb 27th 2007 and one might get it right. Make one mistake... just one and you are all done. One single trade in this scale trading approach can and often does end a career. It has ended literally 1,000s of trading careers in the past, and will continue to do so until trading ceases to exist.

*

I could ramble on for a couple thousand more words here trying to belabor the point, but what's the point in that? Those who are open will hear the message, those who are not receptive (yet) have already clicked out of this thread. Besides, it is Saturday and I'm going fishing. Gotta have our priorities straight!

Trading = positive expectancy of risk to reward in favor of the trader over time... years and years thru all market conditions.

Gambling = positive expectancy of risk to reward for "the house" and against the traders over time... years and years thru all market conditions.

I'm not the best person to rattle off statistics in here. I'd defer that to atticus and others like him that trade off statistics. You can wake those guys out of a sound sleep, give them your stats and they'll tell you with mathematical certainty what odds are for success or lack thereof.

I can paint the ending of this story with a wider brush. Scaled trading emini contracts minus VERY DEEP pockets with ability (and expectancy) to endure large losses at times is a doomed approach. Period, end of story. That is not mere opinion, it is a mathematical fact. Temporary evidence to the contrary, i.e. a period of profitability does not change reality in the end. Time always tells.

Good news is, trading with the intraday trend is one helluva lot simpler and tremendously more profitable. Friday's session offered at least +8pts to +16pts ES to any skilled intraday trader who <b>works with directional bias</b> of the market. That may be the same direction all day, it often changes several times per day. Regardless, trading in harmony with price action rather than against is far safer and profitable over the course of time.

Why step in front of freight trains trying to scoop up 1pt net when we can instead ride the train and fill pockets with ten times that?

 

[smilingsynic]

Quote from austinp:

<i>"... just goes to show there really are as many ways to make money in this game as there are traders (and trading personalities) that do it."</i>

That is absolutely true. Every one of those consistently profitable approaches have one thing in common: greater reward than risk ratio over the course of time. That fact is irrefutable, and the key words are <b>over the course of time</b>.

The core difference between successful trading and gambling is long-term edge. A successful trader mimics "the house" by creating a statistical edge that endures all storms. A gambler tries to beat the house thru a sequence or series of wins before the inevitable streak of losses wipes out all previous gains.

See the difference? There is a slight but profound difference between trading and mere gambling. How we structure our trading approach makes that difference.

*

A mechanical system or trend-following method may only have a 40%, 30% or 20% win ratio. The rest of time it endures controlled losses, but the winning trades far eclipse all losses. That approach is still has a "house edge" because over the course of time, big wins exceed all small losses.

Compare that to selling options, be it credit spreads or naked contracts. A trader can win 80% or even 90% of those trades, accumulating large strings of small to modest gains. However, eventually one or two large losses occur that wipe out all prior gains, and sometimes more than that.

Said trader has been lulled into a false sense of security by weeks, months, maybe even a couple of years' worth of steady gains in this approach. But sooner or later, "the house" comes knocking to collect its dues. Every time, no exceptions if you stay and play the game. That approach is mere gambling, regardless how it feels thru the temporary win streak.

*

"You Can't Lose Trading Commodities" is an old book written by Robert West. That approach is exactly what Saxon is dabbling with, unbeknownst or not. Not much different than the approach Franz Schoar plied with IT and now presumably on his own.

For all those who attempt trading this way, it is nothing more than pure gambling. The edge is inverted = upside down against the trader. Periods of profitability lull traders into a false sense of security. A bunch of now inactive traders just learned that fact while building long trade scales in grains. A couple of limit-down moves always creates margin calls and devestated accounts.

Lesson learned, the hard way once again.

Try scaling down into long trades on the plunge in late Jan 2006 or Feb 27th 2007 and one might get it right. Make one mistake... just one and you are all done. One single trade in this scale trading approach can and often does end a career. It has ended literally 1,000s of trading careers in the past, and will continue to do so until trading ceases to exist.

*

I could ramble on for a couple thousand more words here trying to belabor the point, but what's the point in that? Those who are open will hear the message, those who are not receptive (yet) have already clicked out of this thread. Besides, it is Saturday and I'm going fishing. Gotta have our priorities straight!

Trading = positive expectancy of risk to reward in favor of the trader over time... years and years thru all market conditions.

Gambling = positive expectancy of risk to reward for "the house" and against the traders over time... years and years thru all market conditions.

I'm not the best person to rattle off statistics in here. I'd defer that to atticus and others like him that trade off statistics. You can wake those guys out of a sound sleep, give them your stats and they'll tell you with mathematical certainty what odds are for success or lack thereof.

I can paint the ending of this story with a wider brush. Scaled trading emini contracts minus VERY DEEP pockets with ability (and expectancy) to endure large losses at times is a doomed approach. Period, end of story. That is not mere opinion, it is a mathematical fact. Temporary evidence to the contrary, i.e. a period of profitability does not change reality in the end. Time always tells.

Good news is, trading with the intraday trend is one helluva lot simpler and tremendously more profitable. Friday's session offered at least +8pts to +16pts ES to any skilled intraday trader who <b>works with directional bias</b> of the market. That may be the same direction all day, it often changes several times per day. Regardless, trading in harmony with price action rather than against is far safer and profitable over the course of time.

Why step in front of freight trains trying to scoop up 1pt net when we can instead ride the train and fill pockets with ten times that?

In yesterday's volatility, even if one went COUNTERTREND, there were oppportunities. Saxon bought at just about the absolute low, and could have gotten several points on the upside.

And that what's so flabbergasting.

The way I see it, when one enters a trade, there are five possibilities: (1) large profit; (2) small profit; (3) scratch; (4) small loss; or (5) large loss. What you want to do is get oneself in position to capitalize on the opportunities to achieve option #1; to be able to accept the reality that most trades will result in options #2, #3 and #4; and to use stops to avoid option #5.

As for Wiest, you are absolutely right about the drawdowns and disasters, but one can modify the scale so as to buy on a scale UP after reaching what appears to be a bottom. There was a book that came out about ten years ago by Ralph Fesseden called BE A WINNER TRADING COMMODITIES that advocated that exact strategy (PARASCALE TRADING), and demonstrated that drawdown could be sharply reduced while maintaining most of the profits. Even this modified strategy did not recommend stops (still a problem, imo, and the major weakness with Wiest's original system).

One could easily apply the reverse of Saxon's algorithm on trending days and make big, big money. Add positions when the trade is IN one's favor. No profit targets. GOAL= Hold to close.

Good luck to all.

 

[Buy1Sell2]

Quote from austinp:

[B
A mechanical system or trend-following method may only have a 40%, 30% or 20% win ratio. The rest of time it endures controlled losses, but the winning trades far eclipse all losses. That approach is still has a "house edge" because over the course of time, big wins exceed all small losses.

Why step in front of freight trains trying to scoop up 1pt net when we can instead ride the train and fill pockets with ten times that? [/B]

bingo



The point here is not to "down" Saxon. It is simply to help others (and perhaps Saxon) question why go for the 1 pt when there is so much more available? Nice post by the way Steve.

 

[saxon22]

Quote from austinp:

<i>"... just goes to show there really are as many ways to make money in this game as there are traders (and trading personalities) that do it."</i>

That is absolutely true. Every one of those consistently profitable approaches have one thing in common: greater reward than risk ratio over the course of time. That fact is irrefutable, and the key words are <b>over the course of time</b>.

The core difference between successful trading and gambling is long-term edge. A successful trader mimics "the house" by creating a statistical edge that endures all storms. A gambler tries to beat the house thru a sequence or series of wins before the inevitable streak of losses wipes out all previous gains.

See the difference? There is a slight but profound difference between trading and mere gambling. How we structure our trading approach makes that difference.

*

A mechanical system or trend-following method may only have a 40%, 30% or 20% win ratio. The rest of time it endures controlled losses, but the winning trades far eclipse all losses. That approach is still has a "house edge" because over the course of time, big wins exceed all small losses.

Compare that to selling options, be it credit spreads or naked contracts. A trader can win 80% or even 90% of those trades, accumulating large strings of small to modest gains. However, eventually one or two large losses occur that wipe out all prior gains, and sometimes more than that.

Said trader has been lulled into a false sense of security by weeks, months, maybe even a couple of years' worth of steady gains in this approach. But sooner or later, "the house" comes knocking to collect its dues. Every time, no exceptions if you stay and play the game. That approach is mere gambling, regardless how it feels thru the temporary win streak.

*

"You Can't Lose Trading Commodities" is an old book written by Robert West. That approach is exactly what Saxon is dabbling with, unbeknownst or not. Not much different than the approach Franz Schoar plied with IT and now presumably on his own.

For all those who attempt trading this way, it is nothing more than pure gambling. The edge is inverted = upside down against the trader. Periods of profitability lull traders into a false sense of security. A bunch of now inactive traders just learned that fact while building long trade scales in grains. A couple of limit-down moves always creates margin calls and devastated accounts.

Lesson learned, the hard way once again.

Try scaling down into long trades on the plunge in late Jan 2006 or Feb 27th 2007 and one might get it right. Make one mistake... just one and you are all done. One single trade in this scale trading approach can and often does end a career. It has ended literally 1,000s of trading careers in the past, and will continue to do so until trading ceases to exist.

*

I could ramble on for a couple thousand more words here trying to belabor the point, but what's the point in that? Those who are open will hear the message, those who are not receptive (yet) have already clicked out of this thread. Besides, it is Saturday and I'm going fishing. Gotta have our priorities straight!

Trading = positive expectancy of risk to reward in favor of the trader over time... years and years thru all market conditions.

Gambling = positive expectancy of risk to reward for "the house" and against the traders over time... years and years thru all market conditions.

I'm not the best person to rattle off statistics in here. I'd defer that to atticus and others like him that trade off statistics. You can wake those guys out of a sound sleep, give them your stats and they'll tell you with mathematical certainty what odds are for success or lack thereof.

I can paint the ending of this story with a wider brush. Scaled trading emini contracts minus VERY DEEP pockets with ability (and expectancy) to endure large losses at times is a doomed approach. Period, end of story. That is not mere opinion, it is a mathematical fact. Temporary evidence to the contrary, i.e. a period of profitability does not change reality in the end. Time always tells.

Good news is, trading with the intraday trend is one helluva lot simpler and tremendously more profitable. Friday's session offered at least +8pts to +16pts ES to any skilled intraday trader who <b>works with directional bias</b> of the market. That may be the same direction all day, it often changes several times per day. Regardless, trading in harmony with price action rather than against is far safer and profitable over the course of time.

Why step in front of freight trains trying to scoop up 1pt net when we can instead ride the train and fill pockets with ten times that?

Nice to see your words back on ET. I was under the impression that you have abandoned this site and after not receiving a reply to my last e mail to you, I though that you either do not care or took one of those "once in a lifetime" 2 months vacation to some exotic destination where only the chosen can afford to venture. Welcome back!
As for my method: you assume that I am always in. I am not. I watch the trend develop and when it hits or is close to either resistance or support I go in 5 to 10 contracts at the time COUNTERTREND. From that point aka point x, I add 5 to 10 contracts each time ES goes against me 1 pt. The maximum was 10 cars when I was playing with 30K, now the max. is 60 with a substantially bigger account.
When the trend is very strong like on Friday, I played it safe and went in for only 1 pt. Also, Friday was the day my wire transfer came through and it was the first time I had access to such a large sum of money. So I was couscous.

Is it gambling???? I doubt it.
since most of the time I am already very close to the S/R, the probability of the market running away is pretty slim. AND if it does happen (and occasionally it will), my limit for 10 contracts was $-2500 and for the new account (60 cars) is $-15.000 which comes to 5 points per contract. So, the most I can bleed does not spell a disaster or doom scenario where my whole account is wiped out. Like I said, majority of time I extract 1 pt, per contract and I take it. Of course, I have had days when the market gave me 2,3,4, even 5 points. Moreover, many times the market went further than what I was able to catch. Friday being a perfect example. I left a lot of $$$ on the table. However, many times by taking that 1 point or 2 points I was able to get out and not bleed like a pig.

Thank you for your post. I appreciate and value your opinion and every other trader who regularly post on this thread and who had taken the time to analyze/comment on my approach. Enjoy the rest of this weekend. Off to the Bronx Zoo with the kids to see bulls and bears.

 

[steve46]

Quote from Buy1Sell2:

bingo



The point here is not to "down" Saxon. It is simply to help others (and perhaps Saxon) question why go for the 1 pt when there is so much more available? Nice post by the way Steve.

While I appreciate your compliment sir, I have to admit that I have misunderstood Saxon's method. If in fact he is going for one point per contract, that is different than I had thought..

My comment however is almost the same..I do not have a criticism of the system based on his ability to find a stop....I do say however that one needs to find a way to stay in the market for more than one (1) point per contract. Saxon indicates that he makes a profit using it...I suggest that he could make much more if he were to look at bet sizing differently, and to base his outlook on a longer time frame...

I realize that this difficult to visualize just by this comment so I will offer a chart example to show what I mean.

Look for instance at this chart showing the S&P contract (ES) on a monthly basis. I have a short term MA (Yellow) and a longer term MA (white). Notice how price has pulled back several times in the longer uptrend. There are a number of ways to approach this for trading more profitably than just looking for 1 point per contract. If for instance, after each pullback below the short term MA, a trader were to take a long position upon resumption of the trend (say he or she went long on the first open above the short term MA using either an options position or an outright long), that would have provided a significant profit. Add some risk management to this or use it as a base to trade around and you have a pretty good systematic approach

 

[steve46]

Here is the same concept using weekly charts

Again you can see where price touches the longer term MA and then resumes its trend upward.

What if one were to wait for a touch or test of that longer term MA and then enter long on the first bar opening above the shorter term MA? Using either options or outright position, I think this would be a winner, once you had a risk management policy in place.

 

[steve46]

Here is the daily chart

Once again I hope one can see the benefits of orienting to the longer term...If you started with either a monthly or weekly chart, and looked to the daily for possible entry, you can see that on the daily time frame, price tests the longer term MA and then

What? what would YOU newbies do with this?

I just wait for my setup...I already did MY homework. I can see several good setups all along the chart..I wait for mine to occur then I get up the next morning and I put on my position.

Some times I look for a specific short term profit its true. But in the background I am in the market with risk management rules in place and as soon as I get some breathing room on a trade, I look for places to add, not to take short term profit.

THAT is what I mean by thinking like a professional..Its just one man's opinion, but it is based on a lot of experience.

Hope it helps.

Take care
Steve

 

[princessa]

Quote from saxon22:

That kind of thinking is precisely what I am trying to avoid. If I have in the back of my mind that 20 contracts is 1.5 Million then I would trade 1 lot for the rest of my life.
Can you imagine an Indy 500 driver going through scenarios in his head of what could happen if he were to hit another car or worse spin in the air and land in the middle of a stand full of spectators?
This guy would not drive faster than 50 mph and at the end of the day would go crazy.

Now, please explain why would I want to keep in my head that 20 lots control 1.5 million? What would be the purpose of this?

just to be careful, dude. some folks may have harsh delivery, but the message is valid: be careful with your indy 500 car. for those of us who have lived through some drawdowns, we realize we are not invincible.

let me give an analogy. i used to do gymnastics and my instructor once told me that kids age 5 and under make the best gymnasts b/c they have no fear. they'll try anything! when you've fallen a few times, however, you learn to be more careful and aren''t as fearless with the stunts. same with trading. i think the guys like spectre and smilingsynic (sp?) may have had a few hits and are therefore not as eager to throw money around unless they have a good plan and an even better track record.

i understand you think you have a good system and it may well be. but the point is well taken to think through your trades and not to risk any more than 1% of portfolio value on any one trade. if your system is good, you will build the port and increase size of trade with time.


just my two cents. but, by all means, trade as you see fit...hopefully, you won't have to go through the hard knocks that the others are trying to help you avoid.