ES Journal Archive (2009 - 2010)

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Quote from NoDoji:

It's the part about holding the position that usually causes the trouble and it's especially troublesome if the trade is counter-trend.

Let's say for example, I expect ES to eventually pull back to 1088, I feel it may be nearing a turning point, and I decide to scale in 3 times if it runs against me with a disaster stop in place. So I short 1/3 @ 1105, 1/3 @ 1110 and 1/3 @ 1115, stop @ 1120. I'm now short a full position avg price 1110, with a 22 pt target and a 10 pt stop, decent R:R.

Price turns around after hitting 1117 and pulls back to 1107 where I'm finally green, then buyers step in and run it up to 1112, then price comes back down to the level where it was profitable and moves lower to 1102. So now the reversal is confirmed and the chance of my target being hit is far better than it was at any time during this trade. A seasoned professional sticks with his/her plan, but a lesser trader such as myself is in a position where I'm likely to take my profits early, before the 1088 target is reached, because I endured heat on the trade twice and now it's profitable and a profit's a profit's.

Allowing a full stop to remain in place but taking profits early skews the R:R and removes the profit cushion necessary for consistent profitability.

Now let's say I waited for a confirmed price reversal. Price dipped to 1107, tried to make a new high, failed and left a lower high, then came back to visit the first pullback low. I place my sell stop for a full position @ 1106.50, targeting 1088, and my stop is @ 1112.50 (just above the lower high). I have an 18 pt target and a 6 pt stop, good R:R, and same position size as my scale-in trade. It's now a lot easier for me psychologically to stay in the trade until full target is hit, because I entered on a breakout of a level, my stop is actually smaller and chances are better that I'll take much less heat on the trade because I'm trading in the direction of the new trend.

That's me personally, though. As I said a professional who's experienced with fading a move by scaling in as it runs against, would recognize the confirmation of a reversal and patiently wait for target to be reached.
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You are describing two very distinct entry techniques.

Let's call the average in technique, A, and the no scaling approach, B.

In A you are entering without confirmation, therefore, your stop placement is ambiguous, this forces you to reduce and break down your size, ultimately it's lesser size or your risk will go through the roof.

Assuming you are shorting Higher Highs, as price is approaching a resistance area that you are predicting to hold, there isn't really any recent price action above you to place a logical stop. This in my rulebook is a big problem.

Notice all the disadvantages I mentioned.

1) No logical stop placement
2) Lesser size and if you get to do no adds, even very small size
3) All prediction almost no reaction because of lack of new price action above you

...and so forth.

In my opinion this is without a doubt an inferior entry technique.

In B

1) You have a logical stop placement, as you said, above LH
2) Full size, no underleverage
3) Mostly reaction little prediction
4) Ability to use dynamic size based on stop distance for even greater sizing.

However, if you started using A because you have strong confidence in your R, nothing prevents you from adding to your position as price action develops for a B, then you can reduce the A stop to B's location, and proceed with an even bigger position, assuming your risk parameters are in order.

Problem is subconsciously speaking we like to obtain the higher fills when shorting and the lower fills when buying which is why some are attracted to Entry Technique A, but it's all false sense of security. I don't believe in magic areas of support or resistance, I believe in price development, therefore Im willing to accept lesser entries and humility for the sake of better profits.

In conclusion, I agree with your statement and I must commend you for the clarity you used to describe the scenarios.

ESD
 
Quote from ES.Dreamer:

In conclusion, I agree with your statement and I must commend you for the clarity you used to describe the scenarios.

ESD
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Thanks, ESD. I'm just over 2 years in, so technically a noob and now fighting the great battle of tossing out ego (ammo on my case about that) and just trusting my trading system instead of my opinion that some setups are better than others and that I can somehow know in advance which ones are better.

Although I very rarely averaged down, I often used to trade solely on opinion "(the fundamentals are awful, price is going down, I'll hold this loser until the bitter end because I know the market is flat out stupid to be trading at these prices and I'll be proven right if I'm patient"). I learned that "the bitter end" closes out the majority of those trades :eek:

I got tired of having my face slammed into the sidewalk, and learned very gradually about how to actually trade.

Ammo uses MP, which I think is "guy thing" with all those nips, cleavage and virgins, so his trading style works perfectly for his methodology (and I consider it "safe" counter-trend trading because he trades his plan and never lets opinion override that). For me at this point, my comfort level is now much greater waiting for price confirmation on a trade, rather than anticipating price movement.

My greatest respect for you guys who anticipate well. I'm still amazed when price finds S/R to the tick, or right at a trend line, or exactly at a 20-bar MA and I think "Why didn't I have a limit order sitting there??"
 
Quote from NoDoji:

I often used to trade solely on opinion "(the fundamentals are awful, price is going down, I'll hold this loser until the bitter end because I know the market is flat out stupid to be trading at these prices and I'll be proven right if I'm patient"). I learned that "the bitter end" closes out the majority of those trades :eek:

I got tired of having my face slammed into the sidewalk, and learned very gradually about how to actually trade.
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That's funny. So many of us have been through this exactly. You do such a great job of describing things. :) When you get in trouble in the market is when you are stubbornly convinced that you must be "right" even though the price action of what is actually happening is telling you something else. But we're holding our hands over our ears and humming loudly refusing to listen. The market must be wrong. Doesn't it know enough to act according to our version of things? Doesn't it realize how smart and informed we are? :D

Thanks NoDoji and ESD and everyone for a great discussion and great points made. :)
 
I know I'm right!!!
Dog01x008.jpg
 
Quote from NoDoji:

I'm just over 2 years in, so...
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I never would have guessed..
In fact, I went back and read all your posts from the beginning of the year. You have been consistently profitable in stocks (AMZN, POT, AAPL), in ES and now trading CL.
So, naturally, I am curious. Why CL (over ES or euro-dollar where there is enough action) and why only 1 car ?
 
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