Flash's Self Improvement Trading Journal

[PetaDollar]

Quote from Flashboy:

Bought at 985.00.. 9:53 am

stop 981.50

Hi Flash.. sorry to bug you on a down note.

Entering on pullbacks is great, I do the same thing. You've probably also seen the "Tradin' Hammers" thread.

But I think you need to be more of a tight-ass with your stops on a trade like that. I saw a hammer on the 1m chart where you entered. The stop should be no more than a tick or two below the bottom of the hammer. Sometimes I even place the stop in the bottom 1/4 or 1/5 of the hammer.

On this particular trade there was still a longer term downtrend intact. You were betting that an uptrend had just started, which is a good rewarding bet when it pays off. When I do this, I draw a trend line. For example, draw some upward sloping line starting around the previous low around 8:47 EST. Then get out if price drops below your trend line.

Also, take a look at your previous winners. You will probably find that most of them do not drop nearly 4 ES points before moving in your direction. I'm just guessing based on my experience.

Another thing I like to do is characterize my winners, and as soon as I see the trade not behaving as such, I make the stop really tight or just get out. Almost all of the good hammer trades either take off right away, not breaking below the previous bar's low. Sometimes after that they pull back to about half-hammer, and then take off again.

 

[Flashboy]

Quote from peterfigliozzi:



But I think you need to be more of a tight-ass with your stops on a trade like that. I saw a hammer on the 1m chart where you entered. The stop should be no more than a tick or two below the bottom of the hammer. Sometimes I even place the stop in the bottom 1/4 or 1/5 of the hammer.

Peter,

I didn't base it off a 1m chart.. I based it off the hammer on the 5 min. chart and placed the stop right below the bottom of the hammer..

I"m not sure I see the hammer you're referring to on the 1m chart..

 

[dbphoenix]

Quote from Flashboy:

I didn't base it off a 1m chart.. I based it off the hammer on the 5 min. chart and placed the stop right below the bottom of the hammer..

Hammer or no hammer, if you're going to trade counter-trend, you'd be wise to use a tight stop.

 

[Flashboy]

Quote from dbphoenix:



Hammer or no hammer, if you're going to trade counter-trend, you'd be wise to use a tight stop.

First of all.. how do you guys get the quote from a previous post in bold.. I hit the quote button on bottom right of screen and get whats above..

I agree.. and after I got stopped out.. sat back and thought.. why was I so quick to jump on a trade against a strong developing 30 min. trend..

and I then made another one.. will post it in my chart this evening..

2 trades.. stopped out on both.. right now.. I'd like to see a bear flag form so I can get short.. but skeptical about the 30 min. trend being very oversold..

thanks for the insight

 

[Flashboy]

sorry.. the quote thing worked that time..

I figured it out.. I guess you can't edit it.. when you do it doesn't put it in bold.

 

[dbphoenix]

Quote from Flashboy:

2 trades.. stopped out on both.. right now.. I'd like to see a bear flag form so I can get short.. but skeptical about the 30 min. trend being very oversold..

A word of advice. Your strategy seems to be based on reversals, and these are the most difficult for the beginner to play. While they look as though they lead to maximum profits, the frequent stopouts will erode your equity.

 

[Flashboy]

Quote from dbphoenix:



A word of advice. Your strategy seems to be based on reversals, and these are the most difficult for the beginner to play. While they look as though they lead to maximum profits, the frequent stopouts will erode your equity.

Dbp..

I have a few setups.. but you're right.. I do like the reversals..

and its not a good idea to try and play them off of a 5 minute chart when the trend is clearly down..

I need to be much more selective in my trading.. hence the purpose of this journal.. you guys are confirming things I already know.. and hopefully with other input I will learn to adhere to those rules more diligently..

thanks

 

[dbphoenix]

Before worrying about adhering to the rules, make sure they work. If you can't be at the computer throughout the period in which you're trading, it is especially important to stick to "bread and butter" setups. If your setups are bread-and-butter, fine. If they're not, look for something else until you have more time to devote to your trading.

 

[PetaDollar]

Quote from Flashboy:


Peter,

I didn't base it off a 1m chart.. I based it off the hammer on the 5 min. chart and placed the stop right below the bottom of the hammer..

I see it now. I don't know what the odds are for hammers on the 5 min chart, only the 10 m. On the 10 m there is about a 50% chance of 2x payout per the risk. I assume it only gets worse on the shorter time frames.

I have had a lousy time with hammers on shorter time frames than the 10 m chart, unless there is some other accompanying signal. For example, if the hammer occurs at a previous low.

A word on reversals in general. I have had tremendous success playing shorter term reverals during longer term trends. (In other words buying pullbacks, selling minor rallies.) Basically just what you are doing now except keeping an eye on the longer time frame trend.

I also have had some success going for the trend reversal itself, but the win/loss ratio is much worse, however the payoffs are usually much greater. When I do this type of trade I make sure the stop will be only several ticks, otherwise I don't do it. Still, I'm about to give it up because most of the time there is a pullback once the new trend starts anyway.

 

[electron]

Quote from peterfigliozzi:



A word on reversals in general. I have had tremendous success playing shorter term reverals during longer term trends. (In other words buying pullbacks, selling minor rallies.) Basically just what you are doing now except keeping an eye on the longer time frame trend.

Well, these are not really reversals. These are continuations patterns, pullbacks. You are trading expecting the major trend to continue. It is not a good idea to try reversals in a strong trend, it's beter to do them in a range bound trading market.

BTW, IMHO, there was nothing wrong with his stop placement. It was sound, except that he went against a strong trend before it started showing signs of exhaustion and so got hammered. He chose a wrong startegy, but I would not criticize him for his stop placement because he did the right thing using the pivot as the place to hold his stop. The stop should be placed where it makes sense from a market point of view and not according to some other criteria. Of course, if you think that the stop so chosen is too generous, you may elect not to trade this particular setup at all.

Just my 2 cents.