Futures Trading Analysis

[Futures Track]

So I am interested in how people learn to trade index futures contracts and the systems they use. I do this myself pretty much every morning from 9AM to 11AM Eastern.

Somehow people have to learn and we all know that takes a long time. But how do we get to where we want to be?

There is a lot of free and commercial information. Most is useless but some is not. My task is to separate the two.

I'll try to post regularly and look forward to your comments.

 

[llIHeroic]

Thank you for taking the time to create this thread. I think your topic has the potential to be a valuable discussion. I look forward to hearing about the experiences of others. I will try to briefly share the path I've taken.

The primary way I've learned to trade is to study market behavior and build an understanding of it. If you're not distracting yourself from that goal, over time the mind will start to build an rough, intuitive grasp of basic market characteristics. At the same time, we can work consciously to find parameters to define what we think we know and test them to see if they are consistent with the reality.

After enough time, one can build a model of certain market behavior, and then create a system or routine by which to partner with the market and be on the right side of it.

I have a conception of what I understand a trend to be. I have a conception of what they do when they are ending, and at those points in time I can trade in the direction of the sentiment of the next trend. I compare what I see unfolding before me to what I anticipate things will do if my hypothesis is correct. If there is inconsistency between the two, I will exit. If there is consistency, I continue to hold the trade as the market goes through the sequences I expect.

 

[game]

After enough time, one can build a model of certain market behavior, and then create a system or routine by which to partner with the market and be on the right side of it.

By 'enough time', I assume you are referring to a consistent application of process. In your experience, what are some of the behaviors/attitudes that lengthen/shorten the learning curve? They say growth occurs in spurts, interspersed with long periods of plateaus. Does this match your experience?

 

[llIHeroic]

With regards to the learning process, I think there are a lot of factors that play into how lengthy and difficult the learning curve is for an individual. I would agree that learning usually resembles advances and plateaus since so much of the process occurs behind the scenes as we take in information and the mind digests it and builds connections with it.

This could be quite an in-depth discussion topic so I'll just list two things that came to mind right away that I think are very harmful for learning to trade.

Lack of self-awareness: It seems that some people involve themselves with the markets to meet emotional needs that they aren't even aware of. We've seen journals on this site spiral around in circles for hundreds of pages. It's likely that the authors of those journals are seeking things like attention/support/community/etc. which is a serious distraction from actually learning about the market in an efficient manner. On some level, I believe the primary motive of a lot of people isn't actually to make profitable trades in a consistent and sustained manner.

Un-focused: Some people may have the desire to learn about the market, but they don't have the mental skill-set in order to go about it in a systematic manner. If a trader isn't profitable; I've found they don't often know why. They might try frequently switching methods, continuing to passively read forums, or sim-trade hoping they will learn more over time. What everyone should be doing is drilling down into the specific issues that that are giving them difficulty. Knowing what you don't know is often the first step to learning something new.

 

[llIHeroic]

Regarding Success:

On the flip side, I think the proper mindset for success is the antithesis of the mentality I detailed above. Few people are willing to do the work and differentiate things into distinct concepts and focus on them individually. I think you need to ask yourself questions and study hard to learn the answers. For losing trades, what went wrong, where, when and why?

Do you have short losing trades that go against you immediately and are quickly closed? In certain market contexts, it's likely you have an incorrect hypothesis for entry. What types of environments do these trades occur in? What do they have in common? Are there other entries which appear to be the same type that are successful? What is different about them?

Maybe you can look a little closer and spot a subtle difference in context preceeding the entry. Make a hypothesis and go test the other instances of this behavior to see if your guess is consistent with reality. Does a specific event occur shortly after entry in some cases and not in others? If you sort the recorded trades into two groups, does this specific event seem to have any correlation to the success %? How can you modify your understanding of the market to take this into account?

I don't advocate being obsessive over small details or trying to mechanically define things to an overly-complex degree, but I do think a scientific mindset is required to advance in one's understanding of the market. Some of us are more intuitive than others, so this process will look different for different people, but I think traits such as specificity, detailed analysis, hypothesis and testing, good record-keeping, and self-honesty are very valuable for success in this field.

 

[llIHeroic]

Last post for now; here is an illustration of the process of having a researched and tested model in your mind, and comparing the unfolding reality with your defined parameters. I like to be in control of my trades at all times; I don't see a set-up, enter, put up a stop and profit target, then sit back and hope for the best.

Each forming bar gives me information on how the market is behaving. I continually monitor the information, and when I gather enough information change my perception of the current sentiment, I exit or reverse my trade depending on context. It doesn't have to take very long to know you were wrong. This was a 2 point loss.

 

[game]

Thank you for a detailed response and an excellent example Heroic. The clarity of your writing is probably a reflection of the clarity with which you trade.

 

[i am nobody]

Thank you for taking the time to create this thread. I think your topic has the potential to be a valuable discussion. I look forward to hearing about the experiences of others. I will try to briefly share the path I've taken.

The primary way I've learned to trade is to study market behavior and build an understanding of it. If you're not distracting yourself from that goal, over time the mind will start to build an rough, intuitive grasp of basic market characteristics. At the same time, we can work consciously to find parameters to define what we think we know and test them to see if they are consistent with the reality.

After enough time, one can build a model of certain market behavior, and then create a system or routine by which to partner with the market and be on the right side of it.

I have a conception of what I understand a trend to be. I have a conception of what they do when they are ending, and at those points in time I can trade in the direction of the sentiment of the next trend. I compare what I see unfolding before me to what I anticipate things will do if my hypothesis is correct. If there is inconsistency between the two, I will exit. If there is consistency, I continue to hold the trade as the market goes through the sequences I expect.

Very clear explanation. Looks similar to the way I trade.

The potential to be a valuable discussion will depend of the question: how long will it take before marketsurfer comes here. Because then it will be over i'm afraid.

Some things that are impossible according to marketsurfer:

1. study market behavior and build an understanding of it: impossible he says.
2. the mind will start to build an rough, intuitive grasp of basic market characteristics: impossible he says.
3. define what we think we know and test them to see if they are consistent with the reality: impossible he says.
   
4. build a model of certain market behavior, and then create a system or routine by which to partner with the market and be on the right side of it: impossible he says.
   
5. a trend: impossible he says.
   
6. I have a conception of what they do when they are ending, and at those points in time I can trade in the direction of the sentiment of the next trend: impossible he says.
   
7. I compare what I see unfolding before me to what I anticipate things will do if my hypothesis is correct: impossible he says.
8. continue to hold the trade as the market goes through the sequences I expect: impossible he says.

In short everything you write here is snake oil and impossible according to marketsurfer.

But I agree for 100% with you that what you do can work. People should study your posting and ignore marketsurfer. Listening to marketsurfer will destroy all potential for new traders. But perhaps that's what he wants to do. People should stay stupid so that his befriended funds can take money from them. He should keep the enemy stupid. It is also in his personal intrest. He has (financial?) intrests in Palm Beach Hedge Fund Association. They trade against the the small traders like most ET members.

Marketsurfer warns people to "protect" them. I do the same now.

 

[dbphoenix]

Keep in mind that ms is a failed trader. He is currently a "manager".

IOW, consider the source.

And if he goes on about his "Report", remind him of all the exits with no entries and entries with no exits.

 

[Handle123]

So I am interested in how people learn to trade index futures contracts and the systems they use. I do this myself pretty much every morning from 9AM to 11AM Eastern.

Somehow people have to learn and we all know that takes a long time. But how do we get to where we want to be?

There is a lot of free and commercial information. Most is useless but some is not. My task is to separate the two.

I'll try to post regularly and look forward to your comments.

First, I think way too many people who have little amount of money get into day trading cause it doesn't take much to open an account, way too many commercials or magazines of some guy on golf course saying he "worked' couple hours and now enjoying the good life, what it doesn't tell you is that guy worked so many years, and some years didn't know what month it was or if it was sunny or rainy day outside. Has so many stats, could wallpaper nineteen houses but keeps saying "I am so close".

Very few books if any that offer much more than generalization on Trading Plans and ones that I have seen are very vague on what should be included. Generally good traders not going to write books as they too busy trading, and let's face it, too many that write are in the ego stages of their life cause there isn't big money in writing books.

Most learn by losing money, most don't know how to program, most spend way too much time on entering the market, most don't keep stats, most information overload, most have no clue of what they want to achieve.

What you hope to achieve is losing concept of pain, brain tries to make market as logical entity, chart patterns often shows exactly as logically as possible what makes sense, price goes up-time to buy, price comes down-time to sell, brain is happy-no pain. But try to buy when market dropping like a rock, and one's breathing, blood pressure, anxiety attacks are ripping and brain is causing all of this as a way to tell you something is not logical, and even though brain has designed the Trading Plan based on stats from back testing, brain not happy when price not acting by what it sees.

I believe in anything that is written in Trading Plan must have stats to show why, if no stats, isn't added. I see way way too many traders who write journals either have none or not current stats on their systems, how can you tell how you doing? And account size means nothing. This alone, stats should keep you from day trading for at least a year, nothing wrong with spending couple years of study first before losing your account, if you can't be profitable 4 of 5 trading days each week in simulated=you are Bait.

Three groups of Trading, Entry, Money Management, Mental. And all three can be divided up into many sub classes. I often think "Mental" as time passes does get smaller as one's education increases. Entry is one of two ways, buying as price going up or buying as Price coming down. Money Management is one reason of before trade can be taken and many reasons of to the right of price. Mental=if you stay strict to having Trading Plan stats on all info going into Trading Plan, will have much less Mental problems than anyone else.