I take it that the majority of you guys in here are day traders?
Ghost of If You Can Draw A Straight Line
- Thread starter dbphoenix
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I would say that is likely. However, this approach could be applied to any number of time frames. In fact, this thread started out with the application of this method on the 60-minute bar interval chart, which would most likely, but not necessarily, put one's time frame at beyond a single day.
Yeah, I use this very same method for swing trading. I haven't yet tried to apply it to day trading.
That doesn't rhyme well with a tested trading plan does it? I've spent much time on when not to trade, probably more than on when to trade. It's more difficult because the "not" is mostly context and as such one needs to have more than one chart up while back testing (at least I do) and be very careful not to "see things" one wouldn't have seen in real time. Then comes real time and it's still very difficult (at least for me) to interpret context (beyond the simple lines that is). Still, practice makes perfect, I hope.
Like bunnies :eek:
Thanks Db.
That should all be done in prep. By the time NY opens, I know at what point I want to see either a reversal or a breakout. I don't need anything else. If I had anything else, more than likely I'd hesitate, and then the trade would be gone.
Unless one is coming up with his own plan and has yet to backtest and forwardtest it, there's no need to think about this at all, much less overthink it. And as an aside, I posted those Zen rules having to do with patience, now, on purpose.
This was written by Steenbarger when he was more psychologist and less trading guru. I hope those who are maintaining journals will take it to heart. I hope those who are considering opening and maintaining journals will incorporate these elements from the beginning.
Brett Steenbarger
18 Aug, 2005
The journal lacks specifics. Many times the journal becomes an outlet for the trader, a way of venting. While there is nothing wrong with venting per se, it is hard to see how *simply* venting in a journal can improve performance. A common entry might state, âI overtraded a slow market and broke all my rules. I know I have to take what the market gives me. Tomorrow I need to trade with more disciplineâ. All these things may be true, but the entry lacks specifics regarding *why* the trader overtraded; *how* the overtrading will be avoided in tomorrowâs trade; and *what steps* will be taken to return to the discipline. A journal entry that lacks specifics is a statement of good intentions; not a plan. If your journal entry does not include concrete steps that you can follow to address a problem situation, it is unlikely that it will serve as an action guide.
The journal emphasizes problems, not solutions. Traders love to keep journals when theyâre losing and then fall off the journaling bandwagon when theyâre making money. I would argue that, when youâre making money, thatâs the *best* time to keep a journal. Your goal should be to replicate successful trading patterns, not simply analyze problematic ones. The ideal journals isolate what traders do when theyâre trading their best, so that these solution patterns can be isolated and mentally rehearsed as part of a learning process.
The journal talks too much about the trader and not enough about the markets. Journals are a learning tool, and your ultimate goal is to learn how to trade. By focusing exclusively on your state of mind, what you did or didnât do in the trade, etc., you lose the opportunity to identify and learn patterns that appear in the market. Itâs extremely helpful to review a market day and examine what you could have noticed to alert you to a market move. By retrospectively identifying such trading patterns, you train your mind to look for them the next time they appear.
The journal is reactive, not proactive. This is part of the venting phenomenon: traders will make journal entries after the market day, but rarely use the journal to actively prepare for the coming dayâs trade. An ideal journal captures what youâll be looking for in the coming day in the markets (anticipated setups) and what youâll be working on in your own trading. Learning from past performance is important, but if the learning is not reflected in future plans, it will not be reflected in actual trading outcomes.
The journal lacks metrics. I have found that traders can best assess their strengths and weaknesses by keeping detailed records of their trades and by evaluating themselves across a series of performance measures. I cannot tell you how many traders Iâve encountered who donât have the faintest notion of their average profit per trade; their average win size and loss size; their average holding period per trade; etc. Itâs not that the traders donât care about performance; itâs that they have not drilled down to the trade-by-trade level to see what theyâre actually doing in the markets. Many times, traders *think* theyâre trading one way, only to find out when they look at the data that theyâre not trading that way at all. Itâs hard to see how a trader can identify if theyâre having problems trading in the morning vs. afternoon; if theyâre more often right on the long side than short; or if they are trading large size differently than smaller size if the statistics are not there to be analyzed.
So whatâs a trader to do? The first step is to decide whether or not you really *want* to know what youâre doing and how well youâre doing it; whether you want to put in the time and effort to identify the patterns in each trading dayâthe marketâs and your own. To paraphrase U.S. college basketball coach Bobby Knight, many traders want to trade and many want to win, but not many are willing to put in the work it takes to be a winner. This is the effort required of a winner, and each trader needs to know if he or she has the fire in their belly to sustain such work.
Ultimately, the effort to win is sustained by a desire to know. Excellent traders are always keeping score: they want to know what theyâve done right or wrong, and whatâs making and losing them money. They are always working on themselves and their trading. Iâve met far too many âbreakevenâ traders who, upon inspection, have been losing money consistently. Itâs not that theyâre lying; they simply donât want to know the truth. Thus, they avoid it. It is simply too painful to look at the money and opportunities lost. Keeping a journal *should* be painful at times, but it should also bring out the best in you. Without it, youâre likely to be a business without a plan.
When Trading Journals Donât Work
(edited)
(edited)
Brett Steenbarger
18 Aug, 2005
The journal lacks specifics. Many times the journal becomes an outlet for the trader, a way of venting. While there is nothing wrong with venting per se, it is hard to see how *simply* venting in a journal can improve performance. A common entry might state, âI overtraded a slow market and broke all my rules. I know I have to take what the market gives me. Tomorrow I need to trade with more disciplineâ. All these things may be true, but the entry lacks specifics regarding *why* the trader overtraded; *how* the overtrading will be avoided in tomorrowâs trade; and *what steps* will be taken to return to the discipline. A journal entry that lacks specifics is a statement of good intentions; not a plan. If your journal entry does not include concrete steps that you can follow to address a problem situation, it is unlikely that it will serve as an action guide.
The journal emphasizes problems, not solutions. Traders love to keep journals when theyâre losing and then fall off the journaling bandwagon when theyâre making money. I would argue that, when youâre making money, thatâs the *best* time to keep a journal. Your goal should be to replicate successful trading patterns, not simply analyze problematic ones. The ideal journals isolate what traders do when theyâre trading their best, so that these solution patterns can be isolated and mentally rehearsed as part of a learning process.
The journal talks too much about the trader and not enough about the markets. Journals are a learning tool, and your ultimate goal is to learn how to trade. By focusing exclusively on your state of mind, what you did or didnât do in the trade, etc., you lose the opportunity to identify and learn patterns that appear in the market. Itâs extremely helpful to review a market day and examine what you could have noticed to alert you to a market move. By retrospectively identifying such trading patterns, you train your mind to look for them the next time they appear.
The journal is reactive, not proactive. This is part of the venting phenomenon: traders will make journal entries after the market day, but rarely use the journal to actively prepare for the coming dayâs trade. An ideal journal captures what youâll be looking for in the coming day in the markets (anticipated setups) and what youâll be working on in your own trading. Learning from past performance is important, but if the learning is not reflected in future plans, it will not be reflected in actual trading outcomes.
The journal lacks metrics. I have found that traders can best assess their strengths and weaknesses by keeping detailed records of their trades and by evaluating themselves across a series of performance measures. I cannot tell you how many traders Iâve encountered who donât have the faintest notion of their average profit per trade; their average win size and loss size; their average holding period per trade; etc. Itâs not that the traders donât care about performance; itâs that they have not drilled down to the trade-by-trade level to see what theyâre actually doing in the markets. Many times, traders *think* theyâre trading one way, only to find out when they look at the data that theyâre not trading that way at all. Itâs hard to see how a trader can identify if theyâre having problems trading in the morning vs. afternoon; if theyâre more often right on the long side than short; or if they are trading large size differently than smaller size if the statistics are not there to be analyzed.
So whatâs a trader to do? The first step is to decide whether or not you really *want* to know what youâre doing and how well youâre doing it; whether you want to put in the time and effort to identify the patterns in each trading dayâthe marketâs and your own. To paraphrase U.S. college basketball coach Bobby Knight, many traders want to trade and many want to win, but not many are willing to put in the work it takes to be a winner. This is the effort required of a winner, and each trader needs to know if he or she has the fire in their belly to sustain such work.
Ultimately, the effort to win is sustained by a desire to know. Excellent traders are always keeping score: they want to know what theyâve done right or wrong, and whatâs making and losing them money. They are always working on themselves and their trading. Iâve met far too many âbreakevenâ traders who, upon inspection, have been losing money consistently. Itâs not that theyâre lying; they simply donât want to know the truth. Thus, they avoid it. It is simply too painful to look at the money and opportunities lost. Keeping a journal *should* be painful at times, but it should also bring out the best in you. Without it, youâre likely to be a business without a plan.
I can't really prepare for a range, hinge or chop zone in prep. If one shows up in real time, it will influence how I'd manage a trade I was in or if I should enter a new trade or not. That is what I mean by having problems with "reading" context in real time. I can anticipate chop at the mean of a previous range and so on but sometimes it's more difficult, I think. Maybe it's just me.
You mean if one trades the "SLA" method there is no need for an individual plan? Personally I am trying to trade based on "SLA" but I'm still doing back tests and I am forward testing as I have to learn what to do and when. I don't think I could trade using the rules you posted unless I make them my own which is an iterative process. I'd like to think I am learning to read price and not only trade lines on a chart.
There's something I don't understand here.
I can't really prepare for a range, hinge or chop zone in prep. If one shows up in real time, it will influence how I'd manage a trade I was in or if I should enter a new trade or not. That is what I mean by having problems with "reading" context in real time. I can anticipate chop at the mean of a previous range and so on but sometimes it's more difficult, I think. Maybe it's just me.
You mean if one trades the "SLA" method there is no need for an individual plan? Personally I am trying to trade based on "SLA" but I'm still doing back tests and I am forward testing as I have to learn what to do and when. I don't think I could trade using the rules you posted unless I make them my own which is an iterative process. I'd like to think I am learning to read price and not only trade lines on a chart.
There's something I don't understand here.
The SLA is a plan. If one wants to come up with something of his own, he's free to do so. But he'll have to start all over again with the observation and backtesting phases, which is what I assume you're doing.
Can you show us a backtest of your method? Just the perf output, not the inputs. This stuff would be very difficult to test.
Somehow I need to make your plan my own. For me that means I have to back test to know it's valid and also to see how it's worked in the past, what retraces look like, what the context was and so on. It also means I have to forward test to see that I can actually spot these trades in real time, that I can do a prep that is actually useful while trading - and so on.
Sorry if this is off topic for the intent of this thread.
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