gabfly,notice how she mentions taking notes and writing things down, like a scientist,I and probably you,are learning by osmossis,i think one of these ways is fasterQuote from NoDoji:
First, I studied charts in my preferred trading time frame (5-min) and made notes about the price action environment leading into price pivots that led to strong moves.
Why do price support and price resistance occur here and not there?
At what point does a trend appear to be starting another push?
What happens when a trend reverses?
Do the same things seem to happen again and again, far more often than something else happening?
What defines chop?
When breakouts fail, does the price environment or the time of day provide clues that the breakout might fail instead of run hard?
I got very specific, until I eventually learned to choose levels at which price is likely to find S/R, studied ways of entering and managing such trades, and every day after the close of market, made detailed notes about entries, survivability of stops, minimum targets, how much heat was taken on each trade before it became profitable (if it became profitable).
I gradually defined rules to keep me from trading in chop.
I made notes about what happens just before ranges, flags or triangles break out. How long does the consolidation normally last at various stages of a trend (young, middle-aged and mature)?
After a few months, I determined that out of all possible trades available to me each day (valid setups with entries, stops and targets by the rules), on average a certain percentage of them resulted in a minimum profit target or better without hitting the stop loss. It was a win percentage of over 60% and my average profit target was at least twice my average loss. I consider that high probability. It's a strong edge.
All this was done manually end of each day, though I was still trading live. My problem was I wasn't trading all valid setups, so the "edge" was diluted.
There were some trades that fit my plan, but inexplicably failed. This caused me to hesitate on trades and miss many good ones.
I always want a reason for something and eventually I began to notice a pattern to the failed trades. Once I could define the setups that looked good according to my rules, but failed very regularly, I learned to recognize the price environment surrounding these failed setups and began to trade them in the opposite direction.
These eventually turned out to be my highest probability setups in that they produced large, fast profits at least 80% of the time.
It's the persistence, hard work, and attention to detail that pays off.
Many traders have extremely consistent trading behaviors that fail to produce a profit. For example, some traders put on a trade, move their stop to break even too soon, get stopped out, watch the trade run without them, chase an entry right about at the point the price push is ready to make a normal retrace, then get stopped out of the trade for a loss or another break even. There are traders who do this with such consistency that they can transform their behavior to produce high probability trades. They have but to recognize the setup and entry they desire, wait for price to move in their favor (without yet putting on the trade), then place a limit order at the price they initially planned to enter. Price will pull back to their entry and lift the order (that's where they're stopped out b/e all the time), then price will make the move that they normally end up chasing.
I was one of those traders for a while. I had a bad habit of moving my stop to b/e too soon, getting stopped out of quite a few trades nearly to the tick, then watching the trade run hard without me, or I'd chase an entry and get less profit or nothing at all, or sometimes a loss out of it.
My trading roomie said, "It seems that price comes back to that entry level a lot with this style of trading."
It was a big Aha! moment for me, but it took someone else saying it out loud for that to sink in.
So the only gifts and talents involved here are pattern recognition and stubborn persistence.
I agree. Making strict rules based on my back testing resulted in the eventual (it seemed to take forever for me to get there) ability to simply trade setups and manage them according to my rules for that exact reason. There are no excuses, no wringing of hands and gnashing of teeth, it's all very mechanical now.
Here comes the setup. The entry signal is X. Order placed at X. Stop placed here. Minimum profit target zone is there.
Hey ho, let's go!
Gifted and Talented Traders
- Thread starter NoDoji
- Start date
Right, ammo, I approach it very scientifically knowing that odds will be in my favor if certain things happen over and over again and only fail occasionally.
Gabfly, although I've recently added a lot of discretion to my trading, the core setups and rules are the same well-defined setups and rules I developed over a good part of last year with a few other traders.
I have a setup where I enter a trade in the direction of a trend off a price pullback. Although I tweaked my strategy to avoid slippage and use tighter protective stops, the price at which I enter is the same, and the minimum profit target is the same.
I used to trade breakouts at the breakout level. I now position myself ahead of the breakout based on months of observation and note-taking to determine the optimal way to do that. The minimum profit targets on these trades are the same, the size of the protective stops are the same or quite similar, but the discretionary method of entering gives me a better entry price with no slippage.
I could teach someone the core rules and they'd make money if they followed the rules. I've added some discretionary nuances to how I trade the setups my core rules dictate; those modifications don't affect the statistical edge much.
Gabfly, although I've recently added a lot of discretion to my trading, the core setups and rules are the same well-defined setups and rules I developed over a good part of last year with a few other traders.
I have a setup where I enter a trade in the direction of a trend off a price pullback. Although I tweaked my strategy to avoid slippage and use tighter protective stops, the price at which I enter is the same, and the minimum profit target is the same.
I used to trade breakouts at the breakout level. I now position myself ahead of the breakout based on months of observation and note-taking to determine the optimal way to do that. The minimum profit targets on these trades are the same, the size of the protective stops are the same or quite similar, but the discretionary method of entering gives me a better entry price with no slippage.
I could teach someone the core rules and they'd make money if they followed the rules. I've added some discretionary nuances to how I trade the setups my core rules dictate; those modifications don't affect the statistical edge much.
I have been contemplating that myself. I come from a country that does not have neither standardized tests nor gifted programs. I was extremely bored in school and never did any homework. In High School I used to skip class and read Nietzsche and Blake instead. I wish I had the opportunity to participate in a "gifted" program, maybe I would've gotten more out of my time in school.
Thinking while trading.
http://www.elitetrader.com/vb/showthread.php?s=&postid=2950070&highlight=twt#post2950070
Yes! I've totally overcome that! I do all my thinking ahead of the potential setup and I'm prepared when the time comes. In fact I usually have my order placed in advance now.
I started documenting the trades I missed out on by TWT and realized that 80% of of the trades I missed were very profitable. It became an edge in and of itself
Damn, that's downright frightening :eek:
I think I need to get to a Trader's Anonymous meeting now...