How certain are you of the trades you place?

[rin4et]

Surely nobody taking low-probability trades is exposing anything like 3% of their account funds to risk on an individual trade?! Not anyone with any mathematical/statistical awareness, anyway - and not for long even without it? The lesson learned from doing that would doubtless be pretty fast and very effective?

I said 3% of their position size which is $3000. Their account could be $30k or $40k but the scenario above still applies.

 

[Hooter]

I will take a low probability trade if my risk is small and expected pay out is large enough. Conversely, i will pass on low risk but low pay off trades. I take up to 10 trades a day but the best days are one and done! I often scale into winners and scale out of losers, so my may position size can be quite high if im deep in the money but i almost never start full size. This makes a lot of people mad but i am a PnL day trader and i stop trading when i hit profit goal or loss limit, regardless of the market. You have to have a finish line

 

[JamesEM]

Trading is not so much about winning prediction % abilities, but rather...a collective, dynamic entity.
You could predict right, and still end up wrong or unprofitable. and Vice versa.

My sentiments exactly.

 

[JamesEM]

There is a quote from market Wizards that talks about a cheetah waiting for a week in the bushes for a high probability kill.
Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch it’s prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably also one that is sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading.

There is an inherent problem in this oft-used analogy which seems to be overlooked.

The cheetah doesn't get to see, with absolutely no uncertainty, which of the "kills" would have resulted in success anyway, even if it was deemed less than high probability.

The trading landscape is mentally brutal- you get to be "right" (but "wrong"...i.e. stopped before the move and/or nearly at target then price reverses, stopping you out), "wrong" (but "right"...i.e. making money despite making a mistake according to your plan) and everything in between.

First, you have to understand the nature of probabilities...then you have to accept it (not just act on it...big difference between the two!). Seeing what would have been means you need even more mental capital in order to get to, and act on, that "high probability kill" without letting the journey throw you off.

 

[bpr]

Well there is something called death by a thousand cuts. A stop loss doesn't protect against that especially if you are not selective and focus only on high probability trades.
Let's say traderA and B both have $3000 to play with.
TraderA sits on his hands waiting for that high probability trade. Whereas B thinks a stop loss will protect him against low probability trades.
On Day 1 traderB takes takes 2 low probability trades and gets stopped out with a loss of 3% each.
If this happens 2 days in a row he is down to $2656 all the while traderA has been calmly sitting on his hands and still has his $3000. Not to mention pressure is building on traderB due to the loss and he might be become more risk averse and be hesitant to pull the trigger on the next good trade.
Now on Day 3 let's say a high probability trade comes along and both traderA and B take it. Let's say they both make 13%. Now trader B is just cutting even whereas traderA is at $3390. If this process repeats a few times traderA will be way ahead of B whereas B will be struggling to dig himself out of the hole.
There is a quote from market Wizards that talks about a cheetah waiting for a week in the bushes for a high probability kill.
Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch it’s prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably also one that is sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading.

u have been telling the same thing again again in various posts ....
but you never talk about risk reward ratio...
a low probability trade always has to have high reward to risk ratio...
Similarly a high probability trade generally comes with low reward to risk ratio.

if you have both winning percentage and risk reward ratio then we can compare 2 methods else we cannot compare ...

theses are 2 styles people can choose whatever suits their psychology.

 

[ironchef]

There is an inherent problem in this oft-used analogy which seems to be overlooked.

The cheetah doesn't get to see, with absolutely no uncertainty, which of the "kills" would have resulted in success anyway, even if it was deemed less than high probability.

The trading landscape is mentally brutal- you get to be "right" (but "wrong"...i.e. stopped before the move and/or nearly at target then price reverses, stopping you out), "wrong" (but "right"...i.e. making money despite making a mistake according to your plan) and everything in between.

First, you have to understand the nature of probabilities...then you have to accept it (not just act on it...big difference between the two!). Seeing what would have been means you need even more mental capital in order to get to, and act on, that "high probability kill" without letting the journey throw you off.

Actually according to the PBS program Nature, cheetahs only caught one out of ~5-10 preys they chased, not exactly the win rate you day traders are looking for.

 

[Overnight]

Actually according to the PBS program Nature, cheetahs only caught one out of ~5-10 preys they chased, not exactly the win rate you day traders are looking for.

You guys aren't doing it right without mentioning Mr. Cheetah himself, Sir Attenborough. In fact, what rin4et posted above with the cheetah hiding in the bush etc, I read in David's voice in my mind's ear.

 

[JamesEM]

Actually according to the PBS program Nature, cheetahs only caught one out of ~5-10 preys they chased, not exactly the win rate you day traders are looking for.

Where is the "tumbleweed" emoticon...? lol.

 

[spy guy]

Well there is something called death by a thousand cuts. A stop loss doesn't protect against that especially if you are not selective and focus only on high probability trades.
Let's say traderA and B both have $3000 to play with.
TraderA sits on his hands waiting for that high probability trade. Whereas B thinks a stop loss will protect him against low probability trades.
On Day 1 traderB takes takes 2 low probability trades and gets stopped out with a loss of 3% each.
If this happens 2 days in a row he is down to $2656 all the while traderA has been calmly sitting on his hands and still has his $3000. Not to mention pressure is building on traderB due to the loss and he might be become more risk averse and be hesitant to pull the trigger on the next good trade.
Now on Day 3 let's say a high probability trade comes along and both traderA and B take it. Let's say they both make 13%. Now trader B is just cutting even whereas traderA is at $3390. If this process repeats a few times traderA will be way ahead of B whereas B will be struggling to dig himself out of the hole.
There is a quote from market Wizards that talks about a cheetah waiting for a week in the bushes for a high probability kill.
Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch it’s prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably also one that is sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading.

I concur dont feel like you have to be in the market everyday, wait until it looks right for you, I am out of the market more than I am in it and it works for me

 

[mbondy]

For successful day traders, how certain are you of the trades you make on a scale of 1 to 10?
10 - being as sure as the sun will rise tomorrow
1 - getting heads on a coin flip

Also for context please answer the following questions:
1) How many trades do you place on average per day?
2) On average how many of those trades do you get wrong i.e. stopped out with a loss?
3) What is your average position size? In dollar amount.

Please respond to this thread only if you are a successful day trader. Thanks!

My certainty on any given trade is usually dictated to me by the market shortly after entering, for better or worse.