4 point range (993-997) overnight. Gold rises.
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I trade 1 ES
- Thread starter random trader
- Start date
Limited profit with unlimited loss potential.
What a great idea and a truly exceptional group
of statistical geniuses.
Why not just sell naked calls on QQQ? At least then
you'd have an outside chance to make some money.
What a great idea and a truly exceptional group
of statistical geniuses.
Why not just sell naked calls on QQQ? At least then
you'd have an outside chance to make some money.
Quote from OldTrader:
I doubt there is any combination of stops versus targets that would give you a real edge. Perhaps though TGregg would chime in on this.
Where the edge comes from in my mind is a superior entry, with a wide enough stop that 'noise' will not stop you out 'most of the time'.
Personally, I tend to use 10 point stops. For me it's a 'fail-safe' mechanism...if my entry was that bad then I want out to reassess.
However, I snug that 10 points up over time, once my trade has time to 'mature'. I don't set a target per se, but when I think I've milked the trade enough I get out.
The idea that there is some idealized stop/target combo minimizes the thought process that goes into the superior trade. To make money over time I don't think you can minimize thought.
OldTrader
My baseline method (sell and hold) is very similar to yours. Good entry, wide stop, milk the trade, etc. I know it works because that's how I ran my account from $9,000 to $16,000 last year. I don't know your timeframe, but I use the weekly and I held onto positions for weeks even months. My stop is wider because my entry is OK but not superior, since I am not a good trader.
In this experiment, I want to improve on this baseline method. I want to counter-trade the long term position on a shorter timeframe. A good example will be yesterday: if GTC buy @982 were filled, I would sell again @990 to reestablish my long-term position, after pocketing 8 points. That is the plan.
As you can see, the intent is not to take the profit and wait for the next INDEPENDENT trade. The next trade is DEPENDENT on the earlier trade. I will try to reenter quickly because I don't want to lose the long-term position.
I tend to over-analyze. As a result, I look for confirmation and assurance when I identify trading opportunities. I hesitate and miss numerous such opportunities. With this in mind, the reason I have a target for the short term counter trade is two folds:
1. It provides me the assurance I need to pull the trigger. I realize trading is a psychological game as well as a statistical game.
2. It provides me the chance to get filled when I am away from the market. I have numerous meetings to attend so I get paid.
Hopefully, it is clear now that 5, or 8, or 9 is not that important. TGregg's study just gives me more confidence when it's time to pull the trigger. The whole thing may sound silly to some of you who are highly confident, but I do need this additional assurance. I know my weakness and I am trying to overcome it. Someday maybe I can do without it.
Quote from richardSmack:
Limited profit with unlimited loss potential.
What a great idea and a truly exceptional group
of statistical geniuses.
Why not just sell naked calls on QQQ? At least then
you'd have an outside chance to make some money.
Another fine example of speaking without knowing what one is talking about.
Quote from random trader:
I tend to over-analyze. As a result, I look for confirmation and assurance when I identify trading opportunities. I hesitate and miss numerous such opportunities.
Just thought I'd point out what sometimes seems contradictory. What appears to be the MOST uncertain, HIGHEST risk trade often is the one where the smallest stop order can be used. For instance, when the high of the move occurs, most people are bullish, there appears to be untold risk to the short side, and you can think of no reason for the market to go down. The more certainty and confirmation you require, the less certain your return will be, the wider your stop must be. A widely observed head and shoulders for instance, when the price breaks the neckline, has good certainty technically, but because it's widely observed, risk of loss rises. As traders we are going to be 'compensated' for acting at times when 'certainty' is low. By the way, this is not a suggestion to pick tops or bottoms necessarily.
It provides me the assurance I need to pull the trigger. I realize trading is a psychological game as well as a statistical game.
It's definitely a psychological game, both yours and that of other traders (if you can figure it out). Statistical I have trouble with....unless by statistical you mean financial. But I don't think you do. Statistics would be helpful for instance in a poker game in telling you what the probability might be to draw to an inside straight, and then comparing that with your bet versus the size of the pot. I see people all the time who attempt to use statistics to play the market....August is statistically a bad month, sell in May and go away, etc etc etc. What these types of things leave out are ALL of the important financial and economic considerations. A statistician with the ability to backtest is an accident waiting to happen in my opinion.
What you left out though, and I think it's somewhat telling in this particular case, is MONEY MANAGEMENT, or put another way, TRADE MANAGEMENT. There's alot to this topic, and I don't have the time to get into it here....but suffice to say that managing your trade and your money changes your results.
TGregg's study just gives me more confidence when it's time to pull the trigger.
TGregg's study was a study of random trades using certain stop/target combinations. However, it differed from your strategy because you have a 'bias'. TGregg did not study the target/stop combinations using your 'bias'. His study just reversed the trade each time. Therefore I doubt that the study he made should give you very much comfort, one way or the other.
I like the idea of using wider stops. I also like the idea of trading with a 'bias'. What I call this is trading in the direction of trend. I also like the idea of trading smaller so that you can give the market more room to move and still feel comfortable.
But when you try to make this too 'statistical' I think it will have it's problems because the market ALWAYS changes over time.
As always, these are just my opinions.
OldTrader
Quote from random trader:
My stop is wider because my entry is OK but not superior, since I am not a good trader.
Just one more comment: I would stop making statements of the type above relative to 'not being a good trader'. Frankly, this is not a very empowering type of statement.
Perhaps you're just a relatively new trader. Therefore, you have alot of learning ahead of you. None of us learn this game overnight, and most of us are STILL learning, including me.
So why not refer to yourself as a 'work in progress'?
You know, most 'good' traders are 'good', not necessarily because they get the best entry, or know the most about economics, or found a 'holy grail' type of system to trade with.
Rather, they are good observers first. Good observers of the market, why it acts the way it does, when, how it relates to news announcements, etc etc. An observer does not just look at charts at night. This might teach you some things....but it's much more important to be able to observe what happens and why throughout the day, when things are moving around, news is being announced, stocks are trading, the bond market is moving, etc etc.
Second, the good trader eventually must understand and become comfortable with risk. Risk is what creates reward. Most traders develop ways to deal with this risk, such as money management, trade management, stop losses, etc.
The good trader eventually understands that he must learn to sit, wait, not only for the trade to develop, but perhaps for an opportunity in which he can enter with an appropriate risk. Patience is a quality that most traders could learn more about.
So while you're a 'work in progress', I would not think of myself or refer to myself as 'not being good'. Not a good thought to program yourself with.
OldTrader
Quote from OldTrader:
Quote from random trader:
I tend to over-analyze. As a result, I look for confirmation and assurance when I identify trading opportunities. I hesitate and miss numerous such opportunities.
Just thought I'd point out what sometimes seems contradictory. What appears to be the MOST uncertain, HIGHEST risk trade often is the one where the smallest stop order can be used. For instance, when the high of the move occurs, most people are bullish, there appears to be untold risk to the short side, and you can think of no reason for the market to go down. The more certainty and confirmation you require, the less certain your return will be, the wider your stop must be. A widely observed head and shoulders for instance, when the price breaks the neckline, has good certainty technically, but because it's widely observed, risk of loss rises. As traders we are going to be 'compensated' for acting at times when 'certainty' is low. By the way, this is not a suggestion to pick tops or bottoms necessarily.
It provides me the assurance I need to pull the trigger. I realize trading is a psychological game as well as a statistical game.
It's definitely a psychological game, both yours and that of other traders (if you can figure it out). Statistical I have trouble with....unless by statistical you mean financial. But I don't think you do. Statistics would be helpful for instance in a poker game in telling you what the probability might be to draw to an inside straight, and then comparing that with your bet versus the size of the pot. I see people all the time who attempt to use statistics to play the market....August is statistically a bad month, sell in May and go away, etc etc etc. What these types of things leave out are ALL of the important financial and economic considerations. A statistician with the ability to backtest is an accident waiting to happen in my opinion.
What you left out though, and I think it's somewhat telling in this particular case, is MONEY MANAGEMENT, or put another way, TRADE MANAGEMENT. There's alot to this topic, and I don't have the time to get into it here....but suffice to say that managing your trade and your money changes your results.
TGregg's study just gives me more confidence when it's time to pull the trigger.
TGregg's study was a study of random trades using certain stop/target combinations. However, it differed from your strategy because you have a 'bias'. TGregg did not study the target/stop combinations using your 'bias'. His study just reversed the trade each time. Therefore I doubt that the study he made should give you very much comfort, one way or the other.
I like the idea of using wider stops. I also like the idea of trading with a 'bias'. What I call this is trading in the direction of trend. I also like the idea of trading smaller so that you can give the market more room to move and still feel comfortable.
But when you try to make this too 'statistical' I think it will have it's problems because the market ALWAYS changes over time.
As always, these are just my opinions.
OldTrader
Nothing to disagree. Just a few things to clearify.
Quote from OldTrader:
August is statistically a bad month, sell in May and go away, etc etc etc.
This is not statistics. This is "the probability of raining tomorrow is 50%".
Statistical information you may find useful in the market include things like "the chance of the price revisiting its current level sometime in the future is very high".
Quote from OldTrader:
TGregg's study was a study of random trades using certain stop/target combinations. However, it differed from your strategy because you have a 'bias'. TGregg did not study the target/stop combinations using your 'bias'. His study just reversed the trade each time. Therefore I doubt that the study he made should give you very much comfort, one way or the other.
OldTrader
I recognize the difference. You can call my action superstition if you want, but it does give me comfort. Trading is a psychological game. I know I need confidence, and this is giving me confidence. The technical aspect is secondary.
Quote from OldTrader:
I like the idea of using wider stops. I also like the idea of trading with a 'bias'. What I call this is trading in the direction of trend. I also like the idea of trading smaller so that you can give the market more room to move and still feel comfortable.
OldTrader
This is the cake of my plan. The rest is icing.