Giant Glasses ??
Ideas for struggling traders
- Thread starter steve46
- Start date
Giant Glasses ??
Thanks for your comments
I agree that small traders have significant challenges to overcome when trading small accounts.
Clearly it "takes money to make money".
Here is what I notice about small accounts;
1.) They hesitate to pull the trigger, resulting in missed trades
and unfavorable entry position.
2.) They "tick watch", which causes them to be even more fearful
3.) They take profits way too soon, making it difficult to overcome
costs.
In previous posts, I have suggested ways to overcome each problem but here they are again in a nutshell;
1.) Research your system. Don't trade until you have full confidence that you have a positive expectancy.
2. Don't tick watch. Set your stop, and your first and second scale out levels, then back away from the screen
3. Resist the impulse to stop yourself out prematurely. You may think you are saving yourself a couple of ticks, but in reality you are making sure you realize a loss, whereas if you just let it go you may be pleasantly surprised. Remember this is a business. Treat it that way.
I hope this helps.
Steve
You are talking about money management issue. But probably much bigger problem to the average Joe poses the fact that market data is non-stationary (and that's just the beginning). Then again, 99% (number pulled out of the air) of people will never take an effort to understand and learn the concept and come up with ideas of how to apply the stuff to the real world. Especially that it takes a certain high level of geekiness, lots of time, thinking, studying and unsocial activity.
Indroinas
I agree with your comment. I have commented on the concept of stationarity a few times myself..I don't bring it up here because I am trying to help struggling traders. I assume they don't have the skills to make use of it. However for those interested I suggest reading
Mathematics of Technical Analysis by Clifford Sherry.
I agree with your comment. I have commented on the concept of stationarity a few times myself..I don't bring it up here because I am trying to help struggling traders. I assume they don't have the skills to make use of it. However for those interested I suggest reading
Mathematics of Technical Analysis by Clifford Sherry.
Here is a chart that shows once again how price is likely to test a particular area before moving on
See how price tests three (3) times and then takes off to the next level. This is characteristic of today's market and something that traders have to get used to if they are going to be successful. Otherwise you will simply have to stand aside and watch while this goes on...
As can be seen the slope of the MA's is contradictory. The longer MA says "down" but the shorter MA is changing its slope. To me this means that momentum is developing here and price is consolidating. Then as price tests a specific area, volume builds (not shown in my chart) and then price puts on an impulse move up to the next level.
In my opinion, this is about as "advanced" as a struggling trader can handle. If you are uncomfortable with the idea or can't get the feel of it...simply stand aside and wait for tests of the longer MA (White).
See how price tests three (3) times and then takes off to the next level. This is characteristic of today's market and something that traders have to get used to if they are going to be successful. Otherwise you will simply have to stand aside and watch while this goes on...
As can be seen the slope of the MA's is contradictory. The longer MA says "down" but the shorter MA is changing its slope. To me this means that momentum is developing here and price is consolidating. Then as price tests a specific area, volume builds (not shown in my chart) and then price puts on an impulse move up to the next level.
In my opinion, this is about as "advanced" as a struggling trader can handle. If you are uncomfortable with the idea or can't get the feel of it...simply stand aside and wait for tests of the longer MA (White).
Summary of suggestions for Struggling Traders
1. Trade "with" the longer term trend if possible. I use a chart with daily bars/candles to obtain my "long term" trend
2. Start with a plan but be ready to react to whatever the market does. I use Market Profile to obtain an idea of where "fair value" has been found. I know whether traders accepted the current price as fair, or rejected it in the last session.
3. Use the chart that gives you the best view of the data. I start with a 5 min candle chart (my suggested setup is published), then if price action gets choppy I switch to either constant volume or tick charts. This allows me to "spread out the action" and see a more wavelike picture of price movement.
4. Trade setups that you have tested and have confidence in. I backtest my setups so that I know what to expect. I prioritize them so that I know what the high percentage setups are. I try to stay with a trade even if it looks bad. Sometimes a trade that looks bad will turn out to be a big winner.
5. Follow your your trading plan. Try to take every setup in your plan. Keep record of how your setups perform and make your adjustments on the weekend. Do not adjust your trading plan in the middle of the week.
6. Manage risk like a professional. Trade with adequate account size. If you don't have adequate account size stand aside until you do. Use that time to test and practice execution on a sim.
I have shown a number of charts with good setups. Choose those that fit your temperment and test them yourself. Then draw up your trading program and test that for at least a month.
Once you have confidence that you have a positive expectancy, go live with a properly funded account and keep accurate records
Adjust your plan on the weekends to improve your expectancy.
I am sure there will be questions about some of the items.
Good luck
Steve
1. Trade "with" the longer term trend if possible. I use a chart with daily bars/candles to obtain my "long term" trend
2. Start with a plan but be ready to react to whatever the market does. I use Market Profile to obtain an idea of where "fair value" has been found. I know whether traders accepted the current price as fair, or rejected it in the last session.
3. Use the chart that gives you the best view of the data. I start with a 5 min candle chart (my suggested setup is published), then if price action gets choppy I switch to either constant volume or tick charts. This allows me to "spread out the action" and see a more wavelike picture of price movement.
4. Trade setups that you have tested and have confidence in. I backtest my setups so that I know what to expect. I prioritize them so that I know what the high percentage setups are. I try to stay with a trade even if it looks bad. Sometimes a trade that looks bad will turn out to be a big winner.
5. Follow your your trading plan. Try to take every setup in your plan. Keep record of how your setups perform and make your adjustments on the weekend. Do not adjust your trading plan in the middle of the week.
6. Manage risk like a professional. Trade with adequate account size. If you don't have adequate account size stand aside until you do. Use that time to test and practice execution on a sim.
I have shown a number of charts with good setups. Choose those that fit your temperment and test them yourself. Then draw up your trading program and test that for at least a month.
Once you have confidence that you have a positive expectancy, go live with a properly funded account and keep accurate records
Adjust your plan on the weekends to improve your expectancy.
I am sure there will be questions about some of the items.
Good luck
Steve
Hi Steve.
First off, thanks for all your help.
Do you think you could touch on how a break out trade would work within your guidelines. I see that the high probability trades are fades at resistance/support. However I also noticed on a day like today that if proven wrong or stopped out, reversing the trade can also be profitable. For long I've been wired to enter on breakouts and for just as long I've been getting burnt, unless I have really wide stops. Your method is superb, how would you trade the reverse if at all.
First off, thanks for all your help.
Do you think you could touch on how a break out trade would work within your guidelines. I see that the high probability trades are fades at resistance/support. However I also noticed on a day like today that if proven wrong or stopped out, reversing the trade can also be profitable. For long I've been wired to enter on breakouts and for just as long I've been getting burnt, unless I have really wide stops. Your method is superb, how would you trade the reverse if at all.
Thanks for the kind words Fifo
First I want to post this chart
It displays a lot of ideas that can be useful it you want to use this method
I suggest struggling traders print out the chart and then go back and note the following
First price tests the previous day's high and cannot take it out.
Second, price comes down and tags or tests the 80 period MA (Blue line) and then takes it out to the downside. At this point I am thinking that the momentum is clearly "reversed". For me this is no longer just a pullback, but looks like it could be a short setup.
Next, price continues down to test the pivot, taking it out and then staging a little move up to re-test the 80 period MA. It tags or tests the 80 period MA but then fails to take it out creating a possible lower high (compared to the test of the previous day's high)
Notice the slope of the 80 period MA is downward and the longer 200 period MA is rounding over. Again this suggests that the momentum has changed and a continuation move is likely. The question is where to get on board short?
Generally speaking, in order for price to "take out" a pivot, it has to do so on a relatively wide range bar and on significant volume. The fact that the pivot and longer term MA (white line) are so close together makes the move significant. Seeing price take out both the pivot and the longer term MA tells me I have a good percentage setup in place and I am looking to get short on the open of the next bar....
Notice that price comes back to test the longer term MA. When it also "fails" leaving a tail, you know we are going for a ride south...
In this case we went from a short entry of 1249.25 to a low of 1235.75 or 13.5 ES points.
Again, I would suggest scaling out along the way at 2, 3, 5, 7 and 10 points, leaving at least one unit in case it continued to run.
Now there are a lot of ways to trade that move, but this in my opinon would have worked well for traders wanting a high percentage setup and having the patience to wait for it to develop.
First I want to post this chart
It displays a lot of ideas that can be useful it you want to use this method
I suggest struggling traders print out the chart and then go back and note the following
First price tests the previous day's high and cannot take it out.
Second, price comes down and tags or tests the 80 period MA (Blue line) and then takes it out to the downside. At this point I am thinking that the momentum is clearly "reversed". For me this is no longer just a pullback, but looks like it could be a short setup.
Next, price continues down to test the pivot, taking it out and then staging a little move up to re-test the 80 period MA. It tags or tests the 80 period MA but then fails to take it out creating a possible lower high (compared to the test of the previous day's high)
Notice the slope of the 80 period MA is downward and the longer 200 period MA is rounding over. Again this suggests that the momentum has changed and a continuation move is likely. The question is where to get on board short?
Generally speaking, in order for price to "take out" a pivot, it has to do so on a relatively wide range bar and on significant volume. The fact that the pivot and longer term MA (white line) are so close together makes the move significant. Seeing price take out both the pivot and the longer term MA tells me I have a good percentage setup in place and I am looking to get short on the open of the next bar....
Notice that price comes back to test the longer term MA. When it also "fails" leaving a tail, you know we are going for a ride south...
In this case we went from a short entry of 1249.25 to a low of 1235.75 or 13.5 ES points.
Again, I would suggest scaling out along the way at 2, 3, 5, 7 and 10 points, leaving at least one unit in case it continued to run.
Now there are a lot of ways to trade that move, but this in my opinon would have worked well for traders wanting a high percentage setup and having the patience to wait for it to develop.
Thanks for all the hard work and thoughts