MacAttack

[k p]

Hi NoDoji.... a quick question if I may.

With point 2 in the 1st Excercise, you state that you enter the trade when the second pullback bar doesn't drop below the first pullback in the falling market. In this case though, it appears that you are not being swept into the trade as you now have two bars with higher lows. I just want to make sure I understand you correctly.

Is the idea that because you are in a trending bear and you are at more than 10 ticks away from the 20EMA, those two consecutive bars with a higher low just mean that the price is that much more sure to drop? Or put another way, the chances that the third bar has yet another higher low are slim because this third bar is now more likely to be the bar with a lower low that resumes the down trend?

I hope my explanation of my question is clear enough with words but if I need to post a picture please let me know!

 

[NoDoji]

Hi NoDoji.... a quick question if I may.

With point 2 in the 1st Excercise, you state that you enter the trade when the second pullback bar doesn't drop below the first pullback in the falling market. In this case though, it appears that you are not being swept into the trade as you now have two bars with higher lows. I just want to make sure I understand you correctly.

Is the idea that because you are in a trending bear and you are at more than 10 ticks away from the 20EMA, those two consecutive bars with a higher low just mean that the price is that much more sure to drop? Or put another way, the chances that the third bar has yet another higher low are slim because this third bar is now more likely to be the bar with a lower low that resumes the down trend?

I hope my explanation of my question is clear enough with words but if I need to post a picture please let me know!

Hi kp,

It's just an exercise, a drill so to speak. An aspiring athlete runs many repetitive drills to train the body to behave fluidly under certain conditions.

The exercises are drills to a) train the aspiring trader how to try out ideas and analyze results using a "guess and check" method, and b) demonstrate core ideas that run counter to what most losing traders do (fight trends and get chopped by trading initial breaks out of wide or sloppy ranges).

The core idea in the case you reference above is to test whether entering a trade in the direction of a trending move during a pullback has positive expectancy even under the negative conditions of an equal R:R and a fixed stop loss with no filters for whether the stop loss is technically feasible based on the entry idea proposed (close of a random pullback bar).

I threw that idea out there as an exercise, never having tested it myself. Interestingly, I later tested it over a couple series' of 10 trades and found it had significant positive expectancy.

 

[k p]

Hi kp,

It's just an exercise, a drill so to speak. An aspiring athlete runs many repetitive drills to train the body to behave fluidly under certain conditions.

The exercises are drills to a) train the aspiring trader how to try out ideas and analyze results using a "guess and check" method, and b) demonstrate core ideas that run counter to what most losing traders do (fight trends and get chopped by trading initial breaks out of wide or sloppy ranges).

The core idea in the case you reference above is to test whether entering a trade in the direction of a trending move during a pullback has positive expectancy even under the negative conditions of an equal R:R and a fixed stop loss with no filters for whether the stop loss is technically feasible based on the entry idea proposed (close of a random pullback bar).

I threw that idea out there as an exercise, never having tested it myself. Interestingly, I later tested it over a couple series' of 10 trades and found it had significant positive expectancy.

Ah... good to know that this was a proposed exercise versus an idea that works, but interesting how you found it had positive expectancy, albeit just over 10 trades.

I hate to go off topic with this thread and hence disrespect the original poster, but perhaps I can ask for your opinion since I'm not sure how else to ask you. I'm not sure if you recall me saying earlier that I have been following your threads particularly because your entire path is documented here so well and you are such an active and giving member.

I also very much enjoy posts by your former mentors, bighog, RedNeck and dBPhoenix, and am eager to start a journal, hoping that you guys will guide me along. I have been studying Al Brooks for months, I read that Bob Volman book, but what I haven't done yet is specifically lay out a pattern that I will look for and trade once I figure out that it has a positive expectancy. (At the end of the day it seems so obvious when I see that even though a stock starts out strong, a lower high so often leads to a bear trend day... so I'm working on something like this, although this would require larger stops and hence trading smaller positions. I figure that I don't want to be stopped out of trades too early and want to capture more of the trend of the day)

My issue is with what I should trade. I have been following the gold ETFs, NUGT and DUST because they can have nice moves on many days. But the volume sometimes seems rather thin. The journal from Amitman where he is using 1 minute charts to trade FB intrigues me as well and he seems to just be using a simple setups of broken trendlines or re-entering after pullbacks. Although I know that price action works on any instrument, they I'm sure all have their own nuances so if I would be backtesting certain patterns, it makes sense to do it for the instrument that I want to trade. And finally, because I know that you got converted to futures, it almost makes sense to just learn that one really well. Why bother wasting time on a stock that isn't moving one day, one that you might not be able to short, and one that might be difficult to scale up once you get more confident if the volume isn't there? As Al Brooks says, if you are consistent extracting just one point in the ES every day, just up your contracts to increase your daily profit. I know that you trade CL and seeing as just one penny move in price equals $10, that might be a bit too steep for starting out. I don't want to paper trade, I want to use real money. (I know RedNeck vouches for this as well). And of course, by trading what you trade, and perhaps what lots of the pros on here trade, that might help ensure that I get more help.

So what do you think is best? Just go with random stocks as a learning tool because I can keep the share numbers low? Perhaps even forex as a way to test the waters... but then this might not translate as well to stocks or futures? Or just stick with studying futures, do all my backtesting theory and jump in with CL full well knowing that each penny might cost me $10? I'm not that afraid of a loss and I fully understand how statistics should work out over time if I stick with a plan that has positive expectancy. The account has $11k in it now and I am asking for futures trading permission. So by risking 1%-2% on each trade, a decent ball park figure, this would translate to $100-$200, or I could even fund the account to $20k, which would now make a $200 stop loss only 1% of the account, but this of course would represent only 20 cents in CL as a stop loss so is that realistic for anything other than scalping?

Anyway... sorry for such a long winded question. If you can offer some input, that would be awesome!

 

[NoDoji]

Ah... good to know that this was a proposed exercise versus an idea that works, but interesting how you found it had positive expectancy, albeit just over 10 trades.

I also very much enjoy posts by your former mentors, bighog, RedNeck and dBPhoenix, and am eager to start a journal, hoping that you guys will guide me along. I have been studying Al Brooks for months, I read that Bob Volman book, but what I haven't done yet is specifically lay out a pattern that I will look for and trade once I figure out that it has a positive expectancy. I figure that I don't want to be stopped out of trades too early and want to capture more of the trend of the day)

As Al Brooks says, if you are consistent extracting just one point in the ES every day, just up your contracts to increase your daily profit. I know that you trade CL and seeing as just one penny move in price equals $10, that might be a bit too steep for starting out. I don't want to paper trade, I want to use real money. (I know RedNeck vouches for this as well). And of course, by trading what you trade, and perhaps what lots of the pros on here trade, that might help ensure that I get more help.

Or just stick with studying futures, do all my backtesting theory and jump in with CL full well knowing that each penny might cost me $10? I'm not that afraid of a loss and I fully understand how statistics should work out over time if I stick with a plan that has positive expectancy. The account has $11k in it now and I am asking for futures trading permission. So by risking 1%-2% on each trade, a decent ball park figure, this would translate to $100-$200, or I could even fund the account to $20k, which would now make a $200 stop loss only 1% of the account, but this of course would represent only 20 cents in CL as a stop loss so is that realistic for anything other than scalping?

Anyway... sorry for such a long winded question. If you can offer some input, that would be awesome!

The positive expectancy on that exercise held up through two series of 10 consecutive trades on separate days. It may be worth pursuing

As you stated, if you learn price action, the concepts will apply to any liquid instrument. The main differences between instruments will be leverage, slippage, number of opportunities (tradable price swings), wash sales (with stocks)...but the long/short of it will be the same

Be careful with the belief that you need large stops if you're not scalping. The scalper's entry techniques work for any day trader.

CL is a unique animal and I recommend that if you want to trade it, first develop a plan, manually back test it, then sim trade it for at least a couple months so you have experience with the various adventures that occur, such as 20 ticks of slippage while entering via stop order on a middle of the road triangle breakout, or being in a position Wednesday morning and wondering why something suddenly seems weird at 10:29:45 am EST.

If you want to trade live right out of the gate, I suggest a small Forex account with Oanda.

As for Al Brooks' 1-point and just trade 100 lots comment: Yeah, right.

 

[k p]

The positive expectancy on that exercise held up through two series of 10 consecutive trades on separate days. It may be worth pursuing

As you stated, if you learn price action, the concepts will apply to any liquid instrument. The main differences between instruments will be leverage, slippage, number of opportunities (tradable price swings), wash sales (with stocks)...but the long/short of it will be the same

Be careful with the belief that you need large stops if you're not scalping. The scalper's entry techniques work for any day trader.

CL is a unique animal and I recommend that if you want to trade it, first develop a plan, manually back test it, then sim trade it for at least a couple months so you have experience with the various adventures that occur, such as 20 ticks of slippage while entering via stop order on a middle of the road triangle breakout, or being in a position Wednesday morning and wondering why something suddenly seems weird at 10:29:45 am EST.

If you want to trade live right out of the gate, I suggest a small Forex account with Oanda.

As for Al Brooks' 1-point and just trade 100 lots comment: Yeah, right.

I have read about inventory day for CL so I have been forewarned to stay clear!

I do think that CL might be a little much to start with just for right now, so I will have to pick something else. I just have too many things I'm looking at right now so I need to focus. I like the idea of scalping 1 minute charts because you very quickly see if you are trading well or not. But I also like the idea of going for bigger swings with smaller size so that everything moves a bit slower. Hmmmm....

Thanks as always for your reply!

 

[Redneck]

I also very much enjoy posts by your former mentors, bighog, RedNeck and dBPhoenix,

Small but important clarification;

Never have I been NOD’s mentor… She’s always been a colleague of mine

As is anyone who consistently and earnestly puts their ass on the line in pursuit of this career


RN

 

[k p]

Clarification noted... and in continuation, I very much hope that when I am ready to put my ass on the line, you can be my colleague!

 

[macattack]

Finally reached one of my sim-trading goals, a week where all days were profitable:

Monday: $100
Tuesday: $253
Wednesday: $104
Thursday: $365
Friday: $108

$930 Total for the Week

I'll ignore the fact that I was up over $500 today, before things got a little ugly.
Still need to work on patience to avoid over-trading & to wait for higher-quality opportunities.

Need to work on flawless execution of my plan. Just 1 mistake can ruin the day. By mistake I don't mean a loss; I mean things like cutting a profit short or moving a stop loss or just plain guessing.

Mistakes from today:
Forgot to reset my dom to trade 1 contract & traded 2 instead which led to an extra 8-tick loss.

Had a target of 20 ticks higher on a trade which was already in-the-money & protected & profit already taken on 1 contract, but I lost my nerve, & bailed for a smaller profit, missing out on the bigger profit which was eventually hit.

Overtraded towards the end of the day veering a little too close to the dart-throwing guessing arena.