Master one single technique?

[novicetrader69]

very astute question novicetrader69. it can take a long time to figure out what your niche is and survival is key till it is realized. Different markets, trading vehichles, timefraes and on and on so many variations of how to extract $ from markets. I have been all over the place and lost plenty of money trying to figure out what and how i like to trade. and after 11 years i still am not completely sure. But by journaling all trades daily and organizing them in a database/spreadsheet u can start to identify patterns and realize what is working and what is not. I noticed i was losing more on long trades than shorts and more on small and micro cap lo floaters than on mid and large caps. And that Mondays i had the highest % of losing days, and a high % of trades i made after 11am were losers or i gave profits back. so to decrease my loss % i stopped trading longs and micro/small caps. and boom win % is up. Then i narrow down even further what type of shorts i like. gap up and fade, gap down and failed follow thru, high of day rejection and on and on and on.. key is to identify set-ups and track them. ie. make every loss a learning experience and it is a win for the long run. Some people have set-ups that only happen once a week and they get rich others trade over 20 tickers a day with 10's of thousands of shares and get rich also. Find something that works then start adding to your arsenal.

@Opteronion precious, precious considerations here, I like them a lot but how do you know that what you are tracking in your log on wins and losses contains the data that will allow you to identify a "statistically effective formula"? In other words, how do you know that you are not missing the real variables other then the ones you think make up the formula (e.g. week day, hour, price, etc.) to recognize good trades?

nt

 

[speedo]

Ok, I hear you. What I wanted to get across is that you do not need some magic formula to make money. You can do it using very simple tools, provided you have discipline. Newbies often think the key is figuring out some magic number for Stochastics or whatever. Do some backtesting and prove to yourself it isn't. Don't take my word for it, and I'm not even trying to sell you anything.

Trend identification. This is the basic filter. Determine the trend in the next highest time frame and only trade in that direction. For example, if you trade off 5 minute charts, determine trend from the 60's. How? There are any number of methods, eg trendlines, moving averages, and higher highs, higher lows etc pattern. Will any of them be 100% accurate? Not even close. They will be late in the beginning, right in the middle and late again at the top. You always need to quantify to some degree the strength of the trend. You want to be on the strongest ones, because a weak trend will tend to chop around.

Entry. There are two basic ways of buying in an uptrend. You can buy a breakout, which can be defined many different ways. Or you can buy a pullback. There are lots of techniques for identifying the likely duration of a pullback, eg Fibonacci, Elliot Wave, moving averages etc. None will work all the time, but trading is a probability game. Break outs are low probability moves, particularly intraday.


Trade management. You have a reason to enter a trade. A pattern or set of rules. At some point in a losing trade, those conditions have failed. That is when you exit. Maybe you get a reversal in the next bar. Maybe a big bar against you. Moves that say buyers do not have the upper hand. A stop loss is more disaster insurance. It really should not come into play except on rare occasions when your trade hits an open elevator shaft.

A key component of making money is never letting a profit turn into a loss. Every trade has a noise zone around the entry price, but at some point, depending on time frame and how volatile it is, you can safely say it is in profit. Maybe on the ES, that is $75-100 per contract. Don't let that trade run against you into negative ground.

Taking profits is tricky. You don't want to fall into the trap of grabbing the first decent profit you see. It can be tempting to ring the cash register. This is where backtesting is valuable. You can prove or disprove what is the optimal profit-taking technique for your style. Years ago Jim Cramer made a remark that no matter what, he never wanted to give back more than half the paper profits in a good trade. I think that is a good rule of thumb.

Cutting losses. This is where discipline comes in. Also your backtesting should have shown you the effect of stop losses and how wide they should be. The one thing that will absolutely kill you as a trader is letting a bad trade get away from you.

"....never let a profit turn into a loss" That is really not applicable to a day trader. I average around 55-56% wins but a good 90% of those start out with positive ticks. In order to not let a profit turn into a loss, I would have to take many small profits and the numbers would not work but your overall concept is valid.

 

[tiddlywinks]

"....never let a profit turn into a loss"

Add the word "reasonable" or "decent"...

never let a REASONABLE profit turn into a loss.

All that's left is determine what reasonable means
in the context of why the trade was taken.

This does not work for tic-pluckers however.

 

[speedo]

Add the word "reasonable" or "decent"...

never let a REASONABLE profit turn into a loss.

All that's left is determine what reasonable means
in the context of why the trade was taken.

This does not work for tic-pluckers however.

 

[schweiz]

All that's left is determine what reasonable means
in the context of why the trade was taken.

Reasonable should be defined by the system. You should find the optimal exit based on backtesting. If the backtest is statistically relevant, you can find an objective and reliable exit that will give you close to the optimal solution.
The best balance between letting profits run and avoiding to turn it in a loss.

 

[aquarian1]

no, it does not

firstly, this game (as many others) requires many many different techniques to be mastered to be a winner player... similarly one can not just master the penalty kicks to be good player in soccer.... ,

secondly, even more important, before mastering those techniques has to be discovered by you first (unlike all other games where required techniques are public knowledge)

so you, my friend, like everybody else here, facing a monumental task: discovering whats needed in its entirety and then mastering it

"those techniques have to be discovered by you first (unlike all other games where required techniques are public knowledge)"

Yes. true. This is the rub.

Speaking of daytrading futures:

• To make consistent profits you need a consistent edge.
• To get a consistent edge you must do something that is not "known". This means you must discover or invent something new (or new application of something known).
  
• To invent something new you must think differently from others

This isn't to say there aren't rules of thumb that are useful and should be learned. Really you must learn all the key elements and THEN go beyond the established knowledge and generate something new.

 

[Sprout]

you did not answer me

but thanks a lot it just confirms what i said here earlier

Whatever.

Since your power of inference needs some development - The Market is the answer to your question.

The market is always right and one can know this by debriefing a day.

Many a trader/teacher as well as teacher/traders will point to this, if they point to themselves, well perhaps a meal ticket depends on it.

To that leads to the question, "How do I debrief a day?"

The popular answer is journaling. And there is an extension of journaling that has more structure and can provide more utility and that is logging. Log every bar. If one uses indicators, log the position of those indicators as they are collected in the same dataset as price and volume.
Correlations will arise, patterns will arise. One's discernment will build. Experiment with other indicators until one sees the truth of all indicators. Ultimately the path will lead to just price and volume and the spectrum of differentiation that you have built within your mind. You will notice deeper principals that guide surface movements. As a sculptor looks at a piece of granite and 'exposes' what is already there, one's mind's eye can do the same with the market. It has underlying principals of operation that can be discerned. The market has symmetry. Anything applied to the long applies to the short position as well. The market is fractal. Patterns can be observed from the smallest to the largest timescale. More insight can be discerned when one decouples from time and shifts to an event orientation. An archetypal trend can be defined by three price moves - Dom to non-Dom and a return to Dom. Trends can be complete or incomplete. The list goes on,...

However, in the conciseness of your mind all the above can be reduced to,...

'whatever'

 

[Sprout]

"those techniques have to be discovered by you first (unlike all other games where required techniques are public knowledge)"

Yes. true. This is the rub.

Speaking of daytrading futures:

• To make consistent profits you need a consistent edge.
• To get a consistent edge you must do something that is not "known". This means you must discover or invent something new (or new application of something known).
  
• To invent something new you must think differently from others

This isn't to say there aren't rules of thumb that are useful and should be learned. Really you must learn all the key elements and THEN go beyond the established knowledge and generate something new.

On the most part I would agree with you. What your post does not address is the fact that human emotions have remained unchanged throughout the evolution of markets.

 

[schweiz]

To invent something new you must think differently from others

As most people don't make money in the long term, it is obvious that you should think differently.
That's the reason why it is difficult to discuss with people that don't know what you know and vice versa, as both have different ways of thinking.

 

[777]

Toby Crabel, LOL, he was a mentor to me for one and half long unprofitable years but he made big bucks off of me. Talk about slick operators, he had a picture of himself in Stock & Commodities, but it was a pencil image of himself, LOL, so I flew to Chicago for a Saturday and Monday morning visit for one on one seminar, and he was working for a broker B/K? don't remember but at CME, Saturday morning at 8am went in and some dude sitting there, bald and looking like stepped of the plane in Hawaii and he said he was Crabel, and I said you not like the magazine makes you look in your 50s and full head of hair, he said he was to show the public a better representation of himself. I should have left right then. He then "taught" what can be found in any charting book. I had paid for twelve months before for daily letter of $350 a month for fax. He was in middle of writing his book and never touched upon anything on his daily letter. I asked him if he traded what he recommends and he tells me to stay objective, he doesn't, what? So I go there on Monday morning, everyone is there and they take me to his "real" office, cubbyhole in a supply room, mid morning one of the partners owning the brokerage who trades in Live Cattle pit runs in and doesn't notice me screams at Crabel on his ORB setup didn't work again.

I found out each morning he would slide his fax under the door of every office in that building for free. I stayed with letter till subscription ran out. When he had book published, he sent me one, and when I went to visit CME, I stopped by, he wasn't at same broker, don't recall next one and he gave me four more books, he said he couldn't sell them himself so he was giving them away.

He must have some incredible traders working for him.

Nice sharing. Thanks.