Missing the big picture

Originally posted by Indie Cator
OK guys, I need some help here....

I keep having this annoying syndrome where I spend all day fighting to make a few points and when I look back at the charts at the end of the day I find that I was so busy buying/selling reversals for a few points that I missed the major trend of the day. Today, Friday being a good example. If I'd just sold at the 10.45 high in the emini S&P and followed it down on trailing stops, there was a 25 point opportunity.

I don't know whether its because I've gotton so used to trading like a scalper on the choppiness over the last few months, or because I'm stuck in the 1 min chart and not looking at the 5/15 min charts?

Any thoughts on how to make the mental switch (or trading approach switch) between trending and sideways days?

Thanks for you thoughts..

:)

Indie
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There are times to scalp, times to swing trade, and times to sit on your hands. The trick is knowing when to do each.


If you look back at July and early August everyone was making a killing scalping all day long in those large intraday ranges. Since then the market has lost alot of it's intraday volatility but has been trending well for swing trades.


"There is a time for all things, but I didn't know it. And that is precisely what beats so many men on Wall Street who are very far from being in the main sucker class."


Jesse Livermore
 
Originally posted by Pabst


You make an assumption AAA that significant risk at this juncture is a one way street. That's dangerous thinking my normally wise friend. Who knows!! What if Saddam facing annihilation and Bush facing political scrutinization struck some kind of landmark deal? No chance? Betcha Crude would open $3.00 lower and ES 50 higher. I remember the Tuesday after Labor Day weekend 1988, when the soybean market that had been rapidly rising on drought fears opened up limit down in futures and synthetically in options down 10%. No one saw the massive bear risk there either. I always expect the unexpected.
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Of course you are right. Still, the moves you posit would not destroy me, although I would have to be pried off the floor from the fetal position. The risk to the long side from a really major terrorist action would be vastly greater.
 
Originally posted by J_Commisso


...

Provided you don't want % of equity DD's over a certain limit, then whats the better strat -- the one yielding 12.5ES per week with max peak to trough DD's of 30pts or the one yielding 25 per week with max peak to trough DD's of 110pts?


Just my 2 cents,
Commisso
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Interesting question, but I don't think I could choose with just those numbers. Assuming everything else was equal though, I would go for the higher profit system. If you average double the profits per week, you could make back that bigger drawdown pretty quickly. Let's say you traded them both for 50 weeks. System 1 would end up with 625 points. System 2 with 1250. An extra 80 points of drawdown is pretty meaningless.
 
Originally posted by Quah


Can you explain what you mean by this - or how it is done in actual practice?

It seems to me that you are never holding a winning trade or a losing trade until you close the trade out. I know that sounds like I'm splitting hairs, but I'm never sure at what point someone considers a trade a "winner" and thus applies the "let your winners run" rule.

To me, it's sort of like telling someone "Here, hold this popsicle as long as you can". Pretty soon, it starts melting and dripping on the floor, and part of what used to be a popsicle is now kool-aid.
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I used TradeStation and as I recall they have a stat called open trade profit or something like that. For testing purposes, I would probably just have a stop loss that I would bring to b/e after the trade went in my favor by a specified amount. As I recall they had a stop strategy you could select that accomplished that.

I think in general you could say there is a certain "noise zone" around your entry price. When you break clear of that, I would consider the trade a winning trade that I would not want to go to a loss. I think this is a core principle of most good traders.
 
Originally posted by daniel_m
i know this is gonna sound like a pretty shallow response, but i think it may be a case of the "grass is greener.." in thinking that some other time frame is gonna open up the royal road to riches..
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I totally agree. When you have a time frame, stick to it, be happy with it, and learn to be the best in that playground.
If you want to trade a longer time frame, feel free to build another system.
A lot of people are trading several time frames at once.

The only good thing I can see with long term trading is that you minimize your costs of business.
Slippage and commissions are less meaningful in comparison to you profits.

Another point about scalping : who is talking to do that all day long ? Just trade 1 or 2 hours and get a life.
 
well, i wasn't really saying that a person shouldn't trade multiple time frames. i was saying that there's no point thinking, "hmm, if only i traded a different (longer/shorter) timeframe, i'm sure i'd make more money.."

and are you serious with that 1 or 2 hour a day scalping line? anyone that scalps all day doesn't have a life? come on buddy that's quite a stretch. speak for yourself please!
 
Someone complained about missing a big profit by spending all his day at scalping. That is a usual thing.
If he traded, let's say the hourly time frame, he'd complained about missing a daily or weekly profit...

Trading multiple time frames ? I gave it as an advice. If you are frustrated with scalping. Build another system and trade both.

Rooster (no offense) talked about scalpers as if they were traders "Working the market bar by bar. Struggling all day long. Glued to a computer monitor. Sitting on the edge of their chair from bell to bell".

That's a scary picture, no ?

I speak for myself : I love trading but don't want to do it all day long ! As a fact, I only know the opening bell. I'm successfull because I quit early.

I never wanted to say that fulltime scalpers/traders don't have a life. Hope they have !
 
And when the market's in a tight range, you're glad you are scalping! The grass is always greener on the other side when you're not making money. There's something to be said about 1-2 trades per day and free time though.

Draw down is relative as Mr. Sub so aptly demonstrated the downside of scalping when he lost $10K in one day. He would be hard pressed to lose that much with just 1 or 2 trades.
 
Originally posted by AAAintheBeltway


Interesting question, but I don't think I could choose with just those numbers. Assuming everything else was equal though, I would go for the higher profit system. If you average double the profits per week, you could make back that bigger drawdown pretty quickly. Let's say you traded them both for 50 weeks. System 1 would end up with 625 points. System 2 with 1250. An extra 80 points of drawdown is pretty meaningless.
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Originally posted by J_Commisso

Provided you don't want % of equity DD's over a certain limit, then whats the better strat -- the one yielding 12.5ES per week with max peak to trough DD's of 30pts or the one yielding 25 per week with max peak to trough DD's of 110pts?


Just my 2 cents,
Commisso

Triple A,

With all due respect I'd have to say you missed my point entirely. Suppose I have a 100k account and I want to employ a strategy with the best upside potential, but want to keep my % of equity draw-down under 15%.

Now which one of the two "methods" will be the most profitable for a trader at the end of one year? Remember you have to size your postions to adhere to the 15% floor you want or expect to hold.

IMO; any talk of upside potential without its anti-thesis -- is meaningless jibber-jabber at best.

I suppose this is just my own subjective view on the matter, because I loathe big drawdowns. So much so that I have not had one in the last 5 years...

PEACE ---> Commisso
 
Originally posted by J_Commisso


Originally posted by J_Commisso


Triple A,

With all due respect I'd have to say you missed my point entirely. Suppose I have a 100k account and I want to employ a strategy with the best upside potential, but want to keep my % of equity draw-down under 15%.

Now which one of the two "methods" will be the most profitable for a trader at the end of one year? Remember you have to size your postions to adhere to the 15% floor you want or expect to hold.

IMO; any talk of upside potential without its anti-thesis -- is meaningless jibber-jabber at best.

I suppose this is just my own subjective view on the matter, because I loathe big drawdowns. So much so that I have not had one in the last 5 years...

PEACE ---> Commisso
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You're right, I didn't fully understand your point. Basically, you're saying you could trade much more size with the system with a smaller drawdown and that would more than offset the more volatile system's profit edge. Everything else being equal, I accept that but things seldom end up being equal. Volatility or drawdown is not the only measure of risk. I consider exposure the single most important element of risk. If you're trading three times the size I am with the same equity, you are taking on a lot more risk than I am in terms of exposure. Now maybe you are in the market for 5 minutes at a time, while I'm carrying trades overnight, so it evens out or ends up with me having more risk. I just think it is difficult to say just from looking at drawdown numbers alone.

I do agree with your main point. It's easy to look at the net profits a system made in backtesting and think that's the way to go. it's another story when you're trading it and taking a big drawdown. From what I've read, few people can do it, and many quit just when the drawdown peaks.
 
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