Need Help Developing a New Trading Style for the ES

[Elliott]

Quote from VisionTrader:

I have traditionally used a strategy that looks for 2 point moves in the ES. My average positions during the day are about 7. I have typically traded the 1M chart and the 3M chart. If you want any info on this you can read it in my journal, "Chronicles of an Idiot".

I have done a fairly intense analysis on my bottom line and I really see how the commissions are eating away at my net. Also, being in all the trades is getting to be a little much for my stress level and is eating away at my brain. I would rather worry and stress about one position for a longer time. LOL.

I have been working on developing a plan that looks to hold a position for a longer period of time. I basically have been experimenting using the same plan, which is based on divergence, on longer time frames. Trying to step back and say, okay, based on an H4 or Daily chart where do I "think" the day is headed. I want to wait for the masses to agree with my thoughts and enter a position in this direction. I want to get in a longer term position and manage my profits thru stops.

I have been taking a close look at the 4 hour chart. I used to do this trading the FOREX. If the daily direction is clear and is trending with this chart I have been somewhat successful with larger point gains. Twice last week, I was able to hold a daily poistion for 10 points. These were two trending down days.

I am seriously considering only trading on days when these trends occur and are in line with my charts. I find that my NET profits are nothing to write home about when I try to capture crumbs from lackluster movement. I realize that it is not always possible to tell if the day is going to trend, but in general what I want to do is get in a position and cover myself and then see if my prediction develops.

My trade demons surface every day. One of my biggest problems is the "need to be in a trade". I fight it. This is my single biggest issue. I am realizing that if I don't conquer this problem, long term, I will not be successful. This is one reason I am trying to convert my style. The two days last week when I picked up bigger gains, I only made 2 trades each day. It was a breath of fresh air.

I think that it is unreasonable to expect to capture 10 points on a single position in one day. I think the daily fluctuation of the ES is around 20-25 points.(please correct me if I'm wrong). So let's focus on a weekly number. If the ES fluctuates 100 points a week, I want to capture 10% of this move on weekly basis. I think 10 points a week with enough lots on the line will keep food on the table.

I am trying to take baby steps. My confidence is growing and eventually I would like to hold a position longer. I have not held any overnight positions at this point.

Does anyone have any constructive comments or thoughts that might help me?

Vision,

Try looking at ADX in longer timeframes. This might help you to only trade when there is a trend developed and to stay out when trending is in "no mans land" (below 20).

I also agree with other posters to backtest by hand. Gives a good view of various trading pattern setups and indicator(s) analysis. A more personal view of the market.

Suggestion: Let the market tell you when to enter and exit trades by way of indicators and your system (backtested of course) of using indicators. Fight your feelings of what the market might do. The market has multiple personalities that can change rather quickly. Learn to analyse its mood swings.

Hope this helps.

Much Success to All,

 

[VisionTrader]

Quote from Elliott:



Vision,

Try looking at ADX in longer timeframes. This might help you to only trade when there is a trend developed and to stay out when trending is in "no mans land" (below 20).

I also agree with other posters to backtest by hand. Gives a good view of various trading pattern setups and indicator(s) analysis. A more personal view of the market.

Suggestion: Let the market tell you when to enter and exit trades by way of indicators and your system (backtested of course) of using indicators. Fight your feelings of what the market might do. The market has multiple personalities that can change rather quickly. Learn to analyse its mood swings.

Hope this helps.

Much Success to All,

Thanks. I have am a little cautious about adding anything else to my current methodology. I do not want a bunch of noodles, etc running around the screen. I am working on things and I appreciate your recommendation. Makes sense.

It's funny...your comment about "let the market and your indicators tell you when to exit"........is right on. I find the old trade demons keep me from exiting a trade, even though my system tells me direction is going the other way. Just can't explain it. Working on getting better at this.

 

[dbphoenix]

Quote from VisionTrader:

I have am a little cautious about adding anything else to my current methodology. I do not want a bunch of noodles, etc running around the screen.

Then just draw a simple trendline. If it's broken, be alert to slowing momentum.

 

[VisionTrader]

I think one reality is that I am pretty good at forecasting the market moves in a smaller time frame, not as good as the time frames move up. (Hey, you can't get anything by me )

It's like the weather. I can predict it for the next 15 minutes, but who knows if a thunderstorm will develop by the afternoon. I need to get a grip on this fact at this stage of my learning curve and maximize my potential working in shorter times. Some of the comments in this thread help me to realize this. Others will argue this and quote Livermore, Turtles, and other things. I will listen if they are said in a helpful way. Otherwise, gimme a break.

Today was kind of interesting. I am thinking...if I can pick up enough points on the early short trade and cover the profit...I may get short and stay short until I have a different long term view. I made a nice profit this morning and then at the end of the day on the support, some major buy signals began developing across multiple longer time frames. I got out. Did not make sense to stay in against my system. I need to trade within my boundaries at this point. Just trying to find my boundary lines.

Today was an easy day to make money. Not sure how things will go when the going gets tough.

Here's a chart of my buy signal on the M20 @ the end of the day. I had this on shorter times also and a good buy developing on the hourlies. I actually went long at the end of the day because the signals looked so good. The daily chart is bouncing on the 50 SMA. All this made me wonder if things may run up to the top of the mountain again.

Oh well, clear as mud. Tommorrow is another opportunity. Another Vision.

 

[abishiai]

Vision,

A couple thoughts. It seems to me that it is desirable to be out of the market, and take small bites--like you describe in your journal. 'Chronicles..."

Increased time in the market means increasaed risk. If you are holding for a longer period of time the odds of being hit by a 3rd or 4th standard deviation move are increased. Over the last several months the ES has made some wild moves for no reason other than a bunch of stops got triggered or something like that. If you are are on the wrong side of something like that, you could theoretically get all your margin sucked up and then closed out of the position. The CME has 'busted' trades in these circumstances but who's to say that would work in your favor?

I am working along similar lines that you describe in the 'Chronicles' and am trying to disipline myself to hang on to the good trades for a couple extra points. The primary demon in that regard is the fear of turning a winner into a loser, and the risk is very real.

I like the philosophy of Marty Schwartz ('Pit Bull') who is quoted as saying "It's a good thing I got out when I did, or I would have made some real money." So on the one side, one should be satisfied with success and not be afraid to embrace it. On the other side one should never be satisfied.

Cheer,

kp

 

[GreenDog]

Quote from VisionTrader:



I compare the market to my wife. When she wakes up, I don't know what kind of mood she is in. I need an indicator from her to at least give me a clue. If she says nothing, as the day wears on, I can make an accurate prediction of her direction during the day without her saying anything. It takes a little longer and requires a little more patience this way.

Appreciate the time.

Shorter time frames on the wife will drive you crazy -- I find there's sometimes too much noise to get an accurate signal on the 1 and 5 minute time frames. If I'm getting that bearish feeling I like to try to get away for awhile and look for a reversal later in the day/night.

Fortunately, unlike the markets, I do have a great influence on the future direction of the wife's mood. Wouldn't it be great if you could send flowers down to the CME or NYSE and get long ahead of the delivery!!

 

[TMTrader]

VisionTrader,

Moving from the 1M chart to a 4H chart is a drastic move. While you are very proficient in your current system, switching might have a negative effect on your results simply because you are not used to the different timeframe.

I do believe that the same system can equally work on the longer timeframe using the same indicators and signals. But jumping from 1M to 4H can have a negative effect on your responses to the signals.

Instead, what you can do is gradually migrate from one timeframe to the next, from 1M with confirmation on the 3M, to the 3M with confirmation on the 5M or 8M and so on. This way you will gradually get used to the conditions in the different timeframes. On some markets you will find that it is impossible to trade at a single timeframe since it is too choppy or unclear. Than the experience you gather at different timeframe using the same system will be extremely helpful.

Some people here suggested using different indicators (CCI, ADX etc.), but this is completely off topic. The system works as it is, the only requirement is a different timeframe. There is no reason the same system will not work on a wider timeframe (as I know it is).

TM Trader

 

[TMTrader]

Quote from GreenDog:



Shorter time frames on the wife will drive you crazy -- I find there's sometimes too much noise to get an accurate signal on the 1 and 5 minute time frames. If I'm getting that bearish feeling I like to try to get away for awhile and look for a reversal later in the day/night.

Fortunately, unlike the markets, I do have a great influence on the future direction of the wife's mood. Wouldn't it be great if you could send flowers down to the CME or NYSE and get long ahead of the delivery!!

LOL

 

[VisionTrader]

Quote from GreenDog:



Shorter time frames on the wife will drive you crazy -- I find there's sometimes too much noise to get an accurate signal on the 1 and 5 minute time frames. If I'm getting that bearish feeling I like to try to get away for awhile and look for a reversal later in the day/night.

Fortunately, unlike the markets, I do have a great influence on the future direction of the wife's mood. Wouldn't it be great if you could send flowers down to the CME or NYSE and get long ahead of the delivery!!

 

[VisionTrader]

Quote from TMTrader:

VisionTrader,

Moving from the 1M chart to a 4H chart is a drastic move. While you are very proficient in your current system, switching might have a negative effect on your results simply because you are not used to the different timeframe.

I do believe that the same system can equally work on the longer timeframe using the same indicators and signals. But jumping from 1M to 4H can have a negative effect on your responses to the signals.

Instead, what you can do is gradually migrate from one timeframe to the next, from 1M with confirmation on the 3M, to the 3M with confirmation on the 5M or 8M and so on. This way you will gradually get used to the conditions in the different timeframes. On some markets you will find that it is impossible to trade at a single timeframe since it is too choppy or unclear. Than the experience you gather at different timeframe using the same system will be extremely helpful.

Some people here suggested using different indicators (CCI, ADX etc.), but this is completely off topic. The system works as it is, the only requirement is a different timeframe. There is no reason the same system will not work on a wider timeframe (as I know it is).

TM Trader

Point Taken. Thanks TM.