On the Path to Profitability
- Thread starter Sure Chap
- Start date
A couple of days doesn't work for me. The lookback period is dependent on style. If you're a scalper, less may work. I don't like chasing every whipsaw, so I use smoother values which seem to get a better handle on the intraday trend (if there is one).
Not questioning your motives, but your insight:
Care to share your thesis on this? Of course, such a blatant statement such as those above must cover all possible permutations of edges that are to be found in all markets..
If this is your conclusion, why try to trade at all?
Not saying HFTs aren't unpredictable and can royally screw over short-term traders. Just that there are limits to what they can accomplish on any given day. Before HFTs there were other ways you could be screwed. Seems screwing is a constant in human affairs..
My thesis is that past price data, support and resistance areas, are not reliable on any timeframe due to stop-hunting by institutional algorithm trading. Retail order flow is sold to HFT instutitons who have all the edges over daytraders that make gambling at the casino seem like it has even odds. If you see a place that looks like a safe place to put your stop off an index futures daily chart, or any timeframe, based on fractal nature of the market, and enough other traders do that as well then your stops are more likely to get run by institutions...believing in the predictive value of what's to the left of your chart can work against you as much as for you, past price data isn't safe on higher time frames, as you can see on daily charts on the ES where support and resistance is much more pliable now due to HFT orderbook clearing, daily charts of ES from 1998-2005 were much more with-trend where risk management was easier for retail traders and risk of ruin was far less than in current HFT markets and gurus have failed to address this as they know it will scare off the few retail traders who still try trading these markets.
The first two words tell the whole story. It is YOUR opinion, which therefore is not by definition the only truth. Each trader should do his own test to see what will happen in the market. And act accordingly the results.
All these things you mention don't apply to my trading.
I never have problems with stophunters, as I never put stops in the market.
I never watch support resistance, because in general I am already short with a decent profit when we touch the support, so if the support holds I have enough room to get out without a loss or can even reverse. And if the support breaks I get more profits.
Same applies to resistance, as then I am already long.
I see high probabilities that come close to predictions.
In short: my story is completely different from yours. Your story is the result of your experience, and my story is the result of my experience.
One commonality for all retail traders is their risk of ruin is high. If you don't use stops your risk of ruin increases, even decades of subjective experience will not negate this law of trading.
I suspect iamnobody has MENTAL stops and has enough discipline and experience to follow through on taking those stops. I think he is talking about not having a stop loss order entered in the market for others to see. I agree that risk of ruin increases because most of those people don't know what they are doing. Most people would would even let the price blow through their stops giving it time to see if it will come back only to lose more in the process. Stops are one of those things that if you have enough discipline and experience and confidence you can have mental stops. Most people do not have that discipline. I use an stop limit ordered stop loss every time I enter into a TRADE but when I am making an INVESTMENT in my 401k I have mental stops in place and monitor. Again, please do not make generalizations based on your experience because we all have different experiences and some have "unorthodox methods" but are quite successful at it.
HFT will cut through your mental stop in a microsecond. If a trader is overcapitalized and they can afford great slippage (multiple points on the ES at times) from a mental stop that is a non-subjective fact that should be disclosed to new/learning traders.
If a day trader is trading size, like Al Brooks teaches of hundreds of contracts intraday on the ES, mental stops are idiotic. It's not subjective, it's a fact.
The trick is to enter positions and adjust your stops after liquidity hunting cycles. It's not easy and there are many more trade management skills required to succeed.
Risk of ruin is inversely proportional to leverage and capitalization. Nothing wrong with 20:1 leverage if your pockets are deep enough, and you can survive the learning curve. People who don't gamble in some form generally end up with nothing in life. I'd rather die a gambler than a quitter
It really depends what/when you trade. I trade some wild swings in lower capacity markets, and would have my head handed to me trying to get cute with mental stops.