Pete's Place

Quote from sulong:

peterfigliozzi,

I've been looking at this "if not proven right" thing, and find that so far I cannot wrap parameters around it.
So If you can, could you share what you mean by "proven right"?
Can you be proven right, if your poss. goes against you by 1 tick?
2 ticks? with in a certain amount of time after entry?

sulong
More...

The jist of it is, you can't cut all your losers ahead of your initial stop all the time, and you can't cash in on every entry that eventually turns out to be a winner without hitting your initial stop. If you try, you will pay by killing too many winners and hanging onto too many losers.

However, using the very simple "Initial phase" rules I put up, i'm doing the "good thing" most of the time (staying in winners and getting out of losers before hitting that stop).

How many ticks against? 10 in the NQ. I trail it to b/e.

What will work for you? You have made a bunch of trades in the past, some winners, some losers. Come up with something that allows most of your winners to "pass", and at the same time kills those losers a little earlier. Test your old trade entries with your rule. What % of winners "pass"? Losers cut?
 
Quote from Trend Fader:

You are trying to be mechanical yet discretionary..
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am being!

All discretion takes place before the trade is opened,
after that,
pretty much autopilot.

Best of both worlds:
discretion: adapt to the market
mechanical: take emotions out

I do OK with trade plans, and have no problem pulling the trigger... but after that I pretty much unravel, so making that part mechanical has helped me a great deal.
 
Hey Peter:
Sounds like you are doing fine. Just keep your head down, and "follow through" (maintain your focus). In the long run, it really does not matter if other folks have trouble figuring out what you are doing. In my opinion, all a person can do is point in a direction and hope others have the motivation to work it out for themselves. Good luck tomorrow. Steve46
 
Quote from sulong:

peterfigliozzi,

Can you be proven right, if your poss. goes against you by 1 tick?
2 ticks? with in a certain amount of time after entry?
Thanks

sulong
More...

Sulong, another thing I just thought of, sometimes it means closing out a position that is a little bit profitable, instead of waiting around. Here's an example:

Bulkowski's book (on daily stock chart patterns) says 80% of gaps that close do so within five days. So say you buy XYZ when it gaps down one day. After five days you're up $0.20 but it hasn't filled the gap which would give you a profit of $2.50.

I say, there are only two reasonable courses of action here:
(1) close out the whole position
(2) close out half and stops to b/e on the second half.

Why? It has shown itself not to conform to what 80% of the past winners have done. Sure, the gap may close, but it already had the chance to show itself... why take the chance...

So it's about knowing specifically what to expect in terms of your current trade being a winner. If you have a certain setup in the NQ, how much profit do you expect out of the winners, and how soon? Only armed with that information can we follow the 'Phantom of the Pits' advice and get out, if not proven right, vice waiting to be wrong.
 
Spanked the cash monkey today, but not as hard as I would have liked. The new initial phase method did a great job of cutting my losers again. Also cut off a big winner, but hey, that's the price to pay sometimes. Well, 20% of the time anyway.
 
A loss on the day, and some trader psychology problems.
Phases from today:

(1) Started out well, made a decent profit with 2 winners and 1 scratch

(2) Had a legitimate loss (followed the rules etc., it just didn't work)

(3) Vicious cycle of rule breaking and further losses (addicted to winning)

(4) Recovery-- went back to the rules, two breakeven trades

No need for #3! Breakdowns like #3 come from being hard-headed an not accepting my legitimate losers, not wanting to accept further legitimate losing trades. It's part of the game-- the choice is take 'em like a man, or subject myself to rule-breaking agony.
 
Losses - big picture

Legitimate losses provide valuable information.

One of these must be true:

(1) System got you out of what turned out to be a bad trade early
(2) System got you out of a "late blooming" winner
(3) System got you out of an awesome winner

You can only know which one it was after the day is over.

If it turns out to be (1) or (2), that is OK-- that is what was SUPPOSED to happen in those cases-- you don't want big losers, and you don't want to wait around to be proven wrong. There was nothing you could "do" to change the way the market acted.
Thus, (1) and (2) tell us the system is working properly.

In the case of (3), you now have VALUABLE INFORMATION on a particular type of market behavior that your system does not currently capture. You may choose to modify the rules in order to capture this type of behavior in the future. Or, you may choose to leave things as they are.

Illegitimate, rule breaking losses provide no such valuable information. Instead of paying a small amount to verify the system is working, or paying a small amount to discover new market behavior, we have burned cash for no reason at all. It was an attempt to satisfy the "need to win". We have gained nothing from this donation of cash.
 
Discipline like a DRILL INSTRUCTOR

Trade 1 - A legit, medium-sized loss

Trade 2 - A legit and sizeable gain... sizeable because I followed my exit rules instead of bailing on what was a good little profit... it got bigger.

i'm soooo done for the day, week....
 
I started drawing the pivot points (S2,S1,P,R1,R2) on my charts this past week. I had some questions by the end of the week that I tried to answer (NQ data - Sept/03 to this past Friday)--- here goes:

(1) What is the probability that trades will take place at a particular level sometime during the day:

P: 64%
S1 or R1: 38%
S2 or R2: 19%

This was the first surprise finding. A raging bull and it's just as likely to hit S or R during the day.

(2) If trading opens in a particular zone (e.g. between S1 and S2), does that change things?

A: Yes:
  • It is more likely to hit S1 and S2 if trading begins between the two.
  • R1 and R2 are more likely if trading begins between those two.
  • R1, R2 are less likely if trading begins between P and S1
  • S1, S2 are less likely if trading begins between P and R1
  • Surprise finding: if trading begins S1 and S2, then R1 and R2 are no less likely!
  • Same goes for if trading begins between R1 and R2: hitting S1 and S2 that day is no less likely!

Thus I am left to conclude that when we open between R1 and R2, or S1 and S2, those will tend to be great trading days with wide ranges, and I should be a little bit more greedy with my targets.

I also thought about market behavior during the day-- if that could change things. For a preliminary look, what happens if price bounces off S1? Answer-- surprising-- it is *less* likely to hit R1-- but if it does.. R2 is very likely!
 
I had six trades today, five losers and a small winner, thus lost some coin. But not really a lot. I managed each trade well. Besides making a mental note to continue the never ending search for better entries (six on such a slow day??), not a lot to say about today.
 
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