Price Action - NQ III

[damnpenguins]

This sounds like much more work than it really is. If one were a data geek

I'd classify myself as a frustrated data geek.

The problem for me is I should have paid more attention to STATS101 in University than when the next Pub crawl was! Maybe If I had I'd be better at stats...

The other benefit would be a greater number of brain cells to analysis the data with as well

But if one has rid himself of fear, making these decisions based on price behavior rather than a complex decision-making matrix should not present a problem.

BTW this is pretty much what I was referring to in my first post. After the first 30 or so trades I really started trusting the sequences I was looking for and the MAE became more a point of interest rather than a crutch to base stop decisions off. I hope that makes sense.

 

[dbphoenix]

Unless one is coding, it isn't even so much a matter of "stats". Unless one isn't keeping track at all, he will soon see that if price moves N points after a line break that the odds begin heavily to favor a reversal whereas if it moves less than N the odds favor a continuation, he then knows whether to look for short or long entries after that line break (this is to a large extent the basis for the "dog" trade).

The ultimate goal here, as NoDoji recently pointed out, is to be able to act on these signals in real time without having to think about them (as the time wasted thinking about them will most likely result in missing the trade, or entering late, in which case all the MAE work goes right out the window). No, they are not 100%. But damn close. Close enough to be able to take the trade without thinking about it. And if the trade is taken during one of those rare occasions when the MAE is more than expected, the loss is minimal, minimal enough to be shrugged off.

 

[dbphoenix]

This sounds like much more work than it really is. If one were a data geek, he could also look at how the MAEs vary according to whether the entry is made off an extreme, a DT or DB, a HL or LH, a median, a line break, etc. But if one has rid himself of fear, making these decisions based on price behavior rather than a complex decision-making matrix should not present a problem.

One other thing in this vein. I see traders who haven't done the data collection try to play hinges in what they appear to believe are "adventurous" moves, attempting to find that sweet spot where everybody suddenly gives up and price plummets just seconds after the adventurer transmits his short.

However, if one studies this methodically and deliberately and compares these efforts with the results of waiting until price has "broken out" of the upper or lower limits of the hinge, he may be intrigued by the results.

 

[damnpenguins]

I know personally I've held off trading Hinges until I've thoroughly tested them. It's on the list, but I've really focussed on getting my first 'setup' tested, implemented and executed as accurately as I can. The Trade Plan I go live with will have other entries integrated in time, but theres no point in having too many variables yet. The market will still be there when I get around to it.

Besides, all the Hinge posts @dbphoenix and @fortydraws have made are tagged and saved in evernote for later review, so a lot of the prep work is done

 

[fortydraws]

I've just finished my 100 trades last week. I am not testing SLA, more reversals off extremes...

Some don't even know there's a difference.

The funny thing is though, that I have the pretty much the same stats i.e. My (avg / median) MAE numbers are similar. Also, the number of trades and duration of testing window (100 Trades, 24 trading days).

Funny thing is those I have communicated with regarding this part of the learning process all have very similar numbers - including me. In fact, there is an ET member, one of the handful who I am convinced actually day trade, who shared his typical target and stop loss for the NQ with me and when I saw what he was using you could have knocked me over with a feather - his rather lengthy backtest matched my own "best case" parameters to the tick!

Perhaps this stuff is neither as subjective nor as "incomplete" as those who have done none of the work would have others who have also done none of the work believe. So we who don't mind doing a bit of work for ourselves laugh "all the way to the bank" as the saying goes, while those who want the work done for them grouse about incompleteness, and bemoan the thousands of hours of screen time DbPhoenix failed to mention. I've been at this for less than three whole years, and I have not traded everyday, and most days I have not traded the whole day (usually not ore than 1 1/2 to 3 hours). I know I have nowhere near the 10000 hours everyone claims is necessary to "learn to trade." Though in addition to however much actual real time screen time I have witnessed, I have probably accrued an equal amount, if not more, in replay mode along the way.

Have you found greater confidence in your judgment now that you've finished 2 passes at this exercise?

I only ask because after the first 30 trades or so during my testing - I felt a major shift in my psychology....

Way to go damnpenguins! Here, I believe, is where one sees the true importance for why DbPhoenix stresses doing the back testing, forward testing, sim-trading, etc. for yourself. This is truly "teach a man to fish stuff." Those who, on the other hand, want to be hand fed their fish will be disappointed and frustrated and ... well, they'll be disappointed.

There is a great section in Vadym Graifer's Techniques of Tape Reading, where he discusses "edge," and the necessity of making an edge one's own.

"Edge is yours only ... Trade and observe. Listen to yourself and wait until things become clear, easy, and yours." - Vadym Graifer

Your journal is truly inspiring.

Yes, nicely done, lajax. And you too damnpenguins. And DbPhoneix, of course.

 

[dbphoenix]

I know I have nowhere near the 10000 hours everyone claims is necessary to "learn to trade."

Actually this has to do with becoming an expert violinist. How these memes get started is anybody's guess.

 

[fortydraws]

Actually this has to do with becoming an expert violinist. How these memes get started is anybody's guess.

This video helped me get one guy who had been at this for years "unstuck," and I have shared it with a second friend who I am likewise hoping to get "unstuck." Expert level performance = 10,000 hours. Learning to be just good at something? About 20 hours, unless you let your emotions get in the way.

 

[fortydraws]

Actually this has to do with becoming an expert violinist.

My nine, now ten year old son decided he wanted to learn to play the violin last summer. I set him up with lessons with a certified Suzuki method instructor. I was amazed at how quickly he went from knowing nothing and sounding horrible to playing downright beautifully. Is he an expert violinist? Not by a long shot. But is he a good violinist? I doubt anyone who hears him play would say anything other than yes, a good violinist. By the time he hit his 20th hour of practice, I was starting to enjoy hearing him play. Funny thing, no matter how much she would tell him what he had to do to get that big ringing sound, he was only able to achieve it by practicing for himself.

 

[Gringo]

A pianist can't just use the notes he's comfortable with. A trader has the choice to not engage until and unless the conditions are met. He also has the choice to exit if he thinks things are not looking up. The total lack of structure in trading is it's biggest challenge, and also the biggest advantage. Those who know what they are doing and are patient enough for the ducks to line up don't need 10,000 hours. They are focused on mastering just three keys and waiting for precise moments to only use those keys in a masterly fashion.

 

[dbphoenix]

Rarely do any of us grow up learning how to operate in an arena that allows for complete freedom of creative expression, with no external structure to restrict it in any way. In the trading environment, you will have to make up your own rules and then have the discipline to abide by them.

The problem is, price movement is fluid, always in motion, quite unlike the highly structured events that most of us are accustomed to. In the market environment, the decisions that confront you are as endless as the price movements you intend to take advantage of. You don't just have to decide to participate, you also have to decide when to enter, how long to stay in, and under what conditions to get out.

There is no beginning, middle, or end -- only what you create in your own mind.

--Mark Douglas