Price should take off after you enter

[Apophenia]

By the way ... Achieving 2 to 3 odds (60% win) with 2 to 1 setups (2Reward for 1Risk) is an advantage of 26%. Therefore you could safely bet 13% (Half Kelly) of your bankroll. But let's say you're conservative and bet only 5%. It's 4% Expected Gain per Trade. Anyone would kill for that kind of edge. I donno who's dreaming...

Edit : My empirical stats tell me I have 0.5 RR and 80%++ win (20% Advantage) which is 1% Expected Gain per Trade (5% Risk). In the end you're better than me (And I've been conservative) but I am the one that's dreaming.

 

[profitlocker]

True. The key is to develop a particular entry tactic that succeeds more often than it fails, take it without exception every time one sees it, then ride it for as long as it lasts. There's no way to determine the reward in advance, which is why the whole risk:reward thing is nonsense.

Nonsense is very subjective in trading. I've seen enough price development throughout the years, allowing me to develop effective (quantifiable) handicapping skills, and i'm sure many others have.

 

[Apophenia]

From the principles, you can simulate it yourself and perhaps really learn something.

Current price is at all times the level where two parties last agreed to make a transaction. Trading is both directions seeking liquidity for their position changes, for which exchanges (hopefully) are designed to provide in a safe, just and efficient manner.

Rational buyers want to buy low and rational sellers want to sell high.
So if price goes up, it's because buyers can't find enough liquidity at lower prices and need to bid higher in order to get a long position (demand or lack of supply). If price goes down, it's because sellers can't find enough liquidity at higher prices and need to ask lower in order to go short/sell (supply or lack of demand).

When one side have to yield over time/price changes, a trend forms, which is imbalance between demand and supply. Trend is hindsight analysis telling you demand was stronger (uptrend) or supply was stronger (downtrend) over time/price change.

Of course, a trend might turn on a dime at any time. Even though buyers are bidding higher when price goes up and vica versa for sellers and lower prices, it doesn't mean this behaviour will persist for very long. However, for longer/stable trends, it is observed that they may persist for some more time.

However, market efficiency is really how well trade transactions are facilitated, which is a big purpose of market liquidity: The better market liquidity the more volume are traded per time or price level. High volume zones may be congestion areas: many trades traded at relatively the same prices over high volume and often over some significant time. Volume can also change price action regimes, act as continuation signals and longer timeframe reversal. However, general volume over time is a sign of an efficient market, more trades happening in a zone, thus making price move less in one direction as long as that type of price action regime is dominating.

This can act as a framework for understanding some of what's happening in the market and why. Of course, it's very much easier to classify market behaviour in hindsight than in real-time.

So you trade a la Steidlmayer / Koy ? I've read their Markets & Market Logic. It's a nice read. If you don't ... Then I'll have to distrust you because real Risk takers put their money where their mouth is.

 

[profitlocker]

By the way ... Achieving 2 to 3 odds (60% win) with 2 to 1 setups (2Reward for 1Risk) is an advantage of 26%. Therefore you could safely bet 13% (Half Kelly) of your bankroll. But let's say you're conservative and bet only 5%. It's 4% expected Gain per trade. Anyone would kill for that kind of edge. I donno who's dreaming...

That's not how it works, and it's reckless to assume you can't have 10+ losers in a row just because your win rate averages 60%. It's not a static month-to-month win rate, and for that reason, risking 3% of bankroll could potentially ream your asshole to the point of no return. I try to stay around 1%.

 

[Frederick Foresight]

I was simply trying to debunk the idea of risking very little to make a whole lot. It's what we all want, but most here will agree that it's death by a thousand cuts.

Let's agree that timing is a big deal when it comes to trading. The better the timing, the smaller the protective stop needs to be. Yes, it's easy to go down that rabbit hole seeking perfection but, that aside, not all timing mechanisms are created equal. As for "risking very little to make a whole lot," I'll be the first to declare that I never made a "whole lot" on any single trade. But, depending on how the trade is developing, you can add to an existing position risking only the unrealized profit of the ongoing trade, thereby keeping the initial risk upon original entry quite limited. Sure, you might lose that unrealized profit, but you're potentially taking a bigger ride with no additional risk to your starting capital before the original trade was initiated. It's an available risk trade-off, and you can choose to play it only when conditions warrant.

 

[Frederick Foresight]

Nonsense is very subjective in trading. I've seen enough price development throughout the years, allowing me to develop effective (quantifiable) handicapping skills, and i'm sure many others have.

But why attempt to handicap in advance (R:R), when you can react in real time to favorable or unfavorable market action as it unfolds? Why try to predict when you don't have to?

 

[profitlocker]

Why try to predict when you don't have to?

I really don't want to predict, but it pays more, and I generally don't argue with success.

 

[Apophenia]

That's not how it works, and it's reckless to assume you can't have 10+ losers in a row just because your win rate averages 60%. It's not a static month-to-month win rate, and for that reason, risking 3% of bankroll could potentially ream your asshole to the point of no return. I try to stay around 1%.

Sure. It ain't a static month-to-month win rate but a I expected more confidence from you in these "years/thousands of day trades" that you've accumulated. Anyway ... It's true ... There ain't no magic. However I just want to point out the probability of 10 consecutive losses knowing the win rate (60%). It's 0.0001048576 (0.01%). Shouldn't happen that often. Good luck.

 

[Frederick Foresight]

I really don't want to predict, but it pays more, and I generally don't argue with success.

So you're saying that you're better at predicting the future than you are at reading the present?

 

[Apophenia]

So you're saying that you're better at predicting the future than you are at reading the present?

Didn't say that. He said he earns more in average by predicting. Maybe he's better at reading but it pays less =P However ... To predict without ever reading is prophetic. Even though stats can help the blind man (Think about occurrence of words / letters in an english text).