Questions for experienced daytraders
- Thread starter CheckM8t
- Start date
If the market became choppy/random for an extended period of time , your second and subsequent positions will lose all your profits , and end up in a negative situation.This sort of occurrence will create psychology and other issues.These other issues are more difficult to handle.
http://www.elitetrader.com/vb/showthread.php?threadid=218977
+1
You will go far.
The correct answers are -
(1) no trade is worth entering if its true probability is 50/50, particularly so for the amateur and
(2) you can add to a position (using care: scaling up buying on upward price direction and scaling down selling on downward price direction) but NEVER as a sole amateur trader scale down buy or scale up sell (however frequently though this may be done by other ETers).
You can lighten a position if price has already gone in your direction but it is not usually necessary to do so. Conditions where professionally you might do this are, giving examples, when you are 'unstacking' a very large position or where part of a winning position is always liquidated under a formulaic strategy. But this is not for amateur players.
Lets cut to the chase. If you use one lot (futures markets) or a small position to trade, lets assume a volatile market (eg CL) using the daily price gyrations to trade the successive swings. Take a slower chart. Use 2 signals (triggers): fast and slow. Take the fast signal for entry. If it doesn't go on (subject to any condtions you have for it) take the slower signal next. Exit/reverse on the counter-signal (same procedure). Note: if the entry signal was a buy, then of course the counter-signal is the next sell signal.
If the 50/50 problem is not solved, then all else is irrelevant .. "money management" or not.
No one wins a coin flip game.
No one wins a coin flip game.
Novice argue about keeping tight stops of 5 to 8 pips, and aim for rewards of 20 to 30 pips.They dream they have an edge and boast about it.Those using 20 pip stops have higher % hit rates than 5 to 8 pips stop users based on Statistical data, in fact most of these tight stop strategies are less profitable than wide stop strategies, some of them become losers due to tight stops.
If I've conducted extensive research and defined setups that produce at a minimum twice the profit as the risk defined by my protective stop 50% of the time, how does that create a zero sum result?
Even a 10/90 system can make you money. It's about researching the setups you want to trade and finding the levels that produce profit consistently over time IF (ah, there's the rub) you trade all the setups every day. Say your strategy involves "fly fishing" to catch the one or two strong trend days that occur each week. Your average loss is .10 and your average profit on a trending run is 2.00. You average 9 losses for every trending winner you capture. You're nicely net profitable despite a terrible win rate.
What makes you think having a 70% win rate will make you money? What if, for some reason, you're emotionally unable to trade every setup? I had a 70% winning strategy in place for months before I got to the point that I traded every setup. I worked with a trader who couldn't bring himself to trade this system. He wanted certainty in a field of uncertainty and probability.
Can you provide a link to some kind of study or studies proving this?
I used stops of 15 to 20 ticks trading CL and 6E and a trader joined my Skype room who used stops of 6 ticks trading 6E. That was his max stop on any trade. I didn't believe it. He didn't tell me exactly how he traded, but he dropped a hint or two about what he looked for.
I studied like crazy, began to notice certain patterns and I finally figured it out. I now frequently have trades with stops of 4 to 7 ticks and the impact on profitability has been quite positive. On one setup I trade, the entry method that allows the tiny stop provides me an additional 10-15 ticks of profit.
"Those who say it can't be done are usually interrupted by others doing it." - James Baldwin
I'm with you 100%, and that's why I'm all in/all out on my trades. Why take off half and leave the other half on to see if the market has more to offer? So I'm risking full size and then risking giving up half my profit by holding half a position beyond the point where price is telling me to take profit. Why not take all the profit (keeping my edge fully intact), then get back in if price demonstrates the market has more to offer?
Quote from austinp:
example: ten trades per day in CL, -20 cent initial stop seeking +100 cents profit objectives break down like this:
5 stopped at 0 cents
3 stopped at -20 cents each (-60 cents)
2 stopped at +100 cents each (+200 cents)
net result: 20% "win rate" and +$1,400 per contract on ten round turns
there's your statistical analysis from your own preferred trading symbol in today's current market environment
I am making assumptions here.
CL is more volatile than euro/usd. I found 20 pip stops were much better than 8 pip stops on euro usd.Based on higher volatility of CL, 50 C stops may produce better results.The wider the stops , the less likely one is taken out by increased volatility.
Have you any statistical information on using 50c stops?
My estimate of 50 c stops trading on highly trending days is
4 wins +100
4 losses -50
2 b/e 0
200 profit
Using 20c stops would require perfect timing of entry.
What happens on the 120-cent range, sideways chopping days? -50 cent rips are commonplace now. Near perfect entry timing OR repeated entry after being stop-chopped is the only way to keep draws manageable in between profit swings that erase all losses.
CL is a violent beast now... even -100 cent stops won't prevent losses. Small losses waiting for one solid win is the key to wild market action.