Real Trading Strategies

[downtickboy]

Originally posted by nitro
Trading is about having an edge and a set of market conditions that favors your strategy - period. Remeber this well, markets chage, and nothing lasts forever - try to find those traders that have survived 5, or preferably 10 or more years doing this - THOSE are the guys you want to emulate because they are the ones that have the "creativity" [for lack of a better word] to have adapted and have survived their "strategies" being "arbed" out, or simply the market conditions have changed.

It is incredible how many times the same generic answer gets given on these boards. TRADING IS IN THE DETAILS, and the details are not in indicators. They are in ever changing strategies that at their core give you an edge that you can milk until they stop "letting you." That coupled with your talent to interpret the story that is being told better than the guy/girl that is taking the other side of your trade - period. There is no shortcut to this state thru indicators, etc, only through the pain/joy of experience of trading day in and day out.

nitro

I am trying to find traders with experience like you speak of and hope to get some input from some like that. Some of the traders I know were the kings of the world scalping Nas stocks. Many then blew up their accounts and some stop making money. I have seen how hard it has been for traders to switch styles and adapt. Some are still sitting around waiting for things to return to back in the day. Drives me crazy listening to it.

So like you pointed out I am not looking for the generic top 10 trading phrases. Those have been reproduced on many threads already. I am asking for some the details as long as they would not adversely effect your trading. Nitro what is your approach?

 

[nitro]

Originally posted by silk
The basic underpinnings of my strategy is that stocks trend during the day. Stocks going up tend to keep going up, and vice versa.

The trick is to get in early with small shares. Then add to the position as it goes in your favor. Then after you have a large position you monitor for signs of trend reversal. This is based on "feel". Tone of the market. Momentum. Futures analysis. If it is after 2:30 pm and the position is still moving in my favor i try to hold into the close. I want to hold my positions as long as possible. I will look to get out when the stock's move is approaching its typical daily range. Unless i see extraordinary buying or selling and determine that this is a "special" day for the stock.

So how do you get in early? You have to watch your stocks very closely. Watch to see how they "feel". Do they "want" to go up or not relative to the ticks in the futures. You want to buy stocks that don't want to go down with futures and vice versa. This is holy grail and tells you whether there is big seller or buyer. You want to play the sectors that are moving the most.

So basically i'm using alot of gut instinct to establish positions. Then i use a trending system. This combined with basic tape reading allows excess returns.

This all seems reasonable...

What the poster suggested about taking random positions and then adding to winners and cutting losers is very interesting. Basically it is what i'm doing.

But then this is in stark contrast to what you wrote above

I take alot of positions long and short among different sectors. Then i "fish" for the trend. Add to my winners and build huge positions.

I know people that trade this way...

As long as the market is volatile enough this system will make you good money. It is human nature for people to not sell stocks today that are going up today and vice versa. That creates excess returns for day traders that play the trend.

nitro

 

[Gordon Gekko]

Originally posted by nitro
It is incredible how many times the same generic answer gets given on these boards. TRADING IS IN THE DETAILS, and the details are not in indicators.

nitro,

can you give an example or two of what you consider to be a detail? i'm not asking you to give away a real detail that you actually use. just a general example would be fine.

thanks

 

[Gordon Gekko]

Originally posted by bigscalper
5) how do you deal with a losing streak... how do you deal with a winning streak...

6) what plan do you have when a stock gaps right through your stop...

bigscalper,

these 2 interest me. how do you deal with losing/winning streaks? and how do you handle a gap past your stop?

thanks

 

[Gordon Gekko]

Originally posted by silk
The way to make money is to accept the reality that people want to buy and not sell stocks that are going up, and sell and not buy stocks that are going down.

Add to winners. Do not buy more of losers.

I have made so much money this year based on this.

It is hard to lose big if you do the above. The days that i have lost big is because i didn't do the above.

It is so simple.

silk,

i hope you don't mind answering a few questions..

so i take it you want to buy stocks going up and short stocks going down. if i wanted to do this on monday, how would you suggest i find a long candidate? what pleases you enough so that it qualifies as a stock going up?

i understand to add to winners and not to losers. but what tells you when to add to a position? you must have some type of rule for this. also, THIS IS A BIG QUESTION FOR ME..... say you initiated a long position and you just added to it. now say it is starting to not go your way. are you going to exit the entire position or are you going to take off what you just added? basically, i'm wondering if you treat add tos separate or if you treat the position as a whole even though you've added to it a few times?

please keep in mind i realize that you don't want to give away your EXACT methods of doing the above. if you could make up fake examples off the top of your head that would be fine. i'm just trying to understand your general thoughts on these issues.

THANKS!

 

[silk]

If a long starts going against you, you have to determine the reason. If it is because futures have pulled back, you have to use your futures trading skills and decide if they are likely to continue there down trend. If that seems like the only reason the stock went down, then maybe you still have a good long. Consider putting on some shorts to in weaker sectors to hedge. In most cases you do not want to sell a strong stock just because futures start going down.

For this type of trading it is important to be able to trade multiple positions so that you can hedge situations like the above.

If the stock starts moving against you without the futures moving against you, then you may have a real dog. You then have to determine if the trend has been broken or is the stock just taking a breather. I usually do not sell unless i'm feeling alot of pain. After a stock has crossed a certain "pain" threshold it is ruined in most cases. That is where experience comes in to know whether this line has been crossed.

 

[inandlong]

There is nothing on this thread or any thread that I have read that tells you how to trade in any way different than what isn't already written in a book. There are two exceptions...the opening orders and bullets. Other than those two methods, everything here is a rehash of already thoroughly discussed topics in any two or three good books on trading.

All that really comes to light here are the experiences each trader has using the various methods. As two people can watch the same sunset and have completely different experiences, so too, will any two traders have different experiences to relate, even though they might use identical trading methods.

Someone could post "here's what works for me every time" and when you use it you lose money. The only way to find out what works is paper trade what you think will work first. Then paper trade some more. And then some more. You must learn for yourself what works for you. And you never really know until you trade it live.

The steps are the same for everyone...crawl, walk, run. Read study, practice, trade.

My original contribution is to comment on why I think the posts have been more about the mental and emotional aspects of trading recently. From the last week of July forward the market has been somewhat sideways, ie not trending. It is much more difficult to trade a sideways market. Most guys here probably had monster profits in June and July because the market trended. The traders who had good profits in late July thru this last week are the ones who quickly applied range trading techniques, and those who have been selling theta.

When trading is good, everyone is talking about how their method is working. When trading is not good, the mental aspects come in to play.

I have read that trading a range method and a trending method simultaneously will smooth the earnings curve. That makes sense but I have not studied it. It seems the curve might be smoother, but: will overall profits be as high; will transaction costs significantly increase? In the long run, which makes more money alone, a trending or trading method? By employing the two together am I increasing or decreasing profits? Now if I read someone elses study on the matter, that study will only be valid to me if the author and myself trade exactly the same way. That is not likely to occur.

Bottom line: you have to do the work.

 

[nitro]

Originally posted by Gordon Gekko

nitro,

can you give an example or two of what you consider to be a detail? i'm not asking you to give away a real detail that you actually use. just a general example would be fine.

thanks

From another thread:

I get a bunch of these simple by trading many different pairs.

I took home the pair CAT/DE on Thursday - I didn't want to do it, as I did not like the price action of being long CAT, but the mathematics "demanded" it.

On Friday, I was down immediately on the open. So, I added to the pair [as many pairs traders will do.] Well, even with the spoos going sideways to up, CAT just kept getting hammered, and DE just held. I don't know what happened to me - I have seen this so many times [the action of a large seller is soooo glaringly obvious to me know I can literally smell the stink,] I knew exactly what was happening. Finally, instict took over and I said the hell with the disparity between the two, there is someone that wants out of this stock and wants out badly. So I got out [if I had access to bullets I swear to you I would have gragged on on CAT.] CAT went down almost another .50c before finding some support and coming back, but the action was so similar to the way I see spoos go up - up coil, up coil, up coil - this told me that I just needed to find that last up coil until it headed south again. Sure enough, mr large seller enters again and slams the stock down. Then, up coil, up coil, this time more ferociously - the Mr seller again and wham - stock gets hammered...

I will be watching CAT on Monday for any gap up, and I am gonna play it LOO to sell it, even though CAT/DE is way out of line...

nitro

From still another thread:

Here's how I viewed today:

I came in bearish. But that feeling is tempered by the fact that we're already down two days, this would be the third. And we're a long way from the peak on 9/11.

We're gapping lower on the HON news. Michigan number out just after we open...this can move the market.

We gap down...this immediately has me wondering if we can fill the gap. Not long after the open I notice INTC, IBM, and MSFT are all up. Hmmmm. How do you have a down day with these key stocks up?

The Michigan number comes out worse than expected....down we go. INTC, IBM, and MSFT are still up...they're holding.

Now I'm getting interested in the long side. I see the ticks start to turn, the ES is picking up strength....IBM, INTC, and MSFT all start edging up. I see the NQ moving.

I bought the ES right about the opening price...and easy move up.

You could have bought the ES later on on another set back toward the 880 area....I missed it though. Key stocks firm, every time NQ moves it pulls along the ES.

Later in the day we take the highs out and make a little sprint. NQ does not take the highs out. Something is not clicking. NQ has been the stronger of the two. I short ES as we fail back down through the high. NQ helps me out by going red. I'm thinking we get some pre-weekend weakness...maybe even trade back down to the lows.

Nope, no such luck....but I did pick a small gain....about 5 points. I cover when NQ starts to turn again.

Notice there's no system, no moving average. I doubt there's anything here that anyone else could not have observed.

Later I took a look at the 5 minute chart. Tough day for the moving averages....pretty whipping. I see I bought below the averages, and sold above them. LOL.

OldTrader

nitro

 

[nitro]

Originally posted by inandlong
There is nothing on this thread or any thread that I have read that tells you how to trade in any way different than what isn't already written in a book. There are two exceptions...the opening orders and bullets. Other than those two methods, everything here is a rehash of already thoroughly discussed topics in any two or three good books on trading.

All that really comes to light here are the experiences each trader has using the various methods. As two people can watch the same sunset and have completely different experiences, so too, will any two traders have different experiences to relate, even though they might use identical trading methods.

Someone could post "here's what works for me every time" and when you use it you lose money. The only way to find out what works is paper trade what you think will work first. Then paper trade some more. And then some more. You must learn for yourself what works for you. And you never really know until you trade it live.

The steps are the same for everyone...crawl, walk, run. Read study, practice, trade.

My original contribution is to comment on why I think the posts have been more about the mental and emotional aspects of trading recently. From the last week of July forward the market has been somewhat sideways, ie not trending. It is much more difficult to trade a sideways market. Most guys here probably had monster profits in June and July because the market trended. The traders who had good profits in late July thru this last week are the ones who quickly applied range trading techniques, and those who have been selling theta.

When trading is good, everyone is talking about how their method is working. When trading is not good, the mental aspects come in to play.

I have read that trading a range method and a trending method simultaneously will smooth the earnings curve. That makes sense but I have not studied it. It seems the curve might be smoother, but: will overall profits be as high; will transaction costs significantly increase? In the long run, which makes more money alone, a trending or trading method? By employing the two together am I increasing or decreasing profits? Now if I read someone elses study on the matter, that study will only be valid to me if the author and myself trade exactly the same way. That is not likely to occur.

Bottom line: you have to do the work.

inand,

Interesting point!

One thing that I half disagree with [maybe 85% disagree with] is the part about paper trading. Paper trading is lacking one thing that real trading lacks - FOCUS. The easiest way to put it is the analogy of getting somewhere by getting EXACT directions, as opposed to looking at a map and getting lost. With getting exact directions, you may get to your destination, and very likely efficiently. But by using a map and getting lost, and going down some inane street for a mile only to find out that it's a dead end and is in the middle of a ghetto [and there was a sign in when you turn in, but it was behind a tree and it's pitch black outside] and saying to yourself, hmm, the Sears tower shouldn't be on this side of thigs in relation to where I am - how can this be, Ah, because Milwakee runs in a diagonal- of course!!....

The point is - if someone gives you directions, all you have learned is how to get from here to there. If you get lost trying to get somewhere, now you are learning your way around the city... Paper Trading is OK, but leave that pacifier behind ASAP and start getting lost in a trade with small numbers of shares AND TAKE NOTE OF EVERYTHING...

nitro

 

[easyrider]

I was thinking about things this morning and was trying to see if there was any other business out there where you would want to help your competition to become more competitive. I couldnt really think of one. Anybody know one? I guess what Im asking is: is there any benefit from helping other traders to improve?