Sekiyo’s journal
- Thread starter Sekiyo
- Start date
And did you test this approach...?
I'm sorry to hear you blew your 5K account and I'm sorry you didn't take my advice. You've basically admitted to not having a tested plan and not having an edge.
What makes you think you can consistently extract profits from the market without a tested plan/methodology when the market consistently proves you otherwise?
The basic gist of it is to find some kind of pattern or buy/sell signal you believe will generate profits. It does not matter what that pattern (s) is. Price action. Indicator readings. Whatever. When you've found that - you backtest it. And back-trade it. On dead charts.
If it yields promise and the back-tested results are good - you forward test it by live trading it. Ideally first with simulator. Then with real money small size. Rules for stop placement and exits must be in place. No trading from the hip. Most likely, you'll discover new flaws and have go back to testing/checking. If you start losing money - pull the plug. Back to testing.
A few months of this can cover a lot of ground. And you can effectively back-test years of data as opposed to sitting in front of a chart for 8 hours per day and only clocking in one trading day per day (versus 10 per day when back-testing manually).
This is how you build a trading plan/approach. There are people who actually seem to be profitable trading only one single set-up. I know people who are out of the market 90 % of the time. The rest is spent observing, watching and entering only when things line up just perfectly.
I'm not making any suggestions on methodology/approach or any of that, but I firmly believe that it's hard to argue with what I'm saying above as a basic outline of how you should approach your trading business. Pretty much every successful trader I've been fortunate to talk to have done something similar.
I fear that if you don't heed this advice and insist on simply trading un-tested ideas - the outcome will not be any different from you in the future.
Sorry if this seems harsh and confronting, but as it is a public journal I assume you want advice and I actually wish you the best in your trading endeavours.
Best wishes.
PS: Thank you for the honesty!
Tough day today.
Loss management wasn't percfect.
Gotta learn that it's better to lose a trade than to lose a fortune.
I am still up 150ish net.
But the point isn't to be up or down.
It's to have a statistical advantage and a sound risk management.
I am more lucky than anything else.
Thank you guys for sharing the truth.
I won't happen to be a profitable trader by magic.
Simply by trading alone. It's not that easy.
You guys provide great feedbacks.
Now I really have to get my hands dirty.
Loss management wasn't percfect.
Gotta learn that it's better to lose a trade than to lose a fortune.
I am still up 150ish net.
But the point isn't to be up or down.
It's to have a statistical advantage and a sound risk management.
I am more lucky than anything else.
Thank you guys for sharing the truth.
I won't happen to be a profitable trader by magic.
Simply by trading alone. It's not that easy.
You guys provide great feedbacks.
Now I really have to get my hands dirty.
The correct perception of the losses is extremely important for a trader. If we view a loss as a valuable lesson, then we get some value for our money. This value is knowledge, new experience, and new skill. If we don’t learn from our loss, it’s money wasted, and we are doomed to repeat the same mistakes.
John Magee made the following analogy in Technical Analysis of Stock Trends. There is a territory, and there is a map. Are they ever exactly the same? Not really. They might be close if the map is good. But they are never identical.
Think of territory as stock movement. The map is what we think of the stock movement and what we make of it. If all the reasons that traders discuss have nothing to do with stock movement, then what does? The answer is the stock movement itself! This is the only reality of the market. That’s why the market is never wrong. The market just is what it is. It does what it does. As a Zen philosopher would put it, the market is.
- Techniques of Tape reading
John Magee made the following analogy in Technical Analysis of Stock Trends. There is a territory, and there is a map. Are they ever exactly the same? Not really. They might be close if the map is good. But they are never identical.
Think of territory as stock movement. The map is what we think of the stock movement and what we make of it. If all the reasons that traders discuss have nothing to do with stock movement, then what does? The answer is the stock movement itself! This is the only reality of the market. That’s why the market is never wrong. The market just is what it is. It does what it does. As a Zen philosopher would put it, the market is.
- Techniques of Tape reading
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This is my new KISS trading template.
General conditions on the left.
A spreadsheet to mark stuffs down and do some quick calculation.
1 DOM + volume profile, 2 filtered T&S and a tiny chart with ZigZag attached.
If I had one book to recommend reading
Techniques of Tape reading.
Going to learn more about :
General Conditions -> Overall Bias
Tape Reading -> Timing (Price and Volume)
Setups -> Structure (Levels, IF THEN)
General conditions on the left.
A spreadsheet to mark stuffs down and do some quick calculation.
1 DOM + volume profile, 2 filtered T&S and a tiny chart with ZigZag attached.
If I had one book to recommend reading
Techniques of Tape reading.
Going to learn more about :
General Conditions -> Overall Bias
Tape Reading -> Timing (Price and Volume)
Setups -> Structure (Levels, IF THEN)
Good thinking IMO! I might add just don’t forget the larger and immediate context of the setups. And you might want to learn to apply the traders equation to every trade if you have never done so.
Rules for a setup for an entry can be exactly the same but under different context ( PA to left) the trade one time renders a profit and next time a loss. Nothing is more important than the context because that affects the probability of a trade being successful or not. The exact same setup in different contexts can, and likely will, render different results. In real estate you have no doubt heard, .....LOCATION LOCATION LOCATION. Samathing in trading. And use the traders equation to INITIALLY structure a trade. Actually do the math on each trade and plug the numbers in until you get proficient enough to do it mentally..on the fly.
Traders Equation (Source: Al Brooks)
probability of success x reward needs to be greater than probability of failure x risk
A trader runs this equation BEFORE entering a trade. It is slow at first but soon becomes second nature but he needs to do it for each trade.
Even with a positive traders equation before placing the trade a trader needs to realize that there is STILL a 40% chance it could be wrong. Nevertheless, you might be surprised just how this simple process can put a trader on the winning side more often instead of leaving him to squirm on the losing side.
If I get a chance I may post a chart with a trade or two detailing the process. If you are interested??? Just let me know.
So FIRST do an initial structure of the trade using the traders equation.
SECOND monitor dynamically, the trade as it unfolds after your entry.
After doing this and making the entry then the trader needs to observe the dynamics. By that I mean you have made your entry. You have a position. “How” is the trade developing over a particular time frame whether that be ..5 min..15 min..30 min..? Did PA go against you and take out your SL? Slowly or quickly? Did it go down 1/2 the distance to your stop then turn in your favor? If so “how” Grinding? Quickly? How did the last bar close? In your favor or against you? If you entered the trade did it immediately sail out of port in your favor with “0” adverse movement? PA back and forth...back and forth...
For instance, say you enter ES at 2950 it goes 1/4 point against you to 2949.75 then turns and sails in your favor 3.25 points to 2953.25 on the same bar or the very next bar. In such a case while your initial risk you used to structure the trade on... was... say 2 points the actual risk was 1/4 point or one tick which you need to add a tick to that making it 1/2 point.
So, dynamically you can exit at 2953.00 cause price is at 2953.25. Should you? I would say YES by all means exit. If you exit your reward to risk is R:R is 6:1. You actually risked 1/2 point to make 3 points. Mathematically that is a good trade. You cannot go wrong scalping 3 point for a R:R 6:1 If you make 10 trades that day and make 3 points per trade on 7 trades Then you make 21 points on those 7 trades. But you lose 2 points (assuming 2 pt SL) on 3 trades. So, 21-6 =15 points is your net for the day.
Why would I say exit in the trade above? You got three points on little adversity (risk) so why not hold for more? Because, dynamically, that was a high probability trade. Think about it. You got probability, reward, risk. The three variables. The perfect trade is high probability, Big reward, little risk. Now do you think market is going to give you perfect trades? A perfect trade does occasionally happen but it is very rare and not the norm. MOST of the time you can get one of the variables on your side, and sometimes two, but not all three. Now back to the trade. Is a 6:1 R:R good? In the world of scalping 1 to 8 points I would give a resounding YES! Now think through this. It is not what it seems on the surface. You made 3 points on very small adversity. That can only mean at the time of your entry you hit it right at the moment of high probability. And low risk. Some institution created this action (you don’t need to know who lol) That is, dynamically this PA is so, as opposed, to the initial structuring of the trade. So i planned but this is what is really happening. Think about this. In other areas of life we make plans but 99% of the time we have to make adjustment to our plans as life happens. Well SAME thing with trading!
So, dynamically the market has given you two of the three variables. So, let me ask you this. You got two variables on your side as the trade unfolded right after your entry. SHOULD YOU THEN EXPECT TO GET THE THIRD VARIABLE WHICH IS A BIG REWARD ALSO ON YOUR SIDE? No! No! No! Remember, it is very rare the market will give you a PERFECT trade. That is why you should immediately exit the above trade for a 3 point profit on a 1/2 point actual risk giving you a 6:1 reward to risk. Now here is precisely the mistake novices or even seasoned traders can make if they don’t understand this. THEY will hold for more profit! BIG mistake! (There exceptions ...like for instance, in very strong BO’s you might look at holding for a MM)
Their reasoning goes something like this: “The trade immediately took off in my favor. It didn’t come near my SL. This baby is going to give me a huge win. I am holding for BIG BUCKS NOT LITTLE DOES!” You see they don’t realize that the market just gave them a great R:R trade on a silver platter. Just basically handed it to them. But see greed kicks in. They hold and seconds, or minutes later, price drops back down through their entry and keeps going south hitting their SL and taking them out with a 2 point loss. A 100 bucks loss plus commissions in the ES if trading one contract. Of course worse if trading 5 contracts. They are left shaking their head in bewilderment muttering....I should of..could of...kick myself....well ...you get the picture. See all this is counter-intuitive. It seems wrong to exit such a good trade so early but actually exiting the trade is precisely the correct thing to do.
You may need to convince yourself by running the traders equation agains once you have 3 points in the bag in paper profits.
To run The Traders Equation you have to first assign probability. Will this trade likely go up another 10 points and give me 13 points profit? 50% chance? 60% chance? 40% chance? Or very unlikely considering the larger and immediate context so 20%.
Any time you are going to use the traders equation you are going to have to assign some probability number to the equation. The reward and risk is easy. Just pick them. Then assign the probability of PA giving you your hoped for reward without hitting your set SL. In other words, you, to assign probability to the equation are going to have to basically ask: given the immediate and bigger context (all the bars to the left), will this trade I am wanting to take likely be successful? Will it likely hit my PT BEFORE it will hit my SL? 20%, 40%, 60% chance? What is the chance? Once you decide that plug in the numbers. Plug them in. If it renders a positive trader equation you might look at taking the trade. If not adjust the SL and or reward and assign a new probability number. Run it again. If then positive consider taking the trade. If not might be better to skip the trade.