Some Technical Questions

[Straitjacket]

That's how it should be ... if you treat it like real thing, there should be minimal impact once you go live(obviously there still will be!). The moment you say - What the hell I'm just practicing ... I will NEVER ACTUALLY do this once I go live - you are wasting your time, IMHO.


This brings memories Below is my pre-trade check list and post-trade scoring that I used for swing trading(mixed with day trading). Hope it gives some food for thought.

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I'm not sure I completely understand this one. One thing I used to do is compare my result to the hindsight results. For example, I would look at the chart at the end of the day and calculate how much money I would have made if I traded it perfectly (based on my rules but without doubt/hesitation/mistakes). Then I would compare it with how I actually traded. With time, we want our real trades to come close to hindsight results.


I think Maximum Adverse/Favorable Excursion (MAE, MFE) are good stats to have. It gives you a feel for stop placement and gives you and idea of how much money you are giving up on exits.

NOTE: IMHO, while it's good to keep the stats, if you don't have an edge it will not matter and you might get confused even more. I remember reading this advise in books - make sure you know what your edge is - and I could not understand what they meant. So for what it is worth, try to concentrate on what your edge is ... why is something more likely to go up then down ... why after you enter? [hint: TA by itself is not an edge] Good luck!

I was looking for a way to score my decision making process, this makes sense to me.

Regarding edge...I really struggle with the definition.

Trading strikes me as a series of educated guesses within a complexe and changing system. For some reason, I can understand Soros when he describes the reasoning for his trades. However, I cannot understand why I would use a repeatable technical pattern over and over in a constantly changing context. All I do is handicap the situation and then trade it accordingly if it makes sense. Can this be considered an edge?

For the risk management, I’ll have to ponder on that further. I’ll look into MFA MFE, I’m not familiar with the calculations.

Thanks for your helpful comments.

 

[Straitjacket]

this 'flat at the end of day' stuff, only for losers who still live in mom's basement, and have no other skill to find a job, in this hottest job market.

Why do you believe this to be the case?

 

[dozu888]

I was looking for a way to score my decision making process, this makes sense to me.

Regarding edge...I really struggle with the definition.

Trading strikes me as a series of educated guesses within a complexe and changing system. For some reason, I can understand Soros when he describes the reasoning for his trades. However, I cannot understand why I would use a repeatable technical pattern over and over in a constantly changing context. All I do is handicap the situation and then trade it accordingly if it makes sense. Can this be considered an edge?

For the risk management, I’ll have to ponder on that further. I’ll look into MFA MFE, I’m not familiar with the calculations.

Thanks for your helpful comments.

Some good questions!

Correct. The market is ever changing. YOU are the only edge. You being smarter than the other players. You can read their hands better than they read yours.

But. If you get chance to read thru my stuff. The idea is where is the lowest hanging fruit. In what time frame do the robots not play in.

You find that rhythm. You will realize this game is not too hard. There is clarity where the pro boys have the feast and you can join.

 

[dozu888]

Why do you believe this to be the case?

This time frame belongs to the robots. Beginners often are attracted to it due to the perceived safety of flat overnight.

There is no money to be made here. 1% makes enough to live on. The other 99% live in the basement.

The key question is. What is the path of least resistance. To the lowest hanging fruit. To replicate the financial freedom.

 

[Overnight]

...
I think Maximum Adverse/Favorable Excursion (MAE, MFE) are good stats to have. It gives you a feel for stop placement and gives you and idea of how much money you are giving up on exits...

I disagree here, because MAE/MFE are effectively look-backs, which gives a false sense of the future moves.

Who the hell cares that you COULD have gotten out at point A, B or C? You got out with green (or red).

My target is at point A, but the MFE shows I could have gotten out many points higher at point B? Who cares? Because that MFE could have turned into a MAE in a few moments had I not exited at point A. You see?

I hate that MAE/MFE shit.

 

[qlai]

Because that MFE could have turned into a MAE in a few moments had I not exited at point A. You see?

No, MFE should never turn into MAE ... Because we don't let winners turn into losers, right? MFE is useful because most people cut winners short. MAE is useful because most people hang on to losers until they turn positive. That's how people blow up ... They assume they can survive adverse moves but than Murphy law kicks in at the worst possible time. Also, it prevents you from scaling up, which should always be the ultimate goal ... Unless you don't mind living in Mom's basement

 

[expiated]

1 - I don't have a profit target whatsoever. What would you suggest?

I wouldn't suggest anything for you personally. But just putting it out there as something you can consider (or not) I set my take profit targets in accordance with the typical price range of whatever financial instrument I'm trading as defined by simple moving average envelopes. I've done this with foreign currency pairs and U.S. indices, but I've not traded any other asset class in the last five years, so I cannot speak to it effectiveness with anything else.

2 - I am taking paper trading seriously. For some reason, it actually feels like real money. Has anyone actually experienced this because it goes against what everyone says.

No, I did not experience this. At this point, there is essentially no difference between the two (I no longer find either situation to be all that intense) but when I first switched from demo to live trades, the difference was dramatic.

3 - I am adding one tick to my trades in the journal + $4 round trip. Do you think this is appropriate?

I have no idea.

4 - When trying to document my decision making, I am unsure of what to track. Would any of you have suggestions for other things to document beyond just the trades themselves?

No, but this guy does, if you watch the section of the video beginning at 24:10 and ending at 26:57...

5 - I am doing well so far, but worried about risk management. My trades tend to go well when I wait for the price to go against my thesis coupled with a widening of my stops. All of this feels to me like it increases the risk and this seems to be against what I've read. Any advice on how to approach this dilemma?

No, especially since it's not really clear to me what you're talking about. However, the part you wrote about waiting for the price to go against your thesis coupled with a widening of your stops does not sound good at all! (Which I suppose you already know since you wrote that it seems to be against what you've read.)

 

[wrbtrader]

Yes exactly - I’m always flat by end of day.

Wow...so you've been trading (although on simulator) without designating profit targets (what it should be) prior to entry...

That implies you're trading via an incomplete trade strategy which also implies you're trading via a trade method that's not backtested.

Someone that does the above on the Emini ES futures is trading backward.

It's like you couldn't resist the seductress call of the markets and/or the Emini ES futures via trading the Emini ES futures without a complete trading plan like a male black widow spider choosing to mate with the female black widow including actively somersaulting onto her fangs while knowing there's a good chance the female will devour (eat) you after the deed is done and sometimes inject you with poison during the actual mating.

The good thing is that you know you're trading without having profit targets and at least you're smart enough to know that you can not just pick a random number out of the sky and call it your profit target.

After you decided on how to determine your profit targets...backtest your trade method and then go back on simulator to see if you are feeling the same intense emotions you had before when you were trading with an incomplete trading plan.

I suspect you'll be more relax (less intense) on the simulator when you return with a more complete trading plan.

Simply, those intense emotions you're feeling now is normal for a trader that's trading without a complete trading plan even if its on a simulator. Another way to look at it...your mind knows its doing something wrong when you take those trades on a simulator.

Intense emotions or increasing emotions in hypothetical situations in anything is a way our body/mind is warning us that something is wrong that needs to be fixed prior to continuing in the hypothetical or real situation. Analogy...its like your body getting a fever to warn you that something is wrong and will get worst if you don't fix the situation.

Now imagine what you may feel if you do the same in real money trading in a live account...trading without a complete trading plan. It will have a horrible ending.

wrbtrader

 

[They]

I disagree here, because MAE/MFE are effectively look-backs, which gives a false sense of the future moves.

Who the hell cares that you COULD have gotten out at point A, B or C? You got out with green (or red).

My target is at point A, but the MFE shows I could have gotten out many points higher at point B? Who cares? Because that MFE could have turned into a MAE in a few moments had I not exited at point A. You see?

I hate that MAE/MFE shit.

I agree that MAE and MFE are not the best when used for optimizing profits or stops. But they are important to determine a trade signal's strength.

Doesn't really matter what your trade triggering event is, it needs to be better than random. MAE/MFE numbers, when they are applied to time and or volume traded after the signal event will provide you with this info. And IF your trade trigger is better than a random entry, when does the triggering event's effect fade away?

 

[expiated]

I don't know who "They" is responding to, so I imagine it must be a contributor who is on my "ignore" list. But for anyone else out there who is in the dark (as I was) as to what in the world MFE/MAE stands for, as best as I could determine, they are abbreviations for Maximum Favorable Excursion or the maximum amount of profit available while a trade is open, and Maximum Adverse Excursion or the maximum amount of loss available while a trade is open.