Strategy or Setups
- Thread starter FoxKestrel
- Start date
@FoxKestrel: I think you got that all wrong. You aren't supposed to "pick a strategy", learn it and execute it like you're buying a set of golf clubs.
You need to find a niche that nobody but you can exploit.
1st: 90% of the business is just showing up each and every day
2nd: Have a journal you write each and every day. Major markets, major news, big movers in stocks, unusual volume.
3rd: Specialize. Find a market you can relate to and learn this market inside out. Pick a market nobody cares about. Can be a special set of stocks, can be an illiquid future, exotic currency, just not the stuff everyone and their mom trades.
If you trade Canadian Airline stocks, find out how their margins are, which airports they fly from, where they buy their fuel, how old their planes are...everything.
Just don't be as stupid and trade CL off of chart patterns or "orderflow" when you don't even know what the crack spread and average shipping rate is.
The best trade are those you enter when the muppets are hammering the buttons because of a headline they don't understand.
Know your market better than everybody else.
4th: Fit your infrastructure to your market, not the other way around. I see a ton of people trading FX or "the ES" because software is free and commissions are cheap.
5th: Build watchlists of correlated markets around the market you trade. There is always a lead/lag relationship and especially when correlations break down, it's the first hint that things are changing. If you trade Canadian airline stocks, look at CL, the USD/CAD, the sector ETF, etc.
Don't ever trade a market in isolation. A long as you don't exploit microstructure, context is king.
6th: Learn the exchange rules!!! Know how the matching engine works, learn how a fast market is defined, learn the circuit breakers, learn about trade busting, clearning, everything that concerns how you actually exchange stuff with your counterparty. You don't want to lose money due to not knowing the rules and on the other hand there are many simple trades that exploit those rules. Ask those who traded EUREX settlement prices pre 2012...never lost a single trade.
7th: If you cannot explain to a dude who doesn't trade how and why you make your money, you don't have a strategy.
It probably takes 3 years of dedication and practise to turn the corner and probably another 1-3 years of grinding until you make decent money. Don't read books about strategies or blogs or youtube videos about daytrading. Pick a market and ask yourself if and how you can make money there, then get to work. Use your brain first, watchlists second, orderbook third and charts last.
You need to find a niche that nobody but you can exploit.
1st: 90% of the business is just showing up each and every day
2nd: Have a journal you write each and every day. Major markets, major news, big movers in stocks, unusual volume.
3rd: Specialize. Find a market you can relate to and learn this market inside out. Pick a market nobody cares about. Can be a special set of stocks, can be an illiquid future, exotic currency, just not the stuff everyone and their mom trades.
If you trade Canadian Airline stocks, find out how their margins are, which airports they fly from, where they buy their fuel, how old their planes are...everything.
Just don't be as stupid and trade CL off of chart patterns or "orderflow" when you don't even know what the crack spread and average shipping rate is.
The best trade are those you enter when the muppets are hammering the buttons because of a headline they don't understand.
Know your market better than everybody else.
4th: Fit your infrastructure to your market, not the other way around. I see a ton of people trading FX or "the ES" because software is free and commissions are cheap.
5th: Build watchlists of correlated markets around the market you trade. There is always a lead/lag relationship and especially when correlations break down, it's the first hint that things are changing. If you trade Canadian airline stocks, look at CL, the USD/CAD, the sector ETF, etc.
Don't ever trade a market in isolation. A long as you don't exploit microstructure, context is king.
6th: Learn the exchange rules!!! Know how the matching engine works, learn how a fast market is defined, learn the circuit breakers, learn about trade busting, clearning, everything that concerns how you actually exchange stuff with your counterparty. You don't want to lose money due to not knowing the rules and on the other hand there are many simple trades that exploit those rules. Ask those who traded EUREX settlement prices pre 2012...never lost a single trade.
7th: If you cannot explain to a dude who doesn't trade how and why you make your money, you don't have a strategy.
It probably takes 3 years of dedication and practise to turn the corner and probably another 1-3 years of grinding until you make decent money. Don't read books about strategies or blogs or youtube videos about daytrading. Pick a market and ask yourself if and how you can make money there, then get to work. Use your brain first, watchlists second, orderbook third and charts last.
http://thepatternsite.com/index.html
Think this is best free site on charting, learn how to draw trendlines, have one indicator like 100sma, trend is your friend, bet small and target larger. Most young traders want indicators as it looks easy, it blurs out price, price and volume and trendlines, traders been doing for years.
Learn how to hedge then swing trade futures.
Think this is best free site on charting, learn how to draw trendlines, have one indicator like 100sma, trend is your friend, bet small and target larger. Most young traders want indicators as it looks easy, it blurs out price, price and volume and trendlines, traders been doing for years.
Learn how to hedge then swing trade futures.
[QUOTE="Handle123, post: 4849315, member: 79661"]Learn how to hedge then swing trade futures.[/QUOTE]
This is the absolute best advice: "Learn how to hedge then swing trade futures". @Handle123 -- If this is appreciated and understood by those reading this thread, you should receive major "Likes" for this succinct and cogent post. Thanks @Handle123
This is the absolute best advice: "Learn how to hedge then swing trade futures". @Handle123 -- If this is appreciated and understood by those reading this thread, you should receive major "Likes" for this succinct and cogent post. Thanks @Handle123
I want to like it, but I don't understand it. Do you?
From 2011 to 2014 I found no strategy I could consistently execute with what I personally would call success (I was a break-even trader) so I developed my own winning strategy between 2014 to 2015, and spent 2015 to March of this year “perfecting” it. Yes, I wait for the market to setup and then I execute, but this turned out to be the natural outcome of designing my own winning system.
I sort of concur with what Handle123 wrote about (1) having one indicator, (2) trend is your friend, and (3) the importance of price and trendlines—but for me, it was a matter of focusing in on the one RIGHT indicator, or in my case, the two right KINDS of indicators.
By eliminating everything else from my charts, there is now no question whatsoever in my mind in which direction the S&P (or ES), DOW, NASDAQ, or major currency pairs are trending, whether from an intraday or day-to-day perspective.
However, I determine this in a manner that just about everyone except a trader who calls himself Turveyd have repeatedly tried to convince me it cannot be done, so I must also agree with what MrMuppet wrote about using your own brain first (if I take his words at face value).
Your system has to make sense to YOU. Plus, if you devise it yourself, you will be the world’s foremost authority on using it, which kind of goes along with what MrMuppet wrote about finding a niche that nobody but you can exploit.
Last edited:
Yes, I believe I understand. I hedge when trading to "transfer" part of the risk on the trade to another party. For example say I enter Long on ES future contract. My risk is defined by directional bias (Long or Short the future). So the risk in the trade can be limited by placing a stop loss. Instead of using a stop I will hedge by offsetting the long future by selling 2 ATM Calls on the ES. Then the directional risk has been substantially reduced. (Delta of the long future contract is +100 and the options are -100 so therefore my Delta (Directional risk) is close to Zero. I have in effect traded both sides of the market Long with the Future and Short with the sold call options. Hope this is enough to clarify?
How is this a hedge ... If underlying goes up, you make no money? If underlying goes down more than credit received, you loose money? What am I missing?
You are Correct. One side looses and the other side may win. So it looks like the only real win is the broker who scoops up lots of commissions and fees. What you may be "missing" is how the trade is managed. Say you have a profit (Short term on the future of $500 and want to book that profit as a "realized gain" leaving you with the Losing Side which has a duration left of say 45 days to expiration. The decision when to take the profit from the future contract is the Key to the successful use of this method of trading (may call it a strategy?) The loss on the options is a unrealized loss until the options either expire worthless or require management during the trade.The when to adjust the positions and to enter the future again long against the options is the key. Remember, since I only sell the options I am the collector of the Theta from the buyer of the options (premium). This not only lowers my risk on the position but also lowers margin requirements. (Perhaps @qlai you would assist in a new thread to fully explain -- please let me know. (we both have limited time) Thanks
What part holds most risk of a trade? Opening, by doing back testing showed me to stay hedged during certain hours or days of opening the position, then either the underlying gone so far I can put in a readjusted breakeven stop to include lose on options, or market gone against position so much, underlying PS was hit and keeping the options till it recovers loss. There is no free lunch, sometimes I will lose on both the option and underlying when PS is hit then market goes back in direction system had originally, but very small percentages. I have learned charting reversals very well, so when one offers a signal to reverse, I keep underlying and buy puts if in a uptrend, and if underlying is an futures, I can sell next month out/hedged, there are other ways to hedge as well. So, after retracement happens, all be reversed again. I am more interested in keeping my drawdowns low than making larger amounts but equity curve is all over the place and drawdowns like the S&P Index does not interest me to experience.
It is like catching huge fish in ocean, pull in a bit, let the line out to tire the fish, and eventually it in the boat.