ROFLMAO probably better than the hole you might be in....
Techniques for Day Trading the ES, NQ, YM, MES, MNQ, and MYM
- Thread starter volpri
- Start date
That was a piece of good advice, thanks.
Now it looks like this time it is more likely this may be a succesful BO because: 1)new high today, 2)intraday low at exactly our previous resistance line was a good support, 3)more then 5 bars and it did not return to previous channel, 4) price is above both MAs.
Argument against: forming double top?
I suspect it is going to test our line again soon from above maybe even tomm and: if I am wrong and it breaks down to old channel then I am short, but if our line is not broken then I am long (PT somewhere between new high and support line+old channel width).
What about the recent double top; should we worry?
Now it looks like this time it is more likely this may be a succesful BO because: 1)new high today, 2)intraday low at exactly our previous resistance line was a good support, 3)more then 5 bars and it did not return to previous channel, 4) price is above both MAs.
Argument against: forming double top?
I suspect it is going to test our line again soon from above maybe even tomm and: if I am wrong and it breaks down to old channel then I am short, but if our line is not broken then I am long (PT somewhere between new high and support line+old channel width).
What about the recent double top; should we worry?
How to take a loss and recover quickly:
If I take a position and my premise of bullish or bearish proves to be wrong then I have to make a decision to hold or exit with loss.
Solution:
Start with small position size.
1) First place the correct SL (Wiggle room) which if price reaches that point my premise is likely invalid. See a trader can pick the wrong side of the market and is certain to lose or he can pick the right side and inadvertently get out on a minor correction and lose. A trader can also have excellent paper profits and overstay the market and paper profits evaporate. A trader can also be right on the market and wrong on timing. Correct SL placement IMO needs to take into account the above.
2) If it reaches the invalid point exit immediately with the loss. Taking a loss is really nothing. If I do number three below.
3) Immediately look for an opportunity to reverse direction and go with the correct direction the market. Then I double up position size and go in the correct direction getting my loss back and likely make a good profit on a comparable move. Say I take a loss on 4 points in the ES. I reverse and double up and on a 2 point move I am back to break even. Another point or two and I am ahead of the game. The danger is if the market gyrates back and forth then I could get whipsawed from side to side but if I catch a fairly decent trend on the doubled up reversal then a profit is basically assured.
Of course the tactic is easier said than done. It does take some nerve. But if a trader can stop worrying about money and instead focus on the important thing - namely, where is the market likely to go from this point? If I can re-focus on what is going on in the market then I have a powerful tool for success and a powerful tool for correcting a mis-judgement on market conditions, that caused me to suffer a loss in the first place.
If I take a position and my premise of bullish or bearish proves to be wrong then I have to make a decision to hold or exit with loss.
Solution:
Start with small position size.
1) First place the correct SL (Wiggle room) which if price reaches that point my premise is likely invalid. See a trader can pick the wrong side of the market and is certain to lose or he can pick the right side and inadvertently get out on a minor correction and lose. A trader can also have excellent paper profits and overstay the market and paper profits evaporate. A trader can also be right on the market and wrong on timing. Correct SL placement IMO needs to take into account the above.
2) If it reaches the invalid point exit immediately with the loss. Taking a loss is really nothing. If I do number three below.
3) Immediately look for an opportunity to reverse direction and go with the correct direction the market. Then I double up position size and go in the correct direction getting my loss back and likely make a good profit on a comparable move. Say I take a loss on 4 points in the ES. I reverse and double up and on a 2 point move I am back to break even. Another point or two and I am ahead of the game. The danger is if the market gyrates back and forth then I could get whipsawed from side to side but if I catch a fairly decent trend on the doubled up reversal then a profit is basically assured.
Of course the tactic is easier said than done. It does take some nerve. But if a trader can stop worrying about money and instead focus on the important thing - namely, where is the market likely to go from this point? If I can re-focus on what is going on in the market then I have a powerful tool for success and a powerful tool for correcting a mis-judgement on market conditions, that caused me to suffer a loss in the first place.
Good advice here 
Hey Volpri - with your high win rate style (which i aspire to copy) I'm thinking perhaps your average loss may be as high as double your average win, or what would you say? Maybe triple?
he doesnt lose
volpri is just another bot on this site. duh
The Counter Intuitive Nature of Risk/Reward Ratios
by Boris Schlossberg
What’s better – taking many trades that have a reward to risk ratio of 1 to 5 or taking many trades that have ratio of 5 to 1?
Would you rather make many bets that pay 1 and risk 5 or many bets that pay 5 and risk 1?
If you answered the latter you’d be dead wrong.
On the surface the idea of making many trades that have a positive risk reward profile looks immensely attractive. Who wouldn’t you want to get paid 5 every time you risk 1? Unfortunately many traders confuse the idea of payoff with the probability of actually collecting those payoffs. The probability of consistently making a trade that makes you 5 while keeping risk to 1 is generally very small – MAYBE 15% if that.
One time I was in the green room with a very well known currency analyst who pompously announced that he doesn’t take trades that are less that 4 to 1. Right then and there I knew the guy never bet his own money in his life and was just a glorified paper trader like most Wall Street analysts are.
Assuming you have a long term positive expectancy (i.e. say you lose 3 for every 1 you make, but your winning percentage is 77% or better) you should do as many trades as possible for the same reason that insurance companies write as many policies as possible – the law of large numbers works in your favor. As long you keep each individual trade loss to a very small risk size (between 0.5% and 1.0%) your risk of ruin is manageable. The more you trade the more profits you’ll build up the more capital you’ll have at your disposal to survive the drawdown.
The high reward/low risk trades have the exact opposite profile. You spend a lot of time bleeding away money until you finally hit a good trade. Worse, since good trades are rare – your chance of missing them is very high as you can’t watch the markets all the time. Lastly the psychological toll of constantly losing money makes traders much more reluctant to pull the trigger just at the moment when they need to.
That why when you study all the great hedge fund manager who trade with high reward to risk ratios you notice one thing that most retail traders miss – they are highly selective. From Soros to Tudor Jones many of the great traders will make a few forays into the markets and take quick losses but will pounce on the opportunity when it goes their way. To do that they are perfectly happy to be very patient and select their targets after massive research.
Retail traders on the other hand will trade blindly using high reward to risk ratios because that what they’ve been told and then wonder why they are losing all their money.
Relax and Trade with US – Swing Signals, Day Trading Signals, 24 Hour Trading Room
So the lesson of the day is if you trade like an insurance company don’t be afraid to write a new policy after a hurricane wipes out your profits but if you trade like a hedge fund – you better know exactly what you are doing.
BORIS SCHLOSSBERG
AUGUST 28, 2015
by Boris Schlossberg
What’s better – taking many trades that have a reward to risk ratio of 1 to 5 or taking many trades that have ratio of 5 to 1?
Would you rather make many bets that pay 1 and risk 5 or many bets that pay 5 and risk 1?
If you answered the latter you’d be dead wrong.
On the surface the idea of making many trades that have a positive risk reward profile looks immensely attractive. Who wouldn’t you want to get paid 5 every time you risk 1? Unfortunately many traders confuse the idea of payoff with the probability of actually collecting those payoffs. The probability of consistently making a trade that makes you 5 while keeping risk to 1 is generally very small – MAYBE 15% if that.
One time I was in the green room with a very well known currency analyst who pompously announced that he doesn’t take trades that are less that 4 to 1. Right then and there I knew the guy never bet his own money in his life and was just a glorified paper trader like most Wall Street analysts are.
Assuming you have a long term positive expectancy (i.e. say you lose 3 for every 1 you make, but your winning percentage is 77% or better) you should do as many trades as possible for the same reason that insurance companies write as many policies as possible – the law of large numbers works in your favor. As long you keep each individual trade loss to a very small risk size (between 0.5% and 1.0%) your risk of ruin is manageable. The more you trade the more profits you’ll build up the more capital you’ll have at your disposal to survive the drawdown.
The high reward/low risk trades have the exact opposite profile. You spend a lot of time bleeding away money until you finally hit a good trade. Worse, since good trades are rare – your chance of missing them is very high as you can’t watch the markets all the time. Lastly the psychological toll of constantly losing money makes traders much more reluctant to pull the trigger just at the moment when they need to.
That why when you study all the great hedge fund manager who trade with high reward to risk ratios you notice one thing that most retail traders miss – they are highly selective. From Soros to Tudor Jones many of the great traders will make a few forays into the markets and take quick losses but will pounce on the opportunity when it goes their way. To do that they are perfectly happy to be very patient and select their targets after massive research.
Retail traders on the other hand will trade blindly using high reward to risk ratios because that what they’ve been told and then wonder why they are losing all their money.
Relax and Trade with US – Swing Signals, Day Trading Signals, 24 Hour Trading Room
So the lesson of the day is if you trade like an insurance company don’t be afraid to write a new policy after a hurricane wipes out your profits but if you trade like a hedge fund – you better know exactly what you are doing.
BORIS SCHLOSSBERG
AUGUST 28, 2015