The loneliness of success

Quote from ChkitOut:

imo hesitation in general is a result of the market never being the same twice. meaning, context + setup are never the same twice. in order for that to happen every trader in the world would have to make the same exact trades at the same exact time to produce the same two exact setups twice. i can accept the nature of probability but unlike a casino where the roulette wheel is always the same, the black jack cards are always the same, the market is never the same.

so hesitation to me is a product of "but". yes this 'looks like' its in my plan to take this BUT, its making me buy a little high, BUT, is this really a third leg?, BUT, bar is too big, too much risk, BUT, this second entry is a bear bar, BUT, we are right below the moving average, BUT, the channel is too steep. BUT, is this a second entry buy or a third entry, the previous leg wasnt clear, BUT BUT BUT BUT BUT, there is always a freaking BUT.
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Quote from ChkitOut:

same thing. i see what may be a defined setup that i like, but there is always something wrong with it that makes me pass on it because there is a bar or 2 that changes the defined look (usually because volatility changes or the character of the market changes for example goes from stong trend to tight trading range), so it may be close to what i would consider a good trade but not as close as i would like.
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This sounds like a fear of uncertainty in general with regard to the market. The only certainty in trading is that defined setup/context patterns will be similar ("look like") to each other and that "close" is as good as it gets in a fluid and dynamic environment where anything can happen.

The first question to ask yourself: Do you have a statistically valid plan?

You said you see what may be a defined setup, but...

If a setup is defined, there are no BUTs (unless your setup involves meditating every day with a full moon).

"Defined" means you've clearly described everything about the pattern, and the context in which the pattern appears, that signals to you it's time to put on a trade.

I've spoken with quite a few people here on ET who think they have a statistically valid, well-defined plan, only to review their plan and find the same sort of words and phrases you used above:

strong trend
tight trading range
a little high
a third leg
too high
too much risk
bear bar
too steep

I used to define things much the same way until I had to describe what I wanted to do to someone in terms they could code. What if you had a programmer sitting next to you and you had to define the terms above so that s/he could write code that would recognize a certain pattern and the appropriate context that would validate the pattern as tradable?

I tell people with plans like this to define each of these terms using fixed and relative values. For example, if price has to close above a 20EMA before you consider a long trade, the 20EMA at any given point in time has a fixed value you can reference. If you want to enter a trend following a strong breakout, your definition of "strong" will be based on relative values.

If buying "a little high" means a stop loss would have to be larger than a reasonable profit target, thereby skewing your acceptable risk:reward ratio for a trade, then that pattern/context combo is not a statistically valid setup in a well-defined plan. Every day I encounter patterns that look perfect, but the price at which a technically survivable stop loss would have to be placed invalidates the pattern (the context invalidates the "tradeworthiness" of the pattern).

The more precisely you define each of your vague terms, the easier it should be to put on trades without hesitation.

Which then brings you to the second question to ask yourself: Do trust your ability to remain steadfast in an environment of constant uncertainty?

If you carry negative energy from past painful experiences in the market, you can have a statistically profitable trading plan, yet find yourself unable to trade it due to fear. You may be able to put on trades, but not according to your plan, which usually produces that which you fear in the first place (loss).
 
quiet interesting that there are much more on fear of success from religious posts, than neuroscience one. I wonder why. :confused:
Here is a better one. The subject starts at 0:20:10

<iframe width="640" height="360" src="https://www.youtube.com/embed/Bjq6UN49lDY?feature=player_detailpage" frameborder="0" allowfullscreen></iframe>
 
Quote from NoDoji:


I tell people with plans like this to define each of these terms using fixed and relative values. For example, if price has to close above a 20EMA before you consider a long trade, the 20EMA at any given point in time has a fixed value you can reference. If you want to enter a trend following a strong breakout, your definition of "strong" will be based on relative values.
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so how do i define 'strong' in a relative way?

right now, i just eye ball it (which leads to hesitation because eyeballing is not defining in a way i can say i HAVE to act here), i say, ok the bars have been "small" all day so strong breakout would take on a new meaning than if the bars are "large" all day.

but that is not codeable, because what is small bars? what is large bars? and what is everything in between? it seems futile. thats the part that i dont understand. i think the size of bars on any given day have a normal distribution BUT the values of tiny and huge CHANGE every single day to fit the volatility characteristics of the market so its hard to define so your definition of strong breakout has to change everyday. but maybe im missing something.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3766000>
 

Attachments

take that 20 bar pattern from earlier in the thread that i like and think is statistically significant.

how do i code that? its never going to look exactly like that again.
 
I'm not going to do anyone's work for them, but I'll share some of my definitions pertaining to oil futures on a 5-min charting time frame during pit hours:

Wide range bar (WRB): price bar whose high/low range is equal to or greater than .20

Breaks out with conviction: price breaks out of a range or breaks a previous high/low of the day by more than .07

Strong trend: price does not close outside the counter-trend side of a previous 5min with-trend bar

Airspace: describes the distance between the entry price signaled by a setup pattern and the nearest likely S/R level to be tested

Enough airspace: the distance described above is equal to or greater than the size of a technically survivable stop loss

Those last two demonstrate how a plan can naturally adapt to changing market conditions. If the volatility picks up, the next S/R levels in line to be tested become farther away from entry prices and the survivable stop losses will have to be wider as well. But the overall R:R ratio holds. I may have been able to comfortably place a .10 stop loss on all my trades and target .20 or better. Under volatile conditions, I may have to us a .20 stop, but will now be targeting .40 or better.
 
Quote from ChkitOut:

how do i code that? its never going to look exactly like that again.
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If you need things to be exact, then profitable trading will painful at best, and may well be impossible for you.
 
Quote from NoDoji:

I'm not going to do anyone's work for them, but I'll share some of my definitions pertaining to oil futures on a 5-min charting time frame during pit hours:

Wide range bar (WRB): price bar whose high/low range is equal to or greater than .20

Breaks out with conviction: price breaks out of a range or breaks a previous high/low of the day by more than .07

Strong trend: price does not close outside the counter-trend side of a previous 5min with-trend bar

Airspace: describes the distance between the entry price signaled by a setup pattern and the nearest likely S/R level to be tested

Enough airspace: the distance described above is equal to or greater than the size of a technically survivable stop loss

Those last two demonstrate how a plan can naturally adapt to changing market conditions. If the volatility picks up, the next S/R levels in line to be tested become farther away from entry prices and the survivable stop losses will have to be wider as well. But the overall R:R ratio holds. I may have been able to comfortably place a .10 stop loss on all my trades and target .20 or better. Under volatile conditions, I may have to us a .20 stop, but will now be targeting .40 or better.
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interesting, its good to see HOW someone goes about defining relative values and how you go about designing a plan that leaves no room for this 'looks' ok but..

to me, until i get specific like you described, ill always hesitate to take a trade, even if i think it looks great.

by the way, AL brooks does none of this. he eyeballs everything, and says "well, this looks like it may be ok"
 
Quote from ChkitOut: "imo hesitation in general is a result of the market never being the same twice. meaning, context + setup are never the same twice. in order for that to happen every trader in the world would have to make the same exact trades at the same exact time to produce the same two exact setups twice. i can accept the nature of probability but unlike a casino where the roulette wheel is always the same, the black jack cards are always the same, the market is never the same.

so hesitation to me is a product of "but". yes this 'looks like' its in my plan to take this BUT, its making me buy a little high, BUT, is this really a third leg?, BUT, bar is too big, too much risk, BUT, this second entry is a bear bar, BUT, we are right below the moving average, BUT, the channel is too steep. BUT, is this a second entry buy or a third entry, the previous leg wasnt clear, BUT BUT BUT BUT BUT, there is always a freaking BUT."


Hi ChkitOut,

I didn't become consistently profitable until the last 2 years and part of what helped me turn the corner was backtesting with very defined entry and exit rules. I'm a chart trader like you and I need to see a very specific set of things happen before I enter a trade, and then I always enter the same way (in my case with a stop entry order placed outside the high or low of the bar that is a certain percentage of the 10 period ATR). My initial stop-loss and trailing stop method are also defined.

I backtest by looking at charts in my time frame from some time in the recent past, moving the chart forward one bar at a time looking for an entry signal. I then write down my exact entry with a pen and paper and move forward one bar at a time until the trade is completed and then start hunting for a new entry signal. I've tested a large number of different strategies this way and found that if the testing period encompasses ~ 50 - 100 trades, I get a good idea if an approach is worth pursuing and I'll then test it further. Many backtesting program users prefer a lot more trades than this, and for weakly profitable systems they're definitely right, but I have several years of empirical evidence with my systems showing that this approach works for an initial evaluation of my strategies.

I calculate only a few basic parameters initially, including net profit, % winning vs losing trades, max drawdown, max consecutive losing trades, and profit factor.

Creating defined entry and exit rules and then backtesting them carefully was the most important thing I have done to improve my trading and pursuing a similar path might be helpful for you too. I wonder if you could start by writing down every major variable that could possibly be included in your rules and then look at pictures of many successful past trades to see what quantifiable characteristics they shared.

I'm sorry I'm not much help with this last part. I don't trade using a price action approach like yours. I use indicators and candlestick structures that are easy to evaluate: either they fit my rules or they don't.
 
Quote from ChkitOut:

similar but notice how much difference, the spike is not as strong as seen buy the bear bars and reversal bars, the flag is all overlap, the number of pushes are not clear. it did not form a double bottom like in the prev setup, its above the ema, the signal bar is different, blah blah my point is, stuff is always different.

so the elephant in the room is how am i supposed to assess the probability of a trade if the setups are always different in some way.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3765903>
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Just a quick thought:

In your 2nd chart, the buy signal bar has a close that is in the lower half of the bar. If you only took buy signals where the close was in the upper half of the bar, would results be improved? In the main momentum-based strategy I use this is one of the rules.
 
Quote from Slope Trader:

Just a quick thought:

In your 2nd chart, the buy signal bar has a close that is in the lower half of the bar. If you only took buy signals where the close was in the upper half of the bar, would results be improved? In the main momentum-based strategy I use this is one of the rules.
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hey slope, thanks for your comments. to be honest, im not sure if my results would improve but to me its important to get enough signals to generate sufficient amount of trades as to let the math work.

i'd rather take 30 trades a week with a 60% chance of success, than take 10 trades with an 80% chance of success even though the results would theoretically be the same.

so to me, i feel like i need to give something up (as in a bad looking signal bar) as to give me more viable entries.

a big part of what i do is count number of pushes but it gets hard when you get inside bars that screw up my count. things like this, and many other things make it hard for me to act without hesitation.
 
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