The Trouble With Scribbles

[Buy1Sell2]

There has been a lot of discussion recently about a strategy/method know as SLA. This is where a range is defined using recent highs and lows drawn with horizontal lines or scribbles. Then trades are placed near the extremes and are either taken as reversals or breakouts. When you look at the charts with the scribbles drawn, you quickly realize that anyone, including a first time viewer can easily see the range. You can also easily see other "ranges" and indeed when looking at the charts of the educators and the students, it is easily recognizable that the scribbles are arbitrary in nature. Nearly every chart has the scribbles drawn differently. When describing the trades to be taken, it is suggested that either a breakout can be taken or a reversal. This is brilliant since the trades are planned in advance and one should know which one it will be. There is virtually no emphasis placed on risk management and trade management. The students are encouraged to take profits quickly and aim for a high win rate. Trailing stops are not promoted as an effective means to let a winner run and offset inevitable losses on other trades. The educators place no trades in real time that would lend credibility and testimonial to the method. They do however post hindsight analysis and generalities. So, it all becomes theoretical with no basis in reality. This in truth, is the worst part of the system. No one who is teaching the method "shows" where to place protective stops or trailing stops or brings up the thought of trying to exploit a winner. Without these tenets, the scribbles are useless and unenlightening at best. As for the lines, horizontal scribbles are static in time, while diagonal lines are dynamic in time. Diagonal lines are much more effective and should be used as a fail safe trailing stop method at the very least. However, this is aspect is not discussed. There are other more effective methods of determining entry and exit points. These methods do not say, "when we get to the scribble either go long or go short" . They instead have a bias towards long or short in the larger context and the trader knows which direction they are looking to trade. This is done in real time with current information on current trend and current momentum, not yesterdays. --One other item at this juncture: Several people have posted their thoughts while trading or perhaps in hindsight and every minute or two, they have a new idea of why, who, where, etc. and how it is affecting price. These thoughts amount to way too much over-analysis and can also be considered to be scribbles since that what they look like in a posting or on chart. All you need to do is buy when the trend is up on the longer context chart and you are oversold on the smaller entry/exit chart and vice-versa when trend is down on the larger context chart. Then set trailing stops outside the noise until a reversal happens in the other direction. Simple stuff really. You don't need to know why people are buying. You don't need to know who is buying. You just need to know that someone is buying. --You don't need new analysis every 2 minutes. If trend is up, look to buy. If trend is down, look to sell. ---You don't need horizontal scribbles defining yesterdays range in order to trade successfully today. ---You just don't need scribbles. ---They're trouble.

 

[wrbtrader]

When you look at the charts with the scribbles drawn, you quickly realize that anyone, including a first time viewer can easily see the range.

I saw too many posts by traders that could not easily see the range or had problems understanding why its a range...there own words in the replies about posted charts by the scribble folks here and elsewhere online.

No one who is teaching the method "shows" where to place protective stops or trailing stops or brings up the thought of trying to exploit a winner. Without these tenets, the scribbles are useless and unenlightening at best.

There's no mentoring occurring nor any hand holding. The scribble folks (those sharing their SLA method) are just sharing a "part" of a trade method and its your responsibility to develop your own complete trading plan around that partially shared trade method. Yet, I've seen others trying to learn how to scribble...some are making an effort (they understand their responsibilities) to develop a complete trading plan and they do discuss where they place protective stops, trailing stops and other trade management issues. I guess you've missed their message posts.

Lets take it a little further. Successful trading involves more than a trade method. Simply, even if the scribble folks discuss a trade method from entry to exit, trade management rules and such...its still only part of a trading plan. Thus, if you truly want the complete trading plan...you would then expect the scribble folks to teach you about proper capitalization, discipline, proper trading environment, proper trading equipment, market context, stress management, proper broker platform for the type of trading, proper trading instruments and many other things...all that stuff that completes a trading plan. You should also expect the scribble folks to examine all your trades and help you in real money trading conditions while the scribble method is being applied...along with the scribble folks ensuring that all the above tenets are in place for each trader learning the scribble method considering most folks put too much emphasis on a trade method while ignoring everything else that's equally important.

Seriously, why read just a few chapters about a trade method when you can read the entire book called trading plan...a book like that has never been written nor shared online.

My point, all the above tenets are equally important in a trading plan and its not realistic to expect someone to spend their time and energy teaching you everything...unless its real mentoring in person where the mentor verifies the student has all the above in place prior to placing a single trade. In fact, for most traders, the above tenets are the difference between being a successful trader versus being a losing trader. In other words, if you're going to complain about only getting a few pieces of a trade method...you should also be complaining about not getting a complete trading plan and you should be complaining about the scribble folks not ensuring you have all the tenets in place prior to trading.

Once again, there's no mentoring occurring at this forum and its just folks sharing a few pieces of the puzzle and everything else is the responsibility of the reader. Yeah, if you want to know a little about the other stuff I mentioned above...that too is your responsibility to ask questions instead of expecting to be spoon fed or nipple stuck in you mouth when you're hungry.

All you need to do is buy when the trend is up on the longer context chart and you are oversold on the smaller entry/exit chart and vice-versa when trend is down on the larger context chart.

You're implying that your way of trading is the only way to make a buck. That's not true. Therefore, there's other ways to be profitable and consistently. Too many other types of traders like institutional traders, hedge funds, spreaders, professional traders are able to profit consistently while not trading your way.

By the way, a few of the most documented (verified) profitable traders do tons of analysis. To them its not over-analysis...just review some of the real-money trading competitions and the interviews of the top performers. My point is that everybody thinks differently than you. Thus, some folks are able to manage a lot of analysis while others like you can not or don't need to. That's life in any career. Also, keep in mind that the more experience in trading that someone has...the easier things may seem.

A simple method that's consistently profitable is accomplishing such because the trader has a deep and complex understanding of today's markets.

P.S. I see folks using scribbles posting real-time trades on twitter and stocktwits. In contrast, I do see real-time analysis (not trades) occasionally being posted here at Elitetrader.com to go along with the hindsight analysis. I think you're on a different planet.

P.S.S. I like the name scribbles...its catchy.

 

[dbphoenix]

My point, all the above tenets are equally important in a trading plan. In fact, for most traders its the difference between being a successful trader versus a losing trader. Thus, you're misguided if you think that the scribble folks are obligated to give you or anyone else a complete trading plan when in reality its your responsibility to have those things in place prior to applying a trade method.

Once again, there's no mentoring occurring at this forum and its just folks sharing a few pieces of the puzzle and everything else is the responsibility of the reader. Yeah, if you want to know a little about the other stuff I mentioned above...that too is your responsibility to ask questions instead of expecting to be spoon fed or nipple stuck in you mouth when you're hungry.

That's quite a defense, Mark. Thank you.

What BS doesn't understand -- because he's never read the material, much less studied it -- is that the SLA/AMT is a primer. Training wheels. Yes, it could be made into a complete trading system, and has. It's what I trade every day, or at least every day that I trade. But am I for example going to tell those who are interested where to take profits and where to place their stops and how wide their stops should be and when those stops should be moved? Of course not. There are no absolutes when it comes to risk tolerance per se, much less all the types of risk tolerance. And if I tell the trader what to do each and every step of the way, the "system" remains mine, not his, and he therefore will never learn to trust it. If a trader is going to be successful, he must come up with a trading plan that he trusts. If he does not, he will trade in a perpetual state of anxiety and even fear.

Whether the trader comes up with a stop of a tick, or two ticks, or two points, or twenty, or no stop at all is entirely up to him, and he must through his own testing determine just where that stop should be and when and how it should be moved according to his own risk tolerances (he will learn quickly that no stop at all reflects poor judgement). Likewise he will learn quickly that entering a breakout by one tick is not wise, but it will be up to him to determine just how far price has to go into the breakout before he can trust that it is genuine and not just a random occurrence. If he incorporates breakeven stops, he will have to determine for himself just how far price must go in the desired direction before he can confidently place his breakeven stop. And this will vary according to the instrument traded and how accurate his entry was to begin with. He will also, if he chooses to implement the tactic, learn the value of scaling out, though this also will vary according to the instrument traded (with some it's just not reasonable), i.e., trading multiple contracts and taking profits at X with the first or first set and letting the others run: this is emblematic of conservative and reasonable money management, in contrast to ego gratification.

To buy or sell just because it seems like a good idea and place 40pt stops is ludicrous on the face of it and even more so once one tests such a proposition, regardless of what percentage of his net worth he gambles on each trade. As John Magee pointed out sixty years ago, anyone who knows simple arithmetic and basic probability can figure out that the account balance can quickly drop by 20% or more with such a seemingly conservative approach.And that an account which has dropped by 20% must then increase by 25% just to get back to where it was to begin with. A 50% decline means that the account must then be doubled.

There is a process that every successful trader must go through in order to come up with a trading plan that he trusts (there is of course a process that every successful trader must go through in order to come up with any sort of trading plan at all). But aside from the general horror that traders have with regard to developing trading plans, the trader who elects to go through the process must be allowed to do so with as little interference as possible. Unfortunately, message board participants can't stand that. Rather they almost universally leap into the advisory role, offering all sorts of suggestions, without ever bothering to find out just what it is that the trader is trying to do, what his goals and objectives are (there is a particular journal here to which I have never posted which is a complete mystery to me; the journalist has been in a fog for more than a year, there are hundreds of posts, and yet there is no apparent improvement whatsoever, whereas if this person were to closet himself with his laptop and a spreadsheet, his problem would likely be solved in a matter or weeks).

These unceasing and peckish questions about the SLA are always posted by people who haven't even bothered to read the material. If they were to ask serious questions based on what they've read, I'd be and have been glad to answer them. But when someone asks "what are all these lines for?", I'm sorry, but I'm busy. Read the material. Study it. Work with it a little. The basics of it are those principles which have governed markets for thousands of years. If one doesn't understand them, then he doesn't understand markets. Or trading.

And as a note to BS and marketsurfer and others of their ilk, it does not aid anyone to display one's discourteous and boorish behavior by continually pestering journalists who are working their way (journaling? journey?) through the process of developing trading plans. If the journalists are allowed to go through the process at their own pace in their own way, they will eventually learn whether or not what they are coming up with is total crap or not. If they follow the scientific method, they will be able to figure out where they got off track and begin anew at that point. But if they are continually harassed by trolls, they are more likely to stop journaling at all, which many have done. Even the itinerant pundits who travel from journal to journal dispensing "wisdom" which very likely has absolutely nothing to do with the task in which the journalist is engaged are only slightly more welcome, if only because they tend to be less abrasive.

 

[lucysparabola]

simply unbelievable that people continue to waste their time on this rubbish day in and day out. with so many more productive options, I just can't understand it.

 

[dbphoenix]

simply unbelievable that people continue to waste their time on this rubbish day in and day out. with so many more productive options, I just can't understand it.

Simple. They're looking for someone who will tell them what to do: enter here, exit there. They never stop to consider that the "real time" call is ipso facto late, and that they therefore cannot act on it, without ever-increasing risk of being stopped out (which will very likely happen because they don't know how to assess the state of a trade in real time and thus don't know how and when to exit a trade that isn't working, relying instead on a fixed stop somewhere and leaving it up to the market to decide). And even if the "call" is made in advance, as it is with the SLA/AMT, the trade will never become theirs unless and until they understand why the trading opportunity was an opportunity in the first place. Thus even if someone has a history of making "great calls", so what? Is he going to be there with the "trader" every moment of every trading session to tell him what to do? If not, then what's the point? Trusting that the guru knows what to do? Again, so what? Unless one knows the guru's trading plan, it's all just blind faith, which is grossly inadequate as a basis for one's trading decisions.

 

[dbphoenix]

Imagine a world where everyone has very poor vision -- people can barely see things next to them. The only way they can navigate is by touch -- touch an object and try to determine what it is. As you can imagine, a person living in that world can never be sure what an object really looks like but might have a rough idea based on its shape as determined by touch.

Now imagine a sub-group having access to corrective eye-glasses. This group can not only see the objects clearly but can also see the object's surrounding environment.

Now, people from this world really like apples (an object). They would do anything to eat an apple. The only problem is that many of the apples also have poisonous snakes next to them. As you can only imagine, people without corrective lenses will more likely than not be bit by a snake more than they succeed in getting an apple. This on top of trying to find an apple given their poor eye-sight!

On the other hand, the sub-group with corrective lenses can be more selective in picking the apple 'cos they can also see the snake next to it. So, this group might end up getting more apples than snake bites.

In this thought experiment, the world is analogous to the market; the corrective eye-glasses is the framework a trader needs to 'see' the market; the surrounding environment is the context; and, the objects are trade setups.

You asked me a question on 'objects', asking me how the price action is around it, and what I look for. I cannot explain that to you without you understanding my framework (corrective eye-glasses), and the way I interpret my context (surrounding environment). Even if I tell you the price action, it will not make sense to you. Having said this let me attempt the answer:

I don't look for demand, for I don't know [what] demand looks like. I don't trade at the [key] price level 'cos that is not consistent with my understanding of price action I have gleaned using my framework. So where and how do I take the trade? I let price play out and then step up. The words
'play out' can only be explained with reference to my framework. Now, you can see the difficulty of explaining today's trade to you. The only thing I can assure you is that none of this is subjective. Every single step in my process is objective.

I want to continue with the thought experiment to explain one more opinion of mine before ending.

Imagine that the people in our 'thought experiment' world have access to a ruler. Using that they can exactly measure the distance between the snake and the apple. What use is the ruler to the group that does not have access to corrective lenses? I am sure you will concur with me in saying that the ruler is of no use -- for, this group can barely see; they can't even be sure if an apple is indeed an apple, and most likely they can't see the snake.

What use is the ruler to the group having access to corrective lenses? I would contend that the ruler is not of much use 'cos human judgement (of distance) alone is enough to protect the people in this group from getting bit by the snake. They do not need a ruler to measure the exact distance between the snake and the apple.

The ruler is risk-to-reward ratio. Be wary of using it if you don't have corrective lenses to clearly see the market! And, if you have the corrective lenses, you will not need a ruler!

All the best.

Regards,
Monoid.

 

[dbphoenix]

Incidentally, BS appears to have a burr under his saddle about stops, particularly "trailing stops". The use of trailing stops is emblematic of the trader who is unsure of what he's looking at and consequently doesn't quite know what to do with it (such a trader will often use very wide stops because he has no idea what price is going to do and has no plan to deal with whatever those actions might be).

The SLA/AMT trader, on the other hand, while encouraged to use catastrophic stops (connectivity and so forth), learns to assess the condition of his trade on a continuing basis, knowing when it's in trouble and when it's on track, knowing when the invalidations appear and when and how to act upon them. In other words, the trader exits the trade when the conditions for having entered the trade in the first place are no longer current. This is in contrast with placing stops of various sorts and letting the market decide. It is not up to the market to manage one's trade, much less assume the responsibility for his risk. All this is up to the trader.

 

[wrbtrader]

Simple. They're looking for someone who will tell them what to do: enter here, exit there. They never stop to consider that the "real time" call is ipso facto late, and that they therefore cannot act on it, without ever-increasing risk of being stopped out (which will very likely happen because they don't know how to assess the state of a trade in real time and thus don't know how and when to exit a trade that isn't working, relying instead on a fixed stop somewhere and leaving it up to the market to decide). And even if the "call" is made in advance, as it is with the SLA/AMT, the trade will never become theirs unless and until they understand why the trading opportunity was an opportunity in the first place. Thus even if someone has a history of making "great calls", so what? Is he going to be there with the "trader" every moment of every trading session to tell him what to do? If not, then what's the point? Trusting that the guru knows what to do? Again, so what? Unless one knows the guru's trading plan, it's all just blind faith, which is grossly inadequate as a basis for one's trading decisions.

Buy1Sell2 is intentionally forgetting that there are hundreds of trade strategies shared here at Elitetrader.com and every one of them does not contain all the info that he stated should be shared by those sharing their methods.

I will never understand why folks like him complain about what's shared here at ET while not even sincerely learning what's being shared. Worst, he and those like him have never shared their own complete trading plan while requesting (demeaning in their requests) others to do such.

For him to display such ignorance and to cement that as fact via him starting this thread while implying his way is the preferred way...just plain stupidity on his part.

Regardless, to his character, the best someone can do here within ET forum format is to share a few pieces of the puzzle via text messages and then the responsibility of everything else falls exclusively only on the shoulders of the reader to complete the trading plan via ensuring he/she has in place the other key components (tenets) such as proper capitalization, discipline, stress management, proper broker platform, proper trade execution software, market context of the month/week/day/moment, proper trading environment, trade management rules after entry and so on to be able to properly apply the method.

Everything works together as a team...make a change to one variable...it will have a positive or negative impact on the overall performance of the trader. That is the discretionary part of trading...we need to determine what's best for us and most likely what is best for us is not best for someone else.

 

[dbphoenix]

Buy1Sell2 is intentionally forgetting that there are hundreds of trade strategies shared here at Elitetrader.com and every one of them does not contain all the info that he stated should be shared by those sharing their methods.

I will never understand why folks like him complain about what's shared here at ET while not even sincerely learning what's being shared. Worst, he and those like him have never shared their own complete trading plan while requesting (demeaning in their requests) others to do such.

For him to display such ignorance and to cement that as fact via him starting this thread while implying his way is the preferred way...just plain stupidity on his part.

Regardless, to his character, the best someone can do here within ET forum format is to share a few pieces of the puzzle via text messages and then the responsibility of everything else falls exclusively only on the shoulders of the reader to complete the trading plan via ensuring he/she has in place the other key components (tenets) such as proper capitalization, discipline, stress management, proper broker platform, proper trade execution software, market context of the month/week/day/moment, proper trading environment, trade management rules after entry and so on to be able to properly apply the method.

Everything works together as a team...make a change to one variable...it will have a positive or negative impact on the overall performance of the trader. That is the discretionary part of trading...we need to determine what's best for us and most likely what is best for us is not best for someone else.

Which I learned during my experience in "chat" rooms. Even when I told people what to look for, pointed it out when it occurred, suggested entries and stops and targets and so forth, none of it did any good whatsoever. Why? Most likely because it was mine and not theirs, and they were smart enough, and cautious enough, not to take a trade simply because I said so. They might be impressed later by my ability to "call" the bottom or the top of a move, but that doesn't do much good at the time one has to take or not take the trade. Which is why I shifted the emphasis to what they saw and what they thought about it: where is price, what is it doing, what will tell you when a move up or down is "intentful" and not just somebody dicking around, are you anxious, are you fearful, what is prompting all of this, what are you looking at and why and what information are you deriving from it and so on.

Granted few people can do this. Few people want to. They need to find good trading rooms.

 

[Buy1Sell2]

you would then expect the scribble folks to teach you about proper capitalization, discipline

Yes. These are woefully missing in the mentoring. Thank you for your posting!