The Trouble With Scribbles

[k p]

You might be interested in the posts of a guy named "Fluke". He picked up on Wyckoff and the SLA fairly easily and did so by himself. He only made a couple dozen posts but was then run off, or got tired of the trolls, which is in effect the same thing. In any case, the posts are still there. So you're not alone.

Just like price can either go up, or down, or sideways, there is a third option here. He might have blown up!

 

[dbphoenix]

Old post:

If I recall correctly, he ended up holding part of that position through the day session and overnight - that is still where I struggle. I don't necessarily aspire to hold overnight, but when you're in at the right location, you should milk it for "as long as the trade continues to make a profit".

Within the world of short- term trading, if we consider scalping as one end of the spectrum and multi day swing trades as the other, it seems that the most powerful combination is to enter trades and manage losses like a scalper but to develop the perspective of a position trader when managing winners.

Here is a relevant quote from Oldtrader:

To me the market is a lot like shooting pool. You constantly play for position. Let's say you're in a position that has moved as you expected, and is now near your target area. If you sell, what's your next move? In other words, if you get out, and the move continues will you have a way to know that, do you have a way back in?

It's one thing to achieve a high profit factor in longer term trading, but quite another to do the same in a high turn, short term trading environment. The way to match Db's or 40' PF of 10+ is by playing for position, without taking the larger risks taken by swing traders. And by always rooting each decision to the fundamentals, i.e Behavior.

Another quote from Acrary that you may find interesting:

Monee, it sounds like "you want to eat your cake and have it too". Profit targets improve the % wins and keep drawdown periods small. However, you never get the benefit of the non-normal distribution of gains in the market (fat tail trades). Trailing stops, allow participation in the big moves, but because of their lagging behavior, you're stopped out more often with a loss. Many traders want to use targets for consistency, but when a huge move happens and they only have a fraction of the profit, they get frustrated. You need to decide which goal you want to pursue (home run champ - trailing stops, or batting ave. champ - profit targets). Because of the non-normal distribution of profits in the markets, the home run champ is the better of the two ways to go. I'd guess that most amatuers go for the high percent wins and may have 60 or 70% win records. However, the pro's know it's the big trades that make the big money.

 

[k p]

Old post:

Finally something you post today that I can agree with!

 

[Marvin Zark]

You might be interested in the posts of a guy named "Fluke". He picked up on Wyckoff and the SLA fairly easily and did so by himself. He only made a couple dozen posts but was then run off, or got tired of the trolls, which is in effect the same thing. In any case, the posts are still there. So you're not alone.

Thanks db. Unfortunately, the attached charts to his posts are wrong. What I mean is that when you click on the link it shows chart pics that have nothing to do with the text of the message. A pity.

 

[dbphoenix]

And another:

The following is part of the post I made:

Is the SLA about lines or it is about supply and demand?

Note that if one entered by focusing on supply/demand imbalances as we rejected the mean of the trend channel (see "mean" at the top), he would have made one short entry. And that would be it. He would need to make no further exits or re-entrys until he reached the lower limit of the trend channel. If he were reading supply/demand imbalances rather than lines and line breaks. If one doesn't understand how, I suggest he go back and review the first journal. Trying to fix one's trading by fiddling with these lines is like trying to overhaul one's transmission by fiddling with the radio.

 

[dbphoenix]

Thanks db. Unfortunately, the attached charts to his posts are wrong. What I mean is that when you click on the link it shows chart pics that have nothing to do with the text of the message. A pity.

I know. Doesn't really matter. It's all "hindsight" after all. Many or most of my charts are gone as well, but new examples appear every day. Charts last about as long as raw fish, if that long.

Which is why I started converting everything to pdf as more and more people left TL. Which led to a lot of consolidation.

 

[dbphoenix]

 

[dbphoenix]

And another:

The first step I took was to run a 12 month bar-by-bar walk-forward test of SLA on its own. I would step through each 90 minute morning session and draw in the SL/DLs, and place the trade without seeing what came next, using nothing but the basic rules - I believe this was coined "surfing" at some point. That turned out to be profitable on its own.

I of course went back and tried adding various entry filters, trade management rules, etc., and some worked in some situations, but a few days/weeks later, I would find situations where those new rules were really just becoming a hindrance. This is when I then went back a third time and ran a 4HR and 30M chart alongside the 1M and I realized the primary "filter", if you want to call it that, for moving beyond "just profitable", was location.

It didn't take me a year to do the walk-forward testing, it was just a year's worth of data. All the time spent testing took several months. Application of the principles was/is a whole other game. Its amazing how hard it was to simply do what I was supposed to, what I had planned to do.

To be honest, AMT in the diagonal sense is something I've only more recently been incorporating and it has certainly helped add to the roadmap. As I mentioned in the Ghost thread, DBs discussions of boxes (ranges) is what originally clicked with me - lateral extremes.

To answer the question, I have mostly found frustration when my entries are too close to the mean. I find that price is most undecided and I have a harder time deciphering what traders want to do. And I think in many cases, I'm not the only one. The mean often is a point where I see price bounce up and down, and I really have trouble determining which way it will break.

At the extremes, be it lateral (box) or diagonal (trend channel - as was the case this morning), is the location that I am referencing. If you watched a DOM, or time and sales window, or even just your chart this morning, during the testing of that extreme, price appeared to be almost rabid, if traders, from both sides were so eager to do something they were foaming at their mouths.

Niko started a conversation on TL concerning fear, following something DB mentioned in his PDF. You can see that in the tape at these extremes - breakout shorts fearing they'll miss the boat, early longs fearing they were too early, long time longs that think their position is now in trouble, etc. - you can feel it. That is being emotionless and reading the emotions of everyone else and capitalizing on it.

So by location, I mean extremes - this is where price risk is minimal, and information risk is at its highest. But is it really? When traders are at the mean, they are undecided which direction to go. When traders are at the extremes of a range, their most likely course of action, having tested that extreme, is to test the other side. Of course the market cares nothing of your lines on your chart, and could easily fall through whatever you marked as an extreme. But you know quickly, and often with tighter risk that you were wrong. The mean is filled with scratches trying to find a direction - the extreme is right or wrong, and quickly discovered.

[That is just my perspective].

 

[NoDoji]

On Friday, I unfortunately also started working with 2 point stops because I do see often that when the trade goes against me 2 points, it also goes against me 3 points, so why waste that extra point...

Exactly how often has this occurred over the last 100 appearances of your valid setups?

I'll never forget the time I did a statistical analysis of a setup I thought resulted in a negative result really, really often (my guesstimate was 80% of the time based on how often this setup had screwed me over). I analyzed the outcome over a consecutive series of 50 trades and found that it produced a negative result only 45% of the time. It was the picking and choosing of when to trade the setup that created my negative result and led to my erroneous belief that it was a low expectancy setup.

 

[k p]

Exactly how often has this occurred over the last 100 appearances of your valid setups?

I'll never forget the time I did a statistical analysis of a setup I thought resulted in a negative result really, really often (my guesstimate was 80% of the time based on how often this setup had screwed me over). I analyzed the outcome over a consecutive series of 50 trades and found that it produced a negative result only 45% of the time. It was the picking and choosing of when to trade the setup that created my negative result and led to my erroneous belief that it was a low expectancy setup.

Excellent catch, and every time I say words life often, you are always on my mind because I know you'd be wondering if I actually quantified this "often". If I ignore the reason for taking the trade (ie. the setup), and just look at every instance of every trade I take and just analyze how wide of a stop I would need for it not to go against me, this could be easily done. But of course the fact that each trade is different would make this not as worthwhile. (ie. taking a a short at expected resistance and getting into the the trade within 1 point from the high can make use of a much tighter stop versus taking a breakout trade as an example 3 or 4 points above the level, and since price can easily retrace those 3 or 4 points as a test of R then S without invalidating the trade, a wider stop here is justified since getting in 4 points above a level and having price go against me just 2 points is not nearly enough of a buffer)

So I think I would need to categorize those trades to give this value some merit. But because I am taking the trades without having a firm "setup", the value of this is diminished. When I'm putting on a trade, there is one main thought/theme that is running through my head, and that is that "this is where the trade goes and if I get stopped out with a tight stop, then this trade is clearly not ready to work out yet".

The best way to illustrate this would be with my chart from today. Here is a crop of the 5 sec chart. Look at the area where I say that I didn't pull the trigger for a long. Essentially what I'm thinking here is that price turned a few times here (its just below 4366), and with that quick spike up for that one 5 sec bar, if I entered long right there, it isn't so much because of a setup, but because that is where price turned up before, and now traders are buying again, and if a long trade is gonna work, this is where the long is gonna start, this is where the best chance is. If price should happen to drop below this level and trigger a tight stop, then the odds are much better than the buying just isn't going to come.

Now I'm not sure if this is the right frame of mind to be in, but its a theme that I've been working on in my head. Since I have no idea what price will do, but I have an idea that if it goes beyond this point then it more than likely means that its not going down, then that is the point at which I make a bet and place a long. So taking this into account, if I keep a tight stop and it gets triggered, then at least I can think I got in at the best possible place, the earliest place, and not have to worry too much if I should have held in longer or not because it went past the danger area that should mean there is no direction now.