Trading NQ via Price Action
- Thread starter k p
- Start date
Please allow me to quote a Japanese proverb :
"Cry in the dojo, laugh on the battlefield"
It is only after you backtest, backtest, and backtest again that you will finally get your answers. More than answers, backtest will help you with your emotions as it will give you a certain level of confidence in your entries and targets. If you still struggle, lower your position size until a loss or series of losses generate absolutely no feelings.
But you must be prepared to cry, not literally, but boy is it difficult to start backtesting, getting amazing results, then going for a walk thinking it's impossible people do not know about this and come back in front of the computer, test it some more to realize it only worked between 2002 and 2006. You will hit your head against the keyboard, many times. BUT, after each backtest, you'll get something useful out of it. Every time. You certainly will learn about yourself as a trader and what fits YOU best. That is why so many people here tell you the same things. Lines like "that is for you to find out" or "only YOU can answer that question" are difficult to process and almost sound evasive told by people who want to keep their holy grail a secret. This couldn't be further from the truth. Every trader on the planet reads the market in it's own way, and that is why "do it" is the best advise you can get. If I tell you enter here exit there, what are the chances you will actually do it? First trade, yes, but, after the third loss, will you enter the 4th trade as I suggest? Maybe... what if that trade goes into drawdown, yet again, won't you say to yourself "oh! here it is again, another loss" and probably will close the trade. And of course, right after you closed the 4th trade too early, mine will take off and never come back. Why did I stay in? Why after 3 losses did I stick to the plan? because I LIVED my method. I know it by heart. I trust it IN FULL. I know I can shake off 7 or 8 losses in a row and make a killing week.
It wasn't always like that....
a few years ago, when I started to get positive results, I reviewed a hundred of my previous trades. I wanted to know; if I did not exit my trade at target (2R), how far would price go before coming back to my initial SL. Some trades went to 20R, some to 5R and most to 4R. I then tested all my previous trades using this method. After I compiled the data, I realized 8R would give me the best return. YES, 8R. If I always exited at 8R, I would have made a ton more points/$. Many, many more SL of course and much longer periods of time for price to reach my target, but still, this was amazing data. Am I using this method with 8R targets Today? NO. why? Because I know myself as a trader. I know I can't wait that long for a trade to unfold/reach target. I also know that below 20% winrate, my head starts spinning. So I settled for what is best for ME, what I am most comfortable trading. I'll shoot for 5R, but will settle for 3R if price is stalling.
At the moment I am in the same boat as you are. Backtesting. I've been successfully investing and swing trading, but now I'd like to concentrate on lower timeframes and increase my trades frequency in order to be able to end up with positive week in week out. The road is tough and I know I am nowhere near where I want to be. But one thing is for sure, no live trades will be taken until I get to a certain level of confidence in my edge on lower timeframes.
hope this helps...
"Cry in the dojo, laugh on the battlefield"
It is only after you backtest, backtest, and backtest again that you will finally get your answers. More than answers, backtest will help you with your emotions as it will give you a certain level of confidence in your entries and targets. If you still struggle, lower your position size until a loss or series of losses generate absolutely no feelings.
But you must be prepared to cry, not literally, but boy is it difficult to start backtesting, getting amazing results, then going for a walk thinking it's impossible people do not know about this and come back in front of the computer, test it some more to realize it only worked between 2002 and 2006. You will hit your head against the keyboard, many times. BUT, after each backtest, you'll get something useful out of it. Every time. You certainly will learn about yourself as a trader and what fits YOU best. That is why so many people here tell you the same things. Lines like "that is for you to find out" or "only YOU can answer that question" are difficult to process and almost sound evasive told by people who want to keep their holy grail a secret. This couldn't be further from the truth. Every trader on the planet reads the market in it's own way, and that is why "do it" is the best advise you can get. If I tell you enter here exit there, what are the chances you will actually do it? First trade, yes, but, after the third loss, will you enter the 4th trade as I suggest? Maybe... what if that trade goes into drawdown, yet again, won't you say to yourself "oh! here it is again, another loss" and probably will close the trade. And of course, right after you closed the 4th trade too early, mine will take off and never come back. Why did I stay in? Why after 3 losses did I stick to the plan? because I LIVED my method. I know it by heart. I trust it IN FULL. I know I can shake off 7 or 8 losses in a row and make a killing week.
It wasn't always like that....
a few years ago, when I started to get positive results, I reviewed a hundred of my previous trades. I wanted to know; if I did not exit my trade at target (2R), how far would price go before coming back to my initial SL. Some trades went to 20R, some to 5R and most to 4R. I then tested all my previous trades using this method. After I compiled the data, I realized 8R would give me the best return. YES, 8R. If I always exited at 8R, I would have made a ton more points/$. Many, many more SL of course and much longer periods of time for price to reach my target, but still, this was amazing data. Am I using this method with 8R targets Today? NO. why? Because I know myself as a trader. I know I can't wait that long for a trade to unfold/reach target. I also know that below 20% winrate, my head starts spinning. So I settled for what is best for ME, what I am most comfortable trading. I'll shoot for 5R, but will settle for 3R if price is stalling.
At the moment I am in the same boat as you are. Backtesting. I've been successfully investing and swing trading, but now I'd like to concentrate on lower timeframes and increase my trades frequency in order to be able to end up with positive week in week out. The road is tough and I know I am nowhere near where I want to be. But one thing is for sure, no live trades will be taken until I get to a certain level of confidence in my edge on lower timeframes.
hope this helps...
Alpha
I don't disagree with what you've said here - and would add...
It's the main reason I keep a small basket of stocks in my tool kit - so if one does go belly up (for what ever reason and I'm no longer able to trade it effectively) - I'll move to another
===============
What I was mainly responding to..., was KP thinking the competition is somehow less prepared in stocks - hence stock trading is easier
I dare say - the level of trader competency is identical - no matter it stocks or futures - least in the big(er) named stocks (FB being one of the big ones - based on ave daily volume)
And I trade FB - day in.., day out - come what may
Granted - I'm certain there exist neophyte stock traders - but they're never factor - least to me
RN
I can see where you are coming from and have to agree.
Btw, aren't you meant to be fast asleep reading your belly for the turkey later today?
Or are you the one in the home that cooks the meanest turkey and are stuck in the kitchen?
Wishing you (and your family) a Happy Thanksgiving.
Btw, aren't you meant to be fast asleep reading your belly for the turkey later today?
Or are you the one in the home that cooks the meanest turkey and are stuck in the kitchen?Wishing you (and your family) a Happy Thanksgiving.
And A Very Happy Thanksgiving to You and Your Family Sir
Sleep - Ha - being a trader - you know how that goes
I can't bake a turkey for crap..., but do fry a pretty good one (so I've been told)
Yup..., almost time to start frying - apron and gloves are at the ready - turkey in the fridge marinating
Have a Good one Sir
RN
Sleep - Ha - being a trader - you know how that goes
I can't bake a turkey for crap..., but do fry a pretty good one (so I've been told)
Yup..., almost time to start frying - apron and gloves are at the ready - turkey in the fridge marinating
Have a Good one Sir
RN
kp - I know you gave a lengthy response as to why trading in sim just won't put the same kind of pressure on you as live trading, but I really wish you'd give it some additional consideration. If you can put on trades time and time and time again and have success in sim, I don't see how you wouldn't have more confidence to replicate those results with live trades.
I won't post again of the virtues of sim. Just had to make one last comment.
Hey gears.. no problem about saying it again.
There are certain trades that I think I will still take to be honest. You see, the biggest thing for me has been to see that this trading business is just a statistical game. Sure I've know this, but has it really been at my core? No way! I'd take a trade, lose a bit of money, take another trade, lose more money.. and then I'd be too nervous to do anything. Of course this is when the market really takes off. So the problem has been the lack of consistency. Either I would change the method, thinking it needed to be fixed because 1 or 2 trades didn't work out, or I'd be too scared to take the next trade because I just lost money. So this lack of having a proper mindset is the weakest link.
It almost doesn't so much matter what you do, as long as you do the same thing over and over again, and it has a bit of an edge. In fact, if you do something over and over again and it losses you more money than it makes, then just do the opposite. The problem is that as a scared trader, I wouldn't let a series of trades run its course to realize the edge, and I would tinker with what I was doing each time, thereby changing the variables.
Honestly, if all a person ever did was find some statistical measure that had a positive edge, something simple as "if price opens above the previous day high then it has a 60% chance of going down 5 points before going up 5 points", then this is a trading plan than can easily work. Sure you have to be prepared to lose 4 or 5 days in a row, just like you might have 4 or 5 wins in a row, but as long as you can handle the drawdown and have enough stats to back your edge up, then you got a trading plan! This isn't good enough of course to throw real money at for several reasons, and you'd be pretty bored the rest of the day after placing the first trade, but as long as you did what you should, you simply wouldn't lose money. Yes you could stop trading after 3 losses, and then you don't get the next 3 gains, but this would be a problem of mindset.
Anyway, there are certain trades that might just scream at me to take, and I will take them. But at the same time, I am fully aware I don't know all that much, and if I don't know then I shouldn't dabble. But since I do at least have my backtesting done on my 1:1 trade with a 66% win rate, and I've got SLA deeply ingrained, just not tested well enough given all this new info that I've let sink in, taking that first RET trade is a no brainer if we just broke out of something and aren't in chop. I can almost, just barely, every so slightly, see the glimmer of light that shines on how easy trading can actually be once you've dealt with all the other shit that gets in the way.
There are certain trades that I think I will still take to be honest. You see, the biggest thing for me has been to see that this trading business is just a statistical game. Sure I've know this, but has it really been at my core? No way! I'd take a trade, lose a bit of money, take another trade, lose more money.. and then I'd be too nervous to do anything. Of course this is when the market really takes off. So the problem has been the lack of consistency. Either I would change the method, thinking it needed to be fixed because 1 or 2 trades didn't work out, or I'd be too scared to take the next trade because I just lost money. So this lack of having a proper mindset is the weakest link.
It almost doesn't so much matter what you do, as long as you do the same thing over and over again, and it has a bit of an edge. In fact, if you do something over and over again and it losses you more money than it makes, then just do the opposite. The problem is that as a scared trader, I wouldn't let a series of trades run its course to realize the edge, and I would tinker with what I was doing each time, thereby changing the variables.
Honestly, if all a person ever did was find some statistical measure that had a positive edge, something simple as "if price opens above the previous day high then it has a 60% chance of going down 5 points before going up 5 points", then this is a trading plan than can easily work. Sure you have to be prepared to lose 4 or 5 days in a row, just like you might have 4 or 5 wins in a row, but as long as you can handle the drawdown and have enough stats to back your edge up, then you got a trading plan! This isn't good enough of course to throw real money at for several reasons, and you'd be pretty bored the rest of the day after placing the first trade, but as long as you did what you should, you simply wouldn't lose money. Yes you could stop trading after 3 losses, and then you don't get the next 3 gains, but this would be a problem of mindset.
Anyway, there are certain trades that might just scream at me to take, and I will take them. But at the same time, I am fully aware I don't know all that much, and if I don't know then I shouldn't dabble. But since I do at least have my backtesting done on my 1:1 trade with a 66% win rate, and I've got SLA deeply ingrained, just not tested well enough given all this new info that I've let sink in, taking that first RET trade is a no brainer if we just broke out of something and aren't in chop. I can almost, just barely, every so slightly, see the glimmer of light that shines on how easy trading can actually be once you've dealt with all the other shit that gets in the way.
Just a quick update today... mostly just to say I'm alive with a quick chart.
I'm a bit worn down with continued posting, and now that Db has started his new thread and there is lots of participation, I will be following more so than posting. The discussion over the weekend about why my possible longs at A and B weren't ideal was another big eye opener for me. I still have competing ideas in my head. One is the whole idea behind backtesting for R:R ratios, the other is just following price as in SLA and letting the market tell me.
The problem I always had with SLA was never knowing where to exit, with a line break being about the worst strategy, other than one based purely on fear. Db does even say to lose the lines, hence a line break really won't be part of a solid trading plan. ND has been instrumental in showing her exits, which has really helped. In fact, I even recall her saying that she finds her entries are very similar to what Db shows, so there is lots of overlap betweeen these two great traders and teachers, but there are some fundamental differences and hence why I feel a bit of a tug here and there. Doing the backtesting though had the effect of making me flip through charts consecutively, so certain things jumped out at me since I was just looking at the RET over and over again.
Anyway, so before the open, we were very much in a range of 16 to 35, but this is wide enough to trade you could say, although we did open up pretty much in the middle. I have my 5 min trendlines drawn in.
A - Here is the overnight high, but its not just the OH as price rejected going higher twice. Price rejected going lower, below roughly 4317 a few times as well, hence why this range is pretty well established.
I took a short below this bar which fills two bars later. I unfortunately didn't hold this short, or even go for a 1:1 profit, but just showing what I did with an exit for only a point.
B - Coming down here, we break our DL now, and I'm waiting for that RET. The closer we get to the OL, the worse this will be since that low is quite prominenet. Taking a short to get to the OL within this range is I think quite legit, but if the RET doesn't happen until just above the low, this will be problematic as I could now be shorting into the bottom of this range just before price turns back up.
C - How beautiful is this! The RET happens below the OL, and the top of it even tests the level that was support before which is now resistance. This was another short that just had to be taken.
Sadly, I'm out quickly again. Even sadder yet is the monstrous plunge that happens after. There is simply no way that I would have gotten these profits though because my profit target slider would have been somewhere on the screen, 5 or 10 points away. When price plunges 3 minutes later, that bar itself is over 30 points, and with price dropping off the screen, the profit target would have been hit. Perhaps price would have blown right past, since the profit target is a limit order, but I doubt I'd have collected over 30 points there anyway.
D - Here I mark in the 50% of the down move. The huge move was I'm sure mainly stops being run, but this climb back up seems a bit more orderly. At first we just penetrate the 50% with this up move a little, and I might be enticed to short after some of these RETs, but I'm staying out now. We do end up going a bit higher even, but I'm done for the day.
SUMMARY
So just to summarize, I'm up $42.
Going forward with letting things sink in a bit and I think I will be posting less, more so participating in Db's thread perhaps.
One of the things I had been doing for the past few months is trying to fix something that isn't broken. When certain trades didn't work, I would go back to the drawing board and find a way to make it better. As I said before though, there is simply no way to make some trades better. If I make the entry or exit better for this one trade, then this might mess up the previous 10 trades that worked. So I think the way forward really is with SLA, and excellent context of where not to take a trade. Some days might still be losing days, but I'm sure that if you add up the week or month, you simply won't lose. So I need to explore this more now that I'm able to think a bit differently in terms of expectations from each trade.
I'm a bit worn down with continued posting, and now that Db has started his new thread and there is lots of participation, I will be following more so than posting. The discussion over the weekend about why my possible longs at A and B weren't ideal was another big eye opener for me. I still have competing ideas in my head. One is the whole idea behind backtesting for R:R ratios, the other is just following price as in SLA and letting the market tell me.
The problem I always had with SLA was never knowing where to exit, with a line break being about the worst strategy, other than one based purely on fear. Db does even say to lose the lines, hence a line break really won't be part of a solid trading plan. ND has been instrumental in showing her exits, which has really helped. In fact, I even recall her saying that she finds her entries are very similar to what Db shows, so there is lots of overlap betweeen these two great traders and teachers, but there are some fundamental differences and hence why I feel a bit of a tug here and there. Doing the backtesting though had the effect of making me flip through charts consecutively, so certain things jumped out at me since I was just looking at the RET over and over again.
Anyway, so before the open, we were very much in a range of 16 to 35, but this is wide enough to trade you could say, although we did open up pretty much in the middle. I have my 5 min trendlines drawn in.
A - Here is the overnight high, but its not just the OH as price rejected going higher twice. Price rejected going lower, below roughly 4317 a few times as well, hence why this range is pretty well established.
I took a short below this bar which fills two bars later. I unfortunately didn't hold this short, or even go for a 1:1 profit, but just showing what I did with an exit for only a point.
B - Coming down here, we break our DL now, and I'm waiting for that RET. The closer we get to the OL, the worse this will be since that low is quite prominenet. Taking a short to get to the OL within this range is I think quite legit, but if the RET doesn't happen until just above the low, this will be problematic as I could now be shorting into the bottom of this range just before price turns back up.
C - How beautiful is this! The RET happens below the OL, and the top of it even tests the level that was support before which is now resistance. This was another short that just had to be taken.
Sadly, I'm out quickly again. Even sadder yet is the monstrous plunge that happens after. There is simply no way that I would have gotten these profits though because my profit target slider would have been somewhere on the screen, 5 or 10 points away. When price plunges 3 minutes later, that bar itself is over 30 points, and with price dropping off the screen, the profit target would have been hit. Perhaps price would have blown right past, since the profit target is a limit order, but I doubt I'd have collected over 30 points there anyway.
D - Here I mark in the 50% of the down move. The huge move was I'm sure mainly stops being run, but this climb back up seems a bit more orderly. At first we just penetrate the 50% with this up move a little, and I might be enticed to short after some of these RETs, but I'm staying out now. We do end up going a bit higher even, but I'm done for the day.
SUMMARY
So just to summarize, I'm up $42.
Going forward with letting things sink in a bit and I think I will be posting less, more so participating in Db's thread perhaps.
One of the things I had been doing for the past few months is trying to fix something that isn't broken. When certain trades didn't work, I would go back to the drawing board and find a way to make it better. As I said before though, there is simply no way to make some trades better. If I make the entry or exit better for this one trade, then this might mess up the previous 10 trades that worked. So I think the way forward really is with SLA, and excellent context of where not to take a trade. Some days might still be losing days, but I'm sure that if you add up the week or month, you simply won't lose. So I need to explore this more now that I'm able to think a bit differently in terms of expectations from each trade.
Attachments
I have to agree with the other posters here, regarding SIM trading.
Until you actually place the trades in real time (in SIM), manage them in real time and exit in real time, there is no way that you are going to prove to yourself that what you are doing works.
Your end of day review is a good exercise, but it is not the same as SIM. You are not proving anything to yourself "deep down to your core" by doing this, Until you trade it in real time (SIM) over a period of time, and prove that it works in SIM, you will always be trading scared.
Your 2 trades today proved that. You nailed both short entries, and you couldn't even hold on for a minute on each trade. If you would have just trailed your stop behind each one minute bar, you would have been up about 14pts on the 1st trade and 23pts on the second trade. You also said that in real time you probably wouldn't have gotten as much on the 2nd trade because it would have been hard to move your limit order fast enough. That's what SIM is for!! To practice stuff like that.
Anyway, just my 2cents
Yes, I for sure can't argue with the part about practice with moving my targets. The way it moved today mind you, that huge plunge... that hardly ever happens!
To be honest though, I just don't think I will be able to trade live the same way I could in SIM. I simply wouldn't care nearly as much in SIM and therefore think that I would have much better results. Or in SIM I might be tired of waiting all day for something good, so I might not be as cautious or patient. SIM only really works well if you're going to treat it just like it was real money. So as bad as it sounds, I will be upset to be patient and wait and do the right thing, but not get the actual money for my hard work. I realize these are all terrible excuses, and I realize that this points to a flaw in a proper trading mentality, but its just the honest truth about what I think and what I'm fighting.
I could have an amazing 4 weeks in SIM, perhaps the next 4 weeks will be nothing but down for the markets, and when I decide to go live after 4 weeks it might be nothing but consolidation when we reach the mean of lower level of the channel, so the very first few trades might actually be during less than favorable market conditions.
In some respects, I want to take the trades that look good, and then I get out because I know I haven't tested enough given the recent aha moments. Trust me, I do agree with you, but I just know that today for example I'd be mad for not making at least $500 if I was in SIM because it would have looked easy in SIM and I'd think I just cost myself $500. At least being logged into my live account, I don't have to play the whole "could have" and "should have" game because I can see that I couldn't actually make that money since I got out too quick.
So I very much might be going about this backwards, but given who I am, given what I know about myself and how I know what to say to myself to get me to the next step, I feel as if I have to go down this road. Perhaps I just have to hit rock bottom with this internal fight before I clue in. Being strong willed is an excellent quality, except when you're fighting the wrong battle!
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