Trading the NQ: Take 2

Ha... its funny you say all this because now that I've been able to get my 5 sec charts to be fairly accurate, and using the average bid/ask line to show me where price is at each instant, I thought I might perhaps be able to skip the SC data for now. But I always wondered how different the T&S data would look with a proper feed and with proper volume.

I've noticed that I have trouble pulling the trigger exactly when I should because getting an entry with the best possible price means zero confirmation. But I never know exactly what I'm wanting to see. Anything visible on a chart usually means that price is now a few points away from where the entry needs to be (and I hate kind of being a reactive trader), and hence where a tight stop is ideally beyond the danger point. I know NoDoji would point out, yet again, that I'm looking for the perfect trade, and although that is still somewhat true, I'd like to be able to say why I take a short at some previous swing high here, but not at other places. I was hoping that the T&S would give me just that little bit to help me pull the trigger. But if anything, I see that the T&S does sometimes "lie", but what's even worse is if I'm accumulating a bias from inaccurate coming through. I do wonder if there is a way to differentiate buying that happens at the "ask" from something such as short covering or simply a tactic by short sellers to raise price ever so slightly so that they can load up on more shorts, and buying which is in fact indicative of a move higher.

I would love to find a thread that details how to use T&S. Everything I've seen on youtube is just advertising for a course, and most of the videos don't even have price moving for god sakes!

At the same time, I also wonder if using T&S won't in fact help a win % at all (since it too will have its failed trades), and if, once again, the most important thing to do is to just get in at the best possible price with the smallest risk and to hell with the result as long as I'm taking a trade at some logical extreme and using context to point to a direction.
 
k p said:
I know NoDoji would point out, yet again, that I'm looking for the perfect trade, and although that is still somewhat true, I'd like to be able to say why I take a short at some previous swing high here, but not at other places.
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What if you simply put on the trade at EVERY previous [whatever] with a target that's 3x (or more) your stop loss and let the chips fall where they may?

You see, there's no way to know in advance why you would take a short at some previous swing high here, but not at other places because "there is a random distribution between wins and losses for any given set of variables that define an edge".

Fortunately, in trading "you don't need to know what is going to happen next in order to make money".

Trading occurs when two parties disagree about what they believe is going to happen next. If it was possible to know what's going to happen next with absolute certainty, trading would cease.

There were 7 occurrences this morning of a particular setup I trade. Only 4 of them produced a move sufficient to reach my profit target. Can you see how easily a profitable system could result in a net loss if I try to pick and choose which of these setups will reach my profit target?

"The experts’ trouble in Tetlock’s study is exactly the trouble that all human beings have: we fall in love with our hunches, and we really, really hate to be wrong. Tetlock describes an experiment that he witnessed thirty years ago in a Yale classroom. A rat was put in a T-shaped maze. Food was placed in either the right or the left transept of the T in a random sequence such that, over the long run, the food was on the left sixty per cent of the time and on the right forty per cent. Neither the students nor (needless to say) the rat was told these frequencies. The students were asked to predict on which side of the T the food would appear each time. The rat eventually figured out that the food was on the left side more often than the right, and it therefore nearly always went to the left, scoring roughly sixty per cent—D, but a passing grade. The students looked for patterns of left-right placement, and ended up scoring only fifty-two per cent, an F. The rat, having no reputation to begin with, was not embarrassed about being wrong two out of every five tries. But Yale students, who do have reputations, searched for a hidden order in the sequence. They couldn’t deal with forty-per-cent error, so they ended up with almost fifty-per-cent error."

 
I couldn't agree more, and yet... I'm still having trouble doing this. I think the biggest reason is because I know that in the past, I would end up doing all sorts of different and strange things. I wouldn't have waited for this same setup to occur again, and take the trade in exactly the same way. I guess I'm smart enough at least to know that this is what is required, but at at the same time, because of my random trading nature over so many months in the past, I'm still struggling with doing exactly what I should because I've shown that I'm prone to chase and all those other bad habits. So on the one hand I know that if I just did a series of 20 trades in exactly the same way, I have almost no doubt that it would be a positive outcome, but I cannot start this until I know that I will make sure to get through this series without changing one damn thing. I've got myself between a rock and hard place, and trying to "think" my way out of a random distribution! LOL

I'm almost done with my internal struggle, but I don't think I've shed it quite yet. It's coming though.... :)
 
NoDoji said:
What if you simply put on the trade at EVERY previous [whatever] with a target that's 3x (or more) your stop loss and let the chips fall where they may?

You see, there's no way to know in advance why you would take a short at some previous swing high here, but not at other places because "there is a random distribution between wins and losses for any given set of variables that define an edge".

Fortunately, in trading "you don't need to know what is going to happen next in order to make money".

Trading occurs when two parties disagree about what they believe is going to happen next. If it was possible to know what's going to happen next with absolute certainty, trading would cease.

There were 7 occurrences this morning of a particular setup I trade. Only 4 of them produced a move sufficient to reach my profit target. Can you see how easily a profitable system could result in a net loss if I try to pick and choose which of these setups will reach my profit target?

"The experts’ trouble in Tetlock’s study is exactly the trouble that all human beings have: we fall in love with our hunches, and we really, really hate to be wrong. Tetlock describes an experiment that he witnessed thirty years ago in a Yale classroom. A rat was put in a T-shaped maze. Food was placed in either the right or the left transept of the T in a random sequence such that, over the long run, the food was on the left sixty per cent of the time and on the right forty per cent. Neither the students nor (needless to say) the rat was told these frequencies. The students were asked to predict on which side of the T the food would appear each time. The rat eventually figured out that the food was on the left side more often than the right, and it therefore nearly always went to the left, scoring roughly sixty per cent—D, but a passing grade. The students looked for patterns of left-right placement, and ended up scoring only fifty-two per cent, an F. The rat, having no reputation to begin with, was not embarrassed about being wrong two out of every five tries. But Yale students, who do have reputations, searched for a hidden order in the sequence. They couldn’t deal with forty-per-cent error, so they ended up with almost fifty-per-cent error."
More...
That's trading in a nutshell, you can't be embarrassed about being wrong. Being wrong is part of trading. Also when you don't take a trade that's in your trading plan, your essentially not accepting risk. This was a excellent post Nodoji.
 
NoDoji said:
There were 7 occurrences this morning of a particular setup I trade. Only 4 of them produced a move sufficient to reach my profit target. Can you see how easily a profitable system could result in a net loss if I try to pick and choose which of these setups will reach my profit target?
More...

So, among the 7, those 4 would have something that could be characterized further or there is certain filter that would eliminate the 3, did you tried to analyses further or you just like to keep it that way. It is true, during my automation strategy design, if I apply more filters, I can increase the win rate and reduce DD, but the overall profits over the same period actually decreased.
 
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jl1575 said:
So, among the 7, those 4 would have something that could be characterized further or there is certain filter that would eliminate the 3, did you tried to analyses further or you just like to keep it that way. It is true, during my automation strategy design, if I apply more filters, I can increase the win rate and reduce DD, but the overall profits over the same period actually decreased.
More...

I've filtered my setups every which way and have the same rules now for quite some time. There's a point of diminishing returns when trying to avoid losses.
 
NoDoji said:
"The experts’ trouble in Tetlock’s study is exactly the trouble that all human beings have: we fall in love with our hunches, and we really, really hate to be wrong. Tetlock describes an experiment that he witnessed thirty years ago in a Yale classroom. A rat was put in a T-shaped maze. Food was placed in either the right or the left transept of the T in a random sequence such that, over the long run, the food was on the left sixty per cent of the time and on the right forty per cent. Neither the students nor (needless to say) the rat was told these frequencies. The students were asked to predict on which side of the T the food would appear each time. The rat eventually figured out that the food was on the left side more often than the right, and it therefore nearly always went to the left, scoring roughly sixty per cent—D, but a passing grade. The students looked for patterns of left-right placement, and ended up scoring only fifty-two per cent, an F. The rat, having no reputation to begin with, was not embarrassed about being wrong two out of every five tries. But Yale students, who do have reputations, searched for a hidden order in the sequence. They couldn’t deal with forty-per-cent error, so they ended up with almost fifty-per-cent error."
More...

Interesting story. It could be just that rats in general have much sharper sensing ability for food, as their survival is largely dependent on that.
 
NoDoji said:
A simple suggestion: When you think about placing your order and your brain says "But what if it keeps going [up/down] right through [key level]" immediately yell as loud as you can, "What if it holds and I get 10 points of profit on this trade and it costs me less than $50 to find out!!!"

Derail the fear of loss (your 2 point stop loss will take care of your losses) and you're open to what the market has to offer you in exchange for your willingness to accept uncertainty :)
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This is correct. You must pay fees to trade. Make those fees as small as possible.
 
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