Two Questions For Practicing Day Traders

[ironchef]

Did you figure out why? You didn’t execute live trades as well as your paper trades? Or it’s a completely different thing with live trading?

Most likely psychological?

It is amusing, I am only trading for a Big Mac every day so it shouldn't be a big deal but it is.

Are you trading futures or stocks. Not Index nor futures, individual stocks
If futures are you trading indexed or other Individual stocks
Are you trading all day Yes
Are you trading the USA trading. Session Yes
When you say paper trade.. Is that in real time or using historical data Real time
Toucan

@toucan, I answered your questions in red in your quote.

 

[ironchef]

As a US-index futures daytrader, flat eod, my daily expectation is far different from yours.
IOW, IT DOESN'T MATTER FOR YOUR SUCCESS, AT ALL!! In fact, it doesn't matter to ANYONES success, other than mine!!

When I first started out, the formative years when I was still developing my style and groove, I used minimum wage 40-hour week work earnings as a MONTHLY goal. Today, ironically I had a flashback of this period... Long story short, one my first trades way back when, produced over $300 profit. One trade. One of my first trades. One day-trade. Monthly goal, done! Fortunately, this caused me to study more. What was different about this trade vs other trades? I quickly realized and immutably embedded into my memory that you can only gain from what the market offers. Up, down, sideways, doesn't matter. If it ain't there, you can't get it from there. And hence, my predilection to scalping/intraday swing was born.

The above is free... maybe a nugget, maybe not.

Good trades to you.

Thank you sir.

It is a gold nugget, priceless. I am actually heading that way.

 

[ironchef]

So question 1 is moot, is the new assumption.

So Question 2 then: Expectation is too coarse a measure. It uses probability of W/L. In order to get a meaningful number you need too many trades, e.g. > 30. That is too coarse for what you are trying to learn now. You want to drill down into each trade before measuring dozens of trades.

Imo a day trader should use "High and Low water mark" intra trade, what is called MFE and MAE, and then add time in market.

You see examples of this: you get into a trade and it lasts way longer than normal. If it is a winner, grand slam, then ignore it. But if it is not, and is either a BE or small gain, or loss or large loss, then there are problems:
1) you are protecting the expectation (both probability of W/L and the actual W/L) number by holding onto bad trades. Sort of metrics slight of hand.
2) the trade takes too long and is not being closed and opening another trade, there by reducing the total number of trades. You miss better trades.

Try this metric. MFE/MAE/Time. Some platforms do it for you. They record each trade MFE and MAE and total time in market. Something to consider when choosing a platform.

Then WHEN you have a POSITIVE, $/minute metric. Get that number high, then work on orders handling to get the more profit. The expectation number over many many trades will be fine and reliable.

I have to think really hard about this. Not sure I get what you are trying to tell me.

 

[toucan]

Most likely psychological?

It is amusing, I am only trading for a Big Mac every day so it shouldn't be a big deal but it is.


@toucan, I answered your questions in red in your quote.

thanks for your response. i trade futures so my answers might not apply to your questions..

i daytrade 3 metals futures and 2 energy futures and usually make about 5 to 10 trades per day over the 4 hours that i trade. i only look at if i am profitable over the month, anything green is good for me. but my "expectations" are: >=50% of my trades will be profitable (i run 40-60%) and my profit versus:loss ratio will be >=2R profit versus 1R loss (i consistently run about 1.6R profit versus 1R loss)

percentage profit on your trading account isn't a good metric because it changes with the amount of money you use to trade with. for example: if i trade with $10K and make $1,000, thats 10% profit, but if i trade with a $100K account and make $1,000 thats 1% profit. i trade futures so my account is sized to the margin that it takes to trade my 5 futures.

cheers
toucan

 

[ironchef]

follow the trend the trend is your friend

all friends leave so you should be able to recognise when a move is overstretched in any one direction.

it took me 20 years to learn this.

so you do not get in the end.....

markets hate strong moves.......big bars mean non sustainability. market hates big bars.

novices love big bars because they think it is fast money. simple mismatch which leads to disharmony......

moves without base end because smart traders know it will end and they will be fading every tick.
but if the big bar is so big to be a spike, watch for a channel........a channel is a correction and all corrections do end...oops! well almost all. some just develop into a trend in the opposite direction
Welcome to the fianancial markets.... every minute is a wonder

all this may sound to be off topic but it is connected to your first question how many trades? you can make 1000 a min if what you do makes sense....

@padutrader,

Thank you for your pointers.

Is that what Al Brooks would have said?

 

[ironchef]

thanks for your response. i trade futures so my answers might not apply to your questions..

i daytrade 3 metals futures and 2 energy futures and usually make about 5 to 10 trades per day over the 4 hours that i trade. i only look at if i am profitable over the month, anything green is good for me. but my "expectations" are: >=50% of my trades will be profitable (i run 40-60%) and my profit versus:loss ratio will be >=2R profit versus 1R loss (i consistently run about 1.6R profit versus 1R loss)

percentage profit on your trading account isn't a good metric because it changes with the amount of money you use to trade with. for example: if i trade with $10K and make $1,000, thats 10% profit, but if i trade with a $100K account and make $1,000 thats 1% profit. i trade futures so my account is sized to the margin that it takes to trade my 5 futures.

cheers
toucan

Thanks. Those are very helpful perspectives.

It is interesting live tests, even with a small size taught me more than 10 x paper trades.

 

[ironchef]

Did you figure out why? You didn’t execute live trades as well as your paper trades? Or it’s a completely different thing with live trading?

@Jzwu2017, I do want to come back and thank you for one of your prior responses:

Paper trades just don’t count, seriously. My advice is don’t spend more time on it.

If you really want to try it, reduce the paper trade size by 10x and use real money to do real trades. Then we can look at the data.

I didn't believe it but you were right.

 

[zghorner]

which time i went live? i would have to break each out as they were all different.

or i could break it down by accounts and clearing firms or better yet while trading at the cme using a membership clearing account.

so you don't get one shot get that outta your head. it's not that people can't learn to be great traders it's that they run out of money before they figure it out.

^^^ so true.

ignorant asses like me who started out completely new to financial markets with a $100k live account...lol...

 

[tiddlywinks]

Once again, @Bad_Badness has offered good advise.
MFE/MAE are excellent metrics for helping design setup and trade plans.

Tips and/or gotchas...
MFE/MFA are PER TRADE metrics... You WANT maximum MFE and minimum, or 0 MAE.
Maximum MFE can be attained by exiting profitable trades while they are running.
For instance, a scalp trade where you "expect" 10 ticks with a limit order exit in place
will produce max MFE even if it continues for another 1000 ticks. This is where type/style of trade fits. As a scalp trade the job is done, and done perfectly according to plan!
But as a swing trade, did your system/plan get you back in? Did you second-guess? etc etc.

OTOH, MAE teaches about stops... there are 5 types of stops...
1) Chart structure stops.
2) Money only stops.
3) Time stops.
4) Catastrophe stops. Think circuit breakers and black swans...
Is this the trade that wipes you out? Or will you be able to trade again tomorrow?
5) Ad-hoc stops. Also known as "feel". This has potential to create very bad trading habits.

One other nicety of MAE, it teaches about "give back". Which includes BE.

I also want to mention paper trading.
I am from the camp that paper trading is best used for "how-to" use your platform.
Today, with all the micro, nano, onesie, and fractional instruments, there is no reason
NOT to have skin in the game. Further, as Ai pervades, the more you NEED to understand YOU and what YOU do.

It's like the TV show "Undercover Boss"...
It takes a human to see the human costs and stupidity of highlighted cells in a spreadsheet, and the effects of policies written with a Pilot G2 pen over a bagel and a shmear in the c-suite lounge.

Good trading to you.

 

[qubit000]

you can only gain from what the market offers...And hence, my predilection to scalping/intraday swing was born.

So on average how many trades do you try to make daily and do you have a profit target per day/week/month?