What's Worse: Missing the Move Entirely or Giving All Your Profit Back?

[schizo]

Quote from Blotto:

This really is a horrible thread to read through. The blind leading the blind. All this pain and fear, negative language, and the old textbook cliches. Even the question posed is negative - what is worse, one market error or another. Does it matter? They all come from the same place and all affect your bottom line.

Everyone here who tries to trade should have clearly defined criteria for entering and exiting trades. This should be based on an understanding of how the market works. With these tools, it should be simple to trade correctly. If you do not get the results you expect it is because your understanding is crap or you can't follow your rules. Either way, back to the drawing board and improve.

There is no "missing out" on a move if you don't understand how to get in on it. How can you miss a trade? If it is part of your setup and you saw it form in real time and didn't take it then you didn't "miss" it, you lost your balls. If you didnt' understand it, then you didn't miss it either. If you weren't giving the market your full attention at the time then you also didn't miss anything.

Equally there is no "missing out" when you let a profit come back to breakeven. It was never really a profit because you didn't call the market right and didn't understand enough to manage the trade correctly. Therefore you did not earn the profit because you didn't understand the condition.

Even expert traders will occaisionally get surprised by a counter move developing and give back quite a bit of unrealised profits. Of course there is no reason to beat yourself up for this - if you understood it would reverse, you would have been out at a better price. It is only "missing out" if you do not learn from your mistake.

Next topic for discussion... which is worse: thumb screws or the rack?

You have yet demonstrated anything tangible that I find useful. They're all same crap I've heard too often and I say that in an overly generous term.

The best way you can demonstrate to me that you really know what you're talking about is to post your trades in real time. Considering that you already trade CL, you can join me at CL Redux thread. Then we can talk like real traders.

(Yes, I demand everyone that gets on my nerve to show me their mettle!)

 

[Speciaul_K]

Quote from Blotto:

Crude oil, natural gas, and stock index futures.

Not sure how this fits in to the discussion though. Why do you ask?

With the way the oil market has traded the last 2weeks don't you find it hard to not book profits early?
Such as 4/12-4/14
Im not sure what you target profit wise in a oil trade. Myself I target 1.00 but I find this discussion relevent in trading oil. I would guess if you target .20-.30 moves is not very relevent.

 

[JScott]

Quote from NoDoji:

You place your order and price runs 20 or more ticks without your order getting filled. Then you may feel it's too much risk to chase entry and you wait for a pullback in the trend and it just runs like crazy without you. It does happen. Happens to me at least once a week. [/B]

Quote from Blotto:

You didn't miss that trade. You did not understand the market condition well enough to trade it.

Blotto,

Really? Well if you say so . . .

I can't believe you didn't string us along a bit more while we tried to determine whether you actually knew a thing or two. You kinda showed your hand pretty quick there. Thanks for stopping by.

JS

 

[Tonkadad]

I am going to say that this response below intrigue's me and I agree with it. I am also going to say that Nodoji is going to agree more with the statement below than not.

Let's get this out of the way upfront. I am currently not a profitable trader. But have been in this world long enough to know when something makes sense. Everything is interrelated and what Blotto posted makes sense, at least to me.

Quote from Blotto:

You didn't miss that trade. You did not understand the market condition well enough to trade it. Big difference. If you are not yet skilled enough to get in on those sorts of trades then they aren't there for you, and you shouldn't feel that you are missing anything. As your skills improve you will find yourself "missing" less.

How aggressive you are with your orders is a function of your dealing skills and the prevailing market conditions. Sometimes you need to pay up, other times it is better to wait for a fill at a better price. Being too ambitious with your orders isn't missing a trade - it is understanding the market condition well enough to pick direction, but not well enough to decide how to time your entry.

If you don't understand enough about a particular condition to take an entry (and get filled) then the trade was never there for you as you lack the understanding. There is no "missing" a trade even when you understand yet fail to pull the trigger - that isn't missing it, that is choosing not to take it, but for reasons not related to the market behaviour.

What people call a missed trade is one of:
- lack of understanding
- failure to pull the trigger
- not concentrating on the task at hand (ie noticing the entry late)

 

[kidPWRtrader]

Quote from schizo:

From newbies to pros, we've all been there. Whether you missed a pop or you rode the pop only to give it all back, the outcome is the same. This is perhaps the oldest conundrum that have plagued traders world over for eons.

Fear and greed? Hardly. Stupidity is more like it.

Neither is bad. The only bad is deviating from your trade plan.

 

[Tonkadad]

I also have to say that if I created this thread I would take offense to BLotto's prior statement. Again it is a provocative statement and I believe good can come out it. But ego's will have to be checked at the door and we need to be open to self exploration. It's the events that turn our view of the world upside down that we grow the most from.

"This really is a horrible thread to read through. The blind leading the blind. All this pain and fear, negative language, and the old textbook cliches."

 

[schizo]

Quote from Tonkadad:

I am going to say that this response below intrigue's me and I agree with it. I am also going to say that Nodoji is going to agree more with the statement below than not.

Let's get this out of the way upfront. I am currently not a profitable trader. But have been in this world long enough to know when something makes sense. Everything is interrelated and what Blotto posted makes sense, at least to me.

Hence the reason why successful authors of Trading 101 outnumber successful traders in this field. All Blotto is doing is *stating the obvious*: Either you get it or you don't.

Blotto faulted the trader for "missing the trade" as:

- lack of understanding
- failure to pull the trigger
- not concentrating on the task at hand (ie noticing the entry late)

If you think about it, however, those three tongue-in-cheek answers (and they're not your old textbook cliches?) are actually one and the same. It's you who fail to pull the trigger because you clearly don't know what you're doing. While I don't entirely disagree with his premise, is it so simple as he seem to portray? Isn't it presumptious of him to think that trading is so clear cut? Why, that's like saying just because I scored more points than him, thereby made more money than him, I must know more things about the market than him. Obviously he made less because he knew less than me. Or is it?

 

[kidPWRtrader]

How can missing the move entirely or giving back all of your profits be bad? In fact, if you missed the move entirely it was because you either were not around to take the trade or because you are inexperienced and don't have trust in your system. Neither of these is bad by themselves.

Now, lets say you have a working trade plan. You have simmed it for a few months/years, you have back tested it, front tested it, etc. and it checks out alright. Now, you transition to cash and and you are not following the game plan. THIS IS BAD. But the only bad is once again not following the rules, not actually making a "mistake". Mistakes can happen to absolutely anyone in trading, but breaking a rule does not happen to traders who are around for long.

The second thing, giving all your profit back is a ridiculous concept. Before the dollars hit your account, you do not have any profits. You do not own your open pnl. You can tell me well how about unrealized losses? Yes you do not own those either but im not advocating averaging down or succumbing to emotions and taking above intended stops. Finally, if your tradeplan advocates to take profits at a further area and you give back all "your open pnl", then that is the price you pay to be positive in the long run. If you are constantly finding you are banking profits too soon, then several months down the road you can switch your tradeplan and improve your trading.

Also i didnt read anyones responses... just throwing this out there.

 

[NoDoji]

Quote from Blotto:

You didn't miss that trade. You did not understand the market condition well enough to trade it. Big difference. If you are not yet skilled enough to get in on those sorts of trades then they aren't there for you, and you shouldn't feel that you are missing anything. As your skills improve you will find youself "missing" less.

How aggressive you are with your orders is a function of your dealing skills and the prevailing market conditions.

What people call a missed trade is one of:
- lack of understanding
- failure to pull the trigger
- not concentrating on the task at hand (ie noticing the entry late)

There was a time not long ago when I indeed missed trades because I spent too much time thinking about them and then they ran without me. I got over that issue. When I see an "A" setup, I'm in, no questions asked.

But you stated a few posts ago that you trade crude oil, so surely you know there are many times when you see a setup get ripe, move to whack the bid or ask because the setup is hot, and watch price leave you in the dust without a fill.

I won't chase a CL entry if it moves 20 ticks from where my unfilled order is sitting. Of course if it ends up making an eventual 100+ tick move on a trend so strong it never gives enough pullback to make me feel safe joining it, I'll mutter and whine at length about how I shoulda chased the trade.

I admit that one trade in the past week or so I did chase an entry over 30 ticks from the initial signal point, because I was distracted by something else, saw the move after the fact and thought there was enough momentum left to capture at least some of the move, which I did, but that was a particular price action pattern I'd seen enough times to know there was still some gas in the directional tank. It was such an inexplicable entry that even Schiz asked me why the heck I put on the trade there

 

[Blotto]

Quote from NoDoji:

But you stated a few posts ago that you trade crude oil, so surely you know there are many times when you see a setup get ripe, move to whack the bid or ask because the setup is hot, and watch price leave you in the dust without a fill.

No, this does not happen to me now. If I expect the market to reverse sharply from a bottom I know that the accumulation has been completed and large traders are competing for the final liquidity. There are very few aggressive sell orders hitting the bids at this stage, and other traders will be willing to pay up. Put a limit bid in lower, or even at the inside market, and you'll be sitting there with nothing done most of the time. I'll use a marketable limit order - I'll usually skew 8 ticks from the inside market. There are few circumstances I'd want my fill higher than that.

For what its worth I trade NG also, (including after their weekly inventories), and I know where not to get cute with my orders. In faster markets it is even more important to know when to pay up.

I'm not trying to earn the spread. When I cross the inside market I expect the position to go in my favour immediately in the majority of trades. I'm using a marketable order as that is what is required for that market condition. Limit orders have their place - I will usually have a few in the market to take at least partial profits in the case of sudden spikes in my direction. Equally I place them strategically in areas where price is likely to briefly overextend (areas with a concentration of stops for example) to take advantage of a condition I could not manually react to - ie if the prices trade once on a spike.

When I enter on limit orders, it is only when I am very confident they will be filled, and I will hit market if it appears it will move without filling the order.

I'm pleased you have got over your fear of pulling the trigger in conditions you understand. That is essential. Good also that you do not "chase" the market.

What I will add to this is that I am not trading size. If you're trading more size than you can get done within a few ticks you need to rethink. Limits need to be placed in advance and you need to buy into falling markets etc. I am (and will be for the foreseeable future) small enough that I can get filled within a couple of points. Working large orders is a whole different story.