Yes but I take it one step further and will take the short with the gap below or the long trade with a gap above looking to ride the RTM.
Notice how we just filled the gap at 79
Working on Consistent Profitability
- Thread starter tlow
- Start date
Yes but I take it one step further and will take the short with the gap below or the long trade with a gap above looking to ride the RTM.
Notice how we just filled the gap at 79
That is the sort of nonsense that newbies believe to their universal detriment.
What is left unsaid is that the real consistent money is made by those who know what is most likely to happen next and why - they are best positioned to take advantage of the gyrations whereas newbies are prone to random guessing.
6 out of 150 days when there was a significant gap, but the intent was for prices to continue to progress north for a significant distance, say 20 ES points, and using your rule would have caused a trader to miss the best and sometimes only trade of the day.
You say 4% of the time, I say it kept traders from bagging over 120 ES points in six simple trades, all of which could have been taken with 2 point stops. This is just one condition which has yielded $6,000 per contract in the last six months, and is always at a location where serious size can be traded.
Lets ignore percentages for a moment. I know your intent is to be helpful by giving a newbie a simple rule which will be easy to follow and will keep him out of some bad trades. Indeed, it will kill off most of the mistakes caused by chasing sucker gaps (which later fill). However, this is a shortcut and not the road to true knowledge. Better to understand why some gaps reverse and some continue in the direction of the gap right out the gate.
Case in point was yesterday - if the OP had understood the reason for the gap and the ultimate destination for price he would not have tried to short, but would instead have taken the correct opportunities to go long. I say much better to do the hard work required to understand the condition than to rely on a rule which works until it doesn't.
Fixed rules are for position sizing and other forms of risk control. The market cannot be boxed in, and rulesets applied to it must fit what is correct for the market, not what suits an individual trader.
It is certain I could show you a lot, lots after the fact and a good deal before the fact, however this is not offered to those who are cheeky. You overlook some perfectly valid points by insinuating that I am unable to recognise these conditions as they develop and am simply making ex post facto trade decisions. If you choose to believe that none of this can be predicted then that is your affair.
Quote from tlow:
Blotto,
Ya I would love for you to take a look and mark up my charts...and yes, I am trading for real. Becoming profitable on paper...ya been down that route as I explained somewhere earlier...Ive tried somewhat hard to take paper trading seriously but I don't. Plus, I dont get all tied up in the emotions of trading while its on paper.
I've always been a lets get onto the real thing type person, whether its single water ski, surfing, job, chess, riding a bike, whatever. I take the learning much more serious when I do it for real.
Best analogy I can give for me is when I was learning how to surf...when the waves were 10ft+, my ability is at about 5 feet, and I know I shouldnt be out there because I will get my head crushed...went out anyway...learned real fast...but did take some major ones on the head
I know I am making mistakes and I know, probably most, of my entries/exits aren't good, but I need to learn for real. Plus I am enjoying the ride anyway...not getting off till I start doing stupid stuff that I don't correct
It is a good to be the type of person who steps up to the plate and is happy to learn by doing. This isn't necessarily the wisest course of action when learning trading however. Your first objective is to learn how to consistently determine future market direction. Your second objective is to learn how to enter in the correct location at the optimum point which gives the least risk. Neither of these objectives are enhanced by having a live position on. It is correct that live trading will be emotionally different, and this is something to be overcome, but not until you have a consistent method.
If you want to truly succeed in the market you will need to give it several years, the first few of these without earning much from it. Save your capital, you will need it later on should you pursue this path. Meanwhile you are giving money to those more skilled than yourself, and the process of doing so is not enhancing your own skill in an optimal way - not a good trade.
Blotto,
Please dont take this the wrong way as I appreciate your feedback. I guess I wish you would explain the "why" a little more in depth in your posts..IE "Better to understand why some gaps reverse and some continue in the direction of the gap right out the gate."
ok but why? I think it is pretty obvious I am struggling with this right now. Im not saying spoon feed me the answers, but not backing up your comments isn't all that helpful. And then further you write as an example..."Fixed rules are for position sizing and other forms of risk control. The market cannot be boxed in, and rulesets applied to it must fit what is correct for the market, not what suits an individual trader."...Why do you feel that way or what experiences have you drawn on to make these conclusions?
Again, Im just trying to learn and understand the "why's" and progress forward...I have no intention of trying to prove you wrong or say your guidance is a load of BS. I appreciate the points you are trying to make.
Yeah, the book mentions that
<*)))><
Well today I came out ahead, but I think that was due to luck more than anything...I give myself a "C-" for the day. I had a lot of mental lapses/not paying attention throughout the day similar to yesterday. The nice thing about a slow moving market is I give myself plenty of time to see the set-ups, but it may take 20-30 mins for them to fully develop. The trades I made and the 1 I missed, I was in lala land messing around on the internet while the proper entries were being set-up. Definitely harder to focus in a slow moving market. Again, this is why I think real trading is helping my progress...while I was paper trading, I wouldn't really care and leave for the day or do random stuff around the house. Now ,I need to focus more and pay better attention on a minute by minute basis. And Finally, went with the majority vote in saying shorting is a bad idea...TRIN stayed around 0.5 all day so I only looked for long trades. See I can do as I'm told 
hehe
Trade 1:
6:50- Long 1083.50 Stop 1081.75 Target 1091.00
7:01- Sell to close 1085.50
+2.00 pts
This trade came out a winner, but I shouldn't have been in the trade to begin with...I was late on the entry because I was messing around. I wanted to get in at the 1082.00-1082.50 range. I think my target was a little too overambitious as well. Then I also realized a minute or two into the trade that the housing news was coming out. I think the trade would've been fine had I got my proper entry and exited before the news came out. I decided to stick with the trade and I moved the stop up to 1082.50 right before the news came out. Kinda a coin flip really.
I am happy I exited this trade as soon as I saw momentum dying and the price start to turn around. But this did get me thinking out news more and how (if at all to play it)...Is it worth it to get in just before a major news event with tight stops to play a big jump? Its a bit of a coin flip but if the risk:reward is there...gonna have to backtest this one a bit and see if its worth it. Any opinions?
Trade 2:
8:41- Long 1084.25 Stop 1081.00 Target 1086
8:57- Sell to close 1084.25 at B/E
+0.00 pts
Again, bad entry because I was screwing around. After I got into this trade, I realized the r:r ratio wasn't there since it was a slow moving market and it would need some momentum to push thru the 1086.00 level to make this trade worth it. Had I gotten in earlier when I wanted to at 1082.50-1082.75 level, it would have made it a better trade. Probably could've rode this one out for a small profit, but that is hindsight. Glad I got out of it.
The last trade I wanted to take I didn't because, once again, I wasn't paying close attention. I decided not to take the bad entry price and just sit. Started looking at the set-up around 10:10, and had the entry as 1082.00-1082.50 with stops at 1081.50 target of 1086.00. Had I gone in, would have been a really good trade...oh well...thats what I get for not paying full attention. End of the day I thought about going long on the little pull back to the 1085 area. I am realizing on the slow moving days the need to get that 1 last trade in before the close is going to hurt me in the long run. I didn't completely like the set-up so I stayed out...would've been a winner, but in the end glad I sat on my hands, could have just as easily gone down to 1082 range.
Total Trades: 2
Winners: 1
Losers:0
B/E:1
Total Points: +2.0
Avg. Win: 100.00
Avg. Loss: 0
Total Win: 50%
Total Profits: $100.00
heheTrade 1:
6:50- Long 1083.50 Stop 1081.75 Target 1091.00
7:01- Sell to close 1085.50
+2.00 pts
This trade came out a winner, but I shouldn't have been in the trade to begin with...I was late on the entry because I was messing around. I wanted to get in at the 1082.00-1082.50 range. I think my target was a little too overambitious as well. Then I also realized a minute or two into the trade that the housing news was coming out. I think the trade would've been fine had I got my proper entry and exited before the news came out. I decided to stick with the trade and I moved the stop up to 1082.50 right before the news came out. Kinda a coin flip really.
I am happy I exited this trade as soon as I saw momentum dying and the price start to turn around. But this did get me thinking out news more and how (if at all to play it)...Is it worth it to get in just before a major news event with tight stops to play a big jump? Its a bit of a coin flip but if the risk:reward is there...gonna have to backtest this one a bit and see if its worth it. Any opinions?
Trade 2:
8:41- Long 1084.25 Stop 1081.00 Target 1086
8:57- Sell to close 1084.25 at B/E
+0.00 pts
Again, bad entry because I was screwing around. After I got into this trade, I realized the r:r ratio wasn't there since it was a slow moving market and it would need some momentum to push thru the 1086.00 level to make this trade worth it. Had I gotten in earlier when I wanted to at 1082.50-1082.75 level, it would have made it a better trade. Probably could've rode this one out for a small profit, but that is hindsight. Glad I got out of it.
The last trade I wanted to take I didn't because, once again, I wasn't paying close attention. I decided not to take the bad entry price and just sit. Started looking at the set-up around 10:10, and had the entry as 1082.00-1082.50 with stops at 1081.50 target of 1086.00. Had I gone in, would have been a really good trade...oh well...thats what I get for not paying full attention. End of the day I thought about going long on the little pull back to the 1085 area. I am realizing on the slow moving days the need to get that 1 last trade in before the close is going to hurt me in the long run. I didn't completely like the set-up so I stayed out...would've been a winner, but in the end glad I sat on my hands, could have just as easily gone down to 1082 range.
Total Trades: 2
Winners: 1
Losers:0
B/E:1
Total Points: +2.0
Avg. Win: 100.00
Avg. Loss: 0
Total Win: 50%
Total Profits: $100.00
No offense but your focus on how much you could have made and the fact that you are not focused on risk tells me you are still a novice in this profession.
Ignore the percentages ?
The main theme of trading is to use the percentages to your advantage so why should we ignore them ?
And now you are telling me after the fact that you can catch 20 points on gap days trading with the gap in a trading vehicle that exhibits excessive mean reversion and that we should ignore the high percentages of gap fills and chase price.
How about you prove me wrong and post realtime on any gap day you feel fit.
I want to see you take 20 points with a 2 point stop in the direction of the gap posted in real time or else you are just blowing smoke up everyone's ass after the fact.