Working on Consistent Profitability

[tlow]

Quote from NoDoji:

The chop was awful most of today for those using a 5-min chart. But win rate means nothing if you let the winners run. I had 7 b/e trades today, 1 loss, and 3 winners. A 27% win rate and a fine profitable day.

Ya good point, I don't want to get too hung up on winrate. I've been equating win rate to how well I trade during the day. Maybe thats not the right mentality to have. Today I think I could've managed trades a bit differently but they still would've wound up losers or B/E's. I can't really say I had my 1 trade of the day..."really should not have taken that trade" so maybe as time goes on and I get rid of my bad trades the win rate will become less and less important. Or maybe just apart of system "X" is a better way to put it. Not sure?

Obviously, based on ones system over time, one has a nice set of stats to work from. So do you guys not worry about stats on a daily basis? Maybe only worry if a long term trend starts to develop...ie win rate drops from 40% to 33% over the course of 2 months or something?

In the end, all that matters is how much you make on a daily basis over the long run, right? If you have a long enough time frame, the stats (or holes or strengths) in your system should show you all you need to know whether you will be profitable on a daily basis. Am I thinking about this correctly?

 

[NoDoji]

Quote from tlow:

In the end, all that matters is how much you make on a daily basis over the long run, right? If you have a long enough time frame, the stats (or holes or strengths) in your system should show you all you need to know whether you will be profitable on a daily basis. Am I thinking about this correctly?

I have a specific minimum income I need to make each month and how I get there is meaningless to me as long as I exercise solid risk management. If I have a 10 win rate on a given day, but that one winning trade meets my minimum daily profit requirement, then I'm happy.

In my post-market trade analysis, What is most important to me is that I only traded setups that met my criteria and that I followed my rules for risk management and trade management. If I attain a 90-100% "win rate" regarding my trading rules, the profits will follow naturally.

 

[Went Fishing]

Quote from tlow:
I've been equating win rate to how well I trade during the day.
In the end, all that matters is how much you make on a daily basis over the long run, right?

Maybe it's just your choice of words, but no, I don't "worry about stats on a daily basis". I know when I'm off my game, and I just shut down and walk away. I suggest you stay focused on developing your method of trading and your psychology as a trader. I guarantee you, if you develop a sound method of trading and the discipline necessary to see it through, the dollars and cents will take care of themselves. I'm not saying you did, but many new traders come to the markets with unrealistic monetary goals. As your statement, ".....over the long run". If the median household income in 2008 was $52,029 (Source U.S. Census Bureau), And a trader set a goal of making $200 a day, after 240 trading days he'd achieve the median household income (excluding Fed, State and Local taxes). But what fun is that... make $200... shut down and walk away. Trading ain't about fun it's about money, making and retaining money nothing else. Traders always want to add another zero! Often to their daily detriment.

 

[tlow]

Quote from Went Fishing:

Maybe it's just your choice of words, but no, I don't "worry about stats on a daily basis". I know when I'm off my game, and I just shut down and walk away. I suggest you stay focused on developing your method of trading and your psychology as a trader. I guarantee you, if you develop a sound method of trading and the discipline necessary to see it through, the dollars and cents will take care of themselves. I'm not saying you did, but many new traders come to the markets with unrealistic monetary goals. As your statement, ".....over the long run". If the median household income in 2008 was $52,029 (Source U.S. Census Bureau), And a trader set a goal of making $200 a day, after 240 trading days he'd achieve the median household income (excluding Fed, State and Local taxes). But what fun is that... make $200... shut down and walk away. Trading ain't about fun it's about money, making and retaining money nothing else. Traders always want to add another zero! Often to their daily detriment.

Nod and Fishing,

Thanks for your replies...being an engineer, I tend to focus on numbers Im trying to get a better undersanding of how you guys (and girls) analyze (if at all) your trading ni regards to stats. I guess what Im getting at is if you are trading full time for a living and you know you have a 50% winrate and make $100/day over the course of say 2 years, but then for 2 months your winrate shifts to 40% but you are averaging $150/day...would you go further into why the change? Or it is what it is and "over the long" it will normalize back to your 50% winrate at $100/day?

But then as Nod mentioned in terms of needing X per month...does it matter? If you need $10k per month to live and trade, isn't making that number all that matters?

As I said, Im always thinking about how I can trade better and right now Im using winrate and average ticks per day to evaluate if Im getting better or not. I have set arbitrary goals for myself, but in the end all I care about is whether or not I can sustain making money every day...day in and day out. I agree that focusing on the process...the results should take care of themselves, however, how would you identify whether or not your process is ok and living up to its potential?

 

[jones247]

Simply amazing... despite the chop, you had 3 winners & only 1 loser. And I'm almost sure that the size of the avg. winner was larger than the size of the avg loser.

My set-ups fall into one of the following categories: 1) trend trades at the break of support or resistance levels; 2) trend trades after pullbacks from the support or resistance levels; 3) counter trend trades off the support or resistance levels. I guess it's o.k. to assume that most of your trades are category #1.

My problem is getting the timing right! Are there particular filters (including market psychology or macro info) to improve your setups?

thanks,

Walt

Quote from NoDoji:

The chop was awful most of today for those using a 5-min chart. But win rate means nothing if you let the winners run. I had 7 b/e trades today, 1 loss, and 3 winners. A 27% win rate and a fine profitable day.

 

[tlow]

Man I traded like crap today. On the scale of bad trades, I had 1 so-so trade that I probably shouldn't have been in, 1 bad trade, and 1 really bad trade. On top of that I was really unfocused in the morning...I was sitting around just watching until inventories came out then there wasn't much movement...then i kinda just spaced out. Really crappy. So I missed a get set-up off the 85.40 level around 8:30ish because I just wasn't paying attention...I was so frustrated at myself for that one. Not so much b/c it had a HUGE move, but more because it was just a total mental lapse on my part. Missing trades, not getting filled, not catching full moves, etc...is a part of trading, I feel mental lapses should not be.

Anyway, sorry for my vent. I did my usual of taking a break and came back at the end of the day since I was pretty frustrated at myself for those 3 bad trades. The one positive thing I can take out of today is that I finished up the day pretty well in terms of trading and I think Im getting some of my muscle memory down of taking breaks when Im emotional and that sort of thing.

I feel like Im getting to the point where I see the mistakes developing before they happen. Meaning the 2 trades that were just bad...I knew they were bad..then I compounded one of those trades by not exiting approprately for a small loss 5 tick loss instead of a full stop out. On both those trades, I hear the little man in my head saying, "This is a bad trade..get out...get out." Where as before it was more...hmmmm...not sure if this trade is going to work out or not. So I think thats where some of my frustration got compounded...knowing my mistakes as they were happening.

Anyway, one last note, I took a pretty good fade trade at the end of the day that was pretty low risk...I only walked away with 15 ticks b/c I exited at the pit close. i think I may start holding onto some of those winners into the AH session to get a better feel for that. Today there was really no reason to exit other than the pit closing and probably cost me 5-15 ticks. Thats happened a couple times in the past 2 weeks or so.

Stats for the day:
Total Trades: 7
Winners: 3
Losers: 4
B/E: 0
Avg. Win (ticks): 20.67
Avg. Loss (ticks): -13.25
Total Ticks: 9
Total Win Rate: 42.86%

So maybe a bit of progress today. Was able to walk away positive even though I had an emotional and bad trading day. Felt like I was able to split the session into a brand new one after my little break.

Blah blah blah...move on to tomorrow.

 

[NoDoji]

Quote from tlow:

Man I traded like crap today. Blah blah blah...move on to tomorrow.

Ditto.

I'm a more experienced crappy trader than you, though, because I ended up with 24 ticks

Quote from jones247:

My set-ups fall into one of the following categories: 1) trend trades at the break of support or resistance levels; 2) trend trades after pullbacks from the support or resistance levels; 3) counter trend trades off the support or resistance levels. I guess it's o.k. to assume that most of your trades are category #1.

My problem is getting the timing right! Are there particular filters (including market psychology or macro info) to improve your setups?

thanks,

Walt

Walt, my favorite setup is a with-trend pullback entry. The best way to get in is to wait for price to resume movement in the direction of the trend after it pulls back.

The place to enter when that happens depends on how much confirmation you want. If you are a pure trusting trend-follower, you enter when price touches the trend line and place your stop just outside the previous pivot high/low. If you want a little confirmation, you enter when price turns from pulling back and breaks the high/low of the previous bar in your time frame. If you want a lot of confirmation, you buy/sell the break through the previous pivot high/low (breakout trade).

There's a lot of market psychology tactics you can learn, but none of it's necessary to make money . These involve advanced strategies, and you can read about a lot of them in Al Brooks' or Alan Farley's books, but it will take time before you start to recognize the setups in real time and then have the guts to trade them. They are often very counter-intuitive and result in the moves that make you say, "Why the heck did it do that?" If nothing else, it's worth pursuing to keep you out of certain traps.

 

[jones247]

thanks Nodoji....

I appreciate the feedback


Walt

EDIT: btw... have you modified the "move stop to b/e" plan, as I believe it was about 10 cents. Is that correct?

thanks again...

 

[tlow]

Quote from NoDoji:

Ditto.

I'm a more experienced crappy trader than you, though, because I ended up with 24 ticks



Walt, my favorite setup is a with-trend pullback entry. The best way to get in is to wait for price to resume movement in the direction of the trend after it pulls back.

The place to enter when that happens depends on how much confirmation you want. If you are a pure trusting trend-follower, you enter when price touches the trend line and place your stop just outside the previous pivot high/low. If you want a little confirmation, you enter when price turns from pulling back and breaks the high/low of the previous bar in your time frame. If you want a lot of confirmation, you buy/sell the break through the previous pivot high/low (breakout trade).

Nod,

For you to trade this type of set-up do the waves up/down need to follow a given set of rules? It seems with the CL when there are strong moving/strong trending days, you could be placing your stop 20-30 ticks away.

Personally, I've been working more on how bigsnack trades with finding the local s/r with little or no confirmation then trying to place a tight stop. The main pitfalls im running into are:
1.) as I said a couple days ago, I may misidentify the s/r by 1-5 ticks and not get filled
2.) I usually only give myself 2 tries to get it right if it blasts thru where I identified the s/r and I get stopped out.
3.) If Im off my game (like today), I tend to go into a pitfall of trading poorly and/or misidentifying proper entries point...hopefully this will be remedied with more time and practice

 

[NoDoji]

Quote from tlow:

Nod,

For you to trade this type of set-up do the waves up/down need to follow a given set of rules? It seems with the CL when there are strong moving/strong trending days, you could be placing your stop 20-30 ticks away.

Do you mean when you enter a trade this way, you need to place your protective stop 20-30 ticks away? Or do you mean when you want to enter a trade using a stop order 1 tick outside the previous S/R pivot, price is usually 20-30 ticks away when you place that stop order? My protective stops are always 15 ticks or less. Sometimes my buy/sell stops to enter a trade are placed well in advance when the current price may be 20 ticks away.

Quote from jones247:

EDIT: btw... have you modified the "move stop to b/e" plan, as I believe it was about 10 cents. Is that correct?

That is still my minimum price move before a stop gets moved to b/e. I do have some exceptions to that, such as when I enter a trade prior to a level break and expect immediate follow thru, or when I screw up and move it sooner for no reason other than an itchy finger, thereby guaranteeing I'll be taken out of the best move of the day by a single tick and have to chase a re-entry 20 ticks away from my original perfect entry