YM Journal
- Thread starter Adamned
- Start date
does this mean the stop is the closer of 40 points or the "tight stop" you described?
i am also interested in how you determined the 80, 30, and 40 numbers. if the daily range expands would you still use the same numbers? did you use these same numbers years ago when the daily range was wider?
i am also interested in how you determined the 80, 30, and 40 numbers. if the daily range expands would you still use the same numbers? did you use these same numbers years ago when the daily range was wider?
I'm happy to answer any questions that arise and a few have come up so I shall answer them directly.
The tighter stop I use is really quite simple and is systematic so its always the same. Here it is nothing special. The other side of the swing point will be broken by 10 pts or more. In the instance of the last chart that I posted. The stop would have been at 78. The entry was on limit at 59, the stop at 78, so that equals a stop of 19 plus the b/a spread which is almost half of the 40pt stop I use.
The second entry that bearbelly posted was in fact a very good entry even better than the first one. However, not merely because it worked instantly with out being underwater to much. It was better for various reasons and not only for chart reasons. If one has interest in this setup it would do them a great service to study the differences. If someone really wants to do this I would like to point out first something that has very little significance. The first entry was a trend reversal entry and the second entry was a trend continuation entry. In my experience this has little importance. More often than not the market will struggle more to fulfill the 30 pt objective with a trend continuation than a trend reversal but in the end fulfill the objective anyhow.
Where did the 80,30,40 come from? They came from trial and error operations. In the beginnig I wanted more 1 full pt (1% of the dow cash) for my short term signals and 2.5 full pts (2.5%) for my mid term signals. These were definitely not in touch with the reality of what the market was willing to give on a CONSISTENT basis. The real truth is that these numbers mean nothing to the market they are not special. They only mean a lot to me. They allow me to extract the kind of money I need to make a living from the Dow. Its really nothing more than my comfort levels with the market. I think its a waste of time to take away less than 30 pts per trade. I think its a waste of time to take away 30 pts when I could have taken away 80 pts. And I'm not willing to lose more than 40 pts on any entry no matter what. That simple. I've already had a few questions about the average daily range and how its evolution would effect my exit objectives. It would only effect me if it got drastically smaller and think this is an unlikely event. If it gets larger I don't care that its possible that I can make more pts. I'm happy with my 30-80-40 objectives and I will not change it unless it becomes broken. "If it ain't broke don't fix it." I also think there is an important lesson here. Many people fail in this business because they don't treat it as a business they treat it as a game. Its only a game if you want it to be a game. Nailing the low and buying right at it and holding on till the absolute high and liquidating right there is a game. Hence, the average daily range is very important for this game. Now from a business perspective. The daily range clearly accommodates these profit objectives. Therefore, I will buy at the right time and liquidate right when my objectives are met. I great analogy came to my head when think about this. Think of Walmart in the U.S. over here in Europe its Tescos or Carrefours. Then think of only one product lets say a chocolate bar. To be specific a snickers bar. Back when I was still in the U.S. year 2000 they sold a snickers bar for 35 cents. The average selling price was probably 50 cents at a vending machine. It would sell as high as 75 cents at a conveince store and maybe as high as 1.50 at the airport. Does the most successful retailer in the world (walmart) give a damn about the RANGE of prices? That the same exact product is selling somewhere else for .50,.75, and 1.50. No, they care about selling their product for .35 cents and making a profit on it. This is done by consistency.
How do I define the daily trend? Thats a very good question and I have a very long winded response to that answer. I will save you that reading and by giving the answer first and if you still have interest you can read my reasoning behind it. On a weekly chart a crossover in the MACD by the Dow cash, SP cash, Nasdaq composite, NYSE composite, and the Russell 2000 cash. I would like to point out something very very important. In a bull market I can't sell short and hold over night no matter what the daily trend is. In a bull market heres how my market posture is. I can hold over night on the long side if the weekly macd is on the up and up. I will keep this posture until the MACD crosses to the downside. When the MACD turns down in a bull market I can't hold anything overnight I simply only trade my 30pt objectives from both sides. The whole process is repeated in a bear market just done inversely.
After those long drawn out answers I would like to give some background information regarding all of this. I actually think this is important and why a lot of skilled chart readers fail at trading. They can read the chart like no other but they have little grasp of true strategy. In my opinion its because they lack a thorough understanding in strategy in its truest form the military form. If you were an officer in the armed forces, had a good political science or history program at your university then you may already know most of this. In market books and materials they for some reason never get this right and use all the different forms interchangeably which is a big mistake. First and most important there is grand strategy, then strategy, then tactics. All three are related but distinctly different. To succeed all three subsets must be very clear and support each other, and not cause conflict between each other. If you want learn more about this read the work of B.H. Liddell Hart. (link) http://en.wikipedia.org/wiki/Blitzkrieg
He is my personal favorite. It is mostly his work that created the popular term during WWII blitzkrieg. It was Liddell Hart who inspired Heinz Guderian who went on to apply Hart's work and develop blitzkrieg. A few years back another pop term came from Hart's work "shock and awe" "rapid dominance" This was developed from the work of Hart as well. Any way sorry for the long winded post and good trading to you all.
The tighter stop I use is really quite simple and is systematic so its always the same. Here it is nothing special. The other side of the swing point will be broken by 10 pts or more. In the instance of the last chart that I posted. The stop would have been at 78. The entry was on limit at 59, the stop at 78, so that equals a stop of 19 plus the b/a spread which is almost half of the 40pt stop I use.
The second entry that bearbelly posted was in fact a very good entry even better than the first one. However, not merely because it worked instantly with out being underwater to much. It was better for various reasons and not only for chart reasons. If one has interest in this setup it would do them a great service to study the differences. If someone really wants to do this I would like to point out first something that has very little significance. The first entry was a trend reversal entry and the second entry was a trend continuation entry. In my experience this has little importance. More often than not the market will struggle more to fulfill the 30 pt objective with a trend continuation than a trend reversal but in the end fulfill the objective anyhow.
Where did the 80,30,40 come from? They came from trial and error operations. In the beginnig I wanted more 1 full pt (1% of the dow cash) for my short term signals and 2.5 full pts (2.5%) for my mid term signals. These were definitely not in touch with the reality of what the market was willing to give on a CONSISTENT basis. The real truth is that these numbers mean nothing to the market they are not special. They only mean a lot to me. They allow me to extract the kind of money I need to make a living from the Dow. Its really nothing more than my comfort levels with the market. I think its a waste of time to take away less than 30 pts per trade. I think its a waste of time to take away 30 pts when I could have taken away 80 pts. And I'm not willing to lose more than 40 pts on any entry no matter what. That simple. I've already had a few questions about the average daily range and how its evolution would effect my exit objectives. It would only effect me if it got drastically smaller and think this is an unlikely event. If it gets larger I don't care that its possible that I can make more pts. I'm happy with my 30-80-40 objectives and I will not change it unless it becomes broken. "If it ain't broke don't fix it." I also think there is an important lesson here. Many people fail in this business because they don't treat it as a business they treat it as a game. Its only a game if you want it to be a game. Nailing the low and buying right at it and holding on till the absolute high and liquidating right there is a game. Hence, the average daily range is very important for this game. Now from a business perspective. The daily range clearly accommodates these profit objectives. Therefore, I will buy at the right time and liquidate right when my objectives are met. I great analogy came to my head when think about this. Think of Walmart in the U.S. over here in Europe its Tescos or Carrefours. Then think of only one product lets say a chocolate bar. To be specific a snickers bar. Back when I was still in the U.S. year 2000 they sold a snickers bar for 35 cents. The average selling price was probably 50 cents at a vending machine. It would sell as high as 75 cents at a conveince store and maybe as high as 1.50 at the airport. Does the most successful retailer in the world (walmart) give a damn about the RANGE of prices? That the same exact product is selling somewhere else for .50,.75, and 1.50. No, they care about selling their product for .35 cents and making a profit on it. This is done by consistency.
How do I define the daily trend? Thats a very good question and I have a very long winded response to that answer. I will save you that reading and by giving the answer first and if you still have interest you can read my reasoning behind it. On a weekly chart a crossover in the MACD by the Dow cash, SP cash, Nasdaq composite, NYSE composite, and the Russell 2000 cash. I would like to point out something very very important. In a bull market I can't sell short and hold over night no matter what the daily trend is. In a bull market heres how my market posture is. I can hold over night on the long side if the weekly macd is on the up and up. I will keep this posture until the MACD crosses to the downside. When the MACD turns down in a bull market I can't hold anything overnight I simply only trade my 30pt objectives from both sides. The whole process is repeated in a bear market just done inversely.
After those long drawn out answers I would like to give some background information regarding all of this. I actually think this is important and why a lot of skilled chart readers fail at trading. They can read the chart like no other but they have little grasp of true strategy. In my opinion its because they lack a thorough understanding in strategy in its truest form the military form. If you were an officer in the armed forces, had a good political science or history program at your university then you may already know most of this. In market books and materials they for some reason never get this right and use all the different forms interchangeably which is a big mistake. First and most important there is grand strategy, then strategy, then tactics. All three are related but distinctly different. To succeed all three subsets must be very clear and support each other, and not cause conflict between each other. If you want learn more about this read the work of B.H. Liddell Hart. (link) http://en.wikipedia.org/wiki/Blitzkrieg
He is my personal favorite. It is mostly his work that created the popular term during WWII blitzkrieg. It was Liddell Hart who inspired Heinz Guderian who went on to apply Hart's work and develop blitzkrieg. A few years back another pop term came from Hart's work "shock and awe" "rapid dominance" This was developed from the work of Hart as well. Any way sorry for the long winded post and good trading to you all.
I'm going to post an excerpt from a trading book that I think can help a lot of people. Its from the book Long Term Secrets to Short Term Trading by Larry Williams. I don't think the book is all that great. He doesn't really offer any new original content. On the plus side he does reinforce the principles to to successful speculating very clearly.
The Art of Fly Fishing
Fly fishers and todays commodity traders have much in common that we can all learn from. My daddy taught me the fine art of catching trout long before the fly fishing fad set in. Pops was never much of a fly casting type, but could do an adequate double hall, carefully selected his tippets and knew the difference between front ended weighted line and a double taper.
But he didn't use that stuff very much. fact is he looked down his nose on the L.L. Bean fancy dancer fisherman. As much as they shook their heads at his beloved worms,grubs, and grasshoppers. You'd never catch my dad at a Trout Unlimited meeting. But he could be seen after dark chasing night crawlers around are back yard with a flash light.
I asked him once why he didn't fly fish more often, to which he replied, Son, I came out here to catch fish to take home to eat. Crawlers and Hoppers are the best thing I know of to catch fish with. belive me if those dainty little nymphs caught lots of fish I'd use them. But I sure as hell wouldn't get all dressed up in those fancy vests and pricey waders. This sport is about catching, not dressing.
Maybe thats why I don't have realtime quotes in my office, am pretty computer illiterate,don't read the wall street journal, and hob knob at futures conferences decked out in brooks brothers suits. invariably, successful traders tell me they became winners after they stopped keeping a jillion indicators, watching 3 or 4 monitors and following 5 hot lines every night. Its the simple stuff that works. Is the most common comment winning traders make.
Sure you can get all duded out to trade, but the truth is you'll catch more fish with worms and hoppers on a bent pin than any fly ever tied.
The Art of Fly Fishing
Fly fishers and todays commodity traders have much in common that we can all learn from. My daddy taught me the fine art of catching trout long before the fly fishing fad set in. Pops was never much of a fly casting type, but could do an adequate double hall, carefully selected his tippets and knew the difference between front ended weighted line and a double taper.
But he didn't use that stuff very much. fact is he looked down his nose on the L.L. Bean fancy dancer fisherman. As much as they shook their heads at his beloved worms,grubs, and grasshoppers. You'd never catch my dad at a Trout Unlimited meeting. But he could be seen after dark chasing night crawlers around are back yard with a flash light.
I asked him once why he didn't fly fish more often, to which he replied, Son, I came out here to catch fish to take home to eat. Crawlers and Hoppers are the best thing I know of to catch fish with. belive me if those dainty little nymphs caught lots of fish I'd use them. But I sure as hell wouldn't get all dressed up in those fancy vests and pricey waders. This sport is about catching, not dressing.
Maybe thats why I don't have realtime quotes in my office, am pretty computer illiterate,don't read the wall street journal, and hob knob at futures conferences decked out in brooks brothers suits. invariably, successful traders tell me they became winners after they stopped keeping a jillion indicators, watching 3 or 4 monitors and following 5 hot lines every night. Its the simple stuff that works. Is the most common comment winning traders make.
Sure you can get all duded out to trade, but the truth is you'll catch more fish with worms and hoppers on a bent pin than any fly ever tied.
I apologize for making uninformed comments about fly fishing. I know absolutely nothing about fishing. I have great respect for sportsman and may have made an error with that post. I liked the analogy because it drives home the all important principle of K.I.S.S. I thought Williams may have had a good point. I used to frequent at least once a month back in the day U.P. of Michigan or the way North of Wisconsin. I had friends who owned a cabin at each spot. We did a lot of trail riding. Motocross in the non snow months and snow mobiling in the snow months. I have met quite a few hardcore sportsman there and they all seemed to meet Williams description of his father. They despised the fancy hunter or fisherman. Any way sorry for the broad generalization.