You know what blows me away about being a discretionary trader? How one slip....

[NoDoji]

Quote from schizo:

Not necessarily. Of course, you can't entirely rule out the human factor but you CAN enter trades without hesitating and you CAN place hard stops at the time of your entry. It just takes many years of experience.

But what makes you think ATS will have a better result?

This is true and I rarely hesitate anymore and I always place hard stops immediately.

But trading with an edge and making a decent profit requires you to take all valid setups. It's the probability factor that places the odds in your favor. One of my biggest problems to overcome (still) is picking and choosing from among valid setups. For example, I trade only 4 stocks. Sometimes they all set up at once based on overall market action. If I were to trade them all at once, 2 of them might move 2.00 in my favor, 1 of them might move 1.00 in my favor and 1 of them might move .15 cents in my favor. But instead of taking them all as valid setups I pick one of them to trade. It happens to be the .15 winner and I end up stopped out near break even, while watching the others run without me.

With an ATS, it would put on 4 trades and make a decent profit.

I just finished Trading in the Zone and a very good analogy is presented. Why do casinos make money? Because they have an edge (overall odds in their favor). But the edge only works in their favor because they take the other side of every game played. They don't pick and choose.

ADD: This is a human factor problem. I'm sure it's overcome all the time, as the many highly successful discretionary traders can affirm.

 

[schizo]

Quote from NoDoji:

This is true and I rarely hesitate anymore and I always place hard stops immediately.

But trading with an edge and making a decent profit requires you to take all valid setups. It's the probability factor that places the odds in your favor. One of my biggest problems to overcome (still) is picking and choosing from among valid setups. For example, I trade only 4 stocks. Sometimes they all set up at once based on overall market action. If I were to trade them all at once, 2 of them might move 2.00 in my favor, 1 of them might move 1.00 in my favor and 1 of them might move .15 cents in my favor. But instead of taking them all as valid setups I pick one of them to trade. It happens to be the .15 winner and I end up stopped out near break even, while watching the others run without me.

With an ATS, it would put on 4 trades and make a decent profit.

I just finished Trading in the Zone and a very good analogy is presented. Why do casinos make money? Because they have an edge (overall odds in their favor). But the edge only works in their favor because they take the other side of every game played. They don't pick and choose.

ADD: This is a human factor problem. I'm sure it's overcome all the time, as the many highly successful discretionary traders can affirm.

First of all, as I already stated above, I have no qualm with former discretionary traders (such as yourself) who have decided to automate their system, provided that it's already a money maker.

Be that as it may, why are you trading so many instruments at the same time? Trading is like any other profession under the sun. You specialize and become good within the chosen discipline. However, even if you were trading 4 stocks, why can you not monitor and enter the trades before they reach particular price levels? If you know what you're doing, you should have known far in advance where the potential pivot would have occurred and, therefore, placed your orders before the price reached those levels, no?

Let's suppose ES is at 1067 and I'm looking at 1070 as the possible reversal. Would I hold off placing my order until ES goes up to 1070? NO! I would have placed a limit order at 1069.75 with a resting stop order at 1071.25.

So why couldn't you do this for all 4 stocks?

 

[l2tradr]

Bottom line is, sh1t happens. I remember being in American Home Mortgage with 25% of my account at the time, in the trade for 5 minutes; stock gets halted and goes to (essentially) ZERO next day. My intention was a 20 cent scalp with a 20 cent stop, so I wasn't risking much. Or so I thought.

Imagine for a second that you're in with 100% of your cash for an intraday trade, or, like most people at times, leveraged...you're done.

 

[bighog]

Quote from schizo:


Let's suppose ES is at 1067 and I'm looking at 1070 as the possible reversal. Would I hold off placing my order until ES goes up to 1070? NO! I would have placed a limit order at 1069.75 with a resting stop order at 1071.25.

[/B]

The odds say you will lose on that trade. Why?

Consider your thought process compared to what price action is telling you. Your first mistake is even considering a Short when price is rising. Never trade against the prevailing trend unless shown a reversal signal. Thats almost as golden as "look both ways bfore crossing the street" Thinking price will reverse at a certain point is a Dusty Springfield trade, Dusty made money by singing "Wishin' & Hopin'," not by trading.

You would be better off being a Buyer at 1070.50 (if not already long) looking for a continuation instead of a reversal........the odds say a trend will continue until a greater force shows up.

Why not just go long at 1067.00 if you are so willing to short at 1070.00? See the fallacy of your idea?

http://www.youtube.com/watch?v=tAn3uQX7AGk

Hog out



PS: breakout trading is about discipline more than calling targets........i might see a POSSIBLE target for whatever reason and take the trade based on odds as intuition pings my brain.......but discipline tells me to have a mental lunch point based on a max loss (possible 4 or less ticks where the max stop is 3 handles) for news items like when we got "greeked" a few days ago on our shorts when price popped up and it was "WTF", time to bail out and hit the mouse. :eek:

 

[Kovacs]

Quote from schizo:

When I read a header like "You know what blows me away about being a discretionary trader?", it's hard not to miss what the motive is behind such a thread.

Okay--as long as we're both clear that you're the one making the assumptions and assigning motives.

 

[schizo]

Quote from bighog:

The odds say you will lose on that trade. Why?

Consider your thought process compared to what price action is telling you. Your first mistake is even considering a Short when price is rising. Never trade against the prevailing trend unless shown a reversal signal. Thats almost as golden as "look both ways bfore crossing the street" Thinking price will reverse at a certain point is a Dusty Springfield trade, Dusty made money by singing "Wishin' & Hopin'," not by trading.

Uhm, when did I say I was fading? I just picked the number out of the blue. I could have said the ES was trading at 1375. But thanks for the suggestion nonetheless. By the way, please refrain from hindsight analysis. Instead post the damn trades in realtime if you want to get your point across. That has always been my approach and I expect everyone to do the same.

Even though I personally love fading, your remark is irrelevant to the point I was making above, which was about why one cannot use a discretionary approach to make 4 simultaneous trades. Dig it?!

 

[schizo]

Quote from Kovacs:

Okay--as long as we're both clear that you're the one making the assumptions and assigning motives.

One slip that lands you in the poorhouse isn't because you're a discretionary trader but because you lack the discipline to bail out of your loser. The same disaster would have also hit the mechanical trader had he left out the stops in his algo. The bottom line is you're an idiot if you don't place a stop with every trade and that you're not fit to trade!

 

[christianhgross]

Quote from NoDoji:

Mechanical trading seems to have two advantages (our ATS isn't running live yet, so I don't have personal experience with the reality of it): 1) takes all setups without hesitating, 2) it doesn't suddenly decide to move stops, average losers, let winners turn into losers, read the news and change the plan, etc.

I don't think an ATS has a profit advantage to a discretionary system. A good discretionary trader can make just as much money as a good ATS.

However, an ATS has one advantage over discretionary...

Reaction time!

When you need to act fast an ATS can move ultra fast! I have seen it time and time again when a market pops the ATS can react very quickly.

 

[AMT4SWA]

Quote from bighog:

Your first mistake is even considering a Short when price is rising. Never trade against the prevailing trend unless shown a reversal signal. Thats almost as golden as "look both ways bfore crossing the street"

Hog out

BTW, Commercials frequently SELL into a rising market and BUY into a descending market. :eek: They LOVE the price improvement as they work into the order flow while masking their entry.

Oh darn, now I am going to get the Hog all in a tizzy.....JK.....LOL!

 

[AMT4SWA]

Quote from christianhgross:

I don't think an ATS has a profit advantage to a discretionary system. A good discretionary trader can make just as much money as a good ATS.

However, an ATS has one advantage over discretionary...

Reaction time!

Another VERY BIG advantage ATS systems can have over a discretionary trader........Diversification!

Can YOU track and trade 10 different instruments all at the same time......:eek: