Of all the things I did on my quest for consistent profitability, there were several that were harmful (such as trading live without a well-researched and tested trading plan).
Here are the steps that contributed to consistent profitability, listed in the order they should've been taken:
1. Research trading ideas by compiling statistical data over time through varying market environments (trending, ranging, chopping, calm, and volatile).
2. Develop entry and trade management rules for the ideas that indicate the highest odds of success.
3. In a simulated real-time environment, test these mini-plans.
4. Continue to study and tweak based strictly on statistical data, not on bias or feelings.
5. Discard any ideas that are not consistently profitable after commissions and slippage.
6. Practice trading the remaining ideas in sim for a period of time sufficient to have offered all the common market environments listed above. If you have difficulty following your trading plan, code the ideas into an automated trading system.
7. Trade live with smallest size, and size up accordingly as your account grows. If size affects your ability to follow your plan, trade small again, and consider automating to avoid "Thinking While Trading".
While practicing in sim, I highly recommend reading Mark Douglas' Trading in the Zone several times with a month of trading experience between readings.
I personally found the best trading ideas come from studying price action. A thorough study of price action reveals edges that do not degrade over time. The reason is that basic human nature is unlikely to change in your lifetime; it certainly hasn't changed much at all throughout recorded history.
субота, 19 січня 2013 р.
Pa setups
I'm curious what, specifically, would constitute proof to you that a trader, trading a single futures contract (to ensure there's no average-down opportunity), can in fact be consistently profitable applying one or more of the following standard technical price action concepts:
1. Entering a with-trend position on a pullback
2. Entering a with-trend position on a break of a previous high/low
3. Fading the extremes of a tradeable range
4. Entering a counter-trend position based on the old 1-2-3 reversal setup
1. Entering a with-trend position on a pullback
2. Entering a with-trend position on a break of a previous high/low
3. Fading the extremes of a tradeable range
4. Entering a counter-trend position based on the old 1-2-3 reversal setup
Automated Price Action
Registered: Mar 2004 Posts: 140 |  01-17-13 05:03 PMDonna, Direct chart trading is okay (imo) for the CL for scalping if you going to set it up and not have to move the stop/target lines around afterward too close to the last transaction. Clicking a line and dragging it around is super slow in comparison to single clicking a DOM column cell with no confirmation. We're talking 2-4 secs vs a 1/4 sec mouse click which can cost you some on a 1 min chart. But you have the resources to go beyond that. Your husband can program. It's not hard at all to build your own price ladder (PL) and customize it for your trading style. Your broker is IB, right? It's cake to use their ActiveX component with C# and Windows Forms. All the hard stuff has been done for you already as far at the lower level trade and price messaging goes. What I'm currently doing is have my charting package send over entry signals to my PL and it can also send add-on signals for more positions. NO WAY I could enter these kinds of trades manually on non-time based charts like tick and volume and range charts. I can setup custom brackets and reversals off of the stop or target by overloading either with more contracts than the entry size and also immediately protect the reversed quantity with new stop / target brackets. On the entry brackets, I can simply click the pre-target or pre-stop on the PL and then adjust their respective stop/target values in case I expect more or less from a break-up or break-down. I can get out of a trade based on a dollar value or move my stop up based on one. When I add to a trade on a scalp chart, sometimes price moves so quickly that I have to protect a max dollar loss or live gain made because I'm working with higher leverage which can turn on me. I pretty much know now what point targets of 20, 30, etc can yield with add-ons (even when I don't know the specific entry order prices in real-time) and also know I can get very brief moments of live max gains (where I'm satisfied vs the initial risk) and the computer is going to know and react to getting out far more quickly than human decision. It's all open to your imagination and specific needs. YOU are in control of what it can do. So many things I haven't mentioned and you would have a blast telling your husband what you need as the capabilities improve and you think of new ways to enhance your style of trading. My next step is to build my own charting to go along with it and then I can make direct chart trading far more flexible than this commercial krahp you see. They cater to the generic. There's always some roadblock they'll throw in your way once you see what you did with your PL and then want to innovate direct chart trading beyond what vendors provide. No, you're not going to lose $1000's from programming mistakes. Handling the messaging and keeping track of your position is just not that hard. You can get a basic PL up showing live bid/ask/last in less than a week (1 day if you're familiar with the IB interface). You can get basic order management up in another two. Planning for multiple symbols on multiple PL's running at the same time AND in multiple IB accounts takes more time. Don't worry about that. Do the basic, knowing you're going to rebuild it with more experience gained. The rebuilds are fast because you can reuse so much of the old code, just better organized to handle the more advanced requirements. In the meantime, sure, try a direct chart interface from whatever place. But build YOUR dream PL in parallel. You can integrate your husband's auto-trading code as a part of that and then the wheels of your imagination will REALY start to turn! [You won't even have that DOM number junk on it] | |
неділя, 13 січня 2013 р.
noDoji how to handle losers
Notes I took from a Mark Douglas interview: “There’s no way to know the sequence of wins and losses. If we want to be able to trade our methodology in an effective fashion, to be able to utilize this methodology in a way where we can extract the maximum amount of profit that it makes available to us based on the pattern that it identifies, we have to do it in certain ways. Our mind has to be free to be able to execute these trades without making trading errors and the trading errors come from believing that because the pattern is present, that it’s going to give me a winning trade on THIS one; THIS trade is going to be a winner. You can’t think that way. That’s the way the typical trader thinks. The typical trader thinks ‘I’m not gonna put on this trade on unless I think it’s gonna be a winner or why would I do it?’”
“Trading a technical methodology or a technical pattern does not have anything to do with being right or wrong. It’s just an odds game. You’ve got to be able to take every single trade because you don’t know the sequence of wins and losses. You’ve got to be able to identify what your risk is and that’s simply ‘How much am I willing to spend to find out if other traders are going to come into this market and bid it higher than my price or offer lower than my price if I sold?’”
The solution is to change your mind, to change the way you think. “[You’ve] got to eliminate the potential to think that the market’s going to disappoint you. And the way [you] eliminate the potential is by understanding that trading is not about being right or wrong. It’s a probability game.”
There are stages of development such as learning how to think in probabilities so the market doesn’t have the potential to cause us to feel emotional pain.
“When you put on a trade and it doesn’t work, all it really means is that some of the traders didn’t come into the market that had the same belief that you had, or the same conviction about this market doing whatever it is you thought it was going to do. You have to learn to walk away.”
We can’t predict collective human behavior. “The methodologies that we have access to, these mathematical formulas, do that for us. But you have to understand that there’s no possible way that these mathematical formulas can predict the outcome of these patterns on a trade by trade basis, only on a series of trades. So when I get a signal from my methodology, at the most fundamental level what this is telling me is that the odds are in my favor that somebody is going to come into the market (this is what the pattern means) and bid it higher than here if I bought or offer it lower than here if I sold. That’s all that it’s saying. Now they’re either gonna come or they’re not, and so as a result I don’t look at this as being a ‘right’ or a ‘wrong’; I look at this as How much distance am I going to give the market to move away from my entry point to tell me that they’re either going to come or they’re not, and any further is not worth the cost of finding out.”
I can't speak for Lescor, but my guess is that he learned to attain this mindset before he became a master trader.
“Trading a technical methodology or a technical pattern does not have anything to do with being right or wrong. It’s just an odds game. You’ve got to be able to take every single trade because you don’t know the sequence of wins and losses. You’ve got to be able to identify what your risk is and that’s simply ‘How much am I willing to spend to find out if other traders are going to come into this market and bid it higher than my price or offer lower than my price if I sold?’”
The solution is to change your mind, to change the way you think. “[You’ve] got to eliminate the potential to think that the market’s going to disappoint you. And the way [you] eliminate the potential is by understanding that trading is not about being right or wrong. It’s a probability game.”
There are stages of development such as learning how to think in probabilities so the market doesn’t have the potential to cause us to feel emotional pain.
“When you put on a trade and it doesn’t work, all it really means is that some of the traders didn’t come into the market that had the same belief that you had, or the same conviction about this market doing whatever it is you thought it was going to do. You have to learn to walk away.”
We can’t predict collective human behavior. “The methodologies that we have access to, these mathematical formulas, do that for us. But you have to understand that there’s no possible way that these mathematical formulas can predict the outcome of these patterns on a trade by trade basis, only on a series of trades. So when I get a signal from my methodology, at the most fundamental level what this is telling me is that the odds are in my favor that somebody is going to come into the market (this is what the pattern means) and bid it higher than here if I bought or offer it lower than here if I sold. That’s all that it’s saying. Now they’re either gonna come or they’re not, and so as a result I don’t look at this as being a ‘right’ or a ‘wrong’; I look at this as How much distance am I going to give the market to move away from my entry point to tell me that they’re either going to come or they’re not, and any further is not worth the cost of finding out.”
I can't speak for Lescor, but my guess is that he learned to attain this mindset before he became a master trader.
пʼятниця, 11 січня 2013 р.
Post about Automated trading
A long time member here, although I don't post much. To this topic I can contribute so here it goes for whatever it's worth:
Is it possible to build an automated, profitable trading strategy? This is an oversimplified question (it doesn't actually ask the right kind), but in short, yes, without a shred of doubt. There are a number of algo shops that make a killing at this every day. There are a number of individual traders who make a great living at it as well.
Now, what is the barrier to entry?
There are at least four that I know of:
1. Money. Not as high as some might think because many algo strats are not very latency sensitive. However, one must be capitalized with at least 12 months of expenses in addition to trading capital. In my experience, 12 months wasn't nearly enough, but I am different, just like everyone else.
2. Experience. This is a very, very big one. In my view one has to be at least a promising discretionary trader (someone who knows how to take money out of the market, but not necessarily keep it) before any automation can be even thought of. One must understand the markets very well, through spending thousands of hours trading them instead of reading books and mining data. That latter point is key: a purely academic/scientific initial approach is fundamentally flawed as it takes out the organic nature of the markets out of the equation and thus prevents one from gaining a complete understanding. However, this approach must by all means be applied, but only after said understanding has been gained.
3. Time. It takes 18-24 months to code a dependable platform. Being able to code this platform implies proficiency in programming and systems overall, in addition to having obtained the above experience. Or, it implies that there is a free access to someone else's proficiency. In my experience, this is an exceedingly rare combination of skills, especially given the low survival rate. By the way, existing tools can be used and there is evidence that they can be used profitably. There are notable disadvantages and it may take an almost equivalent amount of time to get them set up/trained right.
4. Drive and commitment. Hardest and most important of all of the above. Have no illusion, making this work is very, very hard. And once you think you realized just how hard it is, it gets harder still. So, you must really want this. You have to want it so bad that you dream about your system/strategy/whatever at night. You think about it on your commute home and you think about it as soon as you wake up in the morning. And you work all the time. Evenings, mornings, weekends. holidays. Nights. And when all of this doesn't produce the results you expected, you take a hard look at yourself and do it all over again. And to make it yet harder you must balance it all with your life. The actually important things like your family, your parents, your friends.
So, is it possible? Sure thing.
"It's long way to the top if you wanna rock'n'roll."
/Wulfrede
Is it possible to build an automated, profitable trading strategy? This is an oversimplified question (it doesn't actually ask the right kind), but in short, yes, without a shred of doubt. There are a number of algo shops that make a killing at this every day. There are a number of individual traders who make a great living at it as well.
Now, what is the barrier to entry?
There are at least four that I know of:
1. Money. Not as high as some might think because many algo strats are not very latency sensitive. However, one must be capitalized with at least 12 months of expenses in addition to trading capital. In my experience, 12 months wasn't nearly enough, but I am different, just like everyone else.
2. Experience. This is a very, very big one. In my view one has to be at least a promising discretionary trader (someone who knows how to take money out of the market, but not necessarily keep it) before any automation can be even thought of. One must understand the markets very well, through spending thousands of hours trading them instead of reading books and mining data. That latter point is key: a purely academic/scientific initial approach is fundamentally flawed as it takes out the organic nature of the markets out of the equation and thus prevents one from gaining a complete understanding. However, this approach must by all means be applied, but only after said understanding has been gained.
3. Time. It takes 18-24 months to code a dependable platform. Being able to code this platform implies proficiency in programming and systems overall, in addition to having obtained the above experience. Or, it implies that there is a free access to someone else's proficiency. In my experience, this is an exceedingly rare combination of skills, especially given the low survival rate. By the way, existing tools can be used and there is evidence that they can be used profitably. There are notable disadvantages and it may take an almost equivalent amount of time to get them set up/trained right.
4. Drive and commitment. Hardest and most important of all of the above. Have no illusion, making this work is very, very hard. And once you think you realized just how hard it is, it gets harder still. So, you must really want this. You have to want it so bad that you dream about your system/strategy/whatever at night. You think about it on your commute home and you think about it as soon as you wake up in the morning. And you work all the time. Evenings, mornings, weekends. holidays. Nights. And when all of this doesn't produce the results you expected, you take a hard look at yourself and do it all over again. And to make it yet harder you must balance it all with your life. The actually important things like your family, your parents, your friends.
So, is it possible? Sure thing.
"It's long way to the top if you wanna rock'n'roll."
/Wulfrede
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