NoDoji trading stats

Trading for a living is not about feelings, it's about hard stats. Feelings are fine if you're taking a fixed amount of money you plan to lose to the casino to see if you can get lucky. The reason your emotions are getting in the way is because of how you feel about setups, for better or worse.

Trading for a living means combining setups and money management rules that place the odds in your favor over a large enough sample size to generate profits despite the random distribution of individual wins and losses.

I never "feel" an edge technically (except those "continuation in a very strong trend" setups). I "know" an edge technically. I "know" that based on the hard statistical data I've compiled for a given pattern in a given context that the odds are in my favor. I also know that the outcome of this individual trade will be random, but if I trade the same pattern/context over and over again, the net outcome of the randomly distributed individual outcomes will be positive.

I no longer care how the setup feels or how it feels once I'm in the trade, because feelings used to sabotage my profit potential badly. I'll never forget my friend and I taking a short trade together, both of us "feeling" that there was support at a nearby level as the trade moved in our favor, both of exiting quickly for .10 profit at the exact same moment, only to watch price immediately break and drop over 1.00 in minutes.

Wolf knows my trading well and can confirm that I am now much better at sitting with the discomfort come hell or high water until the market says loud and clear that the setup is no longer valid.

I can't emphasize enough that feelings have no place in trading. You do research, accrue knowledge, develop rules based on that knowledge, then hold your nose and buy or sell when (and only when) your rules tell you to.

CL trading guide by NoDoji

Here is my cautionary message to anyone wanting to trade CL intraday because you've looked at those charts and seen all those nice price swings and you think of how much money you could make trading just a few contracts.

Take the time to dissect every price swing of .30 or more every day for at least a couple months worth of days.

If you find patterns that lead into these tradable price swings more often than not, and you can recognize them at the hard right edge of price action, then you have the first "gift" necessary for profitable manual trading: pattern recognition skills.

Then analyze the max favorable and adverse price excursion (MFE & MAE) using various trade entry methods, for each appearance of the positive expectancy patterns you found. Keep doing this until you end up with what appears to be the potential for net profitable trading setups.

If you can do this for a couple months worth of trading days, then you have the second "gift" necessary for profitable trading: work ethic.

Next, use the data you collected to set up up rules for trade entry, stop placement, and profit-taking, and apply your rules to simulated live trading for a couple months. Trade every appearance of your chosen setup(s) and manage each trade according to your rules.

If you can do this successfully for a couple months, then you have the third "gift" necessary for profitable trading: discipline.

Once you obtain sim trading results that are in line with your back test results, trade your plan with the smallest size possible in a live trading account, trading every appearance of your setups and managing each trade according to your rules.

If you can do this successfully, then you have the final "gift" necessary for profitable trading: a trader's mindset.

If you do attain that level of success, then pay it forward.

ADD: It took me waaay more than a couple months to go through each of those steps because I was not "gifted". But I did have a huge work ethic.

solfest method CL

It is now factored into my trading algorithm and produces results like this:

Dan:

Not sure I understand your question. The different time frames all have slightly different criteria and they all produce their own blue bar.

With blue bars in place on the longer time frames I can enter on the entry chart if it turns blue.

I have tried, and asked Sierra if there is anyway to have the entry chart pick up the signals from the longer time frames so I would only have to look at one chart.

They say there is a way but I have not been able to do it.

I have no idea if I answered your question or not. :)

April 10, 2011 5:30 PM

Oh, you want the whole system. :)

The length of the MAs really doesn't matter much, I just want to see them stretched out and showing a good trend. I mainly use 8, 21, and 55.

Unless I'm using 5, 13, and 34. :)

The setting for the others are shown on the chart.

I watch 89 tick, 3, 10, and 60 minute charts.

Unless I'm watching the 2 minute. :)

Remember you can't trade my system just as I can't trade yours.

You have to own your system, own it emotionally and intellectually.

Peace.

8/11/2009

Beautiful

2 Minute Crude Oil Chart
Those are some nice signals. Right? The first one was a stop out but the other 2 are things of beauty. Right? Solfest the "genius" must be counting his crude dollars. Right?

Wrong.

What happened? Remember how smart you were yesterday. Yes I do. In fact that was the problem. Recency bias reared its ugly head yet again, recency bias, we place more meaning on the most recent events rather than our historical results. Remember yesterday I was bragging about my brilliant reading of the ADX. So did the ADX let you down today you ask?

No. The ADX levels were through the roof. The problem was I didn't take it in. I saw it but I traded like I did yesterday. I moved stops too soon today. In yesterday's weak trend that was the right move, but today, in the monster trend the thing to do was hit the entry button and let the pre programmed stops do there thing.

I didn't do that. I let my "recent" success from yesterday cloud my decision making today. Result being I hit my daily stop and had to shut it down.

Trading is hard. :)

8/03/2009

Renko Bars and Range Bars

WARNING: This post is very long and has no pictures. If this alarms you skip down to the next post which has few words and shiny pictures of charts.

Pandu the FX trader from Australia asked me this on an old post.

"I want to know what do you mean by 'The hard stop value is set as a % of the range bar we are trading.'. What is the meaning of 'Range Bar'? Also, what parameters do you use for the ADX you use?"

So that along with all the google searches for renko bar trading I get on this blog I thought I should take a moment and discuss why I quit using range bars and or renko bars.

In a word, time.

We all have access to the same data, we all live in the same space and time continuum. I heard that on Star Trek I think.

I don't move the market. I want to be looking at what most everyone else is looking at. Why? Because I'm going to ride along with whomever, collectively or all by themselves, does move the market.

So we're all looking at price move and we are all breaking down that price action with different methods. We have volume, time, and tick data and all of it tracks the same price but presents the trader bar closes in different ways. I want to look at the chart picture with the method, time, that I think most other traders are using. Note I said think, not know.

Of course everyone who uses one of those categories thinks it is the best. Until they change, just like I have. :)

Back to Pandu's question. The range bar measures a set range of price movements and when that range is met the bar prints.

A renko bar does the same except the range has to be all in one direction for the bar to print. So with a 10 tick renko bar the range has to be all up or all down for it to print. A 10 tick range bar could open at 70.25 and have 5 ticks up to 70.30 and 5 ticks down to 70.20 and the bar would print. A 10 tick renko bar would have to have 10 ticks up to 70.35 or 10 ticks down to 70.15 before it would print.
There are other little nuances to them both depending on your chart service but I'm not going into that here.

Got it? I hope so it exhausted me explaining it.

So the benefits to both are when price moves quickly the bars start printing. We need the bars to print in order for our indicators to, well, indicate. It may be a shock for some but all our indicators are lagging. Sorry. They need the price bars to move in order for them to do their "magic".

This all sounds good and works for many people, like the man who loves rain (Rainwater) and really wants to be included in Jules private blog but is too shy to ask. (Rainwater uses range bars not renko bars)

Actually it sounds so good it's making me wonder why I gave them up?

Renko, I gave up because there can be too much intra bar movement and it is too hard to find your way in with renko alone. I started using time charts with renko and then eventually just dumped the renko. Renko charts are great for keeping you in a trade and could be used for a technical exit, but then I started trading for a target rather than a technical exit so renko went bye bye.

Range bars are probably of more use but I found they gave me too many false starts and I need to control my pushy the button fingers.

I control them with time.

Time, I have to wait. I use 1 and 2 minute bars so I don't wait for long but for me, let me say again, for me, I find that time works the best.

Am I late sometimes? Yes. I give that up in order to stay out of some false moves.

So there it is, my trading still looks at range via the ATR, I need to see some movement in one direction via the ADX, I need price on the right side of the EMA's, I look for a higher high or lower low and away we go.

The longer multiple EMAs are there to simulate what a longer term chart would be showing in terms of trend and direction. Like a 5 and 15 minute chart or so.

This is a very long post with no pictures which may be alarming to some. I better place a warning at the top of this post.

Oh yes the rest of Pandu's questions. My stop on the range or renko bar was a % of the bar I was using. So for a 20 tick range bar I may use 75% of that as a stop, 15 ticks. With the ADX and ATR I am looking for a minimum threshold to be met before I start looking for signals. That's all.

P.S. Those renko bar charts were sure pretty.

10/19/2011

I'll just pretend that didn't happen

Yes, I think that is for the best.

Break of the white bar high. :)

It's an ADX function that turns the bar white.

7/28/2009

Change

I did peek a little at charts while on holidays, which was a mistake, and found myself squinting at little charts on my laptop. This got me to thinking about getting the CL trading down to one chart instead of two.

I only use the one minute chart for soybeans but have found with crude oil I need to see trend and range on both the three and one minute charts in order to stay out of trouble. Besides having to watch two charts I have also found that when I see blue on one of the charts I want to hit the button rather than waiting for conformation from the second chart.

So being the quantitative genius that I am I added one minute to three minutes, divided by two and came up with a 2 minute chart.

Still playing with the ADX and ATR settings but found a couple of nice trades today. The trend was so strong this morning blind monkeys could have made money today. Only time will tell if the settings will keep me out of the flats and in the trends.

2 Minute Crude Oil Chart

Solfest said...

Sierra allows you to "program" in an excel spreadsheet the parameters you want from your indicators with a price bar colour change or arrow showing it's time to trade.

For me thats the levels of the ADX and ATR, angle of an EMA, and price on the trade side of the EMAs.

http://tradingcrude.blogspot.com/2008/12/i-make-fire.html

 

12/10/2008

I Make Fire!

Ever see the Tom Hanks movie Castaway? Remember the scene, after days of trying, when he finally makes fire. He starts screaming and dancing around his fire.

Picture one Norwegian, Danish, Swedish, English Canadian dancing around his computer screaming I make bars change colour.

I am a programming master!

Maybe not.

Actually the exceptional Irish trader walked me through some basic programming in Sierra Charts. Sierra uses an XL spreadsheet to allow you to program some parameters of your plan.

The 5 and 1 minute price bars now turn colour when certain conditions are met. The spreadsheet is looking at the ATR, ADX, and CCI and turns the price bar blue for long and white for short. It's not a black box but does give me a visual of when I need to start paying attention.

I have not tried to program anything on the renko charts as they are all ready colour coded for direction, and I am looking at swing highs and lows on it. In other words I wouldn't have a clue on how to program that.

Today's trade action was horrible for me and evidenced by the severe lack of colour on my minute charts.

Here are a couple of 1 minute charts from yesterday and today.



 

Anonymous said...

solf,
Do the yellow bars indicate that you should stay out of market ???
Does your exceptional Irish friend have a room or web site that interested traders can visit ???

Thanks.

December 11, 2008 4:25 AM

Solfest said...

Yes they do.

Contacting the EIT is difficult as he lives in a hollowed out volcano, except when he is at his weekend place, the underground lair.

December 11, 2008 6:56 AM