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How to Break Through in Trading

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charlotte nc
Trading Experience: Master
Platform: ninjatrader
Broker/Data: NinjaTrader
Favorite Futures: Emini (ES, YM, NQ, ect.)
Posts: 388 since Jan 2015
Thanks: 71 given, 965 received

What really Helped me.....

There are a ton of great ideas on this thread that are spot on. So clearly there is a lot of valuable information here already. But I'll just add the few things that really helped me figure out how to improve my systems.

This is more of an automated system that uses advanced computer programming, but some of the these concepts can be translated to discretionary trading as well.

1. I track the performance of all of my entries based on how the get filled and where the price immediately moves next. There are a few ways I characterize this. (I look to see if the bid - ask level changes) or if just the last price changes.) I break this down into three categories. Type A: = Flat. Price hasn't moved since my entry. Type B: Price moved in my favor. Type C: Price moved against me. Typically type B's will start with a 1 tick profit and lead to winners, whereas type C's will start with -1 tick and typically lead to losers. Build a few different entry rules and measure them independently this way. How do they play out? Were you on the wrong side or right side. Once you crack this move onto the next part.

2. What are my targets: (PT vs. SL?). How am I sizing each? What is this based on? There are a number of factors that can impact whether or not you succeed in sizing your opportunity right, but I will give you an idea of the one of the largest factors. (Volatility). If price is moving a ton, then your odds of a larger target being reached becomes more manageable. In low volatility situations small targets are reached more easily. So setting your PT / SL relative to this is key. You should measure the volatility and analyze your PT/ SL settings through tons of back-tests to see the correlation and help you find the sweet spot, but it is there.

3. Exits: Getting filled or not getting filled has everything to do with order types. A market order will get filled immediately whereas a limit order may only get filled after 2-3 touches, price pass through or never. So just know your odds of getting filled with your order types and sizing, play with different order types and figure out what works best for you.

The learning process I recommend would be:

1. Learn the mechanics of the exchange, the order types, the pros and cons of each and their implied house edge. Understand this forwards and backwards because this will be the key that determines if anything else works or fails so the better you grasp this part, the more everything else will make sense.

2. Don't even worry about having a defined system yet, but start testing independently entries, exits, and sizing. All three are completely independent and all 3 have very important value but you could be great at one and suck at two and your whole system will fail. So pick one of these three to start with, and learn to quantify it and measure it independently, to see how well you can get at just entering on the right side, or exiting quickly, etc.

3. Once you understand the mechanics of everything, and know the house edge, you can start to combine entries, exits and sizing into actual trading theory and start developing your system.

I would approach it in this order. Most people go straight to copying a system from someone else, but they lack the fundamental knowledge of points 1 and 2, so even a great system in weak hands will fail.

Good luck!


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