Average ticks per hour using the DOM? | Traders Hideout


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Average ticks per hour using the DOM?

  #5 (permalink)

North Carolina
 
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
 
Posts: 644 since Nov 2011

1. Yes that's exactly what I mean. Most traders are "cheating" to obtain good results. What is cheating? It means they are trading infrequently or with larger stops then targets or even with a larger target then stop (big win). Trade with equal stop and target, constant size trade, and place a statistically valid number of trades per day and you will see how efficient the market is. It is possible for good traders to trade perfectly for a while but difficult to maintain. So, yes realistically it is easier and probably required to "cheat".

2. See, here's the problem as you try to reduce your risk-- you will increase your trading costs. Right, in generally stop losses will cut the profits a method can make by 30% to 60% if expertly utilized else 100%+. Even if you can predict your stop losses with near perfection, they still incur a cost. Imagine you near have perfect knowledge that if the market moves against 6 ticks that it will move to 12 ticks. This is never the actual case. But even if you had that perfect knowledge, you will place stop at 6 ticks. You risk slipping a tick on the stop but on the re-entry you also risk giving up a tick.

3. Right, if you don't take a stop loss you can usually hit a near target esp if you are usually leaning on the right side of market and don't get greedy. Think of it as a variance, you allow the stop to vary significantly because you put a tighter constraint on the target. There has to be a stop loss or else it is just gambling but you could risk some significant portion of your account and still have a low probability of taking a catastrophic loss.

4. Right, if you use stop losses then you have to be ultra-precise. You have to be right at bat. It means you will rarely take any heat on your trades anyway. So, you do not need to take hardly any risk.So if you can trade with a tight stop loss then usually there is no reason to risk-- let's say you think you need $1,000 of risk -- you probably can do just as well with 60% or 70% of that because if you are trading well your trades will be perfect anyway. Once you go beyond a certain point, for me it is around 70% of my loss limit then it was not possible for me to recover on the same day. If you have closed losses, that is. The only exception is with an open trade. One way to think or try to understand this you break some hypothetical risk limit down into portions-- let's imagine you will normally take 6 trades per day and have a 55% win ratio. On any given day, your probability of hitting 4 losses in a row would be ~9%. Relatively low, so it could be just as likely that you aren't reading the market well and/or that something is abnormal. The risk with the tight stop is fragility. Think about it, a 4 modest losses of let's say $225 adds up fast, that's $900 in loss. If the market doesn't move directional at least or more then that then you could have just used a larger stop and did better, at least saving commissions. Another way to think about it: the risk isn't primarily for your wins, it is more about cutting the size of your losses. Of course, you can always make more with more risk but because of the way the market works, the loss limit will jump so we are speaking within a fixed limit.

There is one other way only I know to produce the significant returns which is to trade both long/short at the same time. This is essentially going to flat at times. However, normally if you try to trade the high tail risk style -- you run the risk of having major blow outs. If you trade both sides of market, if the market doesn't nose dive (which it does often) then if you can scalp out closed profits faster then the market moves against your core then it generates a lot of possibilities for winning. However, you will normally have to carry a high risk per day which can be hard psychologically.


lax99 View Post
1) I'm not sure why you say it's difficult to overcome the cost of stop losses. Taking a loss is part of trading, part of the business, part of the game. What do you mean by "the markets are efficient"? Surely you don't mean that there are no opportunities because the market is priced perfectly...

2) I absolutely agree with this. Scalps and trades have to be taken within the context of the market and the context of the moment. Just clicking because X<Y && Z==Q is a recipe for disaster.

3) What do you mean by higher tail risk? Does this "higher tail risk" idea revolve around not using a stop in the market?

4) Again, I have no idea what you're getting at with this. Making more with less? Trading with less risk because you can't recover? I haven't heard either of these ideas before.



Last edited by tpredictor; April 17th, 2018 at 03:28 PM.
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