My account as been approved by the clearinghouse, going to have my first trading day of my career sometime this week, I want my first trade ever to be profitable. So scared yet excited at the same time.
Great great thread. I have been reading this thread over and over again for inspiration as to your approach to the markets. It has certainly helped me view my trading differently and not be afraid of taking small profits and focusing on consistency.
I have a quick question with regards to managing commissions. By taking such small scalps of the market and with the use of leverage, the commissions will quickly add up. I understand that if you have a positive expectancy, net comms, you should not be concerned about how much you are paying the broker.
In your opinion, is there a maximum % of commision to profit that you would seek to not breach? Ie, if you are paying $4.50 RT, and your target is 4 ticks on 6E, you are actively paying 9% of profits in comms.
Do you recommend working up a positive expectancy for a period of say 6 months and then leasing a seat on the exchange?
Many traders get stuck on this. So, the price you pay to the broker is 9%. That is the cost of doing business. You have an overhead and you do need to consider this because it affects your bottom line. So, yes, it sucks that the broker makes money on you. If you are making enough that the broker % is not eating up all your profits, then who cares. Later, when you are in a better position you can negotiate with him for better rates. I have no set opinion on how much you give the broker as long as it is not so much that this venture is not profitable.
As far as leasing a seat on the exchange.... get to the point where that questing is really a serious one, then think about it. For now, just concentrate on making enough to make this entire venture worthwhile.
Last edited by Jaguar52; July 22nd, 2013 at 05:24 AM.
Reason: anothe thought
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I just wanted to thank you for all the time and knowledge you've put into this thread. Tons of priceless information here. The problem, will people listen?....or do they have to learn the hard way? I didn't listen. Now I am
With the growing number of automated programs and the increasing programming savvy, exposing definable canned reliable strategies can pollute those strategies and cause them to fail when applied in a larger context. Look at it this way; your strategies work great with the 2 contracts you are trading. Then you move to 4 and it starts to fail more often. There are so many factors that go into a mechanical strategy being successful, that the slightest change can affect it - and it can be either way, negative or positive. Now imagine a lot of people trading the exact same strategy.
Also, trolling pattern sniffers look for activity patterns and that increase in contracts could put you into a new buy/sell pattern that becomes recognizable. Then the trouble begins.
I had a person I was helping and I encouraged them to blog their progress. They were so successful at what they were doing, that I realized it was time for them to stop blogging what they were doing. Today, they have not blogged any more explanatory details, and while they post their entry, exit and results, they have stopped explaining the why and how of it. I think every trader comes to the point where keeping your edge, even the slightest miniscule edge, is important and crucial to maintaining it sharp. So, if you are blogging detailed explanations of what you are doing, and how you are doing it and when, why, etc in a public way; then think deeply about what the fundamental new electronic market is really about and how it is structured.
Maybe I am paranoid, but I think about all the data collection going on around me from my computer browsing patterns, from my cell phone ipod, ipad, cc swipes, and corner cameras; and can you tell me that the electronic market is not capable of this same kind of tracking? How much money is at stake here? Keep in mind that inventory control is not the mass herd of beasts running wild. It is a controlled, manipulated, and calculated exchange event designed to catch the most amount of traders on the wrong side at the right time and on the right side at the wrong time. Distribution is the setup for the real event of accumulation. Tomorrow, that same accumulation becomes distribution, all for the purpose of making money. The giants slug it out, and you and I do our best to follow the stronger, more reliable giants.
The only solution to remaining truly untouchable, to my mind, is when you trade price purely; using dynamic support and resistance, dynamic buy/sell patterns developing in real time as a consequential result of previous events. Often that previous event was a miss-information event, a fake, a ruse to simply enact the trap or give a false view of trend or intention. I tell people to look for the place where the maximum amount of pain can be inflicted on the largest amount of traders. So, as I wait in the shadows, I am looking for the weakest hands and waiting for their demise to start. But I do prey on the weak along side the giants whose coat tails I am trying to hang on to. I am more of a scavenger.
I have no particular strategy except to read price (buy/sell) patters to the left side of the chart, and to keep an unbiased, non opinion, blank minded approach to the incoming tick, and the price bar building at the hard right edge. At all times, I focus on the long, short, and sideways of every price bar, and just wait until a true intention is revealed, or the other possibilities are eliminated. Then I just trade what comes. Most all my 'rules' have little to do with the entry conditions or the exit conditions. Getting in is the easy part. They have to do with how to make money in the trade I am in, regardless of the direction it is going in. I actually don't care what direction it is going in. I trade a strategy of no strategy. But, if I were to define my strategy it is the strategy of not losing money on any trade. So, if money management is a strategy, then that is what I call it.
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This is a great post! Being new to trading, I am planning to use this procedure. It seems like a long time, but will ensure that my account stays open for a long time after I start trading live. Thank you for this insight.
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Jaguar, that was a very enlightning reading, as this is pretty much what I have come up with after years of trying to trade trends, patterns, support and resistance, not even mentioning indicators. In the end most reliable and dependable moves and patterns are relatively small and are based on fundamentals of human psyche and mass histeria. Run stops, trap weak hands, jump on the bandwagon.
The only problem with it that I can see is these patterns are in many cases small and will require a lot of size to really keep making money. How do you combat slippage and other execution issues?
Yes, that is the big problem with scalping for most instruments. Size increase can affect your success rate as your pattern and size gets on the radar and you are looking for a bigger fill. An instrument like the ES or treasuries can probably handle larger size, but it moves like a snail and it is hard to follow intention and order flow. Since I trade the CL, I hit a wall every time I go in with a 6 lot. So, my solution was to go in with sets of 2 and 1. I will not enter with a lot size larger than 4. Same with the 6E. I go in with sets of 4 and 2. It is the only way I have found to stay off the radars, and still get decent fills on both ends.
Other solutions could be trading closer to the source in Chicago from a server with automated entries. I do not have an auto system that can be programmed to trade dynamic price, so for me, this is not an option. But if you have some decent mechanical strategy this can be an option. Another option is once you have some seed ticks, then find a place to go for a runner. I try to gain 15 ticks first just scalping, then I try for runners. However, I will not turn a winning scalp first target into a losing trade. So, most times I get about 3 or 4 scartches and break evens before I manage to get a runner of more than 15 ticks. Hey, its a jungle.
Hope this helps.
Another thought that really gets me is that many times I get everything right, but cannot account for the 'zombies' who just ruin it because they move their stops too close and make it cost effective for a quick slamming. Since I do not know the future, all I can do is watch to see if price is testing or actually going back for a quick cheap pickup of too close stops. Momentum can be dangerous if too many jump on it, and it becomes too costly to counter it. But, it is fascinating (and frustrating) to see how much traders sabotage themselves with fear (False Evidence Appearing Real).
Last edited by Jaguar52; August 26th, 2013 at 01:40 PM.
Reason: another thought
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