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The easiest part is getting in.
Some use designed strategies, signals and triggers to get into the market. Some use mechanical with discretionary considerations, some subjectivity, or conclusions from evaluation of price or other forces in the market.
Some use coin tosses, or cloud formations, or news, or the number of times their dog barks before 9:30 as an indicator.
The point is that there are a thousand reasons to get into the market. Whether you get out of the market with a win or a loss is yours to control. Just because you got in does not necessarily follow that you can use the same reason to get out. We never know how many trades it will take to fulfill our historical statistics. Considerations of risk reward, time decay, news all play a part in the life of your trade. Your mental outlook, your desire, fear, apprehension, expectation, and self control all determine the outcome of your trade. So, prioritizing correctly your thoughts and actions in a consistent way determines the outcome of your trade more than any other factors.
Can you help answer these questions from other members on NexusFi?
It is important to practice trading in simulation until you have some consistent statistics that demonstrate the possibility of your being able to make profits when going to cash trading. Using sim as a qualifier to get you into the market makes a lot of sense. However, trading sim with anything more than 2 contracts is pointless. Trading sim with 1 contract is more accurate since all you will be asking from the market will be 1 contract traded on the other side of your order. Not much impact on the market, and with decent volume most things will be relative. You will either be the winner or the loser of that single transaction. Trading with 2 contracts in sim gives you the opportunity to learn to manage a trailer and to have more options of money management to practice. So, by all means, spend enough time in sim to become proficient in your technical savvy, trade management decisions, and ability to understand and follow the order flow. Once you are satisfied with your performance, and if you have been honest in your sim trading actions, then you are good to go. Take an "acid test" and see how well you do. If you pass, then take 10% or 15% off the performance rate, and that is most likely going to be your starting out result. Good luck.
If you are looking for someone else to provide you with a winning system, and that system has no real cash trading results, and if that system traded with more than 2 contracts, and if the vendor selling you his system does not or has not traded it with their own money in the live cash market, be very wary of that systems ability to produce what you are looking for. I would say just walk away no matter how big the pie in the sky is being painted for you. Do not buy into anyone's delusion. Sim results only give you an idea of what could be possible in a sim world, not the real world.
If the system you are buying is mechanical and leaves very little by way of discretionary decisions, then you have a better chance at being able to duplicate that systems positive results. If the system is completely discretionary, then you will most likely have a harder time duplicating the results. You would have to be very much like the discretionary trader who designed the system.
Often, a system is very mechanical but in the beginning appears to you to be very discretionary. This is most likely your inability to understand the rules of the system or, more likely, your inability to follow the rules. We all start out with unrealistic expectations, and always think we know better. We often trade with too much hope and not enough focus on capital preservation as the number one priority. Thus when it comes time to make that all important decision of accepting a loss and moving on to act on the next trade opportunity, we fail repeatedly, or act inconsistently and sporadically.
Bottom line is that no matter what you see in sim trade results, unless strictly automated with no more than 2 contracts, your chance of duplicating the positive results reported is 50/50 at best. Finally, measuring the MAE and MFE is your best piece of information that will tell you if you will be able to trade that system. Understand the risk and pressure you will have to endure in order to make that system work. You need to see the trades, to the tick and precisely when. Without this information you are very much in the dark as to your personal reactions when using that system, and you may have a pretty steep mental battle to act appropriately when trading it. So, use sim as a starting point to qualify yourself, and then start really learning how to trade.
Take a typical trade room of 50 attendees who are following the lead of the rooms trade moderator. The moderator goes long, and 5 other traders follow his lead while the rest just watch or follow along in sim. The trade succeeds.
During the next few moments those 5 are all singing praises about how great a trade that was, how great the moderators trading is, and how wonderful it is to be alive. The 45 traders who did not take the signal live are all a bit bummed and disappointed that they failed to follow the instructions and take the trade. So, next time they make a mental point to just do it.
Then the next signal comes along. It is the same signal, same setup, same criteria. The moderator takes the trade and enters. Those first 5 traders take the signal, and this time about another 45 traders take it too. This time the trade goes about 4 ticks filling everyone on entry, but then comes back in steady fashion. The moderator understand what is happening, and his experience allows him to take a small profit, or a scratch or maybe a small stop. For everyone else who are just following, price comes back and takes out every-ones stop, to the tick! Well, what the heck just happened?
Consider that every trade or exchange has 2 sides to it. There are only so many contracts available, and there are only so many spots in the queue. This time the number of entry contracts were real, the number of exchanges were all real, and it could just be that while 5 contracts taking a position last time were the correct balance for the available inventory, the additional 45 contracts just sent that balance over the edge, and caused a shift in immediate control and a marker in the order flow that told some auto trading program somewhere that this time there were a lot of available contracts for the taking at the stop points. This is the basic fallacy of trade room
shadowing. While things would and usually do work for a limited few who are experienced enough to do what needs to be done consistently, the remainder of the traders who trade inconsistently often tip the balance of the statistical probability of a given setup and cause failures. Of course, if the instrument is really deep, like the ES, then it would take a room of many traders with many contracts to tip that scale, but then again, the ES is so full of machines, that at our level of trading, all we probably do is paint a bigger bulls eye on our collective room foreheads and announce that our contracts are now available for the taking.
Now, maybe I am paranoid, but then again maybe the text book statement about how insignificant your single contract is in the market is not really the full truth. If 100 traders all read that statement, and all 100 traders take the same position, then there needs to be another 100 orders waiting to fill them, and at both ends. If the moderator in any trade room understands this, then it would be to his benefit and a smart thing, to get in front of that queue, scale in and out, and use the room attendees as a buffer. Knowing that so many traders are piggybacking your trade is like the institutions knowing that many retail traders try to piggy back their positions, and you often get a lot of shake out price action as the institutions "no bus riders" program kicks in to make sure you are not taking one of their contracts. In reality, the market always wants you on the wrong side at the right time, and on the right side at the wrong time.
Beware of trade rooms with large attendance, and where the success rate is measured by the moderators track record. His record has almost nothing to do with you, and likely never will. You are basically on your own. Of course if all 1000 traders took the signal together, then maybe things might work better. Let's see, 1000 x 10 contracts is a lot of clout. Maybe the inventory will be there....? Well, there are just some strange ideas kicking around in my head after so many years of moderating and trading. I am coming to the conclusion that if you have something that works, keeping it very close to your chest is your best protection to ensure that it continues to work for you. The more you expose it, the more you allow other traders to use it at the same time, the more likely they are now your immediate competition for the queue spots, for the available inventory distribution, and only add to the inventory at the stop out positions. And in this essay I am not even going to go into the moderated sim trading scenario... yikes!
Automated strategies that have a clear and reliable statistical success rate are much easier to deal with. By limiting your discretionary decisions for valid signal identification, and by removing your hesitation and self doubts, you will be placed in the market with less stress and apprehension before the entry. After the entry, you will be free to spend all your energy managing your trade. Once again, you need to be able to see things clearly, and let things go when price tells you that the probability of failure on this particular trade is higher than reasonable. We can know over how many trades any statistical outcome probability might fulfill itself, but we cannot know on any single trade. So, being responsive to the evolving price action and market structure is your best bet to ensure that you control loss. However, if your automated strategy also has a defined draw down rate that you can live with, then you have less to do and can mostly just watch to ensure there are no electronic anomalies. So, I return to the previous statement about exposure of a really good thing.
So, what to do? Learn to trade on your own, devise and adapt things to your needs, and make sure the instrument you trade has enough volume and orders to warrant your trading anything more than 1 contract. Stay focused on your trading, not on learning how to be like someone else. Take what everything you read and learn from anywhere, and adapt yourself. The market will not adapt to you. Focus on discovering what you need to do to make things work consistently well. No two people will see the next tick the same. It is like clouds. Same cloud, you see elephants, I see gorillas. We can agree on today's cloud tomorrow, but right now at the hard right edge, you have to see things for yourself and make all your decisions based on what you see and how you see it; and understand what decisions you need to make to ensure you survive to the next trade. It is not rocket science, but it does take a lot of practice and focus on staying in the moment. Most ideas are a mush mosh of other strategies and approaches. This is how all of it is. You take what you learn and you make it your own. You keep it, you trade it.
IF you are ready to give this trade thing a go, then start with a few key pieces of information;
Here is what I use.
1 - 3 Range price chart with 1 ma / volume / momentum
2 - 30 min chart w/MVP
3 - 3 min chart w/ static pivots for yesterday.. last week, last month
I have a basket of strategies that I use as a descriptive language to structure the price movement on my chart. I trade any particular strategy depending on market conditions.
I add dynamic S&R using trend and channel lines, rectangles.
KISS is the key concept. Less is more. Wait, wait, wait for it. Get paid, go have a life.
Exercise self control at all times. Relax. You only need to win 1 tick more than you lose each trade. Then work on 2, 4, or more ticks as you get stronger and better.
Here is a quote from a recent private session with a lady trader who I am helping. I asked her what does she think the difference was between sim and real cash. Here is her answer.
"Sim vs Cash? It's like using a vibrator without batteries".
The goal in trading is to trade as well as you can, and to find out what you need to do to make your trading precise and better. In the bars is the exchange of all the traders, along with all intentions, agendas, desires, hopes, anger, miss-directions and deceptions. In the order flow is the commitment or lack of commitment at a certain price point or area. Everyone reads the left and we can mostly agree on things after the fact. To the right of the chart is where everything is different for all of us. Metaphysically speaking, we each create our reality by our interpretation of the next tick as it relates to the past, not the future. The future is here when the next bar starts, and becomes the past on the close of the bar. So, we have the capacity to create the future we want by having a clear mind on the hard right edge; and by accepting everything to the left as part of our future. By doodling on our chart, we remind ourselves of our past understanding, and we project our desire into the future. When we fail to see the past for what it really was, we get locked into our desire (which we are projecting into the future) which causes us to not continually re-examine the past and bring it to the hard right edge with a clear mind. If we are free from our desire, then we can add the past to the present, and create our future at the hard right edge. In many ways, the future unfolds one tick at a time. Each unfolding needs to be added to what we already know or understand, and a clear mind will help you accept the true reality of the present.
Weird...but it is pretty early and you caught me before I have brushed my teeth. See you soon. Ed
Wheel spin for profitable traders just means when you hit a wall and cannot increase. But when I mention wheel spin I am referring to traders who make money one day, and give it back the next day,, or make money this week, and give it back next week. In other words, they are not getting anywhere. The good news is they have achieved a level of control and a level of consistency. Being consistent is very important. It means you have your trading routine and actions down pat. You repeat the same actions. Once achieving this, you need to find what it is that needs fixing. Yes, this is where the journal is your bible. Somewhere in the journal is your answer. Working with a mentor who watches you trade helps a lot. Many traders are not entirely honest with themselves. But, if you have a good journal habit, you need to read your entries and analyze your trades. The answer is there. A mentor may just see it and point it out to you. But, from my experience, many traders do not want to hear it. So, they disappear at a crucial point in their trading. What is funny is that, also from my experience, these same traders return and are finally ready to listen to what they refused to listen to 6 months ago.
Also, it is not analyzing the bad trades. Analyze the good trades. These are the ones you need to do more of. Look at your MAE and MFE. The real MFE is in the real trade, not the stat given in NT. Risk - Reward is the name of the game. Winning percentage only has to be better than 51%. However, draw down for retail traders is almost an impossible pill to swallow. So, for me, scalping win percentage of 75% is crucial. Wheel spin is the make or brake stage for most traders. It is a tough - but very exciting place - to get to. Most traders never make it this far. So, if you are there, congratulations. Just be patient, and see what it is you need to do more of.
Some issues for wheel spin are:
They know they have to think more while in the trade....but what? The answer is to watch price and let it tell you what to do.
They know they have to be more flexible - so, no worse than 1:2 on anything, unless your win rate is 80%.
Get your risk per trade down as low as you can. IF your account is trading at 1%, then get the risk down to 1/4% per trade. This will help you weather the wheel spin learning curve.
You may have to sustain risk a bit longer, or be willing to give up the trade until price re-commits in your direction after shaking every weak hand out. Remember, you are the weak hand, so take as many BE as you have to. This is not a bad thing. Capital preservation rules all.
Leverage can play a very crucial role in wheel spin, but winning percentage must justify the risk.
Hope this helps.
budfox
Toronto
Experience: Beginner
Platform: Sierra
Broker: MB
Trading: ES
Posts: 313 since Jun 2013
Hi Jag,
Thanks again for the insightful posts.
I still am trying to understand what makes sim trading that different, given you previously mentioned "that whatever your gains are in sim, reduce it by 15% and thats what it would be in live trading"
So what in your opinion, aside from the psych aspect, and the order fills that make trading the ES on sim so much more different than live trading.
(i have traded stocks before live, but never futures)
That statement applies to the change in your head and the change in the fill speed and rate. I see almost no difference. So, ASIDE from the psych and your spot in the queue, almost nothing is different. If you have your trade plan all set and if you are able to follow it consistently, and if that plan is a profitable one in sim, then nothing should change much.... but it does. Realism is that in SIM if price came to within 1 tick of your stop and hovered there more than 1 second, you would most likely have been stopped out. Realism is that if price tapped your limit entry on a pull back, and did not hover on your limit entry price at least a few seconds, most likely you would not have been filled. Realism is that if you had a buy limit in, and price blasted through and filled you most likely you would have been slipped a couple or more ticks on the fill, and this includes the stop exit. So, fills and your psychological reaction to real loss are the main reasons why you will lose 10 or even 15% off the top of your performance on initial trading with real cash risk in the market.
BTW, I also see no way of avoiding the initial performance loss when going to cash after sim qualifying. So, I recommend your sim performance be as high as possible, higher than 70%. I also recommend you stack the deck in your favor by reducing your risk to less than 1/4% per trade by being well funded. You will need room to weather the initial performance loss until you regain control of yourself.
Everyone is different. Maybe it won't happen to you? Just saying that almost guarantees it will.
