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How did YOU learn to successfully trade futures?


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How did YOU learn to successfully trade futures?

  #11 (permalink)
jubjub
Hartford, CT
 
Posts: 13 since Feb 2018
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tpredictor View Post
I agree you should preserve your capital. There aren't any cheering crowds for traders. Here's the thing: I know or suspect I learned quite a bit from people who might not have been able to trade themselves. For example, I recently seen an excellent pre-market analysis from a known or suspected "snakeoil salesmen" but it was on point. Now, that's a problem if you aren't being honest about it. If an educational vendor is charging and can only trade in sim then they should make it clear. So, that's the first idea you need to embrace that, provided you aren't paying for it, then it doesn't matter if the material you are learning works or not. You can make it work if it speaks to you.

The key is you have to make it work and/or do the original research into it. You need to get a program that allows you to test many trade ideas. Today, I use Tradestation primarily but there are other options out there. If you can get Wealthlab then it might be a good place to start but today requires a Fidelity account. Ninjatrader is more powerful then some other options but more difficult for prototyping. Ninjatrader has market replay capabilities.

Right, if you were doing well before that period then you might want to look at how you performed in that period. Really study it and maybe you can figure something out. Sometimes you have to adapt how you do things. And, that's the difficult part with getting consistent in the markets is that the markets do change. So you need some strategies for different conditions. Speaking of adaptation, if you were primarily using market orders prior then did you consider to switch to using limit orders? Did your losses come from market orders or limit orders?

If you weren't holding a position, you say you got badly burned but each position should have a stop loss. In volatile markets, a lot of traders want to use larger stops but it only works if you can set your stop beyond the volatility. So, in reality its like a compounding of risk. You can actually trade with relatively smaller stops in volatile markets far more effectively. Why? The reason is that you can capture higher R trades. You might want to track the average swing so you can be aware of changes, as well.

I think the absolute easiest way for you to become profitable is to specialize in one or two types of trades only. Build a system and verify that it works. Relax the constraints. Now, test yourself with historical data to see if you can improve the results with your discretion. You can do this much faster then in real-time. You now have a graybox you can trade! Now, try it live but keep it in the simulator for 2-3 weeks to no more then 3 months. If your results are good then go live. Your system should, probably, take 1-4 trades per day at most (keep the volume down). You might try managing the exit but taking every trade or you might try to pick and choose. I wouldn't recommend changing the stop loss but you might try managing the exit, i.e. to take a bigger or smaller profit or close for a small loss. When you go live, go live exactly as you did in the simulator.. everything must the exactly the same.

Right, your objective is to figure out where your personal strengths are. I'm a tape reader but I suspect only about 1/2 the people can learn to tape read due to cognitive processing style. Right, the screen time-- a lot of people want to learn to tape read by staring at the tape. It takes a long time to learn it that way. What you need is to develop your market cognition-- thinking about the market and figuring it out in real-time.

Here's an idea, study the market for 1-2 hours per day. Jot down your trading ideas. Take as many trades as you can in the simulator. Run two sim accounts even. Ignore any losses. Now, afterward look at the results and your notes and focus on your best trades. Take those ideas and develop your own indicators or trading system. Backtest the idea and really study that one trade. Look how the idea or trade works with various filters or how it looks when different indicators are applied. That's your specialty trade.

@tpredictor, I can't thank you enough for crafting this thoughtful answer---you sound like a great mentor. I think part of the problem for me is not having sensible stops and trying to time the whipsaws. My best trades seem to involve momentum plays and scalps. I PDT'd out of my TDA cash account, so went with Etrade. Etrade OptionsHouse is a great compact web platform, but severely limited. I will take a closer look at NinjaTrader and Tradestation and I'm going to read your reply a few times. I also have a fidelity account. Though they don't do futures, wealthlab looks interesting. Hopefully this thread will keep going and other traders can share what learning sources and techniques made things click for them. It sounds like this very forum is a part of that, and I hope to contribute back on my journey.

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  #12 (permalink)
 tpredictor 
North Carolina
 
Experience: Beginner
Platform: NinjaTrader, Tradestation
Trading: es
Posts: 644 since Nov 2011

@jubjub Thanks! Hope others will add/contribute too.

@Scalpingtrader

That is an excellent question. The difficult part is that you have to make the structure. There are several different ways that grayboxes can work and you don't need to use just one method. For example, it could filter your trades or it could funnel up trades for you to take. One way I suggest to start building a graybox is to take your existing setups and try to program them. In that case, you might not require historical profitability. The other method is to take an already profitable system or pattern or trade that has a strong backtested edge. The "problem" with most systems that work is they trigger infrequently. So, you don't get a lot of setups to gain experience with.

So, that's why I mentioned to "relax the rules". If you think about it, in order to add value, you have to take more risk. So, let's say you can build a method that is profitable taking say 30 trades per year. If you can relax the constraints to take 100 trades per year. Maybe, you can deploy the same system or edge on a shorter time frame, as well. The goal is to get the number of trades up so that you can trade it on a frequent basis because discretionary traders make use of implicit learning or pattern recognition. As an aside, a niche for systems is trying to exploit patterns that are infrequent. Those sorts of patterns that discretionary traders won't have any experience with.

Right but once you understand the variables that best determine the profit for a method then why would you want to take more risk by trading with discretion? It is a good question. As Dr. Steenbarger was mentioning, you can also build out. Let's say you have a method that generates average 30 trades per year with a high profit factor. You relax the rules and generate get it up to 50 trades. Next, you deploy the same or similar idea on a shorter time frame. So you can see how you could really multiply out a system.. If you can add in say one or two other setups using similar process then it wont be long before you would have several trades per day to manage and apply discretion too.

All that said, people think of trading as a "singular" activity but trading is like cognition. There are many styles of trading and the strengths that you can use with a given method are going to be different.

Remember, you don't have to trade one method. So, let's say you have some really creative ideas about the market. Well, you could still take those but you have your graybox or system setup to help you take out the consistent profits.

Right, the question is how do you know whether or not it works. There is no way to prove anything about the future but that is why you need to build out a process for testing things. Kevin Davey has a lot of good information on how to test strategies rigorously. But, you need to decide what level of testing is sufficient for you. I do not think walk-forward is absolutely required if you test over a long history and you incubate the strategy. The incubation is a must. Right as for your discretion you have the baseline of what the strategy will do.

For the discretionary testing part, you treat it the same way as a system. There is a set of data that you can see. You can study the setups and how they work. That's the data you train yourself on. You can cheat on this data. You want to cheat actually to get better and better. Next, you test yourself on unseen data. That's your real test. If it looks good then the final stage is incubation/live monitoring or sim trading. It is a lot of work but putting in the work is often what makes the difference.

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  #13 (permalink)
 Grantx 
Reading UK
Legendary no drama Llama
 
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wldman View Post
I do not disagree with that PB. SIM, very quickly becomes a crutch for the week. Past that, nothing will be a better motivator to getting something figured out that losing a couple handles every trade.

I believe folks spend a great deal too much time trying to create a "system" to generate results. If your approach is results generate the system, you are better positioned to make it, adjust or fail sooner.

Dan

I agree with you. Sim trading does not reveal the crippling subtleties of ones personality. Its all the little things that add up to define you as a trader. A few thoughts:

1. When you are live trading you will hesitate. You wont on sim.
2. You will naturally want to limit your losses by using tighter stops but on Sim you put them anywhere.
3. A string of losses on live trading will leave you irritated and questioning (dont pretend otherwise) but you will recover immediately when you are Sim trading and your mind is clear for the next opportunity.

The pain of losing is what allows you to see your weaknesses, it is impossible to know yourself otherwise.

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  #14 (permalink)
 
wldman's Avatar
 wldman 
Chicago Illinois USA
Legendary Market Wizard
 
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Grantx View Post
I agree with you. Sim trading does not reveal the crippling subtleties of ones personality. Its all the little things that add up to define you as a trader. A few thoughts:

1. When you are live trading you will hesitate. You wont on sim.
2. You will naturally want to limit your losses by using tighter stops but on Sim you put them anywhere.
3. A string of losses on live trading will leave you irritated and questioning (dont pretend otherwise) but you will recover immediately when you are Sim trading and your mind is clear for the next opportunity.

The pain of losing is what allows you to see your weaknesses, it is impossible to know yourself otherwise.

that does not understand this will struggle significantly and without good reason.

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  #15 (permalink)
 
paps's Avatar
 paps 
SF Bay Area + CA/US
 
Experience: None
Platform: TS, TOS, Ninja(Analytics)
Trading: NQ CL, ES when volatile mrkts
Posts: 1,739 since Oct 2011
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Grantx View Post
I agree with you. Sim trading does not reveal the crippling subtleties of ones personality. Its all the little things that add up to define you as a trader. A few thoughts:

1. When you are live trading you will hesitate. You wont on sim.
2. You will naturally want to limit your losses by using tighter stops but on Sim you put them anywhere.
3. A string of losses on live trading will leave you irritated and questioning (dont pretend otherwise) but you will recover immediately when you are Sim trading and your mind is clear for the next opportunity.

The pain of losing is what allows you to see your weaknesses, it is impossible to know yourself otherwise.

i have a slight different opinion on this. When you have the mindset of a Winner. When Winning is everything. All you are doing with simming is ensuring day in and out, with rigourous discipline that thing which will make you Win against the Biggest, Mightiest, Skill fullest, Brightest, Best, etc etc etc.

When you approach your Trading with DD "Due Deligence"....with the mindset that you Win or yr $s is in the other mans pocket...Sim'ing or no-Sim'ing makes no difference. Sim'ing infact helps solidify. Lets put a Full Twist....if someone cannot have discipline, knowledge, etc etc in Sim'ing how can that person marvellously start performing in this High Performance field with excellence in live. that all my weird 2cs say.

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  #16 (permalink)
 
xplorer's Avatar
 xplorer 
London UK
Site Moderator
 
Experience: Beginner
Platform: CQG
Broker: S5
Trading: Futures
Posts: 5,944 since Sep 2015
Thanks Given: 15,447
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paps View Post
i have a slight different opinion on this. When you have the mindset of a Winner. When Winning is everything. All you are doing with simming is ensuring day in and out, with rigourous discipline that thing which will make you Win against the Biggest, Mightiest, Skill fullest, Brightest, Best, etc etc etc.

When you approach your Trading with DD "Due Deligence"....with the mindset that you Win or yr $s is in the other mans pocket...Sim'ing or no-Sim'ing makes no difference. Sim'ing infact helps solidify. Lets put a Full Twist....if someone cannot have discipline, knowledge, etc etc in Sim'ing how can that person marvellously start performing in this High Performance field with excellence in live. that all my weird 2cs say.

Hi paps, good points

Perhaps something we can all agree on is: validate a new approach in SIM, but when you have validated it, forget SIM and move to live.

There's the danger of going back to SIM as a 'safe' space IMO, and therein lies the rub, because once you are there you will tend to risk more - in other words, trade more aggressively than live as Grantx suggested.

I know in the past I did that - and after a while you realize you start sweating when you place your live trades but not caring when you place your SIM trade, and that's when the alarm bells should start ringing in your head as you are treating them differently.

Once you are confident your edge is there, you need to 'man up' and abandon SIM. Use SIM thenceforth to test new edges but never go back to it for established ones.

My 2 cents worth!

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  #17 (permalink)
 
xplorer's Avatar
 xplorer 
London UK
Site Moderator
 
Experience: Beginner
Platform: CQG
Broker: S5
Trading: Futures
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Grantx View Post
I agree with you. Sim trading does not reveal the crippling subtleties of ones personality. Its all the little things that add up to define you as a trader. A few thoughts:

2. You will naturally want to limit your losses by using tighter stops but on Sim you put them anywhere.
One approach that may help with enforcing discipline is using a standard risk both in SIM and live (e.g. fixed stop or fixed ATR-based stop)

1. When you are live trading you will hesitate. You wont on sim.
3. A string of losses on live trading will leave you irritated and questioning (dont pretend otherwise) but you will recover immediately when you are Sim trading and your mind is clear for the next opportunity.
The pain of losing is what allows you to see your weaknesses, it is impossible to know yourself otherwise.
Hence why, in my view, once you are positive you have your edge, you need to wean yourself off SIM. It will be tough at first but it will be the only way to be thrown at the deep end and forced to swim with the sharks.

Just a couple of thoughts above, that reinforce my view from my prior post

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  #18 (permalink)
 
paps's Avatar
 paps 
SF Bay Area + CA/US
 
Experience: None
Platform: TS, TOS, Ninja(Analytics)
Trading: NQ CL, ES when volatile mrkts
Posts: 1,739 since Oct 2011
Thanks Given: 2,176
Thanks Received: 1,726


xplorer View Post
Hi paps, good points

Perhaps something we can all agree on is: validate a new approach in SIM, but when you have validated it, forget SIM and move to live.

There's the danger of going back to SIM as a 'safe' space IMO, and therein lies the rub, because once you are there you will tend to risk more - in other words, trade more aggressively than live as Grantx suggested.

I know in the past I did that - and after a while you realize you start sweating when you place your live trades but not caring when you place your SIM trade, and that's when the alarm bells should start ringing in your head as you are treating them differently.

Once you are confident your edge is there, you need to 'man up' and abandon SIM. Use SIM thenceforth to test new edges but never go back to it for established ones.

My 2 cents worth!

Hi @xplorer you have stated the problem. If you look deep it is not the SIm problem.

" you start sweating when you place your live trades but not caring when you place your SIM trade,"

this is not what i meant. you have to exactly do what you do in live on sim. what i used to do is...on a loosing day on sim...no treats so that i feel the pain.

anyways each to his/her own....cheers n goodluck

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  #19 (permalink)
 
Rrrracer's Avatar
 Rrrracer 
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Maybe up to the individual? I know what when I sim, I feel a lot of the emotions I did when I was live... tension, anxiety, elation. That said, I'm getting better at practicing mindfulness while trading, recognizing those situations and bringing myself back to "center".

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  #20 (permalink)
MicAwe
Hilo, HI.
 
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Great thread. Thank you everyone

I am a beginner trader myself. I'm using a system because honestly I wouldn't know where to start in developing my own trading strategy. However, I always figured if I want to truly succeed then I need to outgrow this system.

This thread has confirmed all of those things to me. I'm glad there are others trying to develop their own strategies here as well.

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Last Updated on March 3, 2018


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