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Catastrophic Loss Days
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Created: by xevanchan Attachments:1

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Catastrophic Loss Days

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

@xevanchan

I would advise setting a daily loss limit because if you follow it then you know you will never lose more then x% on any given day. This knowledge makes it more possible to trade aggressively. However, as to whether or not it actually helps you, is based on specific factors of your trades. For example, if you use a tight stop loss then having a run of serially correlated losses can be a significant risk.

There is a trade off between trade selectivity and trade frequency. The mathematics work such that if you trade more selectively then you need to risk more per trade which increases risk of greater drawdown. It also tends to mean that you trade during more exceptional periods which are by definition more risky. If you increase your trade frequency then you risk less per trade but take more mediocre trades-- so trading costs become more predominant.

I suspect you need to become more selective in your trading. One technique I used in the past that seemed to possibly help was to try to identify the best trade in every X period window. If you can capture the best trade ideas of the day then you will not need to take as many trades.

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  #22 (permalink)
London UK
 
Trading Experience: Intermediate
Platform: InvestorRT/TT/DTN.IQ
Broker/Data: LCT/Iq Feed
Favorite Futures: SandP futures
 
Posts: 343 since Jul 2013
Thanks: 45 given, 151 received

1) ditch all and any oscillators. They are useless. They are lagging indicators that reflect the past and are basically weighted averages that you outsource your decision making to. In a psychological sense this is their siren like attraction to traders because they handily avoid you having to take any real trading decisions.

2) If you're trading SandP futures you should be using volume as part of your guide. If there is a volume spurt then what does this mean?

3) You can still trade short term but look at 5min/15min/1 hour charts for S/R levels.

4) Learn market structure/price action. I can recommend a bloke on youtube called Mark Douglas who does a great job on explaining how matkets work. I think his videos are titled something like beat the banks or stop hunts/stop hunting. You will gain a greater understanding why markets chop and why they take off.

5) Look at posts made by Dionysius Toaston this site. He owns (I think) a DOM application but more importantly he explains market structure (where people are likely to buy and sell and why) very well.

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  #23 (permalink)
London
 
 
Posts: 145 since Apr 2018
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tpredictor View Post
@xevanchan

I would advise setting a daily loss limit because if you follow it then you know you will never lose more then x% on any given day. This knowledge makes it more possible to trade aggressively. However, as to whether or not it actually helps you, is based on specific factors of your trades. For example, if you use a tight stop loss then having a run of serially correlated losses can be a significant risk.

There is a trade off between trade selectivity and trade frequency. The mathematics work such that if you trade more selectively then you need to risk more per trade which increases risk of greater drawdown. It also tends to mean that you trade during more exceptional periods which are by definition more risky. If you increase your trade frequency then you risk less per trade but take more mediocre trades-- so trading costs become more predominant.

I suspect you need to become more selective in your trading. One technique I used in the past that seemed to possibly help was to try to identify the best trade in every X period window. If you can capture the best trade ideas of the day then you will not need to take as many trades.

However, am l right on thinking that if you trade futures, there is always the risk of a major catastrophic loss due to limit down or up?

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

If you trade many contracts with a tight stop then a news event that leads to a quick drop in liquidity (slippage) that can cause larger then anticipated losses or, for example, holding through a report release by accident or mistake. The other major risk is holding over closed periods (such as weekends) where the market could gap up or down significantly on events over the closed period such as a weekend. There are other sources of potential large losses or gains such as leaving open orders out by mistake, software bugs, or setting the wrong order type (stop failing to trigger, for example). Some periods such as trading overnight are more risky due to reduced liquidity and higher potential for gaming behavior.



kazz View Post
However, am l right on thinking that if you trade futures, there is always the risk of a major catastrophic loss due to limit down or up?

Sent using the futures.io mobile app


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  #25 (permalink)
Market Wizard
desert CA
 
Trading Experience: Intermediate
Platform: NT7, TOS, IB
Broker/Data: AMP/wCQG, TDA, IB
Favorite Futures: CL,NQ,YM
 
Posts: 2,095 since Jul 2011
Thanks: 2,322 given, 1,658 received

Looking at your chart OP, I've been where you're at. Been there done that with the Woodies-CCI. I even got his paperback book with his setups at one point, sidewinders, etc. I would suggest trashing it completely. Woodies is a total fraud who somehow had a long time cult following. ( One of several painful, long ago experiences trying out indicators sharing this with you. )

It may be ok to have your wavetrend oscillator as your only oscillator, but mainly to be aware of divergences which can help guide but never used as an entry alone. The ACME volume levels are fine where it looks like at least some decent s/r or reaction levels.

As others have mentioned, if you're going by candlesticks, then it's good to learn some PA if you hadn't done so already. Brooks is a good start, but just for getting an idea of reading the PA, as I think he fails (maybe on purpose) to teach any viable entry methods. (if he even trades for real, and now just floats on the trading vendor income stream like the rest of them). The classic 20 MA can help as initial background structure (along with your acme levels) when looking at the PA. Then you can come up with your entries on the bars. My 2c and gl.


Last edited by Cloudy; December 17th, 2018 at 05:28 PM.
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