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ES and the Great POMO Rally
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ES and the Great POMO Rally

  #181 (permalink)
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jonc View Post
tigertrader, based on my limited experience, I would totally agree with what you had stated. 90% of my gains over the years come from only 5% of the trades I made.

But strange enough, even though I see these results I often act to maximize my winning probability.

My question is is this the only method you use and had they work for you consistently?

Absolutely not, see my post #163 in this thread. I will put on a relevant options position, as a speculative adjunct to my "normal" intraday trading methodology. It's actually part speculative exercise and part lotto ticket, which inherently means that the frequency of winning trades is not going to be high. Therefore it is not a consistent enough strategy to use as your primary source of income unless you're incredibly well capitalized. As such, I consider it a supplement to my day-trading/swing trading income.

This doesn't mean that this strategy is more risky than short term trading, because the profit and loss are proportional. A short term system will never allow you to be in the trade long enough to catch a big move. You end up with small losses, but you also end up with small gains.
When you trade for the long term, you have a more positive expectation in terms of the size of the move. If you were trading some short term pattern predictive system you would never be able to participate fully in a major move.

The guiding principle behind the methodology is therefore relevant to how you approach trading in general. It goes back to the fact that most traders feel better with a system that produces more winning trades than losers. They are more concerned with being right and how often they are right, than how much they are right and the relative size of their winners compared to their losers.

This is why I don’t believe in systems that use a fixed risk /reward strategy or fixed amount model. For example, a system that simply uses a fixed percentage of the account size as the unit size and the same fixed stop /loss unit with the same fixed entry/exit unit for every trade. This kind of system may make money, and even have a high frequency of winners, but it will not make as much money as a system that takes volatility into consideration when sizing the position, or a methodology that doesn't limit the expectancy of the system.

The implication of this line of reasoning is that traders do not place enough emphasis on trade/money management. They are far too concerned with finding the perfect indicator that will determine the perfect entry point. But in fact money management is probably the most important skill in trading, because it keeps you in the game, and optimizes your capital usage.
Money management is not only about where you place your stop in an effort to control your risk, but it also about the size of your position relative to the amount of capital you are trading, along with expectancy. At all times, given the risk you are taking, your account size, and the volatility of the market, you must be aware of the optimal number of contracts to be long or short.

A position sizing model tells you ‘how big’ of a position to take, and can help determine where to place your stop. Improperly placed stops will not only limit your risk, but will also limit your opportunity. If not placed properly, fixed price-based stops and trailing stops can seriously degrade your performance by limiting your profitability; so traders must have the patience to wait for good entries, along with taking into consideration the aforementioned factors.

Expectancy is the average amount you can expect to make (or lose) per dollar at risk. It is important to look for trades that have a positive expectation in terms of the size of the move. The key to expectancy is not only how you enter the trade, but more importantly, how you exit it. This means developing the ability to identify highly profitable opportunities and then take maximum advantage of them. How much and how often you add to a profitable trade, how long you are in the trade, and where you get out of a losing trade , is critical to increasing profitability while controlling risk.

Proper money management optimizes the use of your capital. Risking too little doesn't give the market the opportunity to allow your profitable trade to take place and grow, and risking too much will quickly blow up your account. Most traders make the mistake of taking a reactive view of risk, in which their overriding concern is avoiding losses and protecting small profits, in lieu of a more aggressive management of risk which results in a more efficient use of capital.



Last edited by tigertrader; March 6th, 2011 at 11:01 AM.
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  #182 (permalink)
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Charles Biderman On How The Fed Continues To Rig The Market And Why There Will Be A QE 3...And 4 | zero hedge

Exclusive: Bill Gross Dumps All Treasuries, Brings Total "Government Related" Holdings To Zero, Flees To Cash - No QE3? | zero hedge

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  #183 (permalink)
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Great articles! TRF with a duration down to 3.89! That's serious "take cover" posturing IMO. I'd be curious to see what the other taxable F.I. funds are doing. The MBS market certainly isn't spiking in anticipation of the Fed monetizing that segment either. Looking at MBB (iShares MBS ETF), it's made no attempt to close that enormous gap. The Bernank has to be feeling some serious pressure by now. Meanwhile, equities have been range bound for the most part and forming somewhat of a pennant on the daily chart.

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  #184 (permalink)
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ES continues to consolidate within the consolidation - the longer this goes on, the more forceful the breakout should be as momentum traders jump in and those caught on the wrong side exit. Intra-day range action to continues to be subject to sudden reversals, but the recent tendency for the ES , has been for early sell-offs, followed by late day strength.

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ES and the Great POMO Rally-es-03-11-135-min-3_9_2011.jpg  

Last edited by tigertrader; March 10th, 2011 at 08:59 AM.
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  #185 (permalink)
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Upside $TICK extremes are running +800, while downside extremes are only +600 indicating a slightly bullish distribution, however $ADD has been unable to stay in positive territory today, along with $TRIN being unable to travel below 1.00, indicating that volume is concentrated in declining stocks, and may signal an underlying weakness in the market. In addition, high-beta large cap tech stocks are under pressure.

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  #186 (permalink)
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Typical Range Day as the market traded equidistant fom the RTH only PP, and the VWAP lines. Both the PP and VWAP provided excellent refrence points in this range bound market, as we see a narrow value area with price repeatedly moving away from value, but unable to attract volume at higher/lower levels. This reluctance to accept higher/lower prices is followed by the market's continued return back to the PP and VWAP. There is little slope to the VWAP as volume is transacted evenly above and below the average price.

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ES and the Great POMO Rally-es-03-11-15-min-3_9_2011-p.jpg   ES and the Great POMO Rally-es-03-11-15-min-3_9_2011.jpg  
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  #187 (permalink)
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Had you guys watch the interview with Ray Dalio on cnbc recently? He thinks that the equity markets are still attractive in term of price and 2011 will be a good year.

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  #188 (permalink)
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Global stocks are trading weaker with the European Euro Stoxx 50 index down -0.71% and JUNE S&Ps are under pressure.Treasuries and the dollar are higher, with the dollar index at a 1-week high, while most commodities fell after Chinese and German exports unexpectedly declined. The US stock market yesterday fluctuated on both sides of unchanged and turned lower late as weakness in technology stocks offset a decline in oil prices: Dow Jones -0.01%, S&P 500 -0.14%, Nasdaq Composite -0.51%.

If the liquidity drain contiunes, the tech-stock sell-off will gain momentum, and the implication will be a downside breakout in the ES.


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  #189 (permalink)
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tigertrader View Post
Global stocks are trading weaker with the European Euro Stoxx 50 index down -0.71% and JUNE S&Ps are under pressure.Treasuries and the dollar are higher, with the dollar index at a 1-week high, while most commodities fell after Chinese and German exports unexpectedly declined. The US stock market yesterday fluctuated on both sides of unchanged and turned lower late as weakness in technology stocks offset a decline in oil prices: Dow Jones -0.01%, S&P 500 -0.14%, Nasdaq Composite -0.51%.

If the liquidity drain contiunes, the tech-stock sell-off will gain momentum, and the implication will be a downside breakout in the ES.


Thanks TigerTrader! That pennant formation I was mentioning looks to have broke down with price dropping below the trendline and sitting right on the 50 day moving average. This is crucial in a potential change in trend at least from a swing trade perspective. Price held here on the last retracement in Nov/Dec. We could be in for a wild next few days.

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  #190 (permalink)
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Private Banker View Post
Thanks TigerTrader! That pennant formation I was mentioning looks to have broke down with price dropping below the trendline and sitting right on the 50 day moving average. This is crucial in a potential change in trend at least from a swing trade perspective. Price held here on the last retracement in Nov/Dec. We could be in for a wild next few days.


Brilliant minds think alike!!! LOL

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