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Ninja Trader Custom Order Book - 1LDom - Source Code
Most people think when they lose $$ it is a mistake.
I don't think that is the issue.
I have no Holy Grail or Crystal Ball.
EVERY trade I take is a calculated risk assessment.
I have not found a way to be 100% sure the trade will be successful
(I think you have not either)
If the result of the trade is what I PREDICTED then I was correct.
If it does not, I was wrong.
This does not mean I made a mistake, just that my expectations were not met.
A mistake would be made (IMO):
If I took the trade and did not assess the risk of the trade and accept that risk fully.
If I took the trade an did not correctly assess my 'edge' by following my rules.
By making a trading error (i.e. click buy when I meant to click sell)
Other things can probably be added to this list but I'm not trying to make and exhaustive list but only give an example.
In my opinion, mistakes are trading errors and not necessarily correctly predicting the direction of the market.
FWIW
Rejoice in the Thunderstorms of Life . . .
Knowing it's not about Clouds or Wind. . .
But Learning to Dance in the Rain ! ! !
@Adiratus, I see you are from Bratislava? Believe it or not I have actually visited there. Watched my first ice hockey game in Bratislava.
Any case your question. The reason most guys struggle with this is one of two reasons in my opinion, either there trading process is endlessly complex. Example of this, read a few blogs, you see guys making a three hour disection of a trade. Double top this, low volume, trip shoulders, then a loop de loop then another etc., this is not helpful in my opinion because what are you trying to do here? figure out the market, already we have discussed you won't figure it out, today it made a loop de loop and went up, tomorrow it will do a loop de loop and go down.
So the other case is the complete opposite, no plan at all, or no idea of how to construct a plan and basically just making trades based on what you think is the right time to enter. Again trying to guess the market.
For me, I have a simple set of rules, rules for managing my risk, rules for managing my entries and then rules for dictating how I should be behaving during various periods of my trade.
Risk control is simple, work out your capital, all of that part. I won't repeat, many many books on this, you need to risk very small. what you think is small and then divide by 5, I use about 0.4% per trade.
Rules for managing entries. This is important because creating simple rules allows you to get in the market, get warmed up, begin to feel the flow of the day. If you keep this very simple then it is easy to assess whether the conditions were correct for an entry. It was you who defined them. I can tell you 100% of the time, if my entry was incorrect or not by looking at my conditions for entry. The main focal point here is to make it as automatic as possible and take much of the guess work out of it. This in itself will lead to helping with the problem you address. Spending all day wondering whether you should or shouldn't have taken the trade is a serious waste of time. So just set your simple rules and be done with it. The second important part for me with my entry is to ensure that the rules are inline with my overall plan and in my case I'm looking to find spots that will lead to large potential moves. That's it for that part.
Thirdly I have rules to govern my actions during a trade or campaign. I know average times of good moves etc. that I am targetting, so I have a bunch of stuff. if its the first few days etc. I am looking to build size, not decrease or kill the position because of nerves or because I am guessing etc. I'm just looking to do what my plan says, regardless of the market.
Finally I have rules for when it is time to finish up. This is all based on my testing and what has shown to me will create positive expectancy over time.
You need to understand what you are looking for in trading. What is your edge and how you are trying to extract your profit in order to formulate your rules to be inline with your goals. Notice my rules are more about my own actions, not about the market. My own main edge that I look for is market bias or trend in various levels of timeframes and I do not try to guess when they occur I just know that statistically they will occur and when they do I need to ensure I play them properly. The rest my risk control handles.
Another thing, I believe very much in intuition, I believe in the power of the subconcious, it can do absolutely amazing things so you must also give it room to work it's magic. Everything does not go completely mechanical for me, I have a mechanical framework as such that I allow myself to operate within. For instance once I have taken my first baseline risk entry and I'm looking to work the market for a few days from there I can bring in more judgement, so my defining rule is that I cannot ever go beyond the risk of my initial base entry, if the market takes me out then it's over, I look for a whole new play and wait again for the conditions. Enforce discipline. but if the market starts to go my way then I can play with it a little bit, look for the signs that you start to pick up and feel if you watch it long enough, of course my guidelines are always in place, if it's early in the move and I've managed to accumulate some excess risk I'm looking to build the position bigger (without ever going beyond what was the original risk).
So you see I have guiding principles. When I review of course I look at everything I did, but I do not look at it and say ah here was a upside down hat and I should've gone long instead of short etc. I look at the frequency of my trading through the day, compare it to my best days, if it was a bad day, was I starting to get to active. If it was slow, why was it slow, how was the market profile compared to previous slow days, how was the volume compared to average days.
I notice you say you are a perfectionist, I am too, you will need to learn to drop this like a bad habit. It is my experience so far that in trading. You need to bring a blend of perfectionism in terms of being highly organised, keeping your records etc. but at the same time you need to drop that linear mentality when it comes to the day to day battling it out in the order book, this is much more like sport. When you learn to play a shot with the racket, you don't define how you swing the racket from this angle with head looking at this angle and foot at this angle etc.. this would be ridiculous. Trading is no different, you learn the basic idea of what is good form, you try to adhere to these principles and then you practice, over time you start to play a shot and the more you practice the more you feel it rather than think it through, at times you will have to go back to basics, to remind yourself of those principles etc.
Anyway, post is getting on. Sometimes I really get started.. lol
I appreciate your post. Good explanation of what are really mistakes.
So you did visit Bratislava ! LOOL Yeah we are hockey country, people are pretty crazy about it - for real. We had world championship here in 2011. However, i am not personally so crazy about hockey - for me, i am crazy about completely other things but you know - everyone is different
There is also a thread on futures.io (formerly BMT) to duplicate the new method he is using for the profiles with a NT indicator, but I can't recall the thread as it wasn't titled very well because I can't find it.
In response to changing market conditions, Pete Steidlmayer has developed a new method to analyze the markets. Steidlmayer presents his recent research discussing the importance of understanding how price and volume databases as tools for market analysis …
Are the volume strips just a succession of volume at price histograms that restart when a certain range of prices has been broken? Sounds like putting the Gom ladder on a range chart. Or restarting the histogram of the OneLotDom based on range bars.
By the way, what this world needs is a GLOB. (Gom Ladder with order book.)
Already have the GLIG (Gom Ladder with improved graphics)
Just don't attach my volume strips to each other with meat glue, OK?
"If we don't loosen up some money, this sucker is going down." -GW Bush, 2008
“Lack of proof that something is true does not prove that it is not true - when you want to believe.” -Humpty Dumpty, 2014
“The greatest shortcoming of the human race is our inability to understand the exponential function.” Prof. Albert Bartlett
