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Webinar: FuturesTrader71 (FT71) on Risk, Sizing, Scaling and Trade Management
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Webinar: FuturesTrader71 (FT71) on Risk, Sizing, Scaling and Trade Management

  #131 (permalink)
Market Wizard
Hungary
 
Futures Experience: Intermediate
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Lots of knowledge in this webinar. I particularly liked the Q&A at the end. Big thanks!!

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  #132 (permalink)
Hyde Park,
Chicago, Illinois
 
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Platform: e*trade
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The first 15 minutes was my favorite. Just re-listened to it and took some notes:

Price risk vs informational risk
  • Price risk is yanking your order because you want to see how the market behaves at that price (aka waiting for confirmation)
  • Informational risk is taking the price because you anticipated trading @ that price level
  • Professional traders take informational risk because taking a better price puts a trader closer to knowing whether they are right or wrong.
  • We never know what is going to happen. We need to accept this as a trader in order to move forward.

Emotional capital
  • Success is based on how well you execute your edge
  • Taking a bad trade debits your emotional confidence and makes you less confident
  • Repeteition of the exercise of trading... taking your edge and knowing it has (and will continue) makes it easier to see the market for what it is
  • When you are low on emotional capital, you can't see the forest for the trees and you suffer greatly as a result
  • When you become more confident, your view of the market completely changes... it is like being in the matrix almost
  • Depleted emotional capital will lead to lower actual capital. That is why it is best to sit out the market when you are in a funk


Last edited by Bermudan Option; February 10th, 2013 at 11:20 PM.
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  #133 (permalink)
Hyde Park,
Chicago, Illinois
 
Futures Experience: Intermediate
Platform: e*trade
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Posts: 484 since May 2011
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did anyone get the book that Futurestrader91 recommended (The Nature of Risk by Justin Mamis) I am about halfway through and it is a good read. It reminds me of Trading in the Zone as the author redefines how we look @ risk as traders/investors.

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  #134 (permalink)
Site Administrator
Manta, Ecuador
 
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Bermudan Option View Post
did anyone get the book that Futurestrader91 recommended (The Nature of Risk by Justin Mamis) I am about halfway through and it is a good read. It reminds me of Trading in the Zone as the author redefines how we look @ risk as traders/investors.

It's on my bookshelf, unfortunately I haven't had time to read it.

Please start a new thread to discuss this book as you go through it and share your thoughts.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

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  #135 (permalink)
Site Administrator
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There is now an AMA (Ask Me Anything) thread for questions aimed directly at FuturesTrader71:
https://futures.io/vendors-product-reviews/26325-futurestrader71-morad-askar-ask-me-anything-ask-me-anything.html

As part of our AMA series, FT71 will also be presenting two 30-minute live screen sharing sessions each month. This is in addition to any normally scheduled "full" webinar presentations.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

Reply With Quote
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  #136 (permalink)
Elite Member
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Bermudan Option View Post
did anyone get the book that Futurestrader91 recommended (The Nature of Risk by Justin Mamis) I am about halfway through and it is a good read. It reminds me of Trading in the Zone as the author redefines how we look @ risk as traders/investors.




Big Mike View Post
It's on my bookshelf, unfortunately I haven't had time to read it.

Please start a new thread to discuss this book as you go through it and share your thoughts.

Mike


I have started a new thread for this invaluable book and am in the process of posting a thorough review, and also plan on posting snippets that I wanted to highlight for the benefit of everyone: The Nature of Risk: Justin mamis - Discuss this book!

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  #137 (permalink)
Trading Apprentice
Los Angeles, California
 
Futures Experience: Intermediate
Platform: ThinkorSwim
Favorite Futures: Emini ES
 
Posts: 24 since Mar 2017
Thanks: 4 given, 5 received

Hello everyone,

I'd really like to continue this conversation and get more specific. The video near the end at around 1:42:00 was about giving the trade room to work, keep the stop at an area that your no longer right. This confuses newer traders for sure.

I've had months of performance where my stops where just hit and day by day leads to death by a million cuts. I've also had trades where performance goes up with a negative risk/reward ratio.

The reason why I say this confuses newer traders is because when talking about the risk/reward ratios, the amount is in ticks. A few ticks in the emini SPX amounts to nearly $50 or one point. What happens is traders think they can get away with super tight stops and end up overtrading, not paying attention to trade location.

The sweet spot should be where risk/reward is positive, trade location has some logic, otherwise we would all be flipping coins with a black box. One also has to account for a daily loss limit as FT71 has mentioned elsewhere. It keeps guys from fighting trends all day long and not living to trade another day.

I'd like to know what others think about this and where their "sweet spot" is

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  #138 (permalink)
Market Wizard
North Carolina
 
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miktrading View Post
I'd like to know what others think about this and where their "sweet spot" is

One way to view the market is that there is competition among different leverage levels. For example, if you know the market will go up say 5 points at some probability then why not trade it for 1 point with larger size. This is basically arbitrage. The ability to arbitrage is based on your leverage capacity and edge. Markets are said to be efficient because professionals are arbitraging all the edges away in real time. So, if you don't trade with enough leverage even if you can predict or forecast the market, you won't be able to make a worthwhile return. However, leverage works both ways. The risk is that if you try to trade for a small target with a small stop then it becomes easy for a larger trader with more capital to game your stops-- or the market as a whole can do that too. For example, let's imagine a large group of traders attempt to arbitrage the same profit but act in unison. That entire group of traders is at break even and their stops now represent the largest profit potential in the market. So, you need the right leverage.

You can track both the realized risk and max risk for evaluating performance. If you are asking what your max loss limit can be, it depends on your probability of realizing it. I'd be willing to risk a larger amount if my probability of realizing it were relatively less and it increased my profit. In percentage terms, obviously larger accounts will want to risk less while smaller accounts will need risk more. A risk of 2% to 5% seems to be reasonable to me but smaller accounts may need to risk more and very large accounts might desire to risk less.

Right, with smaller stops you run the risk of serially correlated losers while larger stops expose you to tail risk. With more frequent trading, you need a higher confidence of statistical profitability while if you trade less frequently then any house edge becomes less relevant especially if you are trading a large reward to risk.

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  #139 (permalink)
Trading Apprentice
Los Angeles, California
 
Futures Experience: Intermediate
Platform: ThinkorSwim
Favorite Futures: Emini ES
 
Posts: 24 since Mar 2017
Thanks: 4 given, 5 received


tpredictor View Post
You can track both the realized risk and max risk for evaluating performance. If you are asking what your max loss limit can be, it depends on your probability of realizing it. I'd be willing to risk a larger amount if my probability of realizing it were relatively less and it increased my profit. In percentage terms, obviously larger accounts will want to risk less while smaller accounts will need risk more. A risk of 2% to 5% seems to be reasonable to me but smaller accounts may need to risk more and very large accounts might desire to risk less.


I think that's where the harmonic rotations come into play. What makes your probability valid, and why? In percentage terms, I believe it has to keep the trader from risk of ruin, so less is better. That's all assuming that not much leverage if any is used.

Stop sizing also shouldn't be so wide that if you are wrong, you have no trade left. For example if you were wrong on a direction, yet by the time you get stopped, you can't take the other side.

If the rotational study is based on 1 minute or 5 minute bars, yet the move to meet your reward parameters takes 30 minutes, you still have the issue of being stopped after decent MFE. Meeting the 5 minute rotation avg of say 5 points, but your risking 10 to make 20, so the next rotation could be down and continue down.

Maybe I didn't understand the concept as well.

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