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

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  #101 (permalink)
 
 
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emerson View Post
I remember that he had another coin-toss experiment in his Webinar 3 with a different set of rules that yielded some really interesting results. The problem was that there wasn't enough samples. One interesting rule (hopefully without giving too much away) was that the system couldn't trade during the first and last hours because there is too much directional bias during those times.

I would like to see variations of these experiments with 1000's of samples.

You are correct. Beginning prop traders were not allowed to trade in the first and last hour and that included the coin toss. A learning trader used to have a better chance in chop. I didn't want to complicate things, so I left it out for simplicity. Anyone can vary the rules as necessary.

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  #102 (permalink)
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trendisyourfriend View Post
No disrespect but maybe an analysis such as the one provided should have a prominent disclaimer. Have been inspired by the most recent commentary from Lance Begg:

"There is a tendency called hindsight bias in which the human mind views past occurrences as having been more predictable at the time than they actually were. And there is a confident belief in the fact that you would have entered at the right time, and quite likely would have targeted just the right area for maximum profits. The reality is far different. Uncertainty prevails at the hard right edge of our screen and there is actually no way we can know how we would have felt, decided or acted, were we actually trading this live. So... while this analysis actually will appear quite simple, it may not have been so obvious at the time."

Not sure there... I trade what I see which is volume and order flow based while paying attention to the big picture's context. Lance Begg? Lol! "I come from a land down under!" I think he's pretty spot on actually. He's a realist IMO.

What I'd like to know was, what was the resistance at the swing high for that particular day? I would have loved to join the offer on that. I don't trade the ES much anymore but that looked like a great day/opportunity. Like I said, it's very easy to rip apart a chart. The comments I made would have been real time based relative to volume on what was unfolding and how I trade. I hope it was fairly clear.

Cheers,
PB

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  #103 (permalink)
 
 
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Lornz View Post
I watched the webinar and I must say that I take offense at his surfing comment.

There are no wave machines in Oslo, but there is one in BÝ:





However, that's not a proper way to surf, so why not take a trip to Lofoten instead?




I demand an immediate retraction and apology!

LOL...comment withdrawn. Happy surfing! Is the surfing in the pool vs. surfing in Hawaii the equivalent to demo trading vs. live trading in the markets?

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  #104 (permalink)
 
 
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TI Anon View Post
No, I'm confident his spreadsheet is right.

The point I was trying to make (poorly it seems), is in this series of 14 trades, 1 trade (#5) was mainly responsible for the result. And, since the sample size was so small the results were of little, if any, practical value.

You commented about the series of posts of traders becoming frustrated, etc. and quitting in disgust. After years of seeing people come and go, one reasons stands out as the cause. They all start trading without understanding the task at hand by using the same type of education; after-the-fact and faulty statistical analysis by self promoted trainers. Successful trainers train, successful traders trade.

One of the most amazing things, never discussed, that contributes to the high failure rate is the large amount of effort put forth in training people how to "embrace losing". Brokers, trainers and even peers all do it. Brokers because they want to limit their liability. Trainers because they know their method doesn't work,(they used it and it didn't work for them-that's why they became trainers). And, peers because they have been brainwashed by the other two.

When the Chicago Bulls were interviewing Derek Rose, before drafting him, they asked what he didn't like most about playing basketball. He immediately responded, "I hate losing!", they knew at that moment they had a potential MVP. It's no wonder so many traders fail, when so many are teaching them to be "great losers". It is only possible to train "how to be a winner" when you have an actual winning strategy. Without one, you have to teach "how to be a good loser", or you'll soon be out of business.

(I know there is a good chance I'll be attacked for these comments. I'll only consider the attacks by long term profitable traders-with verifiable proof- to be of any consideration, what so ever. Comments by others will be treated in kind.)

That's all good except that I trade. I don't think anything made me a better trader than when I started backing people and started to discover the BS I was believing about myself and how I traded because I would be asked questions about it.

Your example on Derek Rose; whom I have met, is not anywhere near what happens in trading. Derek doesn't lose indefinitely after he throws the ball. The score doesn't keep dropping into the deep negatives until he takes position of the ball again after his last shot and does something with it. Hence, he doesn't have to "be a great loser".

If you don't take your losses in trading and get good at it, then you are just another guy "waiting for the market to turn" so that you can scratch the trade or make a tick. I cut my losses FAST. If it doesn't behave the way I expect, then I pull the trade and wait for the next setup.

In my experience, if a trader spends less time trying to be right and more time simply putting on the trade when the setup shows up and closing it when it doesn't work, they would be much better off any day of the week. Again, I watched guys struggle and my knowledge didn't come from a "training book". I paid dearly for what I'm sharing.

Thanks for your continuous questioning of anything and everything I'm doing though. It keeps things that I haven't looked at in a while fresh for me.

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  #105 (permalink)
 
 
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Big Mike View Post
No trader wants to lose money.

But if you take the Derrick Rose example, embracing losers or being a good loser would be equivalent to Derrick missing a lay up. If he flips out, loses control, throws out all his strengths of how to play good ball and just starts fouling everyone and hoarding the ball, missing shot after shot after shot, then he is going to have a problem.

He doesn't do this. He is a good loser when you equate a loss to a particular shot within the game. He keeps his cool and doesn't focus on the missed shot. No. He moves on to the next shot, because that is what matters.

Traders need to be a good loser in the terms they need to learn that missing a lay up is part of the game. It is not a big deal, so don't make it one. By being a good loser on these individual plays, or trades, then the game as a whole (trading session, day, week) can come out on top as a winner because you've remained in control and allowed your experience as a player prevail.

Mike

Much better put than what I said. If he changes his shooting technique because he missed a free throw, he would put himself through a new learning curve and a heck of a lot of frustration (which many ppl who trade on a retail level do).

If he misses a free throw, it may be the biggest of the game, then he doesn't celebrate it. He doesn't like doing it, but he can't carry that to the next game and the next free throw. That is what I'm calling "being a great loser". You just let it go and move on and stick to your plan. That is my point.

TI Anonymous takes my words to mean that you should just lose and be happy about it. I am not happy to lose on a trade regardless of the size I have on. That is not my goal.

I feel like no matter what is said and how it is said and how many examples, analogies, references or whatever is used, some people will take the most negative connotation and possibility of doubt and emphasize THAT. Which to me is interesting, given how many traders have come to me over the years and have received my full attention and help for no return whatsoever. I believe in Karma and I love to trade and I love to teach and change lives. This is why I followed the prop route and later, when I stopped backing people, I decided to just continue honing those skills online for whomever wanted to listen.

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  #106 (permalink)
 
 
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omni72 View Post
Seemed to work pretty well for this guy:


I don't recognize the guy in the video. Who is he??? A failure I'm sure because all he talks about is how much he loses.

I have watched that video at least a few hundred times over the years and have posted it on my twitter thread several times. Love it!

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Private Banker View Post
Thanks for sharing that link. I think this is a good example of what traders should not do as FT71 refers to a few times. I'm not too familiar with FT71 and these are only my opinions of course. However, I've been trading for a long time and have managed millions of dollars in client and proprietary capital and know what makes sense and what does not. I think in the example provided in the link, it shows how one can get out of trouble while being biased on a direction.

I think it's extremely important to do one's "homework" so that they are prepared going into each day's trading session however, it is extremely important to remain open minded. You can have a "slight" bias on direction but I think it's more important to recognize and change what the order flow is telling you. By looking at the chart provided on how the day turned out, you were trying to swim against the current all day. Had you watched the open and order flow, there clearly was downward pressure on the market. Establishing a short position off vwap and cycling through positions on retracements and thrusts back into trend would've resulted in far more of a profit while taking risk off as the trend developed further. Remember, previous areas of support are often tested and when they're blown through, the market can reward you big time. Same goes for areas of resistance.

I understand the point of the description given but I think this was a case of being overly biased on direction and being lucky enough to have caught that first retracement higher which was the majority of the overall return in the trade(s). So, my point here is don't fight the order flow!

Anyway, I realize hindsight is 20/20 and it's easy to sit here and rip through a chart. My intentions for showing this are not sanctimonious in any way and are simply to emphasize that while it's important to have a game plan, you need to be open to adapting to what the order flow is telling you (sorry for being repetitive but I really want to drive that home). The chart below provides an alternative view which shows what I'm referring to based on what is happening TODAY. High and low volume nodes are important to watch as we can see how the market accepted and rejected price in the past however, the market is constantly changing and what was in in the past, may not be the case tomorrow which is why it is extremely important to remain open minded and trade what your screens are telling you.

I mean no disrespect to FT71 as I'm sure he is an excellent trader/teacher or whatever and this is an example of just one day but I had to step in here as opinions vary. I guess this makes the market move as people have different ideas on what is happening or will happen based on their trade set ups, etc.



Cheers,
PB

Very constructive post and thanks for that. No offense taken and I welcome this opinion.

One thing that is missing here is that I think you are assuming that I'm fading the trend all day. I trade both sides of a move as long as the trade is taken in my "areas to do business" (homework). This isn't for everyone not is scaling out of trades. I am simply sharing what works for me and it is based on day-in-day-out refinement for years of trading.

Thanks for posting your view on that day!

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monpere View Post
In terms of trade management, my experience has been that 'all in/all out' has always proven to be superior. I believe most average traders like scaling out because it makes them feel good. That in itself may be a valid reason to do it, but it generally does not perform better.

...

Fair enough...I prefer all-in/scale-out for most of my trades and scale-in/scale-out on major areas of interest; but that is a rare occurrence. The reason I am all-in/scale-out is because I know myself and will do what it takes to gain full perspective on the trade by reducing risk whenever possible. You can run statistics on it and so on, but I know that I'm much better in a scaling approach than all-in/all-out. I will be the first to say that I would suck at trading a 1-lot.

However, your definition of "losing trade" is not quite accurate. As I show in that coin-toss example sheet, it is a small sample in this case but the probability of hitting a full stop versus scaling out and then using those profits to offset the stop are very evident in my live trading. Many people don't see the logic in this mathematically, but it is quite simple.

Also, I often use my theoretical average as an "uncle point" and so the damage is not significant AS LONG AS I get my first scale on the trade (which happens very often). This subject is actually very enlightening but too much to write about here.

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  #109 (permalink)
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FuturesTrader71 View Post
Very constructive post and thanks for that. No offense taken and I welcome this opinion.

One thing that is missing here is that I think you are assuming that I'm fading the trend all day. I trade both sides of a move as long as the trade is taken in my "areas to do business" (homework). This isn't for everyone not is scaling out of trades. I am simply sharing what works for me and it is based on day-in-day-out refinement for years of trading.

Thanks for posting your view on that day!

Thanks, I was just going off of the link that was provided which had an example of multiple long entries that were on a spread sheet that occurred on a down trend day. Of course, we don't know what kind of day will develop based off of the open. All we can do is pay attention to the levels of significance and trade from there. As I mentioned, clearly this is just one day of trading and know it's completely impossible to comprehend a trader's preference/strategy and I'm sure you know what was occurring that day and would probably be thinking similar to I. My intent in providing that commentary was simply an alternative view on how things were unfolding relative to the trading that occurred per the spread sheet. No one was more right than the other. At the end of the day, we all walked away profitable. That's the beauty of trading...

Cheers,
PB

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Private Banker View Post
Thanks, I was just going off of the link that was provided which had an example of multiple long entries that were on a spread sheet that occurred on a down trend day. Of course, we don't know what kind of day will develop based off of the open. All we can do is pay attention to the levels of significance and trade from there. As I mentioned, clearly this is just one day of trading and know it's completely impossible to comprehend a trader's preference/strategy and I'm sure you know what was occurring that day and would probably be thinking similar to I. My intent in providing that commentary was simply an alternative view on how things were unfolding relative to the trading that occurred per the spread sheet. No one was more right than the other. At the end of the day, we all walked away profitable. That's the beauty of trading...

Cheers,
PB

Can you really rely on volume profile analysis in hindsight? Isn't it possible and likely that the volume profile as it looks on a historical chart, looked very different in the middle of the day while the profile was developing?

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  #111 (permalink)
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monpere View Post
Can you really rely on volume profile analysis in hindsight? Isn't it possible and likely that the volume profile as it looks on a historical chart, looked very different in the middle of the day while the profile was developing?

I don't know about that software, but gomi's MP adjusts to the bars visible on the chart, so you can see precisely what the profile would have looked like at any time. It's the ongoing development of the profile that tells you what's happening intraday.

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  #112 (permalink)
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monpere View Post
Can you really rely on volume profile analysis in hindsight? Isn't it possible and likely that the volume profile as it looks on a historical chart, looked very different in the middle of the day while the profile was developing?

Sure, you can but are you referring to that particular day or on a composite of a few years? I know people actually initiate and exit trades from these areas but I prefer to watch the volume there and join the bid or offer should there be an interest there.

Looking at intra-day volume profiles to formulate or manage trades can be tricky but you have to just pay attention to the PA and volume. But I would say the big picture volume composite would have a greater impact than any intra-day volume areas. So, in the example I provided, price was sold into which created a low volume area at the high, then a high volume area around the open which rejected price or put a better way, there weren't enough buyers interested in that price range. So price dropped lower looking for buyers. Some buyers most likely stepped in and were able to push price back up to the previous high volume area where buyers were no longer interested in price and sellers gained control again from there. And so on.

The actual profile will definitely look different obviously as the day develops. Per the chart, you can see a majority of the volume took place at the low of the day which appeared to be stops being blown out and shorts probably covering as well as potential new buyers coming in based on what the big picture's structure was at the time making that area a large price acceptance area for the end of the day. I would imagine the point of control shifted from the high volume area in the AM down to the big blowout area at the bottom of the profile in the afternoon.

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  #113 (permalink)
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FT71,
Forgot to say, i also like your idea of preserving "emotional capital".
i personally don't think i could ever trade futures unless i had a massive amount of capital already built up in my account.
but under those circumstances, i can see it could be good.

~M

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  #114 (permalink)
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FuturesTrader71 View Post

TI Anonymous takes my words to mean that you should just lose and be happy about it.

It seems you have missed my point. I'll take Big Mike's advice and rephrase.

My comments in regards to losing were in response to Big Mike's inquiry about the plight of some on the board. It was presented as an alternate opinion, not about FT's words. In the most basic terms here it is:

1. The mind is a goal seeking device.
2. If you "program" it to be a "good loser" that's exactly what you will get.
3. Brokers, trainers and peers reinforce the concept of "good loser".
4. Traders then lose and become frustrated and disillusioned.
5. They got exactly what they were trained and convinced was the goal they were seeking.

Again, this is in the most basic of terms. Nothing about FT, just an alternate (rarely if ever discussed) explanation to what happens.

FT and I actually have the same goal- to help other traders. We just do it in different ways. Mine has to do with injecting "common sense" and "critical thinking" into the process.

(For further reading see-Maxwell Maltz. It is a place to start, but not the destination.)

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  #115 (permalink)
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Another Great Webinar by you-know-who.



Isn't Online Anonymity Fun ?

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Don't know if anyone posted this, but here's the link to the Trader Intervention webinar that Big Mike referred to. Well worth listening to.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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Anagami View Post
Don't know if anyone posted this, but here's the link to the Trader Intervention webinar that Big Mike referred to. Well worth listening to.

Thanks for digging up the link. And yes, I think this guy really clearly demonstrates the cycle of what a lot of people go through, right up to the end where he kept making bad decisions even when faced with how obviously poor they were.... and even when the webinar was done, I wonder if he went ahead with his bad plan, or if he really did take the advice to heart and make changes.

If anyone knows how he is trading today, or what actions he took after the Trader Intervention, please let me know.

I don't mean to ridicule this guy, and I also don't want to pierce the veil of anonymity and respect his right to privacy. But his case study is really a good example of what I hear on a near daily basis when people contact me and share their stories or ask for advice.

Mike

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Big Mike View Post
Thanks for digging up the link. And yes, I think this guy really clearly demonstrates the cycle of what a lot of people go through, right up to the end where he kept making bad decisions even when faced with how obviously poor they were.... and even when the webinar was done, I wonder if he went ahead with his bad plan, or if he really did take the advice to heart and make changes.

If anyone knows how he is trading today, or what actions he took after the Trader Intervention, please let me know.

I don't mean to ridicule this guy, and I also don't want to pierce the veil of anonymity and respect his right to privacy. But his case study is really a good example of what I hear on a near daily basis when people contact me and share their stories or ask for advice.

Mike

Despite his losses, it seemed like the guy didn't hit the bottom just yet... didn't feel like he was psychologically ready to accept what it takes to trade, to give up on focus and attachment to money/results...etc. As long as it stays on a purely intellectual level, it's just talk, and the monster is still there to trip him up the next time.

The big question is: how does one overturn the deep mechanisms that make you go crazy? Talking with somebody takes you only so far.... and we're so good at bullshitting ourselves... and the next time you break a promise to yourself, you see it was all just talk.

A fundamental re-orientation is necessary. Have to break some bones in yourself and set them right.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #119 (permalink)
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The best part of this webinar for me was the coin toss and taking a trade based on it but I was hoping it could be more extensive.

Do you guys know of any other sources which make a similar study or experiment?

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jonc View Post
The best part of this webinar for me was the coin toss and taking a trade based on it but I was hoping it could be more extensive.

Do you guys know of any other sources which make a similar study or experiment?

I haven't read it, nor do I endorse reading it, but Van Tharp wrote about random entries in his book. There have been several discussions on the subject on other message boards.

Amazon.com: Trade Your Way to Financial Freedom (9780071478717): Van Tharp: Books

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  #121 (permalink)
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I've just watched the webinar and really enjoyed it, thanks so much to @FuturesTrader71 for taking the time to do it. I have a question on price risk vs. information risk, but created a new thread to discuss it, I would appreciate your views: This thread seems too cluttered and I wanted to keep one topic from this webinar in one place.

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  #122 (permalink)
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Sorry to keep spamming this thread, but the webinar raised an issue with me that I haven't found a solution for, as yet. I created a new thread for that and it's directly related to what @FuturesTrader71 was talking about. If you have time I would appreciate it if you could have a look:

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  #123 (permalink)
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Watched the video today. Excellent. Thanks to FuturesTrader71 and BigMike.

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TI Anon View Post
In FT's example one of the 14 trades in the 2 contract 5-tick stop/5-tick winner + 5-tick stop/10-tick winner, had only a "1" tick loss not 10 ticks as the other losers. This went against the rules he stated at the start and would change his expectancy, perhaps even moving it to break even or a loss. (This is a good example of critical examination and due diligence)

The rules weren't changed at all. There was a fill for 5 ticks which left 1 contract that stopped out at -5 ticks but given the thin product, the stop ran through and lost a tick.

Here is how it went: 2 contract in position, 1 scaled for 5 ticks (+5 ticks gain), 1 stopped out for 6 ticks because the market (Russell 2000 mini) skipped the stop by a tick (which for anyone who trades the Russell knows that this is a common occurrence). Thanks for the due diligence though.

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Please let me know what specific items you would like to see FT71 discuss for his next webinar.

Mike

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jonc View Post
The best part of this webinar for me was the coin toss and taking a trade based on it but I was hoping it could be more extensive.

Do you guys know of any other sources which make a similar study or experiment?

Before I waste the time creating a strategy,
has anyone created a strategy to accomplish the coin toss trading?

Tks

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DavidHP View Post
Before I waste the time creating a strategy,
has anyone created a strategy to accomplish the coin toss trading?

Tks

Not exactly coin tosses, but may be useful:







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I've not tested this yet so it may not be error free.

Here are the parameters as outlined in the Video.

Flip a coin.
Heads go long
Tails go short.
(this is accomplished by a random class in NT Script)
A trade is taken either short or long as indicated by the random generator.

Once a trade is initiated, a 5 Tick stop is added and two targets.
One target at 5 Ticks profit.
One target at 10 Ticks profit.

When the trade closes either win or loss and is flat,
the script waits 30 seconds.
Then another trade is generated by a coin flip.

This continues until the Sample Size is completed. (Default 30 trades)

The number of contracts traded, targets, stops, sample size and time to wait can be configured by the user.

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Attached Files
Register to download File Type: zip CoinToss.zip (2.1 KB, 22 views)
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DavidHP View Post
I've not tested this yet so it may not be error free.

Thanks for coding this. Consider creating a new thread, so this does not get lost and is easy to find in the future.

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Please use the indicator in this thread.

The one on this thread should be used:

(Post #7 unless someone revises it later)

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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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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

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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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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

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There is now an AMA (Ask Me Anything) thread for questions aimed directly at FuturesTrader71:


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.

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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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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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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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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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Is it possible to re-upload this video to Youtube? Flash player won't be working in a couple of months anyway.

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