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Home Runs or Daily Goals?


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Home Runs or Daily Goals?

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  #1 (permalink)
Bellingham, WA
 
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I was reading Hondo's stuff on More Contracts = More Control = Less Risk Exposure and I was playing around with the numbers. Everyone talks about this but I was hoping maybe someone could dumb it down a little here.

I am trading the 6E and I enter with 3 contracts, one of which targets +10 and the other two are sent as runners from somewhere in break-even land. The idea in my mind is have double the position on runners because that is where the money is made...right?

I realize that I am really oversimplifying here but for the sake of argument... If 6E is trending 20% of the time that's 4 days out of 20 in every month. So...because I am so awesome I average $300 on the 16 non-trending days and $1200 on the 4 trending days. Thats 4800 + 4800 = 9600 a month on average or $480 a day.. Thus, all I need to do is hit the $480 daily goal and quit. One way I can do this is enter with 3 contracts, target one contract at +10 and then send the other two contracts to target another 5 ticks after that, giving me $500 a day if my math is right.

Doing it this way seems so much easier than hanging out and taking 750 one day, then 200 the next day, then 500 another day, then 100 the day after that because I am always positioning myself to send the runners and take as much or as little as the market will give. As long as I follow my rules I take what I can get... It seems for emotional well-being and improved quality of life that setting a daily goal and quitting is best. We have all heard this.

You are welcome to state your case for the Daily Goal as well. I would like to hear a better argument for hitting the home run 20% of the time. Is the Black Swan worth all the effort in the end?

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  #2 (permalink)
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sounds like a good plan so far (not necessarily verifying math yet) - four questions...

Does time of trades affect your entries... ie avoid market reports, certain times of day/days of week, etc.?

How often does the 10 tick target for the first get hit vs your initial stop loss?

How often do the runners stay on a trail vs getting hit at the b/e price - are they set with different trail settings?

How many trades per day is this limited to in case you haven't met your daily goal?

kz

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  #3 (permalink)
Bellingham, WA
 
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I don't trade news and right now my time schedule is 5:20 to 7 PST.

I have a 10 tick stop... Don't have hard numbers here... But I usually don't hit my stop at all and almost always hit my first target. I usually hold my stop below breakeven until the a bar after my target is hit. Even then I don't always move it to Breakeven for a bit because the price retraces back to breakeven for me a lot. So one of my favorite things to do is move it to breakeven manually when it's more like +17 or so and then when its about +20 I move my stop to +10. I will usually hold my stop at +10 for the duration of the move because the runner doesn't carry on a lot further for me and a +10 stop doesn't seem to get hit after that.

I might take 2 trades in the morning, usually only take one if it's profitable. If I get out for a quick loss of say -5 ticks I will attempt a re-entry pretty quickly after that. Any more trades than that begin to get too much for me. I would stay in the market if the Black Swan idea makes sense though. It seems you almost have to overtrade to ride these trades.

P.S. Kirk... I look to enter trades around the half hour mark per Jeff. So 5:30 am, 6 am, and 6:30. If Barron's Econ Calender news falls on those time slots I don't take the trade. Like right now it's 6:55 and I didn't take a trade this morning because I didn't like the P.A. so I won't try to take anything else.

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  #4 (permalink)
sea side
 
 
Posts: 217 since Dec 2009
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Nice thread Dragon,

If memory service me right LBR somewhere stated that ES pro traders making main money during week just on 1-2 trades, all others are just maneuvers, I've heard that a lot in other sources as well,
but...
whereas that traders waiting 1-2 big trades per week, other making their bread and butter on those trades which that big traders loose.
Also it's not secret correct and full info about author of "Black Swan" and how he is down, recently I got in the same list turtles, who, while awaiting trend could make a lot of trades loosing on them, but one day...they get winner which covers all losers and bring huge profit...
I also heard like some old traders work - trading is business, come to office, looked on market, did your profit, closed all, gone home, again and again, just doing business, not dreaming about huge profits to buy 100 ft yachts from 1 trade.
I also heard story of one old trader who traded through "unknown" quantity of recessions, he told : for us it was just business, we hadn't so much greed, we don't dreamed about millions, we just did our business - traded.
Do not to offend anybody.
A lot of traders suffer a lot calculating their loses from unrealized profits above their profit targets, but never tried to calculate their loses which come while awaiting for that profit above target, missing profit target.
A lot of times I've heard : know your market, it seems the main here is to know "market range" or by other others "each market profit size for certain timeframes"
I'm trying to determine that, which can help to position profit expectations and trading correctly and if anyone also interested in that will be glad to hear.

P.s. Dragon thank you a lot for that good thread as it's quite important in trading : to know what you are doing and what you are expecting.

Krgds,
Andrew

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  #5 (permalink)
Bellingham, WA
 
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NP Andrew. Nice to see you on futures.io (formerly BMT). I realize that 90% of this also relates to each personality. I am sitting on the fence right now.

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  #6 (permalink)
sea side
 
 
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Dragon,

thank you for kind words.
Of course a lot of depends on personality, sometimes even 99%.
Why you are sitting on fence now ?
I'm sitting on sidelines now

Krgds,
Andrew


Dragon View Post
NP Andrew. Nice to see you on futures.io (formerly BMT). I realize that 90% of this also relates to each personality. I am sitting on the fence right now.


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  #7 (permalink)
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Sitting on the fence just means that I haven't decided if I will switch to a Daily Goal yet. Right now I am sending runners.

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  #8 (permalink)
sea side
 
 
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Dragon,

Don't you want to create for HG different account and try it with 1 contract ?
Continuing at the same time send runners as you used to do ?

Krgds,
Andrew


Dragon View Post
Sitting on the fence just means that I haven't decided if I will switch to a Daily Goal yet. Right now I am sending runners.


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  #9 (permalink)
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Dragon View Post
I was reading Hondo's stuff on More Contracts = More Control = Less Risk Exposure and I was playing around with the numbers. Everyone talks about this but I was hoping maybe someone could dumb it down a little here.

I am trading the 6E and I enter with 3 contracts, one of which targets +10 and the other two are sent as runners from somewhere in break-even land. The idea in my mind is have double the position on runners because that is where the money is made...right?

I realize that I am really oversimplifying here but for the sake of argument... If 6E is trending 20% of the time that's 4 days out of 20 in every month. So...because I am so awesome I average $300 on the 16 non-trending days and $1200 on the 4 trending days. Thats 4800 + 4800 = 9600 a month on average or $480 a day.. Thus, all I need to do is hit the $480 daily goal and quit. One way I can do this is enter with 3 contracts, target one contract at +10 and then send the other two contracts to target another 5 ticks after that, giving me $500 a day if my math is right.

Doing it this way seems so much easier than hanging out and taking 750 one day, then 200 the next day, then 500 another day, then 100 the day after that because I am always positioning myself to send the runners and take as much or as little as the market will give. As long as I follow my rules I take what I can get... It seems for emotional well-being and improved quality of life that setting a daily goal and quitting is best. We have all heard this.

You are welcome to state your case for the Daily Goal as well. I would like to hear a better argument for hitting the home run 20% of the time. Is the Black Swan worth all the effort in the end?

Are you using tick charts for the 6E, and if so, what is your favorite chart? Lately, I'm finding that longer term charts take out alot of the guesswork of which way a trade will be heading. Also, do you use Fibonacci numbers for you chart sizing, and if so, which?

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  #10 (permalink)
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pdavidow View Post
Are you using tick charts for the 6E, and if so, what is your favorite chart? Lately, I'm finding that longer term charts take out alot of the guesswork of which way a trade will be heading. Also, do you use Fibonacci numbers for you chart sizing, and if so, which?

Just read my journal .

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  #11 (permalink)
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In his book Trading Risk, Kenneth Grant claims that pretty much all effective systems break down into 5 small losses, 4 small wins and one big win which is the one the profits come from (similar to the idea suggested above).

I am most comfortable with the more statistical approach to trading (i.e. you can't predict the outcome of a single trade but you can "predict" the overall outcome of a hundred or a thousand trades). I accept that within those "100" trades there will be strings of losers but over the hundred trades I will come out ahead.

I find the concept of daily goals conflicts with this approach. If I hit a loosing streak then I won't hit my daily goal but that does not mean the system is broken.

My job is to put a certain amount of money, which I accept I may loose, at risk using a system that has a reasonable chance of success and trade that system for the hundred trades (or thousand trades or whatever) it will take to realize the potential of that system.

If my back testing was faulty or the markets I am trading change significantly then I loose my money. If not and I place my trades like a machine then I win.

I would like to be able to have daily goals. I was brainwashed into wanting a regularly salaried job too. But in trading I don't think it can be so.

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  #12 (permalink)
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svuhmed View Post
In his book Trading Risk, Kenneth Grant claims that pretty much all effective systems break down into 5 small losses, 4 small wins and one big win which is the one the profits come from (similar to the idea suggested above).

Interesting. I need to go back and look at this to verify. Seems ok.


svuhmed View Post
I would like to be able to have daily goals. I was brainwashed into wanting a regularly salaried job too. But in trading I don't think it can be so.

Maybe that's why I am inherently to the daily goal idea, so I can get paid a fixed amount of money like at work. It just seemed like an easier achievement.

Maybe the goals could be simple. Don't get stopped out. Make money. Trading is so easy.

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  #13 (permalink)
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IMHO, one should have a slightly longer period range for goals; like weekly goals.

This allows for those days that simply do not do well with one's trading style. Not being constrained to a daily goal then allows one to just close the trading computer, and wait for another day. Can a whole week be unconducive? Sure, but it is less likely than one day being unconducive to the trading style.

For example, in day trading the /es, I am a counter trend trader, so I come out well on choppy days, finding natural pivots, waiting for the test of the pivot, then taking trades. That means quick, short trades, for small profits, and hopefully no losses. On the other hand, on trend days, I end up taking profits too quickly and may miss the big move, and end up riding it too late with only a small position size because my stop is so much larger.

By tackling a weekly goal, I can sometimes take the rest of the week off after 2 good days. And I am much quicker to quit when the day seems to be going bad, as I just tell myself: "Heck, maybe tomorrow might work better. Let me keep some powder dry."



Dragon View Post
I was reading Hondo's stuff on More Contracts = More Control = Less Risk Exposure and I was playing around with the numbers. Everyone talks about this but I was hoping maybe someone could dumb it down a little here.

I am trading the 6E and I enter with 3 contracts, one of which targets +10 and the other two are sent as runners from somewhere in break-even land. The idea in my mind is have double the position on runners because that is where the money is made...right?

I realize that I am really oversimplifying here but for the sake of argument... If 6E is trending 20% of the time that's 4 days out of 20 in every month. So...because I am so awesome I average $300 on the 16 non-trending days and $1200 on the 4 trending days. Thats 4800 + 4800 = 9600 a month on average or $480 a day.. Thus, all I need to do is hit the $480 daily goal and quit. One way I can do this is enter with 3 contracts, target one contract at +10 and then send the other two contracts to target another 5 ticks after that, giving me $500 a day if my math is right.

Doing it this way seems so much easier than hanging out and taking 750 one day, then 200 the next day, then 500 another day, then 100 the day after that because I am always positioning myself to send the runners and take as much or as little as the market will give. As long as I follow my rules I take what I can get... It seems for emotional well-being and improved quality of life that setting a daily goal and quitting is best. We have all heard this.

You are welcome to state your case for the Daily Goal as well. I would like to hear a better argument for hitting the home run 20% of the time. Is the Black Swan worth all the effort in the end?


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  #14 (permalink)
sea side
 
 
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Koganam,

What do you mean by "natural pivots" previous day HLC ?

Krgds,
Andrew


koganam View Post
IMHO, one should have a slightly longer period range for goals; like weekly goals.

This allows for those days that simply do not do well with one's trading style. Not being constrained to a daily goal then allows one to just close the trading computer, and wait for another day. Can a whole week be unconducive? Sure, but it is less likely than one day being unconducive to the trading style.

For example, in day trading the /es, I am a counter trend trader, so I come out well on choppy days, finding natural pivots, waiting for the test of the pivot, then taking trades. That means quick, short trades, for small profits, and hopefully no losses. On the other hand, on trend days, I end up taking profits too quickly and may miss the big move, and end up riding it too late with only a small position size because my stop is so much larger.

By tackling a weekly goal, I can sometimes take the rest of the week off after 2 good days. And I am much quicker to quit when the day seems to be going bad, as I just tell myself: "Heck, maybe tomorrow might work better. Let me keep some powder dry."


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  #15 (permalink)
Garner, NC/USA
 
 
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The natural pivots in the /es, and most futures 24hr markets for that matter are:
  • Yesterday's high
  • Yesterday's low
  • Overnight high
  • Overnight low.
In my observations, it would seem to me that yesterday's close is only a pivot in the case of gaps.

One also needs to be aware of some kind of pivots: floor, Person's, Woodies, etc, and how the market reacts to them. That allows one to filter trades if the signal is close to them.



Andrew View Post
Koganam,

What do you mean by "natural pivots" previous day HLC ?

Krgds,
Andrew


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  #16 (permalink)
sea side
 
 
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Koganam,

Agree, good info.
I also watch following (but just for reference)
yesterday RTH HLC/3, Overnight hours HLC/3 as well as both that pivots divided by 2
Let me know if it looks interesting to you too.

Krgds,
Andrew


koganam View Post
The natural pivots in the /es, and most futures 24hr markets for that matter are:
  • Yesterday's high
  • Yesterday's low
  • Overnight high
  • Overnight low.
In my observations, it would seem to me that yesterday's close is only a pivot in the case of gaps.

One also needs to be aware of some kind of pivots: floor, Person's, Woodies, etc, and how the market reacts to them. That allows one to filter trades if the signal is close to them.


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  #17 (permalink)
wny
 
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svuhmed View Post
I find the concept of daily goals conflicts with this approach. If I hit a loosing streak then I won't hit my daily goal but that does not mean the system is broken.

I think this is a very important point and why I also agree its a bad idea to have a daily goal.
While of course trading requires a great amount of skill there is also a highly random element to it that a sound system will exerpience drawdowns occasionally from nothing other than a random losing streak, and on the flip sound a faulty system will experience random winning streaks.
With a daily goal in mind, it is pyschologically incredibly easy to deviate from a winning strategy when it is going into nothing more than a random losing streak.

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  #18 (permalink)
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darthtrader3.6 View Post
With a daily goal in mind, it is pyschologically incredibly easy to deviate from a winning strategy


I have never thought of it this way, that you could be hurting yourself mentally by quitting on a awesome strategy.

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  #19 (permalink)
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I am struggling with something similar....do i a scalp or position myself for a bigger move. A look at popular traders / educators shows a mixed picture. Most of the time, i think it depends on the persons psychology.

I have poor self-esteem (:-)) and need constant approval. So i scalp. I take the money, when i see the move is running out of steam...this could be in the form of trailing my scalp chart candles or sometimes my anchor candles. When i trail my anchor candles i make double my intended scalp target.

Another thing i struggle with is having a daily goal vs. trading all day. In my trading experience i have made 20 - 30 ticks in a couple of trades and then give it all back once i hit a chop area. Then again i scalp and scalp and make it all back. But most times i go into the red after a nice win...and then deeper into the red. Then i feel bad and lose confidence and this is where i am now. I am scared to trade live even though i have a decent system with a 4 tick risk for 8 + ticks reward potential etc.

Currently i have a goal of making 200 net on the 6E using 1 contract. Now do i scalp for 4 ticks a couple of times, or do i scalp for 8 ticks or do hold for 16 ticks.

The beauty of trending instruments like the 6E is that if it starts trending, it usually gives a few small pullbacks in the trend and you could get a nice 10+ ticks without heat. If i don't trade during the chop/and any period that is not looking like a trend, i could potentially make my daily goal in that one trend and be done.

I guess as long i trade i will be guessing myself..especially if i see someone is making 10 points etc on a trade while i make 20 trades to make the 10 points.


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  #20 (permalink)
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Dragon View Post
I was reading Hondo's stuff on More Contracts = More Control = Less Risk Exposure and I was playing around with the numbers. Everyone talks about this but I was hoping maybe someone could dumb it down a little here.

I am trading the 6E and I enter with 3 contracts, one of which targets +10 and the other two are sent as runners from somewhere in break-even land. The idea in my mind is have double the position on runners because that is where the money is made...right?

I realize that I am really oversimplifying here but for the sake of argument... If 6E is trending 20% of the time that's 4 days out of 20 in every month. So...because I am so awesome I average $300 on the 16 non-trending days and $1200 on the 4 trending days. Thats 4800 + 4800 = 9600 a month on average or $480 a day.. Thus, all I need to do is hit the $480 daily goal and quit. One way I can do this is enter with 3 contracts, target one contract at +10 and then send the other two contracts to target another 5 ticks after that, giving me $500 a day if my math is right.

Doing it this way seems so much easier than hanging out and taking 750 one day, then 200 the next day, then 500 another day, then 100 the day after that because I am always positioning myself to send the runners and take as much or as little as the market will give. As long as I follow my rules I take what I can get... It seems for emotional well-being and improved quality of life that setting a daily goal and quitting is best. We have all heard this.

You are welcome to state your case for the Daily Goal as well. I would like to hear a better argument for hitting the home run 20% of the time. Is the Black Swan worth all the effort in the end?

In my opinion, it makes absolutely no sense whatsoever to have a daily profit target and then quit after that. If you do that, then what you are really doing is "dictating" to the market how much money you would like it to give you on a daily basis. If you study the markets long enough, you will realize that 80% of your profits can come from 20% of the time you spend trading.

The best way to trade is to adapt to the market, not to try to force the market to adapt to your predefined notion of what you think you should be making. Some days the market will give you a lot, some days it will give you very little. Learn to recognize the easy times and take advantage of them when they happen. If you quit early on those days just because you have reached some artificial daily goal, then you will be seriously reducing your overall profits, and ironically increasing your risk of losing money as a trader. You need those big days to really maximize your results and make up for some other times when you might lose money.

If you think about it, setting a daily goal and then walking away is a serious sign of uncertainty and fear in you as a trader. Why would you walk away if the market is doing what it should be doing and giving you money? Because you have already made a profit and are now afraid to lose it? If that is the case, then your confidence in your skills and market understanding is lacking, and you need more practice. If you psychologically feel the need to stick to daily goals because you are afraid of giving back profits, then you are engaging in "fear-based" trading, and you will never become a great trader until you overcome that.

The best traders know how to press their advantage when the odds and market conditions are in their favor, and pull back when the odds are not. Therefore, do not try to "dictate" to the market what it should be giving you - instead, train yourself to adapt to what it is doing and ride the good times while they last. Stay with the wave as long as it is running, and when it is no longer so easy to trade, only then should you stop.

I am reminded of a quote from Charles Darwin:

"It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change. "

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  #21 (permalink)
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nqemini View Post
I am struggling with something similar....do i a scalp or position myself for a bigger move. A look at popular traders / educators shows a mixed picture. Most of the time, i think it depends on the persons psychology.

I would suggest, do both. Learn to identify those places in the market where you expect a larger turn to happen. Then, zoom in on a smaller time frame chart, and wait for a minor reversal to happen in the direction that you expect the eventual "big turn" to go. Enter on a scalp, and get out with 1/2 your position once you are in a decent profit. Move the other 1/2 to break-even. If it runs on that move, you will turn the other half into a larger profit. If it doesn't, you get stopped out on the second half at break-even but overall are still profitable because you made something on the first half scalp. Keep scalping like this in the direction of the coming major turn, until the run starts to happen. Also, keep monitoring price action that may tell you if you were wrong about your initial thoughts about the direction of the coming major turn. If you change your mind and think that it actually might go the other way on the larger time frame, just start scalping in the other direction using the same method. You should also have a plan for how you are going to trail your stop when the market starts to run... go over past data and see how far it pulls back when it does run, and how long runs usually last. Set up some charts based on this information that will allow you to easily follow the trend when it does start to go.

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  #22 (permalink)
sea side
 
 
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Great posts, however as usual

Thank you a lot that you continue to give some insights about pro trading.

Krgds,
Andrew


FBJS View Post
I would suggest, do both. Learn to identify those places in the market where you expect a larger turn to happen. Then, zoom in on a smaller time frame chart, and wait for a minor reversal to happen in the direction that you expect the eventual "big turn" to go. Enter on a scalp, and get out with 1/2 your position once you are in a decent profit. Move the other 1/2 to break-even. If it runs on that move, you will turn the other half into a larger profit. If it doesn't, you get stopped out on the second half at break-even but overall are still profitable because you made something on the first half scalp. Keep scalping like this in the direction of the coming major turn, until the run starts to happen. Also, keep monitoring price action that may tell you if you were wrong about your initial thoughts about the direction of the coming major turn. If you change your mind and think that it actually might go the other way on the larger time frame, just start scalping in the other direction using the same method. You should also have a plan for how you are going to trail your stop when the market starts to run... go over past data and see how far it pulls back when it does run, and how long runs usually last. Set up some charts based on this information that will allow you to easily follow the trend when it does start to go.


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  #23 (permalink)
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Andrew View Post
Great posts, however as usual

Thank you a lot that you continue to give some insights about pro trading.

Krgds,
Andrew

Thanks Andrew...

Some things that I forgot to add regarding this method:

Make sure that you only enter in spots where you have a better than 50/50 chance of making money with your scalp. If your odds are only 50/50 assuming a 1:1 ratio of gain:loss, it will be a losing strategy since you will lose 2 contracts on a stop-out and only make 1 on a win.

Ideally, you should learn to read price action well enough that you actually exit with your full position on a scalp, and then look for re-entry when it comes back. Then when you detect that "the" big move is starting to happen and it's breaking out of the range, get in and hold. Of course this takes practice and experience to detect that condition - so if you can't do that then you can use the original method I mentioned as long as you make sure that you are entering in very choice locations where your risk/reward ratio is very good on your scalp. Then again, I suppose that takes practice as well.... so unfortunately, there are no truly easy answers!

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  #24 (permalink)
sea side
 
 
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FBJS,

Just because one can not read any books just to talk with you
I've used to see where is gold and where is "not gold"
So, one of the methods is to, say, enter with 2 contract and exit with 2 contract,
but
if big move is seen, then enter with 1 contract, covered it at usual target profit, but remaining 50 % of position, i.e. 1 contract run along with big movement until it considered ok to be in trade, correct ?
Also question...what is better win/loss ratio for scalp assuming that entry at point where odds better than 50%?

Krgds,
Andrew


FBJS View Post
Thanks Andrew...

Some things that I forgot to add regarding this method:

Make sure that you only enter in spots where you have a better than 50/50 chance of making money with your scalp. If your odds are only 50/50 assuming a 1:1 ratio of gain:loss, it will be a losing strategy since you will lose 2 contracts on a stop-out and only make 1 on a win.

Ideally, you should learn to read price action well enough that you actually exit with your full position on a scalp, and then look for re-entry when it comes back. Then when you detect that "the" big move is starting to happen and it's breaking out of the range, get in and hold. Of course this takes practice and experience to detect that condition - so if you can't do that then you can use the original method I mentioned as long as you make sure that you are entering in very choice locations where your risk/reward ratio is very good on your scalp. Then again, I suppose that takes practice as well.... so unfortunately, there are no truly easy answers!


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  #25 (permalink)
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Andrew View Post
FBJS,

Just because one can not read any books just to talk with you
I've used to see where is gold and where is "not gold"
So, one of the methods is to, say, enter with 2 contract and exit with 2 contract,
but
if big move is seen, then enter with 1 contract, covered it at usual target profit, but remaining 50 % of position, i.e. 1 contract run along with big movement until it considered ok to be in trade, correct ?
Also question...what is better win/loss ratio for scalp assuming that entry at point where odds better than 50%?

Krgds,
Andrew

Rather than just holding half my position for a trending move that starts to occur, I would actually tend to enter with additional contracts when I see that happening, because the market is easier to read under those conditions and it's important to "press your advantage" to maximize profits. So for example, if it breaks out of a range with fast trading and high volume, and if I feel that this is one of those times where that run is likely to continue for some time, I will quickly add more contracts to my position to maximize my gains. (Of course, this is all still within the trading plan, I don't add anything too crazy in terms of size, just something larger than normal. You also have to know when it's appropriate to do this and when it's not.) Then as the market moves in my direction, I may scale out slightly from this "larger-than-normal" position at point where I feel that short-term reversals may be happening against the trend, eventually getting myself to a "normal" position size as the trend continues. I will then continue to hold the "normal" position then until a certain condition is reached signifying the end of the trend, usually based on price action and/or crossing certain MAs that I have set up for this purpose. Basically, I don't use a 100% mechanical system for this, it really depends on feeling out the price action.

In terms of playing the range, I am in and out all the time with my full scalping position, since I am usually pretty confident in being able to tell when we will stay in a range and when we are likely to break out. So there is no point in only taking off 1/2 the position and watching the market come back to break even to stop me out when it is just chopping around. You have to be able to change your mental state very quickly between ranging and trending modes if you want to do this, and always be on the look-out for market condition changes that indicate that a trend could be about to occur.

In terms of scalping, unfortunately it's basically a lot of "feel" in terms of when to get in and out...so I don't always have specific conditions where I measure exactly how far it can go and what my loss might be. But I usually try to eyeball it to get at least 1.5:1 or so in terms of reward/risk, and 70% chance of it going my way. HOWEVER - I do NOT set my profit target and stop ahead of time and then just blindly stick to it. Every second that I am in a scalping position, I am always asking myself: "Is this continuing as I expect? Is it going to the other end of the range as I expect? Or do I feel like something is wrong here and it could be turning back down early? On the other hand, is it accelerating a little bit, telling me instead that it could be about to break out?" As I continually ask myself these things, I adjust my stop accordingly, and/or get out of the position because I will never take a loss on a scalp that has moved more than a few ticks in my direction (exactly how much depends on the contract in question and how it is trading). When I feel "nervous" about it stalling, I'll get out quickly or move the stop up to a very tight position. On the other hand if I feel confident about it going further than usual, I may move the stop back a bit to avoid getting knocked out prematurely. It's all based on price feeling and market action under these conditions.

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  #26 (permalink)
sea side
 
 
Posts: 217 since Dec 2009
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FBJS,

Thank you a lot for one more great insight !

Krgds,
Andrew

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  #27 (permalink)
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Dragon View Post
I was reading Hondo's stuff on More Contracts = More Control = Less Risk Exposure and I was playing around with the numbers. Everyone talks about this but I was hoping maybe someone could dumb it down a little here.

I am trading the 6E and I enter with 3 contracts, one of which targets +10 and the other two are sent as runners from somewhere in break-even land. The idea in my mind is have double the position on runners because that is where the money is made...right?

I realize that I am really oversimplifying here but for the sake of argument... If 6E is trending 20% of the time that's 4 days out of 20 in every month. So...because I am so awesome I average $300 on the 16 non-trending days and $1200 on the 4 trending days. Thats 4800 + 4800 = 9600 a month on average or $480 a day.. Thus, all I need to do is hit the $480 daily goal and quit. One way I can do this is enter with 3 contracts, target one contract at +10 and then send the other two contracts to target another 5 ticks after that, giving me $500 a day if my math is right.

Doing it this way seems so much easier than hanging out and taking 750 one day, then 200 the next day, then 500 another day, then 100 the day after that because I am always positioning myself to send the runners and take as much or as little as the market will give. As long as I follow my rules I take what I can get... It seems for emotional well-being and improved quality of life that setting a daily goal and quitting is best. We have all heard this.

You are welcome to state your case for the Daily Goal as well. I would like to hear a better argument for hitting the home run 20% of the time. Is the Black Swan worth all the effort in the end?

If you can pull more money from the market on a particular day, then why not continue to do so? This way, when you have really bad days, your average profit/day will still be high.

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  #28 (permalink)
Bellingham, WA
 
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FBJS View Post
Rather than just holding half my position for a trending move that starts to occur, I would actually tend to enter with additional contracts when I see that happening, because the market is easier to read under those conditions and it's important to "press your advantage" to maximize profits. So for example, if it breaks out of a range with fast trading and high volume, and if I feel that this is one of those times where that run is likely to continue for some time, I will quickly add more contracts to my position to maximize my gains. (Of course, this is all still within the trading plan, I don't add anything too crazy in terms of size, just something larger than normal. You also have to know when it's appropriate to do this and when it's not.) Then as the market moves in my direction, I may scale out slightly from this "larger-than-normal" position at point where I feel that short-term reversals may be happening against the trend, eventually getting myself to a "normal" position size as the trend continues. I will then continue to hold the "normal" position then until a certain condition is reached signifying the end of the trend, usually based on price action and/or crossing certain MAs that I have set up for this purpose. Basically, I don't use a 100% mechanical system for this, it really depends on feeling out the price action.

In terms of playing the range, I am in and out all the time with my full scalping position, since I am usually pretty confident in being able to tell when we will stay in a range and when we are likely to break out. So there is no point in only taking off 1/2 the position and watching the market come back to break even to stop me out when it is just chopping around. You have to be able to change your mental state very quickly between ranging and trending modes if you want to do this, and always be on the look-out for market condition changes that indicate that a trend could be about to occur.

In terms of scalping, unfortunately it's basically a lot of "feel" in terms of when to get in and out...so I don't always have specific conditions where I measure exactly how far it can go and what my loss might be. But I usually try to eyeball it to get at least 1.5:1 or so in terms of reward/risk, and 70% chance of it going my way. HOWEVER - I do NOT set my profit target and stop ahead of time and then just blindly stick to it. Every second that I am in a scalping position, I am always asking myself: "Is this continuing as I expect? Is it going to the other end of the range as I expect? Or do I feel like something is wrong here and it could be turning back down early? On the other hand, is it accelerating a little bit, telling me instead that it could be about to break out?" As I continually ask myself these things, I adjust my stop accordingly, and/or get out of the position because I will never take a loss on a scalp that has moved more than a few ticks in my direction (exactly how much depends on the contract in question and how it is trading). When I feel "nervous" about it stalling, I'll get out quickly or move the stop up to a very tight position. On the other hand if I feel confident about it going further than usual, I may move the stop back a bit to avoid getting knocked out prematurely. It's all based on price feeling and market action under these conditions.

Wow. Ok so I really like your posts but to play devils advocate... I also agree that fear is a huge part of the whole daily goal idea... I didn't even realize it until you said it but fear is a huge part of my attraction to daily goals. But let's say you have 5 years of personal trading data and know that over the last three profitable years you average a 1000 a day scaling in and out. Say you are even better than that...2000 a day. This is even after you have managed to build up your account significantly and add more contracts to trade with. Mentally you have come to a risk tolerance level when scaling in and out and you know how many contracts you tend to add scaling in on big trends. You aren't anek and don't have sweet after-the-fact posting skillz so 2000 has become your mental barrier average. Anything over that contract-wise is too much money movement to watch and you are ok with this because 2000 a day is not a bad day. Some days you make like 7000 other days you make 700 because you are very, very good. Wouldn't be better to scalp for 3-5 ticks on a major S/R breakout on the 60 minute or something and be done in like 2 minutes? Then you can go play outside.

The other issue I have is that overtrading leads to more exposure to geopolitical events that aren't on Barron's econ calender (hi websouth!).

So enough with devil's advocate there is a flip side to the daily goal idea to me... Well correction...flip side to high-contract hard-core scalping... You are probably banking more than 2% of your account on one setup hitting your profit target with that many contracts and not hitting your stop which is probably bigger than your target to accept the drawdown. It seems like a sure-fire way to blow up. I can't think of a single pattern, indi, strat, whatev, that has worked everytime for me. You just have to manage every trade differently, and you can't do that with a scalp (I don't know, maybe you can with my 60 min S/R idea, drawdowns acceptable of course). Trading with say a couple of contracts on a trend allows you to manage your risk better. If the market stalls you can take a contract off or get out (should have done that today still stewing). Or if the market is moving you can add another or take one off and bank some profits.

So I still just don't know...

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  #29 (permalink)
Garner, NC/USA
 
 
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Every trade is a scalp until it proves itself otherwise.



Dragon View Post
Wow. Ok so I really like your posts but to play devils advocate... I also agree that fear is a huge part of the whole daily goal idea... I didn't even realize it until you said it but fear is a huge part of my attraction to daily goals. But let's say you have 5 years of personal trading data and know that over the last three profitable years you average a 1000 a day scaling in and out. Say you are even better than that...2000 a day. This is even after you have managed to build up your account significantly and add more contracts to trade with. Mentally you have come to a risk tolerance level when scaling in and out and you know how many contracts you tend to add scaling in on big trends. You aren't anek and don't have sweet after-the-fact posting skillz so 2000 has become your mental barrier average. Anything over that contract-wise is too much money movement to watch and you are ok with this because 2000 a day is not a bad day. Some days you make like 7000 other days you make 700 because you are very, very good. Wouldn't be better to scalp for 3-5 ticks on a major S/R breakout on the 60 minute or something and be done in like 2 minutes? Then you can go play outside.

The other issue I have is that overtrading leads to more exposure to geopolitical events that aren't on Barron's econ calender (hi websouth!).

So enough with devil's advocate there is a flip side to the daily goal idea to me... Well correction...flip side to high-contract hard-core scalping... You are probably banking more than 2% of your account on one setup hitting your profit target with that many contracts and not hitting your stop which is probably bigger than your target to accept the drawdown. It seems like a sure-fire way to blow up. I can't think of a single pattern, indi, strat, whatev, that has worked everytime for me. You just have to manage every trade differently, and you can't do that with a scalp (I don't know, maybe you can with my 60 min S/R idea, drawdowns acceptable of course). Trading with say a couple of contracts on a trend allows you to manage your risk better. If the market stalls you can take a contract off or get out (should have done that today still stewing). Or if the market is moving you can add another or take one off and bank some profits.

So I still just don't know...


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  #30 (permalink)
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Dragon View Post
Wow. Ok so I really like your posts but to play devils advocate... I also agree that fear is a huge part of the whole daily goal idea... I didn't even realize it until you said it but fear is a huge part of my attraction to daily goals. But let's say you have 5 years of personal trading data and know that over the last three profitable years you average a 1000 a day scaling in and out. Say you are even better than that...2000 a day. This is even after you have managed to build up your account significantly and add more contracts to trade with. Mentally you have come to a risk tolerance level when scaling in and out and you know how many contracts you tend to add scaling in on big trends. You aren't anek and don't have sweet after-the-fact posting skillz so 2000 has become your mental barrier average. Anything over that contract-wise is too much money movement to watch and you are ok with this because 2000 a day is not a bad day. Some days you make like 7000 other days you make 700 because you are very, very good. Wouldn't be better to scalp for 3-5 ticks on a major S/R breakout on the 60 minute or something and be done in like 2 minutes? Then you can go play outside.

You make an interesting point - what is really "better"? To do some quick scalps or trend trades in the morning and then go enjoy the rest of your day doing something else, or to dedicate yourself to sitting in front of the computer and staying with the market when it is giving you money, regardless of the time involved?

It really depends on your goals. Before you decide what your trading style should be, you should decide why you are trading in the first place. Some people want trading to just be an activity that they do for a couple of hours a day that makes them a nice income of a few hundred thousand a year, so they can go spend time doing other things that they love. There is absolutely nothing wrong with this, and if you have a system with positive expectancy that can make you a couple of grand a day in about an hour or two, then you should just trade that and take the rest of the day off, if that's what you want. Who cares if the market is still running, you have other things to do with your life besides sit in front of a computer.

There is nothing wrong with this, providing you are quitting trading each day because that is part of your trading plan, and because you just quit all the time at this point. If you quit trading once you hit some artificial daily profit target because you are scared to give back your gains, then that is a very serious problem - not because of missing out on maximizing your profits, but because that fear is a sign that you might not be as good of a trader as you think. Fear is never a good thing to be trading with.

So just make a decision how and when you are going to trade, and then during those times, TRADE. Regardless of what your P/L is, just keep trading until the time is up or you determine that the market conditions are not right for your system any more. There is nothing wrong with quitting early if the market is telling you that today is not a good day to trade, but if it is a great trading day, and if you are still within your normal trading time window, and if you are still making profits, then do not quit just because you are scared to give something back.


Quoting 
The other issue I have is that overtrading leads to more exposure to geopolitical events that aren't on Barron's econ calender (hi websouth!).

Again, nothing wrong with having set times to trade, in order to avoid certain things like you mentioned - as long as that is all part of your plan.


Quoting 
So enough with devil's advocate there is a flip side to the daily goal idea to me... Well correction...flip side to high-contract hard-core scalping... You are probably banking more than 2% of your account on one setup hitting your profit target with that many contracts and not hitting your stop which is probably bigger than your target to accept the drawdown.

In my case, this is not correct. I never risk more than .5% to 1% of my account. 2% is too high. And my stop is never, ever, bigger than my profit target. At worst it may be 1:1 at certain times, but usually it is better. Sometimes I take what I call a "pure" scalp, which is essentially a counter-trend play. Those times are rare, and I usually only do that when I think that the market is seriously overextended or I see a high probability opportunity. In those cases, I make sure to get out very fast and be quick on the trigger. Most scalps are in the direction of a trend, and I always enter with the idea that it's going to turn into a longer move... however, sometimes it just doesn't for whatever reason, and in those cases it turns out to be a scalp. I am in and out of the market all the time generally.


Quoting 
It seems like a sure-fire way to blow up. I can't think of a single pattern, indi, strat, whatev, that has worked everytime for me. You just have to manage every trade differently, and you can't do that with a scalp (I don't know, maybe you can with my 60 min S/R idea, drawdowns acceptable of course).

I do manage every trade differently. Based on the price action, I move the stop around constantly... sometimes up tight, sometimes looser. Sometimes I'll place a limit order at a set price beyond the market to get out, sometimes I'll place a limit order in between the bid/ask spread (if there is room there), and sometimes I'll manually get out with a market order if I really don't like it. (Keep in mind that this is done using primarily a 5 second and a 20 second chart, with a 2 minute chart as the long time frame. You can't do this type of thing on an hourly chart, or even a 5 minute. Also, keep in mind that this type of short-term scalping relies primarily on reading pure price action - you generally can't make money on these types of short time frames using indicators for your buy/sell signals.)

Generally this is all during choppy times, of course. In reality most money is made in strong trends, not in ranges. But unless you are always watching the market and aware of what is going on, you are going to miss the early start of trends. I spend time scalping not to make a lot of money there, but to be "in tune" with the market to be ready for the eventual trends that occur. Sometimes it gets boring and I walk away, and sometimes I'll miss the exact start of a trend because of that... it's not 100% perfect.


Quoting 
Trading with say a couple of contracts on a trend allows you to manage your risk better. If the market stalls you can take a contract off or get out (should have done that today still stewing). Or if the market is moving you can add another or take one off and bank some profits.

Trend trading is definitely the way to make money, no question... but the market isn't going to hold up a sign for you saying "get ready for a trend in 5 minutes". By being "in tune" with what is going on at all times, I can detect small changes in price action that indicate that a trend is about to begin, which improves my risk/reward ratio in general. The real trick is to avoid overtrading, of course. On a bad day I might overtrade a bit and end up breaking even for a while in a choppy zone, but I generally won't lose much. If I ever did start to lose steadily, I would immediately quit and walk away (which has happened once or twice). You have to be able to limit the damage to your account very, very quickly when you detect that you are not doing things correctly for whatever reason. (Actually, I would say that this ability is one of the most important things to know how to do as a trader... if you find it hard to walk away when you are starting to make mistakes and your account equity starts to decline, your trading career is going to be in VERY serious trouble.)



Quoting 
So I still just don't know...

Just decide what you want to do... it sounds to me like you don't want to sit in front of your computer monitor for 14 hours a day trying to maximize your profits. (Most people who try that don't even end up maximizing their profits anyways, they just make money and then give it back.) So just trade according to whatever plan you have set up that you feel comfortable with, but don't set a daily profit goal - just set a time frame where you will always continue to trade the market as long as it is giving you money, and then stick to it.

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  #31 (permalink)
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I read this, and thought about this thread. So, for what it's worth, here's Toby's opinion.

"I think that risk is best controlled by taking a large number of small trades versus making a few large bets on a small number of trades."

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  #32 (permalink)
Austin, TX
 
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I too trade the EC and it's been quite a week.

I trade two sessions (CST): from 1:30 until around 5:00, then 7:00 to about 10:30. Of course, it all depends upon when I wake up in the middle of the night, how long my nap is, etc. The overnight session is very active since the Euro market opens at 2 AM. This is where the best long term trades come in. Plus, very little news to mess up your plans. So it works well with my trading strategy. I have less luck in the 2nd session.

Also, I like to set a daily goal of 10% of my account. So a trader with a $3,000 account size is looking for roughly 30 pips a day. Not that traders should limit themselves, but having a goal changes the mental approach. Also, trading at least 2 contracts allows you to grab a few pips early, put them in the bank and leaves a runner for those nice moves. Once the account size doubles, add another contract but don't change the strategy.

So a person with a 30 pip goal trading two contracts might want to let the first contract go at +5, +10, or whatever the market allows. As the trade develops the trader can manipulate the stop accordingly. But just putting those pips in the bank early changes your mental approach as you've taken a positive step towards reaching your goal.

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  #33 (permalink)
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Not into the home runs. My strategy has developed into one where I will pull 1.5-3 points out of the market per day. Two days ago I had a 2.5 point trade and today was a 1.5 point trade. Buy-n-hold today, at my in, would have netted me thus far a 7.75 point gain. But that strategy, I feel, is gambling. I follow my indicators, follow my rules, and profit results. For this, to be making points on a daily basis, is my goal. Small win's with the occasional homer.

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  #34 (permalink)
Springfield,Missouri, USA
 
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I trade to make money, not to make spectacular trades. Once that is accomplished, I'm done for the day.
Experience tells me this is best for me. Everyone is different. It all depends on your statistical performance. With today's software, it is easy to analyze your historical performance. Not only are there odds in the market, but there are also odds for traders. Every trader should know the point, in terms of profit, time and trades, at which their statistical performance declines. Quit at the peak.
It's been said a thousand times here and I'll repeat it. Keep a journal. On every trade, record how you felt before during and after the trade. If you are a scalper with dozens of trades, then pick some other basis. maybe every hour. I prefer to jot this down every time I am up or down a certain amount of money.
Look for patterns in your trading. Most traders spend all their time looking for patterns in the market, but are oblivious to the patterns within themselves. Incorporate the statisitcal results of these internal patterns into your trading plan.


"Psychologically, it's better to have a modest target and achieve it every day than an aggressive target and fall behind. You'll start taking larger risks to try and catch up instead of focusing on consistent performance day-after-day."
- Barry Taylor

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  #35 (permalink)
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Reasons for daily goal that I can think of:
1. Lifestyle - Trading for lifestyle, not purely for money. You want to trade 1 hour then go play golf.
2. Psychological - Understanding that personally, when you start winning, psychologically, you develop a "I'm unbeatable" syndrome, and start being careless in your trading.
3. Fear - Just because you are afraid to loose the profits you have made.
4. Mathematical - You have a conservative yearly income goal, and that set daily goal will achieve it.

Scalp vs. Capture long trends
- Huge trends are less frequent, so most traders who trade them make their weekly profits, with 1 or 2 trades
during the week, and all the other trades are small losers. You are out of luck if you were taking a bathroom break when that trending setup occurred, then you just get 'pissed' off... literally otherwise you get in market chasing mode.
- If you are a good scalper, you can trade a huge trend by jumping in and out of it several times with and against the trend, and make as much as, or more then the trend trader who sat through the heat of all the pullbacks.
- As a scalper you get more trading opportunities, and can trade more market environments, you can trade ranges, as well as trends.
- It is statistically easier to predict that the market is going to move 10 ticks, then to predict it will move 210 ticks
- If you are not trading fixed risk, you will probably loose money. If you're trading 3 contracts on one trade, and 25 on the next trade because you 'think' or 'feel' it will be a big move, in the long run, you will probably loose money. Very few traders have this market instinct, and it is generally not very teachable, I would not advise this style of trading to new traders. If you try to do it without that inherent ability, you are gambling, not trading.
- Be careful of any trader who uses the word 'feel' in describing their method or setups. That word is used because they cannot quantify, or verbalize their setup, so don't try to trade it. It will make them gobs of money, it will send you to the poor house. Maybe at some you might develop your own feel. Otherwise, you can put that trader in a tub of ice, Identify the part of his brain that gives him that 'feel' and shave off a slice with a cheese a grater.
Personally, 'feeling' has nothing to do with my trading, I don't have that special instinct, so I dug my trench in the mechanical trading camp.
- If you feel 'good' after you make a 10 tick trade, and feel 'awesome' after making a 40 tick trade, you still need to work on your psychology, it will prove to be your demise. You need to get to the point where a trade, is a trade, is a trade.
- If you are trading less the 1:1 reward/risk, you better have have a crystal ball, because you will need a ultra high win ratio to be profitable
- If you don't have a specific exit strategy, you are going to be one frustrated trader, every time you realize your discretionary exit captured only 1/10th of the move. Better go look for that cheese grater.
- If you are able to notice a decline in your trading account in one day's worth of trading, then you are either under capitalized, or you are taking way too much risk in your methodology. Look into R-Multiples money management for instance, among other available approaches.
- If your trading plan has 17 different setups, you will probably not make it, you need to have very few setups, but know them better then you know that soft little curve on your wife's lower back that feels like... oh sorry, I kinda drifted off there , but you get the idea.

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  #36 (permalink)
Netherlands
 
Experience: Advanced
Platform: none
Trading: Stocks
 
Ryanb's Avatar
 
Posts: 196 since Sep 2010
Thanks: 117 given, 357 received

No homeruns, no target.

since the beginning of this year i dont take profit anymore, i let the market take profit for me as i trail my stop.
reason that i`m doing this is that i always want to do the perfect entry, and that doesn't happen that easy, so if i have it i have to milk the cow until it`s empty.

Taking profit with a target it's like a salesmen that is offering a discount after the consumer said he wanted to buy it.

"Want what the market wants" if the market wants to give you a nice run, let it go.

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  #37 (permalink)
Russia,Khabarovsk
 
Experience: Beginner
Platform: NT
Trading: Gold
 
Cachevary's Avatar
 
Posts: 407 since Feb 2014

My view is all you need is just a winning streak,whether it small takes or homeruns.

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