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PATS Trading Psychology Or Mack's Soapbox
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PATS Trading Psychology Or Mack's Soapbox

  #31 (permalink)
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https://www.youtube.com/watch?v=BajNSVDLNL8&t=0s

About 7 and a half minutes in he starts talking about a 22 point runner then starts talking about the math of risking 8 to make 2. He tries to get back to the days trading then goes back to explaining runners again.Helps to clarify some of what I was thinking, that the scalps are only part of the story the runners are the other chapter.

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  #32 (permalink)
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Do u guys know if Mack is on this forum?

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  #33 (permalink)
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Doubt it. Never has come up in any of the prior threads. He is big on responding to E-mails.

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  #34 (permalink)
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https://www.youtube.com/watch?v=ihKIaEGPjrQ

About 13:30 he starts on trendlines, goes on to haters hitting his web site, makes it clear that this is not about his trades but about how to trade. Best parts are where he talks about failed traders trying to teach others with all the new fancy words.

He is way to nice to call them what they are frauds, or as W.C. Fields said "ďIf you canít dazzle them with brilliance, baffle them with bullshit.Ē But I am sure Hank is too polite to ever use that quote.

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  #35 (permalink)
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I've watched some of the videos from the pats youtube channel. I'm just wondering why he never? talks about exits/where to take stop loss.

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  #36 (permalink)
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danielo View Post
I've watched some of the videos from the pats youtube channel. I'm just wondering why he never? talks about exits/where to take stop loss.

If you are his student or trade his method, it's pretty well known - 2 points (or the 1 tick above/below the signal bar).

It's better if he explains it - https://priceactiontradingsystem.com/faqs/

Look at the third FAQ from the bottom.

HTH

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  #37 (permalink)
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PATS Trading Psychology Or Mack's Soapbox

Thank you! Really helpful! :-))


Sent using the futures.io mobile app

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  #38 (permalink)
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Mack's tactic is a 4t target and an 8t stop. Optionally, a portion of the size can be dedicated to a larger target (TBD) with a BE stop (the remaining 8t stops are moved to BE - IF AND WHEN the 4t target is filled).

With all due respect to Mack, I'm skeptical of a few things.

The initial R/R ratio is brutal on the trader who can't yet make the 67% W/L ratio required to stay afloat. He should mention that the option is an advanced method and shouldn't be relied upon to negate the necessity of the 67% win rate.

BE is the statistically worst place to park a stop for his setup. A lot of traders enter or re-enter there because the trapped traders are still making healing trades. They're not all shook out after a 6t move and if there was a reasonable expectation of a swing, it isn't nullified with a retest of the entry.

The tactic doesn't easily lend itself to analysis. If he wants to see his expectancy, the trader has to log 2 different trades/tactics every time he uses the option. That's a problem with any method that includes a management option.

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  #39 (permalink)
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Mack himself says you donít have to do it this way. You could...

. hold the entire trade for runner
. not trail the stop to breakeven but reinvest the profits from a scalp
. move to breakeven but donít scalp out & hold for a runner
. or whatever else comes to your mind

His point being that there is no one right method to manage these trades.
As long as you take the right entries & a management style that you can consistently stick to, youĎll be fine.

If you donít like the math of the scalp, hold the trade longer.
If you donít like the logic of the breakeven stop, keep the stop where it was.
Just do what you can do consistently.

(Just my take/Interpretation of his stuff, so take it for what itís worth)

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  #40 (permalink)
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Leon of Pizza may I politely suggest you review some of the PATs rules as you are close to what it does, but not quite there yet. I do agree with most of your criticism, but from a slightly different view.

You are right that PATs is an advanced trading method but what you don't say is that it is clearly labeled as an advanced hard to learn method. Mack is almost a broken record in his how to do it lectures that the PATs method is a PhD in trading. Many here on the forums have called it a simplified Al Brooks method. No where has it even been suggested that this is a a quick and easy to learn system. Mack suggests re-reading his method several times and sim trading for an extended period of time until you can recognize the moves in real time. So I totally agree with your assessment, as would Mack that this is an advanced trading method.

Mack claims that a six tick move from the close of the signal bar is a very high probability event with the ES. Certainly the extra 3 ticks for the second leg has a reduced probability, even on his daily replay sessions. The forth contract, the runner, often fails at break even, but when it does go, well he says the runners take a mediocre scalping system and make it a highly profitable system. The perception of this system is an issue in behavioral economics as shown in Moneyball. Baseball scouts over value the players who can occasionally hit one out of the park and under value the players who somehow manage to get on base very regularly. So the typical person's mind will discount the value of the routine scalp and wonder why the system isn't optimized for a big win on the runner without you being consciously aware of it. Follow several of the trading journals and see how many write extensively about hitting a one point scalp.

I am with you that calculating expectancy for PATs is a major pain. Stops are 1 tick above or below the signal bar. Signal bar is where the move starts. Stops are no more than 8 ticks. If it will be over that Mack won't take the trade. The first thing you do is move the stop to that 1 tick position, so it is a stop within a range that doesn't exceed 8 ticks. Then, if the trade goes in the correct direction for 5 ticks you have an 8 tick profit and two contracts with a break even stop. So yes a second set of records to keep on that third contract that is locked in between a possibly changed stop and an 8 tick exit. As well as records on the fourth contract where once again you are manually moving the stop as the trade progresses. So really it is three trades at one entry with what, at least intuitively are increasing risks and rewards. So my spreadsheet is really wide as I have entry direction, reason, price and time followed by two exit profit/loss and an exit price time and profit/loss for the runner. I have a daily summary sheet that I have split in two to track the scalps separate from the runners then bringing the daily totals together. Good thing I have a printer that does tabloid size paper! ( 11 by 17 inch paper)

Somewhere buried deep in all his printed works Dr. Van Tharp addresses calculating expectancy with a variable stop. He suggests doing the same thing as when you don't know what your initial risk is, use your average loss, preferably over 100 sim trades or back tested trades. My own experience is Mr Davies at Jigsaw trading is correct my actual track record is not as good as my after the fact track record so I keep track of both to see what the system edge is and how much of it I am managing to capture. In fact Mack is in agreement with Jigsaw as he says repeatedly that comparing actual to theoretical at the end of the day is the most important thing you can do. Downloading results to a spreadsheet also uses a lot of real estate because each winning trade has a minimum of four transactions, frequently more.

The issue with calculating the average loss with the PATs method is one of the major issues with the PATs method, in my opinion. That of course is Macks explicit statements that this is a training exercise and it isn't about his own trading record. What differentiates Mack from the frauds with the rented Lambos, rented models and empty champagne bottles is he has never ever claimed to show anything but an after the game commentary on where he thought the opportunities were. Be that as it may there is no place you can go to except your own records to get that loss level.

A contributing factor is the same issue for all of us who use those darn tick charts, nobodies bars are the same. So everybody using a 2000 tick chart is going to have different size signal bars so by definition everyone has to apply the method to their own situation. So really what you end up with is the same evaluation problem as you see with many of the trading journals on this forum. Those being (sarcasm on) the members of the red and green order who proudly trade off of a bare chart on a discretionary method. I am laughing with them, not at them, but the issue is clear. How do you calculate expectancy on a discretionary trader.

I think we are more likely to trust people who admit to mistakes. Certainly back when I had to be evaluated I always tried to come up with some small shortcoming that I could promise to improve on. The ever obscene Tom Dante takes the opposite approach and constantly tells us aspiring traders which stupid mistakes we are making. Futures Trader 71 does the same thing, in polite language, on a regular basis. Mack, for whatever reason uses the always positive method. He does occasionally point out a place where a lot of us could have miss read the action but his strongest rebuke is to say you need a lot more studying. Not directly pointing out failings is contrary to what many people have experienced so it may not seem right, especially to a drill sergeant!

Given the difficulty in statistically evaluating the PATs method and the lack of a verified track record why bother then? Because Dr. Van Tharp says the most profitable traders are the rules based discretionary crowd. Probably why so many on this forum eventually become novices in the order of the red and green. PATs gives you a framework and an explicit method with daily feedback for moving in that direction. So do a few others, but mostly with even greater complexity and higher fees.

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