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Best way to learn in a high volatile environment
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Best way to learn in a high volatile environment

  #11 (permalink)
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I appreciate all the advice @xplorer, @suko, and @New Level

I've had the last couple of hours to relax, I think I might've had too much adrenaline flowing and I wasn't quite thinking properly. I was just in problem-solving-mode and impatient, sometimes you need a breather

With the comments made here, it seems a bit crazy that I am putting such a high emphasis on wanting to learn how to trade these events that aren't as frequent.

Having said that, and if anybody cares, I will go with the first option of limiting my flexibility. Sure I might not learn as fast, but you have all pointed out that I don't need to, and it probably shouldn't be a priority for someone with my level of experience.

But thinking about it more, if I just take as many trades as I want with little restriction until I hit a certain % loss limit I will develop bad habits that I've worked hard to drive away. Today I took 18 trades and I was at the break-even point, so I could've kept on trading a lot more, and I know I overtraded. The market conditions will change shortly, but the bad habits will linger for longer.

Another lesson is to calm yourself a bit before rushing to post something on FIO, so you don't end up asking stupid questions

If anybody has any further input, I'd still love to hear your thoughts. But as for what's best for me in the short-term, I think I might have my answer.

Cheers!

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  #12 (permalink)
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To add to my previous reply, my short-term choice doesn't mean that I will not try to learn how to adapt to these conditions.

Instead my focus will be on surviving these conditions for now, while slowly learning ways to trade more effectively during these kinds of environments. In the hopes of being able to trade them proficiently once I become a better trader.


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  #13 (permalink)
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Have you watched "Cancel Crash," about the '87 Crash?

They interview Brent Hull, the guy who stepped up when VIX was topping 150 and placed the solitary long trade that turned the entire market around. One of the greatest trades of all time.

So, the funny thing about the story is that Hull was running a market maker firm at the time, not really experienced as a trader yet, first time to go through volatility like that, didn't how to respond. So he sent a kid down to the library to look up in a book what to do when the market blows off like that. The kid comes back and says, "You are supposed to go long."

So then he went took his badge and went down into the nearly silent pit and placed his long order.

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  #14 (permalink)
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suko View Post
Have you watched "Cancel Crash," about the '87 Crash?

They interview Brent Hull, the guy who stepped up when VIX was topping 150 and placed the solitary long trade that turned the entire market around. One of the greatest trades of all time.

So, the funny thing about the story is that Hull was running a market maker firm at the time, not really experienced as a trader yet, first time to go through volatility like that, didn't how to respond. So he sent a kid down to the library to look up in a book what to do when the market blows off like that. The kid comes back and says, "You are supposed to go long."

So then he went took his badge and went down into the nearly silent pit and placed his long order.

I have not watched it, but thank you for the reference. I'll be watching that documentary tonight as it's on YouTube.
https://www.youtube.com/watch?v=jLfjEMDJubg for anyone else interested.

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  #15 (permalink)
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Best way to learn from is "YOU"

Hi,

Thank you for quoting me. Believe me, I am not even a break even trader yet!

This is one of long write up on FIO and these are just my view. Pardon my English.

I think recent volatility has caught your mind. That was pure election results and was expected. NQ was down but other markets were up like Dow and NQ. That told me that technical stocks are getting weaker as OTF moved their money to Down and S&P. Just my observation.

So you asked about volatility, I did a quick study for 253 days RTH NQ Daily range. Here are the stats.

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• Do I limit flexibility in my trading style (max X trades per day) and slowly learn until the market conditions become more favorable for my trading style?

It depends on volatility. If I see there is a trade more than 10 points I would take as much I can.

• or do I allow flexibility and protect my account with a max % loss / day so that I can learn how to trade in this environment as fast as possible?

Totally depends on your risk:reward.

• Somewhere in between?

Subjective to answer.


• Should discipline be prioritized and a restriction for # of trades or # of trades per hour be set and followed? Will this mean that a trader won't be able to adapt quickly to these conditions? Is it ok to consciously take the 'slow learning' approach?

I did a study some time back. Indices are most active between 9.30 am – 11.45 EST and 1.30 pm – 3.30 pm. Choose your time window based on Day Range and volatility.

Take today’s example. I was quit during lunch time. This was due to my observation on NISS (NYSE ADV/Decline which told me it is going to be range day. After testing Friday low it convinced me.


• Should a trader take as many trades within their % loss limit until they can get the 'flow' of things? Is the risk of over trading not worth the potential of learning fast?

I don’t agree for rookie traders until a consistency is proven by trade results. So one has to achieve some consistency and confidence to take the trades.

• Will taking too many trades lead to bad habits in the mid and long-term that will be too difficult to overcome?

Taking too many trades will definitely lead to bad habits. Election type trading a big No No.

• At what point should a trader say 'this is not where I can adapt fast enough, I will wait until I'm a better trader?'

If you are not able to produce results after 6 weeks. Stop and go back to find out why..
I did the same thing before going live. I dropped everything and started from scratch. Sim traded until proved and went live.


No one has perfect answer and no one knows if Market is going up/down or sideways. We have to depend on our homework and screen time and other experience such reading market internals.

I like to thank you for your journal as I go through it every day to see what I am missing.

What changed and improved my recent trading..

Below stuff.

Lance Beggs type traders I found on websites. Pure Price Action.

Below journals opened my eyes and gave me confidence.

Eye Opener

@Big Mike - https://futures.io/elite-trading-journals/1415-big-mike-s-day-trading-method-advice.html
@Inletcap - https://futures.io/elite-trading-journals/39314-inletcap-s-random-collections.html
@GruttePier - https://futures.io/trading-journals/37351-gruttepier-s-trading-journal-getting-profitable.html

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  #16 (permalink)
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chipps1983 View Post
Hi,

Thank you for quoting me. Believe me, I am not even a break even trader yet!

This is one of long write up on FIO and these are just my view. Pardon my English.

I think recent volatility has caught your mind. That was pure election results and was expected. NQ was down but other markets were up like Dow and NQ. That told me that technical stocks are getting weaker as OTF moved their money to Down and S&P. Just my observation.

So you asked about volatility, I did a quick study for 253 days RTH NQ Daily range. Here are the stats.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).



• Do I limit flexibility in my trading style (max X trades per day) and slowly learn until the market conditions become more favorable for my trading style?

It depends on volatility. If I see there is a trade more than 10 points I would take as much I can.

• or do I allow flexibility and protect my account with a max % loss / day so that I can learn how to trade in this environment as fast as possible?

Totally depends on your risk:reward.

• Somewhere in between?

Subjective to answer.


• Should discipline be prioritized and a restriction for # of trades or # of trades per hour be set and followed? Will this mean that a trader won't be able to adapt quickly to these conditions? Is it ok to consciously take the 'slow learning' approach?

I did a study some time back. Indices are most active between 9.30 am – 11.45 EST and 1.30 pm – 3.30 pm. Choose your time window based on Day Range and volatility.

Take today’s example. I was quit during lunch time. This was due to my observation on NISS (NYSE ADV/Decline which told me it is going to be range day. After testing Friday low it convinced me.


• Should a trader take as many trades within their % loss limit until they can get the 'flow' of things? Is the risk of over trading not worth the potential of learning fast?

I don’t agree for rookie traders until a consistency is proven by trade results. So one has to achieve some consistency and confidence to take the trades.

• Will taking too many trades lead to bad habits in the mid and long-term that will be too difficult to overcome?

Taking too many trades will definitely lead to bad habits. Election type trading a big No No.

• At what point should a trader say 'this is not where I can adapt fast enough, I will wait until I'm a better trader?'

If you are not able to produce results after 6 weeks. Stop and go back to find out why..
I did the same thing before going live. I dropped everything and started from scratch. Sim traded until proved and went live.


No one has perfect answer and no one knows if Market is going up/down or sideways. We have to depend on our homework and screen time and other experience such reading market internals.

I like to thank you for your journal as I go through it every day to see what I am missing.

What changed and improved my recent trading..

Below stuff.

Lance Beggs type traders I found on websites. Pure Price Action.

Below journals opened my eyes and gave me confidence.

Eye Opener

@Big Mike - https://futures.io/elite-trading-journals/1415-big-mike-s-day-trading-method-advice.html
@Inletcap - https://futures.io/elite-trading-journals/39314-inletcap-s-random-collections.html
@GruttePier - https://futures.io/trading-journals/37351-gruttepier-s-trading-journal-getting-profitable.html

Amazing response chipps! Reinforces that I need to relax a bit and not let the potential of huge wins due to high volatility lead me into a greedy path. That could eventually lead to ruin, and you are right about first stage being survival

Also, did you manually grab the data for that table? or is there a quick way to grab a bunch of data? I'd like to do some sort of similar analyses in the future.

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  #17 (permalink)
Market Wizard
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SoftSoap View Post
Amazing response chipps! Reinforces that I need to relax a bit and not let the potential of huge wins due to high volatility lead me into a greedy path. That could eventually lead to ruin, and you are right about first stage being survival

Also, did you manually grab the data for that table? or is there a quick way to grab a bunch of data? I'd like to do some sort of similar analyses in the future.

Its a manual effort. Thank you for giving me that Idea of Day range. Holidays seasons are the worst days. 25-30 points range. Thanks Giving week and Christmas (15days).

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  #18 (permalink)
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SoftSoap View Post
I appreciate all the advice

I've had the last couple of hours to relax, I think I might've had too much adrenaline flowing and I wasn't quite thinking properly. I was just in problem-solving-mode and impatient, sometimes you need a breather

With the comments made here, it seems a bit crazy that I am putting such a high emphasis on wanting to learn how to trade these events that aren't as frequent.

Having said that, and if anybody cares, I will go with the first option of limiting my flexibility. Sure I might not learn as fast, but you have all pointed out that I don't need to, and it probably shouldn't be a priority for someone with my level of experience.

But thinking about it more, if I just take as many trades as I want with little restriction until I hit a certain % loss limit I will develop bad habits that I've worked hard to drive away. Today I took 18 trades and I was at the break-even point, so I could've kept on trading a lot more, and I know I overtraded. The market conditions will change shortly, but the bad habits will linger for longer.

Another lesson is to calm yourself a bit before rushing to post something on FIO, so you don't end up asking stupid questions

If anybody has any further input, I'd still love to hear your thoughts. But as for what's best for me in the short-term, I think I might have my answer.

Cheers!

I think some of us are saying what we're saying because we've gone through it before and learned something from it. I know I have.

This is me over a year ago, and it's not even extreme levels of volatility. It was the day of ECB President Draghi's conference (I think it was about QE at the time) and when he speaks, he moves certain markets in a way equivalent to when Yellen delivers her remarks.

I traded that and at the end I wrote in my log "Draghi galore. Clearly this kind of volatility shouldn't be traded."

Next day there was a similar level of volatility, and despite me having wrote what I wrote the day before, I had a Britney Spears' 'whoops! I did it again' moment and this is the resulting chart. (Blue/Red arrows are Buy/Sells)


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I had advised myself against trading any further. Yet I couldn't help myself.


I was lucky as both days I ended up with something like -50 bucks loss but it could have been much, much worse.

From that point onwards I pretty much said to myself 'no trading during this type of volatility', and I have not done it since.


I'm not claiming that people can't profit from this type of situations. You have, and I'm sure others will also have been able to.


The real question for me is, is it worth the risk? My own answer right now is no. I prefer to dedicate my time to watch what happens on a normal day. That should take the priority every day, in my book.

Will there be a time in the future where I will look again at it with a view to developing a methodology suited to trading highly volatile events? Sure. Maybe. Who knows?


But using @suko's analogy, I think it's far more important to be able to stay afloat first.


After all, what's the point of surf-riding a hurricane if you can't swim?

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  #19 (permalink)
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I was thinking about this topic in the shower and realized that I hijacked the discussion.

You are talking about realized volatility and I am talking about implied volatility.

Two totally different things. Samurai sword and Swiss Army knife indeed.

Those of us in the volatility space are attempting to harvest the risk premium between the realized and implied.
That has nothing to do with what you are talking about.

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  #20 (permalink)
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suko View Post
I was thinking about this topic in the shower and realized that I hijacked the discussion.

You are talking about realized volatility and I am talking about implied volatility.

Two totally different things. Samurai sword and Swiss Army knife indeed.

Those of us in the volatility space are attempting to harvest the risk premium between the realized and implied.
That has nothing to do with what you are talking about.

suko could you explain the difference please?

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