Tiger: I'm not sure what your question is specifically.. I actually sent a reply initially but for some reason it didn't post.
I am profitable but have some holes in my work.. I am not satisfied with scaling, adding and trailing stops.. open trade management. In ES if my target area is not hit or I have a runner I leave a lot on the table.. I have not found any "indicator" that tells me where to put my trailing stop. Obviously recent swing H/L on whatever timeframe but too much gets left on the table.. The problem with a retracement is you really don't know how far back it will come. DO you wait or jump out and risk losing your position? Do you add back on the rotation if it puts in a lower swing assuming you're short, etc.
I do not have any process where I can quantify probabilities for those items.
When I had System Writer Plus, the predecessor to Trade Station I did system design/backtesting for managiing $ but that was trend/swing oriented - it was a different world then...
Today, I am at a disadvantage since I cannot backtest a large sample size due to the discretionary element.
My trading is somewhat discretionary within a rule based approach. I go into the day with several hypothesises and key areas the market might test.. These are related to the typical areas but also volume related..
I rely a lot on Volume profiles and just plain old MArket Logic/Auction Theory.
When we talk about stops years back I figured out that somehow the market would "go for the stops." Just paranoia but the reality is the market will go to test extremes and that is where stops are typically placed and that creates market facilitation or business.
After watching market rotation whether rangebound or within a trend the auction theory really resonated with me... I only learned about it in 1982-4ish from Pete Stedlmier at his Market Logic School in Chicago. CQG was the first quote vendor to have it and after almost a year I gave up on it as a trading tool but the theory really resonated with me since it verbalized a lot of what I had deduced for myself.
TOday I use Volume Based Market Profiling in a Composite and Micro profile of the recent swing H/L with the developing daily profile... Three layers. FOr the day I have the developing profille in relation to the previous days profile with 1.0 Range Bars overlaying a Microcomposite Volume profile and then the developing daily volume profile. Trigger is a 1.0 range and 233tick for Entry.. I am playing with Renko for taking the noise out after i'm in a trade for possible stop trailing but ...
I have very few indicators other than to keep me focused on the interday trend so I don't end up fading.. In the past I was a pure systems guy but I could never program what I wanted - not my forte..
I certianly still have a long way to go but the enemy is me - not the market...
I hope this clarifies your question a bit..
Last edited by roztom; November 5th, 2011 at 06:24 PM.
trade decisions are based on MP and areas that are shaping up to be a short term move. I typically look at Globex high and low during the regular session and take trades based on what the market is doing in relation to the Globex high and low and based on where the recent strength/weakness is as seen on MP. After the first hour is in, I then base decisions on what the market is doing in relation to the 1st hour high and low.
The advantage to this strategy is taht I was constantly getting stopped for loss and/or my winners were too small. The market action seems bent on taking out stops and I kept seeing trades work, albiet after I was stopped out.
I must say this doesn't work when I am flat out wrong and the market is trending hard AND I fail to put the hedge back on. That has been key. I have to maintain the strategy. The rule is simple, let the trade get profitable and let it run until I can take reasonable profit, or until it gets me back in the hedge. When I fail to put the hedge back on, that is when I have lost.
What I don't understand, is that you are putting on a spread ( not a hedge - that implies cash vs. futures), but treating it as an outright. You're not buying strength and selling weakness with the respective legs, and you're not putting on a bull spread because the spread is too far out, nor putting on a bear spread, because the spread came in too far, so why not just trade the outright, and move your stop farther out?
Tiger: Sorry for the misunderstanding on stop placement. I do try tokeep my stops under 2pts and usually 1.25ish.. IF I take a trade at my level I can have a .75 stop but I am usually late waitiing for a bar to close - I use mkt orders so I give it up there if I used limit I could slice it better but I like to get on the train before it leaves the station. I use 233tic for entry. MY stop is initially 2tic over H/L. I should have been more specific. I "like" 1.00 - 1.25 stops..usually I am closest to the 1.25 - 1.50ish give a tick or 2.
I only enter positions at key areas where the market will either prove itself or a change has taken place.. I look at market strcture and key volume based nodes. I expect the market to test these areas and either get rejected or fnd acceptance. IF rejected I'm in good with the OTF, if accepted then things have changed and I get stopped out.
I run the tight stops because my numbers are good. One of my issues is if I enter late...0.75tic since I scale sometimes at 2,3 pts and runner.. unless I have specific larger targets which I prefer.. I read the DOM at critical areas to confirm..I also like to see Cumulative Delta diverg but it is inconsistent..probably just me.. I really find many indicators create conflict since they lag if used in the present tense. vs say a MA for a retracement or to confirm an existing trend. I have used Oscillators for Divergence but not currently - have't found the secret sauce yet.... IMHO.
ES Opening Friday Trade 11/11/11.
Trade 1:Friday in ES I had my CLVN number at 1250.00 the RTH Open range high was 1249.75. I shorted 1248.75 with stop 2 tics over high = 1.5pts. I trade in units of 3 for first trade of day. I automatically scale 1/3 at 2pts 1246.75, next scale 1240.75 +8 and final target HVN 1234.00. LOD was 1234.50. I covered last unit at 1235.50.+ 13.25. = +23.25 pts.
After first 2 pt scale I bring my stop to B.E. I do not like to trail closely, in fact one of my issues is when market doesn't make my targets but has 4 pts in it I often end up scratching the last units..haven't figured out a good remedy for that.. Also rentering is tough since the fuel has been used up until the other side can come in for a possible continuation later.. I tend to believe it is the first pass that has the greatest probability and retests have to have shorter targets.... but never know until I get there.. I scale quicker on rotations...
Trade#2: According to MP rules after Range Extensio Down you look only for short trades since the OTF has shown their activity.. Next trade for me a rotation back up buy responsive buyers and shorts covering and then a retest of LOD.
Test of 34.50 LOW: On this trade the market rotated up to 1241.25 - 1241.50 CLVN area for another short for a retest of the 34.50 low. MArket got to 1241.00 I shorted 1240.00 stp 2 tics over 1.50 stop, Scaled +2, Scaled 36.00 just before DVAL +4, B/E 3rd unit. = +6. I entered late.. was me not mkt..otherwise stop would be 1 or 2 tics better. Wife asked if I wanted lunch..
The B/E troubles me on last since I leave $ on the table.. Happens a lot IF I trail behind a 1.0 range bar 50ma it helps but is too slow... I hope I can get some pointers here on better ideas on open trade mgmt.
This day did not go perfect for me.. I tried to short later in the day and got stopped out when structure changed and I needed to play the long side which I did.. In MP talk this became a neutral day.. I had anticipated this since we are in a strong uptrend, there would be profit taking on Friday and you need to shake the tree to get the weak longs out.
When the structure changes I have a hard time changing from one side to the other..just slow to see it..
Hope this shows what I do with recent examples... and where my stops come from. Also if I need a wider stop I will go up to 2pts but I get queasy there...depends on the structure/context or I lighten up & cut position by 1/3. Tom
Last edited by roztom; November 6th, 2011 at 08:32 AM.
The following 2 users say Thank You to roztom for this post:
Seems when I move my stops farther out....the market ultimately has a change in volatility and those get taken out, too. This spread/hedge thing seems to work when that happens, as well. The issue is always how I manage "me" when I put the spread/hedge back on and/or if I leave it off. I have found by doing this I stay more focused on my charts, rather than my DOM. ANother thing, found I was getting DOM hypnosis, which may be a whole topic in itself, but basically by not taking stops and instead focusing on the charts and picking areas where I am "wrong" about direction and placing a spread/hedge order in that "wrong" area" in the correlated market, I have been able to hold onto my original position without taking a huge draw down or loss.
I may start a journal here and write it in during my trading next week. I do a sort of journal now by sending myself an email on a 5 minute routine my coach taught me, where I write "what" I am feeling, "why" I am feeling it and is the decision I am contemplating in my "best interest" if I execute it. Have found that to be tremendously helpful in keeping me focused on what is happening and how I am responding internally to it.
The following user says Thank You to rwhitt for this post:
Lots of common elements in our respective trading styles - must be our Chicago backgrounds; even had a similar day Friday. I don't trade with tight stops however, even though I try to initiate trades at inflection points just as you do. As I mentioned in another thread, there's a price to be paid for adhering to this practice - the market will not allow you to lower your risk for free. You are forced to place your stops at very obvious levels, falling into the hands of the predatory algos and professional stop hunters. So, I endeavor to place my stops, where they won't be found, but still serve their intended purpose. The drawback is obvious; I'm going to take bigger hits when I get stopped out, but I will get stopped out less. I also compensate, by adding to my winners when a trade is working for me.
The following user says Thank You to tigertrader for this post: