A discretionary trader should always have a slight bias towards the market if he or she is or isn't trading. Thats level 1 just a gut feeling. level two are risky trades the trader is usually right about. He won't enter them but hes usually right over 50% of the time. level three trades hes right about 3 out of 4 times on average. level four anything over 3.0 out of 4 times. Anything similar to this grading system will work.
The underlying psychological enforcer here is to optimize the discretionary system by process of survival of the fittest. if you see a pattern number 4 and starts happening only 3 out of 4 times it gets moved to 3. etc. if you see a pattern that happens 3 out of 4 times but with an extra technical piece of information it happens 3.5 times out of 4, the new type of setup is moved to 4.
I think you underestimate the brain's ability to recognize patterns. You don't always need hard statistics to succeed at trading long term. My automated system is in my brain.
You said "Thats level 1 just a gut feeling. level two are risky trades...". I'm not even gonna tackle these, I will let your fellow discretionary traders offer their comment on these.
I will just say this, I only trade 2 setups, so I could not even possibly have level 3 and level 4 trades And, the moment I consider one of these setups 'risky', it will be dropped from my trading plan. My advice is, trade 1 setup, and know that setup inside and out, be able to recognize that setup in your sleep. I can look at a chart for 1.5 seconds, and tell you I see 6 of my setups on that chart, and I know I'll probably win at least 4 of them. No analysis, no trade rating, no pontification, no drawing lines, no calculations, no market theory, no debate, no fear. All that stuff was considered 5 years ago when I was developing the setups, so it is all built in.
Last edited by monpere; June 23rd, 2011 at 05:10 PM.
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level 1 and 2 trades shouldn't be taken Monpere. They are bad trades so don't consider them part of the system. They are more or less slight biases. Sometimes they help you spot an upcoming set up. An example of these are something like the inside of a pendant setup rather then the end, some range bound situations, and a variety of other situations where you can tell the direction but you wouldn't bet on it. You can guess where the market will go based on the previous trend or a larger time frame but the smaller charts disagree.
I only trade a couple setups that I feel I have down pat.
I counter trade exhaustion according to wick length, volatility, relative trend length, angle of trend, and previous resistance or support peaks. without one of these factors my setups wouldn't be level 4. I also trade pendants and trend continuations. obviously, I don't use indicators. I let the market tell me whats going on. If I tried to program a trading bot like this system it would just take hundreds of hours. I've thought about it but pattern recognition outside of indicators is very hard to program. Thats like programing a computer to recognize your friends faces on any angle / lightening as oppose to just using your own eyes. programing is the easy way out and in a way I think its handicapping true potential and eliminating the exhilaration of manual trading. but, everyone has their own opinions ;p
Monpere this doesn't look like an automated system at all ????????????????????? seems discretionary, no programming involved. So why are you bitching at me about how I don't know what I am talking about? I'd really like to know...
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Getting back to the Topic here...
There is a lot of good advice here, some of it more so than others.
However, if you have emotions that are holding you back, I don't think it's wise to trade.
You first need to work on yourself. Ask yourself why you feel a certain way, address issues in your life, feel good about yourself.
Trading really depends on you. Your the beginning and end to all of this, not your system, not your platform, not your computer.
If you feel anxiety, depression, frustration, anger, fear, etc., etc., are you really going to start trading? Be wise, be prudent, be careful. Spend the time investing in yourself and figure things out. I don't know anyone who does this without an emotional foundation to stand on.
This is really how to begin to trade.
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The best think I have found that helps is to trade two accounts. One you live account and the other a demo account. Trade the live one then compare it to the demo, which (in theory) you are following your rules. Compare which is better. 99% of the time you will find following your rules will work out better in the long run.
I do have several accounts, one live and several demo accounts for different purposes: One for new strategy testing, one for robots, one for manual training and one basic sim just to test tools and so on.
But still I have to struggle with psychological barriers to put or use robots online although very good results already achieved to the demo account.
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Historical Chart Marking boosts Confidence
The biggest boost to my confidence is also the best way to learn the trade set ups. Do HISTORICAL CHART MARKING: marking trades from the middel of the chart where you can see what happend before and after. Using the global cross hair across mutilpe time frames, you can see how things came together on all your charts. Try to explain every pivot in the market. What did the Indicators tell you before a pivot took place to signal that it was coming. WOW! This is so powerful! You must see things unfold doing Historical work first before you can ever have a clear visoin of how the markets move. I think this step is the most important and most neglected for traders. This is the first step toward learning how to see your trade set ups on the chart and you can score a high win loss ratio boosting your confidence in both your ability and the trade set ups. These pictures of successful trades are recorded in your brain. Your brain gets to see what worked and what didn't. Then these pictures, stored in your brain, are used by your subconscious mind. They become instincts that will later act as a filter to find good trades and keep you out of bad ones. If you are a technical trader as I am, then pattern recognition is the key and the subconscious has a lot more RAM than your conscious mind so feed it all the pictures you can by doing HISTORICALS. Plus, it goes much faster that sim or replay so you can cover more days in the market this way, and feed your subconscious more data. FEED YOUR BRAIN. Do Historical Chart Marking. I studied the Nexgen and New Futures Trading methods and they both emphasized Historicals. Here is a chart of the Historical work I did yesterday.
It was nice talking to you the other day. Still letting your concept roll around some in my head.
I am curious, but I prefer to do market replay instead of historicals because the MACDBB can move SOOO much already. Henry and Horst, and Danielle all swear by it, but to me if a MACDBB moves 1 cm on that darn chart by the time it closes, that sure is a different look. So Market Replay is really good to look at for me.
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